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The one thing that jumps out at you when reading the mainstream posts of the past week-and-a-half bringing Platinum Coin Seigniorage (PCS) into the forefront of attention again, for the first time since last year's debt ceiling crisis, is that every mainstream blogger or commentator is telling a story about minting a Trillion Dollar Coin (TDC), or a few trillion dollar coins as an option the President can either use or not to get around the debt ceiling. But no one is telling us the much bigger story of the enormously increased authority to cause the creation of fiat money, delegated to the Executive Branch by the Congress in the 1996 legislation enabling PCS. And no one is telling us what the possible implications of this change are for our political and economic systems.

I've reviewed these posts, as well as a cable segment,  in the four earlier installments of this series. The installments, beginning with this one, are here. The posts and the cable segment are by: Pethokoukis, Wiesenthal, Carney, Drum, Yglesias,  Yglesias, Harry Bradford, Brad Plumer. and Chris Hayes.

Background: Moving off the Gold Standard

This is reminiscent of the situation with the system of fiat currency itself in 1971, when President Nixon, took us off the gold standard for purposes of international trade. After Nixon's action there were no good treatments in the Press, or by economists, about how the move to a non-convertible fiat currency with a floating exchange rate ,and no international debts denominated in any other currency, had changed the financial system by removing the possibility that the Government could become involuntarily insolvent (“run out of money” except through its own choice not to create more).

Before Nixon's big change, the amount of US currency and reserves was limited by the amount of our gold reserves, because it was possible for other nations to demand payment in gold in return for the dollars they held in their accounts at the Federal Reserve. In fact, Nixon closed the gold convertibility window, because France had started what looked like might be a multinational run on the gold reserves of the United States, jeopardizing the stability of the dollar in international trade, and threatening its role as the reserve currency in the middle of the Vietnam War.

After the window was closed however, other nations followed the United States in leaving the gold standard, with the result that now we have a world of nations with fiat currencies, though many nations aren't “sovereign” in their own currencies because they've incurred debts in other currencies, or have pegged their currencies to the dollar, or, in the case of the Eurozone nations have, like the American States, given up their power to issue currency, and become currency users of the Euro (or the dollar, as the case may be).

Nixon's ending of the gold standard was enormously significant because it removed the gold supply solvency constraint on the United States. And it restored the powers of the Government given it by the Constitution to issue money as needed to provide for the common defense and the general welfare (today we might say fulfill the public purpose).

The Gold Standard Hangover and Progressive Fiscal Policy

But the full significance of this event wasn't understood by most government officials or the public, both here and in other nations. Constraints on spending that were appropriate for a gold standard-based financial system were never repealed. They persist to this very day in our institutions, in our minds, in our economic systems, and in our politics.

These included: 1) Congress dividing the financial functions of the Government between the Federal Reserve and the Treasury; 2) Congress prohibiting the Fed from directly buying Treasury-issued debt; 3) Congress's ceiling on debt subject to the limit; 4) Congress's prohibiting the Fed from issuing credits directly to the Treasury to implement deficit spending, forcing it to issue debt and making the terms deficit and debt close to synonymous in the public's mind; 5) Congress's delegating its currency power primarily to the Fed; while leaving its delegation of the power to coin money with the Treasury; and 6) Congress leaving the Fed, the Central Bank, independent of the Executive Branch and the Treasury, but, at the same time closely associated with the Banking and Wall Street interests that own the regional banks, and sit on the Federal Open Market Committee (FOMC).

These constraints have divided the sovereign currency power of the Government and weakened the President's power to implement spending appropriated by Congress, when that spending involves deficits, even though that deficit spending was previously approved by Congress in its appropriations process. They have also perpetuated the previous gold standard-based understanding of deficit spending as closely associated with the national debt and the further understanding of the debt as a threat to government solvency, the international credit of the United States, “our grandchildren,” our standing with “the bond vigilantes,” fiscal sustainability, and fiscal responsibility.

So, these constraints have mired us down in the deficit/debt cluster of issues, self-imposed chains that prevent us from using Federal fiscal policy to meet our many problems. They have been the worst enemy of economic progressivism over the past 40 or so years, and have prevented us from responding strongly enough to the crash of 2008 to create a robust, full employment economy.

And, perhaps worse, the thinking that arises out of them now rationalizes the policies of austerity and deficit reduction that threaten to destroy the social safety net and bring our economy down again into recession or depression, or at least into a decade or more of future stagnation. These austerity policies will ruin the economic lives and prospects of a generation of Americans, and will place increasing burdens driving more and more older people into poverty, for the sake of false gold-standard based theories about how to run fiscal policy in what has become a sovereign fiat currency-based financial system.

PCS Creates a Great Crack in Gold Standard Constraints and Austerity Justifications

The big story about Platinum Coin Seigniorage is not the Trillion Dollar Coin and its possible implications for solving the debt ceiling crisis, as the mainstream has been telling us. Instead it is the great crack it creates in the wall of gold standard-based constraints still hanging over our politics and economics, and the increased fiscal and policy space this gives us to use to solve our various national problems. It is the authority the Executive Branch of Government now has to break through these constraints, and begin to unify the financial functions of government behind the public purpose.  Let's look at those constraints again, and see what PCS, if used vigorously by the President, can do to weaken them or make them irrelevant.

-- Congress dividing the financial functions of the Government between the Federal Reserve and the Treasury: PCS enables the Treasury to commandeer the power of the Fed to create unlimited reserves to fill the Treasury General Account (TGA); the public spending purse, to cover debt repayment and deficit spending for years to come. The Treasury can use this power to demonstrate to the public that there is no Federal solvency problem, and no need for austerity or deficit reduction, because many trillions of dollars fill the public purse.

Another implication of this power is that it would add greatly to the amount of reserves in the banking system as the Treasury adds reserves through debt repayment and deficit spending without destroying them through a corresponding amount of debt issuance. To compensate for Treasury's reserve adds, the Fed, if it wants to keep the Federal Funds Rate at a target level above zero, would have to pay interest on reserves (IOR) shifting the interest paying function from the Treasury to the Fed.

--  Congress prohibiting the Fed from directly buying Treasury-issued debt: PCS, if used to produce coins with face values high enough to repay the debt subject to the limit and also pay for future deficit spending appropriations for some years, enables the Treasury to get along without issuing debt. So, it would need no one including the Fed to buy Treasury debt.

-- Congress's ceiling on debt subject to the limit:  PCS, if used to produce coins with face values high enough to repay the debt subject to the limit and also pay for future deficit spending appropriations for some years, would make the debt ceiling a dead letter for some time to come, even if the PCS authority were repealed. The law would be still be there; but it would have no effect on politics or fiscal policy because there would be no, or at least very little, debt. And there would also be no political issue due to the presence of public debt.

-- Congress's prohibiting the Fed from issuing credits directly to the Treasury to implement deficit spending, forcing it to issue debt and making the terms deficit and debt close to synonymous in the public's mind: This constraint arises from the prohibition against the Fed granting credit to the Treasury. PCS however, involves the Fed exchanging reserves for a legal tender coin produced by the Treasury. Technically this isn't granting credit to Treasury; but just the Fed accepting a deposit of legal tender into the Mint's account, crediting that deposit as reserves, and then transferring most of the reserves created into the TGA as seigniorage. So, PCS produces revenue for the Treasury without violating this constraint, and also renders the constraint unimportant.

-- Congress's delegating its currency power primarily to the Fed; while leaving its delegation of the power to coin money with the Treasury: This constraint still remains with PCS. But the 1996 legislation, for the first time, makes the coining power of the Mint the near equivalent of the reserve creating power of the Fed, by allowing the Treasury to create coins with arbitrarily high face values.

With that power, the Treasury can require the Fed to fill the public purse to any level that Treasury thinks is necessary for its purposes. So, the Treasury's lack of currency and reserve-creating authority would be far less important than before, if PCS is used to its full potential.

Let's be clear, however, filling the public purse to any level, however high it may be, doesn't open the purse strings for free spending by the President.  Congress still has to appropriate spending in excess of tax revenues for Treasury to spend that money. So, Congress still has control of the public purse; even after delegating its authority to fill it to the Treasury and the Fed in combination.

-- Congress leaving the Fed, the Central Bank, independent of the Executive Branch and the Treasury, but, at the same time closely associated with the Banking and Wall Street interests that own the regional banks, and sit on the Federal Open Market Committee (FOMC) which sets the monetary policy of the United States: PCS, again, if high enough coin face values are involved, reduces the independence of the Fed relative to the Treasury, by influencing its actions in setting its target interest rate.

As I've explained above, when and if coin seigiorage is spent by Treasury, reserves are added to the banking system in the trillions of dollars. But, these reserves would not be drained by debt issuance, so their existence in the system will drive the Federal Funds Rate (FFR) down to zero. If the Fed has a positive interest rate target, then it will need to pay IOR to depositors, and this will shift the bill for Federal interest over to the Fed, rather than the Treasury, taking it off budget.

Variations in PCS Options

The mainstream bloggers and commentators told the PCS story solely in terms of the theoretical availability of coins with face values in the low trillions and their potential impact on the debt ceiling conflict. But they never considered or examined a more aggressive use of PCS to change the US financial system substantially, by freeing the Treasury from its gold standard chains and the political system from fiscal policy alternatives focused first  and last on their fiscal impact on deficits, debts, and misplaced solvency fears, rather than on full employment, price stability, and other public purposes. They never considered a range of PCS options and their possible wide range of impacts on economics, politics, and the federal financial system, as well as on the debt ceiling conflict.

Not even Brad Plumer. quoting the acute Jack Balkin, is thinking, for example, about very high value PCS, in the $60 T or greater range, as options that might liquidate the debt completely, and change the whole structure of how fiscal policy could be implemented. In addition, no one was thinking about the relationship between the general PCS authority and the broader government context including the Congress and the Fed.

As I've said in another place, a $60 T solution would allow Treasury to harness the authority of the Fed to fill the TGA (the public purse), so that Treasury need never issue debt again for the next 15 – 20 years, ample time to reconsider the unwise and damaging decision made by Congress in gold standard days to make the Fed independent of the Executive Branch and unaccountable to the public. That solution would also make the debt ceiling issue a dead letter, to the point where that legislation could easily be repealed over the next few years, since no one would expect to use it again.

When one proposes a very high value PCS solution, almost the first objection, after getting over the shock of hearing or seeing the proposal, is that either repayment of the debt, or deficit spending using seigniorage rather than debt issuance would be inflationary. That consideration made it into the mainstream posts. I'll consider the inflation objection at length in my next post. However it's also already been considered and evaluated in past writings by myself, and also by Scott Fullwiler. The bottom line, however, is that debt repayment won't be inflationary; and that deficit spending using seigniorage, also won't be inflationary in itself.

Any inflation effect will result from unwise and excessive Congressional deficit spending past the point of full employment. It will have nothing to do with using seigniorage credits rather than credits accumulated through bond sales for deficit spending.

If the mainstream had considered a wide range of PCS options, then one among them would have caught the broader PCS story, not that PCS could help the President over his current hump with the Republicans; but that it can remove many of the Treasury's gold standard-based constraints and, in the process, free up progressive advocates to push for solutions to most of our acute policy problems without always having to fight the “we can't afford it, because we're running out of money and what will we do about the burden on our grandchildren,” battle. If used properly, PCS can end all current justifications for austerity, debt, and deficit reduction in public spending. It can free progressives to build the Green New Deal and with it a bright future for America. The mainstream bloggers have missed all that by their narrow focus on the Trillion Dollar Coin and the debt ceiling rather than on PCS and its more general implications and potential significance if used.

Why?

One important question, is why the mainstream bloggers who are interested in the PCS idea haven't explored options other than the band-aid option of a few trillions in coin seigniorage to get by the debt ceiling for a little while. Why couldn't they see PCS more broadly than they do and explore the idea to begin to understand the likely impact of it generally as well as alternative PCS options. What's holding them back? Is it the impact of busy lives and hectic days? Is it the time they spend on the telephone or in email communications with other mainstream bloggers and insiders in the Washington/New York village? Is it that they consciously or unconsciously shy away from ideas that might lead them to advocate policies that would actually change the system of political economy we have now?

I cannot say. But what I do know is that their examination of platinum coin seigniorage in the context of the debt ceiling crisis, and otherwise, is too narrow and superficial too serve us well. We need deeper thinking and more detailed exploration of this relatively new idea, and its implications.

But the sudden waves of blogging by the mainstream when debt ceiling crises approach, aren't giving us any of that. What they're giving us instead, is an echo chamber treatment of the TDC, not the daring explorations of a new idea, very high face value platinum coin seigniorage, that we have a right to expect from a free press.

(Cross-posted from New Economic Perspectives.)

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Comment Preferences

  •  if for no other reason (4+ / 0-)
    Recommended by:
    elwior, HoundDog, Ian S, Larsstephens

    talking about the large coins, makes the smaller more possible.
    and every other option is better then letting the republicans call the shots.

  •  This whole thing (0+ / 0-)

    Is just stupid, one step away from wack job conspiracy theory.  There will be no trillion dollar coin.  Lets stop wasting time on magical thinking.

  •  This is what I was talking about on your (6+ / 0-)

    other diary. There are plenty of important ramifications that flow from PCS.

    Another excellent job!

    Might and Right are always fighting, in our youth it seems exciting. Right is always nearly winning, Might can hardly keep from grinning. -- Clarence Day

    by hestal on Fri Dec 14, 2012 at 05:28:41 PM PST

  •  I'll be very interested in reading your next post (2+ / 0-)
    Recommended by:
    elwior, HoundDog

    How would this effect the international exchange rates?

    I imagine that the injection of $60T  would devalue the dollar relative to other currencies and to oil pricing.

    •  Read the post (3+ / 0-)
      Recommended by:
      Larsstephens, psyched, offgrid

      There's no injection of $60 T! The $16 T in national debt payoff is just a swap of debt instruments for reserves, And the remaining $44 T covers deficit spending for 15 - 25 years; so it only gradually added to the economy. If it's spent well and adds value to the economy, there will be no devaluation of the dollar.

  •  A Trillion Dollars of Platinum is 26,000 Tons. (2+ / 0-)
    Recommended by:
    HoundDog, Larsstephens

    That's about 106 years' global sales at 2010 rates.

    Seems like there'd be logistical problems obtaining enough in any short period of time.

    I take it the platinum would be only a trace element in a trillion dollar platinum coin; in which case why bother with it at all?

    We are called to speak for the weak, for the voiceless, for victims of our nation and for those it calls enemy.... --ML King "Beyond Vietnam"

    by Gooserock on Fri Dec 14, 2012 at 05:44:46 PM PST

  •  While I don't necessarily agree with all of your (4+ / 0-)
    Recommended by:
    FG, wonkydonkey, Larsstephens, psyched

    points, you've certainly advanced a thought provoking, well written, and creative set of proposals here, Letsgetitdone, so I have to tip and rec your brilliant post, for sheer audacity, and talent, even though I have reservations about some parts of your arguments, and skepticism about the possibility President Obama would pursue the second part of your argument, after already announcing the administrations senior most lawyers consider it unconstitutional.

    After such praise I hope you will take well, my additional reactions  that you are probably confusing most readers by mixing the two levels of your argument.  

    I find the first part of your argument, using PCS to buy time, or even overcome destructive GOP threats to bring our government to its knees with the debt limit if we do not agree to devastating cuts to Social Security, Medicare, and Medicaid programs, to be interesting from a purely Machiavellian negotiating stance, regardless of its constitutionality, and think it is regrettable that our President has let qualms from his legal advisors box out a negotiating maneuver that could allow President Obama to make good on the "audacity" part of his "audacity of hope" campaign promises.

    My concern is that in your eagerness to jump over this first potentially plausible  and powerful first half of your argument  to advance the second more ambitious part -- that of transcending of "gold standard hangover' assumptions to finance a new golden age of expanded progressive spending confounds  the two dimension of your argument to the detriment of the perceived credibility of the first.

    This is the kind of delightfully creative and provocative proposal  that's great fun for PhD level economics seminars but likely to raise credibility issues for most politicians who will not wish to be seen so far out on the "thin ice."

    My hope is that now that you've planted a seed for us all to think about, and perhaps, "got this  second more ambitious part "out of your system," you will write several post concentrating on both advocating for, and  spelling out exactly how President Obama could use PCS in the debt limit face-off -- both as a threat for bargaining power, and perhaps, even as a real tactic to buy time in the budget standoff.

    The way that seems most likely to get peoples attention would be to acknowledge it would be radical, and perhaps even precipitate a constitutional crisis, but that if the GOP seriously continues to do tremendous damage to our national and global financial systems by blackmailing our nation with their extremist demands for massive cuts to entitlement programs the President may have not choice but to consider every legal response to keep our government payments going, and prevent a potentially destabilizing global financial collapse.

    In this context your proposal that we mint one, or several $1 trillion coins, to prevent the artificial imposition, and perhaps even unconstitutional shut down of the executive branch by the legislative branch deserves more attention, and discussion.

    If we could generate a healthy discussion and get some of our smartest and trusted Democratic economic voices convinced this could be a plausible, or realistic possibility,  then you could start stretching out the merits of the second part of you argument which I understand, but also feel would be such a radical departure from conventional assumptions as to require much, much greater public endorsement for from both courts, voters and legislatures.

    Also, I do either do not understand how such an an expansion of the money supply beyond our real productive capacity would not be inflationary.

    Given the legislative intransigence by Republicans on raising taxes on the wealthiest, I support a sustained moderate inflation of approximately 2% to 3% as a way of rebalancing the excess concentration of wealth, and believe this is inevitable to some extent.

    But, redistributing wealth with tax rates would be more progressive as inflation is going to transfer wealth from all saver to consumers, hurting those on fixed income and middle class savers on pensions or Social Security, unless we get more generous COLA, (we are debating going in the wrong direction.)

    But, notice that if we are unable to win over public support with this vastly simpler and more conventional argument about redistribution of wealth with taxation, what makes you believe we have any chance whatsoever of selling this much more radical second part of your argument, that even Democratic legal advisors to Obama suggest may be unconstitutional?

    As my former significant other's daughter like to say at this point in conversations, "whatever...."

    To be brief, (lol) the positive potential I see in the first part of your argument is if the GOP are going to be so destructive as the threaten such great harm to our nation, people, and global financial system, then the President ought to say, to heck with uncertainties about unconstitutionality, let the SCOTUS determine that, in the short-term he will keep out country's finances with PCS coinage if necessary and pound the stuffings out of the GOP daily from the bully pulpit until they relent.

    Let's concentrate on explaining why this would not only be perfectly  possible, and constitutional, but heroic, and smart.

    If we can achieve that much, then lets stretch it out as far as we can.  

    Thanks for this thought provoking post.  I hope you recognize that I wouldn't spend this much time challenging certain parts of your argument, if I didn't see merit in the rest of it.  

    Very well argued and written.  

     

    The means is the ends in the process of becoming. - Mahatma Gandhi

    by HoundDog on Fri Dec 14, 2012 at 05:59:20 PM PST

    •  There will be no platinum coins. It is interesting (0+ / 0-)

      and thought provoking but it won't happen. As you said, too many people believe it's illegal or even unconstitutional.

    •  Sorry (3+ / 0-)
      Recommended by:
      Larsstephens, psyched, HoundDog
      . . . after already announcing the administrations senior most lawyers consider it unconstitutional.
      I may have missed something; but I haven't heard that any senior lawyers from the Administration say that Minting a Platinum Coin with an arbitrary face value like $60 T would be unconstitutional. As far as I know, they've never mentioned it at all. What they have said is that their challenging the Constitutionality of the debt ceiling would not work. I agree with that, because I know of two alternatives including PCS which the Administration can use to avoid default.

      AS the rest of your reply, I think you need to read my post more carefully. I'm not proposing any more injection of net financial assets into the privates sector than Congress approves in the normal course of its budgeting. The debt patoff can't be inflationary because the debt instruments themselves are more inflationary than the reserves the Government would replace them with. The other $44T would be deficit spent into the economy over 5- 25 years as Congress decides. There's no empirical evidence that spending that money into the economy without floating debt is any more inflationary than doing it along with debt. In fact, that the evidence that exists points in the other direction.

      •  About a month ago, I read an article about the PCS (0+ / 0-)

        and  buried deep within the article was a paragraph explaining why President Obama was unlikely to pursue such an approach which mentioned his legal advisors told him it was unlikely to survive a constitutional test.

        It was not really an announcement, as much as a report of off the record inside comment, sorry I miscommunicated that part.  I'll see if I can find the article later this afternoon.

        I remember though thinking it seemed like a weak argument, that wasn't convincing, and I was annoyed if Obama rejected the idea on such a flimsy basis.

        I caught the aspect of your proposal that the administration would not be injecting any funds into the economy that were not approved of by congress, which is an excellent point politically, which may in fact, be a tipping point factor that might convince our cautious president he is not really doing anything other than keeping the government solvent to spending funds already authorized by the legislative branch.  

        In one of your next posts I think you should emphasize this point to refute the concern that this would be overreaching by the executive branch, infringing on the legislative's branch control over the budget.  It seems to me that one might be able to argue the opposite.  That once the legislative branch has authorized spending programs, then it is the executive branch's duty to implement and execute those plans, so the whole debt-ceiling constraint becomes a constraint on the executive branch's ability to fulfill this obligation.  

        If the legislative branch issue two contradictory sets of bills, they seem to me to be the party responsible for creating the extraordinary situation that requires an extraordinary response by the executive branch -- which set of laws does the executive branch implement?  

        The strongest argument seems to me to be using another capacity already authorized by the legislative branch - that of PCS coinage to maintain continuity of spending and payments, until the legislative branch gets its act together, is actually the most conservative, and most consistent with the separation of powers.

        With regard to your last point on inflation, I'm still puzzled.  My memory of my macro-economics classes was that expanding government debt is thee the traditional way of expanding money supply, and if done so beyond the expansion of the "real production" in the economy the result is inflation.

        So, I understand that you are suggesting that expanding the reserves is not doing this but only enabling government spending authorized by congress.  

        But, this still seems potentially inflationary to me.  While I support the idea of Keynesian  stimulus during times of great recession, and acknowledge that government spending is a direct component of GDP, it still seems suspicious to me that this be counted fully as equivalent of an expansion of "real production."  

        If we were to inject $60 trillion of deficit spending into the economy over some period of decades, would we not expect inflation of "hard assets" such as real estate and commodities as greater numbers of dollars are chasing a finite number of "real goods?"

        I accept your argument that "spending that money into the economy, without floating debt" might be less inflationary that "doing it along with debt," but it would seem to me that both would have some potential for inflation.

        I'm reminding of the text book examples of Keynesian economics where critics suggested that we hire people to dig holes then then hire them again to fill them up.  But at least they have wages that create consumer demand which then stimulates real production.

        But, how much better it would be to have them to real productive work such building productive infrastructure such as roads, bridges etc.  

        I've used this argument to suggest that the President infrastructure bank or even just domestic spending on Medicare, Medicaid, and Social Security have higher economic multipliers than military spending just on the basis that the spending is done domestically, and health care expenditures have "real economic" value as opposed to leaving military hardware, or exploded bombs overseas. (Whatever "utility" one attributes to "feelings of greater security" does not seem to me to count as much as a "real productive" assets or good, - but I'll admit I'm struggling to understand this distinction more clearly.)

        So, perhaps, one could argue that anything people are willing to spend money on is a "real" good or asset, but this doesn't seem right to me.

        Here I'll admit I'm beyond the edge of my understanding of economics.  

        But, as I think about it more, would it not be fair to say the second part of your proposal would be a subset of Keynesian stimulus plans? Perhaps, a more clever one, but likely to be opposed by everyone who already oppose Keynesian stimulus?  

        BTW, I started the Keynesian Kossacks group thinking we need such stimulus now to counter the "austerity bomb" impacts of excess cuts backs to government spending - so I'm certainly not opposed to it. But, I've always thought we do incur a trade-off of  some degree of inflation risk that we should be willing to make up for by cutting back on such spending during times of stronger "natural" economic expansion. ?

        Now, I'm wondering if I should be republishing your PCS proposals and analysis which I have learned a great deal from in the Keynesian Kossacks group?

           

        The means is the ends in the process of becoming. - Mahatma Gandhi

        by HoundDog on Sat Dec 15, 2012 at 08:37:07 AM PST

        [ Parent ]

  •  First thing (1+ / 0-)
    Recommended by:
    wonkydonkey

    we ain't go no free press! It is all bought and paid for (even the ones we like!) It comes with a neat corporate package. Imagine if you will, how pissed those CEOs would be if they thought they would lose control so easily!

    Second thing: reality can only change when a majority of folks agree it has changed. It will take a LOT to get people to understand how easily it would be to change the debt reality after being hammered with it all our lives.

    American Television is a vast sea of stupid. -xxdr zombiexx

    by glitterscale on Fri Dec 14, 2012 at 06:55:15 PM PST

    •  All you need to do is... (2+ / 0-)
      Recommended by:
      Larsstephens, glitterscale

      ...explain that that the good old USA "hit the lottery" and everyone would understand and get on-board.

      Or in a slightly more sophisticated common analogy, that in the Gene Roddenberry Star Trek future, mankind had "transcended the need for money," based on the fact that the society was so productive there was enough for everyone, and that any residual usage was merely "score-keeping."

      Utopian Prosperity is very appealing, especially to those suffering under the current man-made financial near-collapse.

      "It's never too late to have a happy childhood."

      by wonkydonkey on Fri Dec 14, 2012 at 07:56:15 PM PST

      [ Parent ]

    •  Sorry about that (2+ / 0-)
      Recommended by:
      Larsstephens, psyched

      But I don't see what this comment offers to the discussion. Go try to depress some other comment thread.

  •  Excellent discussion. (0+ / 0-)

    I started looking into the issues involved in how we handle national currency about five years ago in response to articles by Henry C.K. Liu in which he discussed what I am now seeing as the basic premise of MMT: that fiat currency is in fact "backed" by a government's power to levy taxes.  This research was complimented by some work I was doing on the American pre-revolutionary period and the origins of the Bank of England, as well as the novel I was writing set during the Depression.  The combination of all this reading brought me to much the same conclusions as you set out: that the current American fiscal crisis is a phantasm created by interaction between sovereign and banks which has never been updated to reflect monetary realities in the post Gold Standard era.  The structure of world banking, in fact, continues to follow systems designed in the seventeenth century. These systems can easily be gamed by modern computer algorithms and were never designed to deal with currency volumes in which error or fraud of .01 percent could be significant.

    Historical experience in the Great Depression proved that the inelasticity of the Gold Standard was dangerous to the functioning of modern economies.  Attempts to extract repayment of massive sovereign debts incurred in WWI did no good for the creditors and plunged the world back into war.  What appears good for bankers and investors is not necessarily good for society, and in the long run, is not even good for bankers and investors.  Governments before the Age of Piracy knew this well, and instead of granting control over currency to "independent banks" kept the management of currency as one of the fundamental rights of state, right up there with "monopoly on the use of force".

    Our government needs to stop wringing its hands and whining about how helpless it is to deal with the economy.  There are plenty of things that could and can be done, if we just get over outmoded and delusional ideas.

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