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Yesterday, Ezra Klein reported in the Washington Post that:

The Treasury Department will not mint a trillion-dollar platinum coin to get around the debt ceiling. If they did, the Federal Reserve would not accept it.

That’s the bottom line of the statement that Anthony Coley, a spokesman for the Treasury Department, gave me today.

“Neither the Treasury Department nor the Federal Reserve believes that the law can or should be used to facilitate the production of platinum coins for the purpose of avoiding an increase in the debt limit,”
he said.

The inclusion of the Federal Reserve is significant. For the platinum coin idea to work, the Federal Reserve would have to treat it as a legal way for the Treasury Department to create currency. If they don’t believe it’s legal and would not credit the Treasury Department’s deposit, the platinum coin would be worthless.

This statement from Ezra Klein would have us believe that the Federal Reserve is an independent agent in this matter, and that it can refuse to credit the deposit of a newly minted high face value proof platinum coin, if the Treasury makes such a deposit. It also assumes that if the Treasury insisted on the deposit of the coin, that the Fed would be in a position to go Court to contest that; that it has a choice in the matter.

I don't believe that either of these things are true. I also think they are just a rationalization, so the President, who most probably decided this can pretend that this decision isn't on him; or at least can be partially blamed on the Fed. Let's review some critical aspects of the relationship between the Fed and the Treasury.

Fed Independence?

First,  here are a some quotes from the US Code and comments.

"…banks, when required by the Secretary of the Treasury, shall act as fiscal agents of the United States; and the revenues of the Government or any part thereof may be deposited in such banks, and disbursements may be made by checks drawn against such deposits."12 USC 391
The coins are legal tender, and disbursements can't be made unless a deposit is credited. So, both imply that all banks that receive such deposits must credit them, and that the Bank officers at the New York Fed cannot refuse to credit the face values of a deposit of coins by the US Mint in its Public Enterprise Fund (PEF) Account. As for the Board of Governors, including the Fed Chair, forbidding the New York Fed from crediting the deposit, there is this part of the USC:
". . . wherever any power vested by this chapter in the Board of Governors of the Federal Reserve System or the Federal reserve agent appears to conflict with the powers of the Secretary of the Treasury, such powers shall be exercised subject to the supervision and control of the Secretary." 12 USC 246
The US code says that the Secretary has supervision and control, not the Fed Chair, or the bank officers at any of the banks, however exalted, within the Fed system. So, if anyone in the Fed system wants to go to Court about this; it's hard to see that they could get standing even to file an injunction. In fact, if they attempted to get an injunction and to sue after a Treasury order prohibiting them from doing that, apparently the Treasury Secretary could fire the offending parties if “supervision and control” means what it usually means.

In short, the Platinum coin is still on the books. The legal rationalizations of the Treasury and the Fed are a smoke screen to obscure the President's deciding not to use the authority he is granted by the Platinum Coin Seigniorage (PCS) legislation. And finally the coin certainly would work if the President decided to use it, provided he ordered the Secretary to mint and have a platinum coin deposited in the Mint's PEF at the New York Fed; and provided the Secretary sent instructions to the New York Fed and the Board of Governors ordering that the coin be credited and no attempts be made to contest the Secretary's action in a Court of Law.

The Wrong Kind of Coin

After a hiatus of 16 months the Trillion Dollar Coin (TDC) surfaced again in the mainstream blogging and MSM World at the beginning of December. The outbreak of posts and discussions was fairly intense as people began looking beyond the “fiscal cliff “crisis and started looking ahead to the debt ceiling fight to come. During the second half of December however, posts and commentary slowed as we got closer and closer to the “cliff,” and most commentary focused on that.

But at the beginning of the New Year, after the 'cliff” was partially deflated, new posts from mainstream bloggers on the possibility of minting a Trillion Dollar Coin (TDC) to avoid the debt ceiling appeared, including a post from Paul Krugman. In addition, Jerrold Nadler (D-NY) became the first Congressman to advocate for the TDC to get around the debt ceiling, the TDC was suddenly ubiquitous on MSNBC, and began appearing on other networks as well.

The ground swell for the TDC continued through the first week of January and kept growing larger and larger facilitated by the #minthecoin twitter campaign. The hashtag #mintthecoin was originated By Stephanie Kelton of the Economics Department of the University of Missouri at Kansas City. Joe Wiesenthal, blogging at Business Insider, picked it up, used it to name a White House petition, and marketed a viral petition drive urging the President to mint a TDC and use it to pay down debt so the debt ceiling could be avoided.

The twitter campaign became a phenomenon and a trending topic, accompanied by more and more blog posts across the political spectrum, both pro and con, about using the TDC. Signatures on the petition grew fast, finally resulting in questions at White House news conferences about the TDC, asking whether the President was going to use it or had considered it.

Increasingly, after January 5th, the platinum coin was everywhere even getting covered by the Colbert show. Finally, on June 12, as the web frenzy continued to grow and after a very notable panel discussion of Platinum Coin Seigniorage on Chris Hayes's Up show, including both Wiesenthal and Kelton, among others, this past Saturday morning at MSNBC, the Treasury and the Fed tried to put an end to speculation by announcing that the Administration would not mint the coin.

So, now the web echos with cries that the platinum coin is dead, some of the cries are joyful. Some of them are angry. Perhaps they're right. Perhaps the coin is dead. But perhaps also it will come back again, in a new guise, when conditions are right. How can that be?

Well first, we need to recognize that the TDC, with its intense and frenzied web-based campaign was based on the wrong coin and the wrong cause. The cause or the problem it was addressed to was getting past the debt ceiling by creating some head room below it with the seigniorage proceeds. After that, the TDC bloggers envisioned that deficit spending would continue to require issuing debt instruments, and that there would be no further “disruption” in the normal way of doing things, and also that the President would cope with the coming sequester, and continuing resolution (CR) conflicts separately.

So, the TDC, even if used, would really change very little. It wouldn't stop the Republicans from pursuing spending cuts in entitlements and important discretionary programs. It wouldn't change the fundamental drive for austerity in both parties, fueled as it is by the view that “national debt” is both frighteningly large, and also unsustainable. So, at best, the TDC was a tactic to put off the day of reckoning with the Republicans, and perhaps to use the law authorizing it as the basis for a swap with the Republicans of the PCS legislation for the debt ceiling law, a very silly and odious idea proposed by a mainstream blogger, wanting to return the system to “normal” but not change it.

Considering this background, it is easy for the President to say that we won't use PCS. Maybe not as easy he would have liked. But still the TDC was only a tactic. The President can abandon it and talk about other tactics, or his apologists can talk about his desire to avoid default by having a government shutdown that will break Republican resistance, as President Clinton was able to do. If they and he can do that for long enough, then the President can keep Democratic Congresspeople in line for as long as it takes for him to make his “grand bargain” for austerity with enough Republicans to join with the supine Democrats to pass it.

Even though I have blogged more frequently about PCS than anyone, I have never been for minting one TDC and returning to normal Treasury/Fed procedures for deficit spending. I have always proposed substantial and significant change in the financial system, change that would end with paying off the national debt, and with destroying the underlying political rationale for austerity based on the debt and the related idea of fiscal unsustainability.

During the whole current TDC campaign I have blogged constantly about High Value Platinum Coin Seigniorage (HVPCS) and its potential for changing the fiscal and political landscape and destroying the basis for austerity politics, while changing the game radically for progressive attempts to create greater economic and social justice. I referred to HVPCS as the big story the mainstream was missing, and also as game-changing PCS that would change the context of politics.

I believe that if the MSM bloggers hadn't set up one of their usual “only talk to fellow villagers” echo chambers, but instead had embarked on an honest discussion of PCS options, they would have ended with a groundswell of support for HVPCS to fight austerity and that idea, since it is more strategic than tactical, would have been much harder for the President, Geithner, and Bernanke to dismiss, after a campaign that had identified it as the way out of austerity for the United States.

The President must, if he's going to be successful in making the “grand bargain” continue to present himself as preferring not to make serious cuts to entitlement and other valued domestic programs, unless the Republicans “make him do it.” To the extent possible, the Democrats who will support him, also want to deny responsibility for the actions they will take. For the President and his Democrats to be seen as forced into the “grand bargain,” the President cannot be seen as acting to take an important way out of the austerity trap “off the table.” And that is what he would have had to do if the TDC campaign had been replaced with an HVPCS campaign sold as an answer to austerity.

The MSM and the blogosphere generally have missed the chance to generate such a campaign with the really heavy pressure it would have placed on the President and the Democratic Party. That is its failure; yet another disservice to the American people by the MSM Press.

The Right Kind of Coin

I've been blogging about the right kind of coin for a long time now, and very frequently since the latest wave of PCS began in December. That kind of coin is a platinum coin with a face value of $60 T. Why $60 T? Because that's the face value needed to pay off the national debt, and to cover deficit spending for 15 – 25 years, enough time to educate people about the nature of fiat money and the desirability of changing the current financial system so that the Federal Reserve is reorganized as part of the Treasury Department, and the Treasury's authority to create reserves as it spends, without either debt financing or seigniorage, is recognized as the way things ought to be done.

The idea that after Congress appropriates money for Federal deficit spending, that spending can only occur if and when the Treasury can raise the money, is a hangover from gold standard days and ridiculous for a fiat sovereign government like the United States. The authority to spend should be delegated by Congress to the Treasury at the point appropriations are approved.

Appropriations are a mandate on the Executive; that mandate, in a sane nation, would be accompanied by the delegation of the authority to fulfill the mandate. That is the system we should eventually have because it is the only one that makes any sense and that can keep both the Executive and Congress accountable for their actions.

But until Congress passes legislation creating that system, it ought to be recognized by all that the PCS legislation is on the books, and that for the President not to use it to fill the public purse with enough funds to banish the underlying fiscal conditions that underlie austerity politics, the national debt, and the ability to cover the deficit for a long time to come, is inexcusably corrupt, fiscally and economically irresponsible, and completely opposed to the public public purpose that the President is supposed to serve.

So, I want to tell the President that for as long as the PCS law is on the books, and austerity is impending, he has the duty and the obligation to reject it and to mint a game-changing PCS solution using a very high value platinum coin, that after it is credited by the Fed, will make it very plain that there is no need for austerity, but that there is a need for whatever deficit spending Congress needs to appropriate, and he needs to implement, to put America back on the road to the economic and social justice we ought to be pursuing as part of a Green New Deal.

I call on him to mint that $60 T coin now. And if he fails to do that; and instead, along with the Democrats, goes ahead with his plans to impose unnecessary austerity and sacrifice on most Americans other than the wealthy, in the face of his ability to create financial plenty, then I, and others who I am able to persuade about game-changing HVPCS, will do all we can to place the blame where it belongs for “the great betrayal,” and to see that Congresspeople who join in the “grand bargain” travesty of justice pay for it at the polls!

But before we get to that point, I call on others who want to see an end to austerity join me in beginning again to blog, comment, facebook, and tweet about PCS; but this time to forget about the TDC, which was always the wrong coin, and to focus on #minttheHVPC instead. That is up the ante! Make this about ending austerity, and using the right platinum coin to create the political space needed for doing it!

Forget about them taking PCS off the table! We're putting it back on the Table! Make 'Em Mint the HVPC! Make 'Em Do It!

(Cross-posted from Correntewire.com.)

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Comment Preferences

  •  I favor a chocolate coin. Mint flavor. n/t (6+ / 0-)

    Guns don't kill people...people with GUNS kill people.

    by thestructureguy on Mon Jan 14, 2013 at 08:25:16 AM PST

  •  Yep, you can do a lot in 15-25 years. (2+ / 0-)
    Recommended by:
    Nada Lemming, doc2
    I've been blogging about the right kind of coin for a long time now, and very frequently since the latest wave of PCS began in December. That kind of coin is a platinum coin with a face value of $60 T. Why $60 T? Because that's the face value needed to pay off the national debt, and to cover deficit spending for 15 – 25 years, enough time to educate people about the nature of fiat money and the desirability of changing the current financial system so that the Federal Reserve is reorganized as part of the Treasury Department, and the Treasury's authority to create reserves as it spends, without either debt financing or seigniorage, is recognized as the way things ought to be done.
    Au contraire, I think 15-25 years of that would be sufficient to reduce Earth's civilization to smoking ruins.  

    You know, I sometimes think if I could see, I'd be kicking a lot of ass. -Stevie Wonder at the Glastonbury Festival, 2010

    by Rich in PA on Mon Jan 14, 2013 at 08:34:38 AM PST

    •  The smoking ruins would be the (5+ / 0-)

      Banker's plan to suck our life-blood and keep us, yea! even unto our great-great-great-grandchilden, in debt.

      For the world, for the US, it would be a boon.


      Markos! Not only are the Gates Not Crashed, they've fallen on us. Actual Representatives are what we urgently need, because we have almost none.

      by Jim P on Mon Jan 14, 2013 at 09:12:21 AM PST

      [ Parent ]

      •  If the supply of money is unlimited... (3+ / 0-)
        Recommended by:
        doc2, Theston, Aquarius40

        ...then how would goods and services be allocated in the economy?  

        You know, I sometimes think if I could see, I'd be kicking a lot of ass. -Stevie Wonder at the Glastonbury Festival, 2010

        by Rich in PA on Mon Jan 14, 2013 at 09:34:46 AM PST

        [ Parent ]

        •  A rhetorical question if there ever was one ... (0+ / 0-)
        •  Exactly like they are now (4+ / 0-)

          Money in circulation wouldn't be unlimited.  It would still result from Congressional appropriations.  Nothing would be spent unless authorized by Congress.

          "[W]e shall see the reign of witches pass over . . . and the people, recovering their true spirit, restore their government to its true principles." Jefferson

          by RenMin on Mon Jan 14, 2013 at 10:56:07 AM PST

          [ Parent ]

          •  No, it would of course be unlimited. (0+ / 0-)

            If the purpose of the bulk of the $60T is to pay off debts, it would be released via creditors into the economy.  

            You know, I sometimes think if I could see, I'd be kicking a lot of ass. -Stevie Wonder at the Glastonbury Festival, 2010

            by Rich in PA on Mon Jan 14, 2013 at 11:21:33 AM PST

            [ Parent ]

            •  Not the purpose of the $60 T (8+ / 0-)

              $16.4 T of it would be paid off. The rest is for covering deficit spending so no more debt would be issued. Inflation possibilities are covered here. Bottom line, no chance of inflation due to the use of seigniorage financing rather than bond finance.

              •  And Bond finance GUARANTEES inflation. n/t (3+ / 0-)
                Recommended by:
                katiec, cynndara, Calgacus


                Markos! Not only are the Gates Not Crashed, they've fallen on us. Actual Representatives are what we urgently need, because we have almost none.

                by Jim P on Mon Jan 14, 2013 at 12:12:28 PM PST

                [ Parent ]

              •  We may not want to pay it off (2+ / 0-)
                Recommended by:
                wigwam, RenMin

                I think there are arguments for the federal government providing an ultra safe non-bank issued means of savings that pays interest.  I guess the FDIC insurance does that also, but maybe government bonds are a better choice.  I don't really know.

                It is an aspect of the overall idea of a coordinated monetary, fiscal, and economic policy.  Congress can authorize the Treasury to issue a certain minimum and maximum amount of debt as a tool of policy rather than a requirement.  In this scenario the debt limit is a meaningful part of fiscal, monetary, and economic policy as it sets how many bonds Congress wants the public to hold and anything beyond that the Treasury would spend via reserves.

                •  Remember (1+ / 0-)
                  Recommended by:
                  RenMin

                  that "the public" in this context means, "The Ultra-Rich".  That being the case, the entire scam is mainly a way of maintaining the wealth and privilege of a small number of extremely wealthy families AT THE PUBLIC EXPENSE.  You might as well grant them coats of arms and call them aristocrats.

                  •  That is the argument to have... (1+ / 0-)
                    Recommended by:
                    Calgacus

                    There are arguments for and against.

                    But, one small problem is that you are still buying the premise ie PUBLIC EXPENSE.  There is no public expense to creating money unless is creates inflation. So, public expense is not the argument.  Is it worthwhile to be deploying money to those who already have money via interest payments on treasury bonds?  You have made a cogent argument that it is not.  Would it be better just to insure savings more?  Could it be mitigated by a higher tax on interest income on government securities at higher tax brackets?  Perhaps an exemption on the first several thousand dollars in interest or so?

                    But, the idea is that we should be having a debate to decide the public purpose of Treasury securities rather than simply saying that all deficits will be financed by the issuance of Treasury securities.

                •  Exactly! it's about borrowing-to-coining ratios? (3+ / 0-)
                  Recommended by:
                  RenMin, Calgacus, Donner

                  Currently we cover roughly 1% of our tax deficits through coining money and 99% through borrowing money.  Platinum Coin Seigniorage removes the need to stick with that ratio, which we have no reason to believe is optimal.  But, even so there still be reasons to sell bonds:
                  * To give the Chinese a nondestructive way to recycle their dollars.
                  * The give pension funds a place to invest.
                  * To provide a place to invest the SS Trust Fund.
                  * To provide a buffer against inflation (according to folks like Krugman)
                  * To provide a mechanism for adjusting interest rates.

                  There are lots of plausibly good reasons to continue to sell Treasury bills and Treasury bonds.  The question is how much and how many.  I don't claim to know the optimum ratio of coining to borrowing (selling of bonds).  IMHO, that's a question that should be handles by the professional economists at the Treasury and the Fed.

                  •  Nah, we just need to think through the logic (0+ / 0-)

                    of a fiat currency.

                    How can an infinite unit of account be a good store of value?

                    Seems odd to even expect such a thing.

                    Seems to me that an infinite thing's strength is in velocity.

                    A store of value in the human body is known as a blood clot.

                    And the economists at the Fed have pretty much sucked, I think we need  to be our own best advocates.

                  •  Hi, wigwam (2+ / 0-)
                    Recommended by:
                    katiec, wigwam

                    I think the Fed can fulfill your purposes by paying interest-on-reserves. That's really all that's needed. Bonds need never be issued. They're a risk-free investment; so the interest on them is "welfare."

                    •  But, we don't have to win that argument (1+ / 0-)
                      Recommended by:
                      katiec

                      The argument over the efficacy of bond sales can wait and be addressed down the line.  The matter of near-term importance is to establish that there is a legitimate alternative to bond sales and to establish the precedent of using it to cover more than 1% of the deficit.  Once we win that argument, the quibble over the optimum amount of bonds to sell becomes something of an academic matter.

                      In fact, at the moment, we should probably sell all the bonds we possibly can --- after all, the effective interest rate is now negative.

          •  Wow, how many times do people (0+ / 0-)

            have to repeat this point?

            if necessary for years; if necessary, alone

            by SouthernLiberalinMD on Tue Jan 15, 2013 at 04:13:23 PM PST

            [ Parent ]

        •  The capability (7+ / 0-)

          to  create money is unlimited, but the supply of money in the private economy must be limited to prevent inflation. In particular, don't deficit spend past full employment! The credits the coin produces primarily sit there, after the debt is paid. The reason why you want them to sit there is so people can't be fooled into thinking the Government can run out of money. Minting the Biiiig coin is about revealing the truth, which can best be done by actually producing and showing people the money!

        •  The supply of money is already unlimited (5+ / 0-)

          See QE, QE1, QE2, QE3... and it sure as hell isn't being allocated to any part of the economy that isn't bankers.

          And anyway, the supply of money wouldn't be unlimited under US control, it would be limited by Congressional Appropriations.


          Markos! Not only are the Gates Not Crashed, they've fallen on us. Actual Representatives are what we urgently need, because we have almost none.

          by Jim P on Mon Jan 14, 2013 at 12:11:38 PM PST

          [ Parent ]

          •  You noticed that too? (2+ / 0-)
            Recommended by:
            Calgacus, katiec

            The significant difference between the use of Platinum Coin Seigniorage and Quantitative Easing is the fact that Treasury bonds that the Fed owns still count toward the debt limit.

            That said, it looks to me as though nearly all of the money that was "pumped into the economy" via quantitative easing is sitting at the Fed in the reserves of the commercial banks and gathering interest for them.

            •  I agree that's the case (2+ / 0-)
              Recommended by:
              katiec, wigwam

              But the important things are the politics and the optics. As long as have to call the debt instruments "debt" progressive fiscal policy is crippled by the debt memes. That's why the biiig coin should be used to facilitate debt payoff and deficit spending.

              •  I agree that HVPCS would be optimal (0+ / 0-)

                That said, I'd be very happy with any use of PCS as a substitute for borrowing, if nothing else, simply to establish a precedent for such use, and to force people to realize that debt is not the only option.

    •  Only if you use (4+ / 0-)
      Recommended by:
      katiec, cynndara, psyched, Calgacus

      it use to feed unregulated businesses filled with fraudsters destroying the environment for the sake of private profits. On the other hand, if you spend it on programs devoted to the transition to sustainability you'll have a fighting chance to save the earth for future generations!

    •  We're already on track for (1+ / 0-)
      Recommended by:
      katiec

      civilization being in smoking ruins, or haven't you seen the climate news lately?

      I don't think HVPCS is likely to destroy civilization. The things which assuredly are going to destroy civilization are off the table of the national political discussion, apparently permanently, so I don't see why you're getting worked up over this.

      if necessary for years; if necessary, alone

      by SouthernLiberalinMD on Tue Jan 15, 2013 at 04:12:43 PM PST

      [ Parent ]

  •  This is where I'm at (9+ / 0-)

    Mint 20 of them.  Pay all the debt and put the fed out of business.   Then open a national bank like they have in North Dakota at the state level.   Shenanigans over.

    "I'm a Republican from the 80s". - The most "liberal" president in my lifetime.

    by Nada Lemming on Mon Jan 14, 2013 at 08:53:00 AM PST

  •  If we hit the debt ceiling (4+ / 0-)
    Recommended by:
    BlueDragon, RenMin, Aquarius40, cynndara

    (beyond Geithner's tricks) there will be a flood of legislation demanding basically every impound Obama imposes be reversed based on a) essential need, b) the Impound Act (which forbids spending less than Congress allocated, c) the 14th amendment issues and, yes, d) platinum coinage. I predict quite a judicial circus with different circuit courts coming out for different legal positions and a fast track to the Supreme Court.

    Really, though, platinum coinage is not the way to go. The government is the source of all current monies. Now that the country mostly uses electronic money, the government should be able to print electronic money, simply by instructing the Federal Reserve to credit their account. Platinum coinage works not because the platinum coins themselves are good currency (they're not very practical) but because technicalities of the law mean platinum coins could be used to do what the government really should do, create electronic money whenever the country needs it.

    •  I agree as do, I think, all MMTers but the (2+ / 0-)
      Recommended by:
      psyched, Calgacus

      value of PCS is in the optics. HOWEVER - if what has come out of the conversation about PCS is that the public understands fiat currency and the fact that we really are just talking about a spreadsheet/electronic accounting entry, then I think that's all to the good and I'm fine with making an entry and not minting a coin.

      "When in doubt, do the brave thing." - Jan Smuts

      by bunnygirl60 on Mon Jan 14, 2013 at 02:04:18 PM PST

      [ Parent ]

    •  Well, that's (2+ / 0-)
      Recommended by:
      psyched, Calgacus

      the point. A platinum coin when deposited in the Mint's account at the Fed is an instruction from the Mint mandating that the Fed credit its account with the face value of the coin. The diary shows the legal basis for that mandate.

  •  Completely counterproductive (4+ / 0-)
    Recommended by:
    Quicklund, doc2, Aquarius40, VClib

    Musing about the trillion dollar coin -- or even a 60 trillion dollar coin -- right now is akin to me dreaming about winning the lottery. It's really nice to dream about, but it's not going to happen.  And it would be insane for me make winning the lottery my financial or retirement plan, rather than focusing on something that I can do and can control with respect to my financial future.  

    That's kind of how I view this coin thing.  If you want to say, let's muse about what might have been, that's one thing.  I have no problem with that.

    I do have a problem with pretending that it's still a possibility.  There are some very very real issues coming up.  And the debt ceiling is only one.  The other two is whether the across-the-board cuts in the sequester are going to remain in place, and how much is the government going to take in, and spend, next fiscal year (the expiration of the continuing resolution).  And to the extent that discussion of the trillion dollar coin leads people to think they don't have to realistically face those issues, discussion of the trillion dollar coin is counterproductive.  

    This coin thing is not. gonna. happen.  Period.

    It might just be time to focus on what can happen over the next few months.  

    •  Except that you are wrong. The conversation is (4+ / 0-)
      Recommended by:
      katiec, psyched, cynndara, Calgacus

      incredibly valuable because it may be the first time since the Nixon Shock that the public has had any inkling of what it means to have a fiat currency and it may have broken through the thick heads of a few legislators that the government has available to it a tool kit which has been, so far, entirely unrealized. Maybe we don't mint the $1 T coin but maybe we do start looking at other answers, like high value PCS. Being "realistic" means using the tools we have available to meet the needs of the system which is in crisis. Pretending, as you propose, that one of those tools is "counterproductive" is like saying, "I need to get this screw into this piece of wood but I've decided that using a screwdriver is counterproductive." Sure, there are other ways to get a screw into wood but ignoring the screwdriver is just plain stupid. (And before I have to put this into a response, I am NOT saying you are, in any way "stupid.)

      That you and I are even having this discussion is a CLEAR indicator that the conversation has genuinely and irrevocably changed thanks in no small part to LetsGetItDone.

      "When in doubt, do the brave thing." - Jan Smuts

      by bunnygirl60 on Mon Jan 14, 2013 at 02:13:10 PM PST

      [ Parent ]

    •  I don't discuss the TDC (2+ / 0-)
      Recommended by:
      katiec, psyched

      I discuss only the $60 T coin. And you haven't addressed the points made in the diary about the $60 T coin and what it would do to fiscal politics.  In any case, the President can still mint that $60 T coin. He has the power, as I've shown above, and his failure to have it minted is another aspect of his failure to create conditions under which progressive politics can thrive. This President is aiming to cut the safety net and many other valuable programs that Democrats have put in place over the years, and he's going to do that for no good reason. I want people to know that. I want them to know that he has a legal alternative. That he can mint that $60 T coin and change the whole ground of fiscal politics.

  •  Worth discussing. I'd rewrite this in (2+ / 0-)
    Recommended by:
    Quicklund, BlueDragon

    half as many words, though, if I were the author. An important topic needs more punch and less "too long; didn't read" kind of reactions that it will get, imo.

    Short version of the essay, and the headline, if I understand:

    Minting the coin ends borrowing at interest.

    Follow-up with stats shows debt-service is actually 1/4 of our deficit, and will continue to be more or less that level forever. We're borrowing money at interest to pay off interest.

    The kind of thing any loan-shark would love.

    Without massive pressure -- hell, even WITH massive pressure -- I don't see any President going the sane route though. First rule of our entire political class: Don't hurt the Bankers. That's before even "protect the nation." As has been demonstrated for a long time now.


    Markos! Not only are the Gates Not Crashed, they've fallen on us. Actual Representatives are what we urgently need, because we have almost none.

    by Jim P on Mon Jan 14, 2013 at 09:10:24 AM PST

  •  $600,000,000,000,000 coin would be better since (1+ / 0-)
    Recommended by:
    BlueDragon

    It would go beyond debt and provide surplus for years to come. End austerity...start sybariticism!

    "If the past sits in judgment on the present, the future will be lost." Winston Churchill

    by Kvetchnrelease on Mon Jan 14, 2013 at 09:37:05 AM PST

    •  I want to give (4+ / 0-)
      Recommended by:
      katiec, psyched, cynndara, Calgacus

      people enough years to become educated about fiat money for them to make an intelligent decision about whether or not to fold the Fed into the Treasury. 15 years is enough  time for that. If they decide not to do anything, then they're telling us that people don't want the Treasury to have the printing power. So, in that case, use of PCS should be ended, and we can go back to debt financing. On the other hand, if they decide that printing through minting works fine then they can legislate the end of the Fed and give Treasury the right to create money out of thin air.

  •  Some progressives have the same view of... (3+ / 0-)
    Recommended by:
    doc2, Aquarius40, Deep Texan

    ...economics as some conservatives have about evolution: something to be decried in the face of evidence.  It's embarrassing to see presumably sensible people embrace the notion that creating fantastical amounts of nominal money would solve our problems, punishing the guilty while leaving everyone else unscathed, indeed better off.  At least a proposal to actually liquidate the wealthy and seize their assets recognizes that "assets" means more than just printing or coining without limit.

    You know, I sometimes think if I could see, I'd be kicking a lot of ass. -Stevie Wonder at the Glastonbury Festival, 2010

    by Rich in PA on Mon Jan 14, 2013 at 09:39:48 AM PST

    •  Why should the far right have a monopoly (3+ / 0-)
      Recommended by:
      Rich in PA, Aquarius40, Deep Texan

      on inanity? Screw that!

    •  Well, actually, the evidence so far... (4+ / 0-)

      indicates that the TCS would not affect inflation. Experts have concluded that it would be virtually identical in effect to the quantitative easing the Fed has already used. The latter has had no ill effect on our money and has probably helped the overall economy.

      Just another faggity fag socialist fuckstick homosinner!

      by Ian S on Mon Jan 14, 2013 at 12:47:23 PM PST

      [ Parent ]

    •  Not creating fantastical (1+ / 0-)
      Recommended by:
      psyched

      amounts of money in private sector. Just giving Treasury the authority to pay off the debt and not issues any more for at least 15 years. What's gets spent into the private economy is up to Congress! Even if they deficit spend an average of $3 Trillion per year, the money would last at least 15 years. I know $3 T per year sounds like a lot of deficit; but we will have gradual de-evaluation of the currency over 15 -25 years, so at the end of the period the nominal amount spent will be the equivalent of much less in 2013 dollars. Right now are deficits aren't large enough for full employment. Also, they aren't spent on the right things. So higher deficits are needed right now. Less will be needed in constant dollars over time if we spend enough now to get a full employment economy.

    •  It changes the problem, not solves them... (3+ / 0-)
      Recommended by:
      psyched, Calgacus, katiec

      Right now the problem everyone is trying to solve is that the government is not destroying enough money(taxes) equal to the amount of money it creates(spending). And, therefore, must exchange interest bearing government IOUs(bonds) for non-interest bearing IOUs(currency) from the public to make up the difference and hope the public wants enough of them.

      When describing what is actually happening I hope you can see how inane the current so called problem is?

      What creating an unlimited credit for the Treasury does is change the problem statement.  Now, instead of asking what the government can afford we have to ask what should the government spend on, what is the capacity of the economy to support that spending, and how much and who should be taxed in order to keep inflation in check.

      Even without PCS tricks, the notion that we should even be worrying about the top problem and even worse proposing austerity to solve it (which will do the opposite) is insane since it won't work, and cruel because it inflicts tremendous suffering for no reason.  There are 25 million under-employed right now.  The only possible result of any proposal so far (Democrat or Republican) is more unemployment, recession, and probably an increase in the deficit.  The only possible conclusion about the character of our current elected officials is that they are ignorant, cruel, or both.  Because not a single one has suggested increasing spending on jobs leaving net taxes alone (increasing progressiveness would be a good thing), which by improving the economy and putting people to work would decrease the deficit.

    •  Well, actually, (2+ / 0-)
      Recommended by:
      Calgacus, katiec

      the entire "science" of economics is pretty much all hot air.  It's based on specious arguments advanced either without proof or in the face of countering evidence, and usually maintained in awesome contradiction of real-world facts.  It began with thought-exercises and rationalizations, continued with some mathematical "proofs" built on top of those unfounded assumptions, and then when Keynes finally pointed out just how and why Neoclassical economics was a complete failure, the new information was acknowledged just until, basically, he and the few economists who were working in the real world died off . . . . and then the field was quickly taken over once more by ideologues spouting nonsense bought and paid for by uber-rich capitalists who needed to buy themselves some public policy under good academic cover.

      The only economists these days who pay any attention to facts are unemployed or working in Beijing.

  •  having this conversation (7+ / 0-)

    means some people will begin to recognize that money is a convenient fiction we can manipulate at will.

    i say make tons of these proposals, no matter how shocking.

    lord knows the other side makes shocking proposals all the time that go down as reasonable.

    Donate to Occupy Wall Street here: http://nycga.cc/donate/

    by BlueDragon on Mon Jan 14, 2013 at 09:40:09 AM PST

    •  I think the biggest problem with PCS (5+ / 0-)

      is that getting the idea accepted by a large enough group of people requires thinking about and having conversations about exactly what money is and how a government should manage it.

      The law clearly allows platinum coins to be minted in any denomination.  The reason(s) to not actually do it to solve the problems at hand are entirely political and emotional and the fact that it just hasn't been done before.

      Using logical arguments will not, all by itself, get us past the resistance because of the emotional fear of runaway inflation/devaluation and the need to come to terms with the idea that, yes, the paper money in your wallet is, conceptually, exactly the same as a $60 trillion coin.

      The other reason, of course, is that the existing hierarchy of financial overlords stand to lose some of their power if the national debt problem simply goes away.  I mean, come on - politicians love to talk about "making the hard choices" and "shared sacrifice."

      At any rate, if we are going to move the Overton window on the austerity debate, we definitely need to have these kinds of ideas out there being discussed.  The more radical the better.  

      That's the main reason I continue to support these kinds of diaries.  I do not think PCS will be implemented any time soon.  If it ever is, it will only be possible after a sustained campaign and in conjunction with a radical change in the political environment.

      "Why do we see the same old Republicans all over the news all the time when they were kicked out for screwing everything up?" - socratic's grandma

      by Michael James on Mon Jan 14, 2013 at 10:25:58 AM PST

      [ Parent ]

      •  I agree with your basic premis but there was (4+ / 0-)
        Recommended by:
        katiec, Michael James, psyched, Calgacus

        a time when drunk driving was just something lots of people did. Then we had a national conversation, an on-going campaign and pressure came from many directions. Now we have all kinds of legislation, law enforcement and...what do you know, a dramatic drop in drunk driving fatalities.

        I say, let's get this party started!

        "When in doubt, do the brave thing." - Jan Smuts

        by bunnygirl60 on Mon Jan 14, 2013 at 02:20:52 PM PST

        [ Parent ]

      •  Two things (4+ / 0-)
        Recommended by:
        Michael James, psyched, Calgacus, katiec
        Using logical arguments will not, all by itself, get us past the resistance because of the emotional fear of runaway inflation/devaluation and the need to come to terms with the idea that, yes, the paper money in your wallet is, conceptually, exactly the same as a $60 trillion coin.
        That's true! Logical arguments won't do it. That's why we need action from the President. If the coin were minted, and the public saw it being used to pay off the debt quickly and to stop issuing new debt, then the opposition to it would melt away quickly. See here.
        •  I'm not so sure about opposition melting away (3+ / 0-)
          Recommended by:
          psyched, wigwam, Calgacus

          quickly.

          Take the gun control issue as an example.  Most rational people are in agreement that we need to change the status quo.

          However, despite the fact that no specific proposals for actual legislation or executive orders have yet been put forth by the administration, that isn't stopping idiots from behaving as if there is an imminent Nazi invasion coming.

          My other anecdote that is currently informing my views on this is that I have a great friend who, based on our conversations on facebook, seems to pride himself on being a non-partisan "fiscal hawk."

          Whenever I post links or comments about economics, he tends to say things like "I really don't care which party, I just wish one of them would balance the budget" or "I'm tired of kicking the can down the road. We're leaving a massive debt for our kids to pay off."

          When I pointed out that the US has a fiat currency and, unlike a person in charge of a household budget, simply cannot ever "run out of money" he started in on how "just printing more money" can't be sustained indefinitely.

          This runaway fear of dire consequences in the distant future (e.g. inflation, collapse of the dollar, etc.) just seems to override his thought process and I think a lot of people are in that same mindset.  

          Do you have thoughts on this general topic?  I mean, if the Treasury can just mint platinum coins at will to avoid debt, but still fund government expenses, would we still need income taxes?

          Also, if Congress suddenly realized that they had the power to spend whatever they wanted, but without necessarily having to dish out economic pain in the form of taxes and/or fees, what would that lead to given the implicit moral hazard?  

          And, while I get that we would not need to care about demand for bonds if we stopped issuing them there still could be problems with filling the public purse via PCS.  As I recall, back in the Clinton surplus days, they actually started discussing whether the government should really go ahead and pay off the debt and stop issuing new debt instruments since things like mortgages rely on long-term bond yields as part of figuring the rates.  What would we do to figure a new "risk free" rate if there was no longer any new debt issued.

          Also, if foreign countries/investors decide they don't like us "printing money," isn't that a problem given that we rely on imported goods so much?  

          I like what I've read so far about MMT and PCS and I will always advocate for what I think are good public policy ideas, but changing the mindset of people like my friend is going to be an absolutely huge job.  

          I also think if you can help walk people through some of the issues I mentioned above, that would help.  Maybe you already have and I didn't see it, but I think a lot of people can't run with PCS until they learn how to walk first.

          "Why do we see the same old Republicans all over the news all the time when they were kicked out for screwing everything up?" - socratic's grandma

          by Michael James on Mon Jan 14, 2013 at 05:38:06 PM PST

          [ Parent ]

          •  People have to understand (3+ / 0-)
            Recommended by:
            Michael James, Calgacus, katiec

            that they've been brainwashed.  Programmed.  They've been fed that line about the horrors of inflation and the baskets of paper money to buy food in Weimar Germany all their lives.  The financial and capitalist classes make damned sure that they're exposed to this propaganda, because if the people were to actually understand how they're being screwed, they'd take up the pitchforks and torches.

            I find that "ordinary people" are quite receptive to learning more about these things and easily grasp the idea that what they already know may be bullshit.  The average worker in this country is after all a veteran of TV advertising and sales campaigns; they know all about being sold a bill of goods.  Tell them they're being tricked, and they'll hear you out, because no one likes being made a fool of, and avoiding being cheated is the pre-eminent survival skill in our society.  Show them HOW they're being tricked, and they'll catch on fairly quickly, although the conclusions they reach from that point will be their own.

          •  Sure, here are answers (3+ / 0-)
            Recommended by:
            Michael James, Calgacus, katiec
            Do you have thoughts on this general topic?  I mean, if the Treasury can just mint platinum coins at will to avoid debt, but still fund government expenses, would we still need income taxes?
            Taxes are needed for 3 reasons. Without them the currency would have no value because money is government debt, specifically it is a tax credit. Without them we couldn't control demand-pull inflation when it does threaten. And third, we also need them for leveling because inequality that is too great threatens democracy.
            Also, if Congress suddenly realized that they had the power to spend whatever they wanted, but without necessarily having to dish out economic pain in the form of taxes and/or fees, what would that lead to given the implicit moral hazard?
            I don't know. This is a democracy. If Congress makes unwise decisions, then it's up to people to replace its incumbents.
            And, while I get that we would not need to care about demand for bonds if we stopped issuing them there still could be problems with filling the public purse via PCS.  As I recall, back in the Clinton surplus days, they actually started discussing whether the government should really go ahead and pay off the debt and stop issuing new debt instruments since things like mortgages rely on long-term bond yields as part of figuring the rates.  What would we do to figure a new "risk free" rate if there was no longer any new debt issued.
            We'd still have taxes for the majority of the revenue we collected; but much more seigniorage than we have now. Don't know why there'd be a problem. Certainly in the case of the $60 T coin, there's be no problem filling the purse. On the risk free rate, that would just be the Fed's overnight rate of Interest on Reserves (IOR). No need for bonds. Bonds are just welfare for the rich and foreign nations anyway.
            Also, if foreign countries/investors decide they don't like us "printing money," isn't that a problem given that we rely on imported goods so much?  

            First, I don't know why they'd have a problem since we'd be paying off our debts to them when they fall due. However, if some nations had problems and no longer wanted to export to us, then other nations would just have the US market. Also, we're always complaining about how foreign nations have been taking American jobs. Well, if some nations got annoyed at us for "printing money" and stpped exporting to us, then we'd get some of those jobs back wouldn't we.

            Last,on inflation using PCS I've treated that here. Bottom line, there would be NO inflation due to PCS in itself.

          •  Printing money is like watering crops (2+ / 0-)
            Recommended by:
            Calgacus, katiec

            Too much water and you drown them; too little and you dry them up.  But the right level of watering has to continue forever.

            As the economy grows so must the money supply.  We could not have the economy we have now had we stopped printing and minting in 1900.

            Inflation is a matter of the value of the dollar, and the value of the dollar is pretty much a matter of supply and demand.  The printing and minting of money increases the supply dollars.  But the collection of taxes both diminishes the supply and provides the intrinsic demand for dollars.  In fact, its best to think of the dollar as a transferable tax credit.

            •  The point is debt instruments (1+ / 0-)
              Recommended by:
              wigwam
              Inflation is a matter of the value of the dollar, and the value of the dollar is pretty much a matter of supply and demand.
              That's true; but it has to be recognized that securities are money too; or, at least, easily convertible to money in a short time through selling them or using them as collateral for loans. So, the real issue is net financial assets whether in the form of reserves or securities. If the government creates so much of that it outstrips the capacity to produce goods and services, then there'll be inflation. But it's about the NFA; not about "the money" in the sense of reserves.
              •  I agree to a point. (0+ / 0-)

                Yes, treasuries can be instantly monetized by selling or pawning them to a bank.  But, the discount that one will have to accept is a function of the expected effective interest rate.  In times of inflation, that discount is very high, which means that those NFAs have lost a lot of value, which shrinks the NFA-version of the money supply, i.e., it means fewer dollars chasing those goods and services.

                Now, I don't claim to know how strong that effect is.  That's a matter that needs to be left to professional economists, of which I am not one.  

                •  Some comments (0+ / 0-)

                  Not to disagree with what you wrote - but just want to add that the discount of bonds vs currency is completely controlled by the monopoly issuer of both - the government. So even in inflationary times, the government can set nominal rates very low, making real rates probably negative.

                  Now, I don't claim to know how strong that effect is.  That's a matter that needs to be left to professional economists, of which I am not one.

                  Since it is clear to us non-economists that professional economists should study all these effects - reliable papers are written on them once in a blue moon. Don't know if the human race has produced more than a dozen or so. Professional "Economists" prefer to take one partial, often wrong answer as an axiom and then reason badly with mounds of soporific BS to arrive at predetermined conclusions.

  •  LGID regarding your call for others to post (2+ / 0-)
    Recommended by:
    psyched, Calgacus

    diaries and blogs, I'm doing my best to learn as fast as possible. I posted today on PCS and policy space. I'm working on a new one about thinking out loud about the psychology behind progressive opposition to PCS. Anyway, it's an adventure and I so appreciate all that you do in the cause.

    "When in doubt, do the brave thing." - Jan Smuts

    by bunnygirl60 on Mon Jan 14, 2013 at 02:25:21 PM PST

  •  OK. I'm with you. (1+ / 0-)
    Recommended by:
    katiec

    Color me convinced.

    This is what they get for magicking 17 trillion out of their bum and handing it to a bunch of criminals.

    if necessary for years; if necessary, alone

    by SouthernLiberalinMD on Tue Jan 15, 2013 at 04:10:37 PM PST

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