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Some have responded to the recent boomlet for using Platinum Coin Seigniorage (PCS) as a solution to the debt ceiling problem, by reacting to the ridicule visited upon PCS advocates by know-nothings like Heidi Moore of the Guardian and Matt O'Brien of the Atlantic, by proposing “smaller ball” PCS than the clearly inadequate Trillion Dollar Coin (TDC) itself. This post will focus on J. D. Alt's interesting post which makes five points about the TDC debate as it was addressed on a recent Chris Hayes show.

-- 1. Stephanie Kelton's reframing of a question about financial constraints to point out that the real issue is resource and productive capability constraints and not purely financial constraints, is a point that is essential to keep in the forefront our discussions and also that this is “. . . the central truth of MMT.

-- 2. It's not laws but social norms that:

. . . that form the living tissue, muscle and sinew that cling to the bones. Social norms change, but they change slowly, over time—they do NOT, by their nature, change “all at once.”

Clearly, it is a social norm that will not allow the Trillion Dollar Coin to be considered as a plausible solution to the national debt—and which necessitated so much giggling on the show. Legal or not, economy-saving or not, minting trillion dollar coins is NOT how our society pays its bills. Any shift in this social norm has to be very incremental.

-- 3. Producing too much money and spending it into the economy, as Joe Wiesenthal pointed out on the show can cause inflation if the amount of spending injected exceeds the resources of the economy to absorb it. On the other hand, if it doesn't exceed those resources then “the result will not be inflation but rather a growing of the economy and an expansion of national assets; in that case, in could be argued, to withhold the spending is indefensible.”

-- 4. “Paying your debts and living within your means”:

. . . is a very powerful message to the religious psyche that permeates our cultural norms. It can only be countered by explaining WHY, in fact, the sovereign government is in debt (see item no. 5 below) and making clear, over and over, Dr. Kelton’s point that the “means” we have to live within are not FINANCIAL means but, rather, RESOURCE means.

-- 5.  A point not directly addressed in Hayes's show is that the constantly and casually reiterated idea that the Federal Government can only raise money for spending by either taxing or borrowing is false; and that it can also create money though issuing currency. He also points out that it has to be made clear to people that the reason for the existence of the debt is this false assumption. And then he ends with:

“Issuing” currency (rather than borrowing in the bond market) to pay for sovereign spending over and above what is collected in taxes might be one of those things that could be done incrementally. Instead of threatening the institutional and social norms of the bond market with total annihilation, MMT could propose that sovereign spending be “monetized” only on a limited basis, to accomplish certain specific and special goals that would strengthen and benefit the nation as a whole. Over time, as people saw the benefits of monetized sovereign spending—and became assured it did not, if properly managed, lead to inflation—the social norm would likely shift. If that happened, the next time Chris Hayes had a panel discussion about the national debt, there wouldn’t have to be so much giggling.
I agree with the first of these five points. But I have either questions or qualifications to raise about the rest.

On Social Norms, and their impact on MMT Policy Advocacy

First, I don't flatly disagree with the notion that social norms change slowly over time, but do not change all at once. I just wonder about the application of this generalization to reality. For example, if something were called “a social norm” and that something did, apparently, break down rather quickly, to be replaced by another something we called a social norm, would we then change our mind about the first thing we called a norm, or would we conclude that it was not, after all, a “real” social norm. In other words, what evidence would J. D. Alt accept as sfficient for him to falsify the generalization that social norms change only slowly? There has to be some or we're looking at tautology here, not empirical social science.

Second, in looking at a specific social norm that doesn't “change all at once” how would we mark the beginning of the process of change of that social norm over time? In a recent article, Ellen Brown points outthat the idea of using coin seigniorage to pay off the national debt was first suggested in the early 1980s by a chairman of the Coinage Subcommittee of the U.S. House of Representatives. Does this count as the beginning of a process to change the social norm that Federal spending must be based on either taxing or borrowing?

How about the beginning of the MMT synthesis in 1996, and the thinking associated with it that the Governments with fiat currencies can spend freely by printing money? Is that the beginning? What about the acceleration of MMT work in the late 1990s and early 2000s? Is that the beginning of the change in social norms involved here? How about the publication of Ellen Brown's book in 2007; which mentioned the possibility of coin seigniorage being used to disintegrate “the Web of Debt”? Is that the beginning?

I could go on with this; but you see the point. Unless we can agree on the starting point of the process of change for a social norm, J. D. Alt's generalization is pretty meaningless for any coherent application.

He wants us to think that High Value Platinum Coin Seigniorage (HVPCS) won't happen anytime soon because it violates a social norm, and these change only very slowly; but if we don't have the starting date of such a change, we can't very well evaluate whether we're looking at an overnight change about to happen; or whether a change that happens tomorrow, or next week, or next month, has actually been 42 years in the making; say since Nixon took the US entirely off the gold standard; or even since FDR took the domestic economy off the gold standard 80 years ago.

Third, I have some background in Complex Adaptive Systems Theory (See Ch. 2), plus many years of research in Conflict studies, Civil Strife, mass movements, and the social sciences more generally. I know that when complex systems are having difficulties maintaining themselves at “the edge of chaos,” they can easily fall into the death spirals of either rigid mechanical order, or seemingly chaotic dynamics, before they reorganize into a new pattern that successfully maintains their identity as a complex system. During the process of reorganization new global properties of the reorganized complex system emerge in very short time frames. These new global properties can easily involve social and cultural norms that were never dominant in the previous state of the complex system subject to system transformation.

Does that mean that the old dominant social norms changed very rapidly or only very slowly? Again, that's going to depend on your perspective. If you look at the rapid breakdown and transformation of the system involved you'd swear that the change was very rapid.

On the other hand, if you do a historical analysis, it's almost never hard to show that the change you're analyzing has deep historical roots and was a long time coming. Do I really have to cite historical examples on this point? What about the norm that the major European powers wouldn't fight major wars against one another. That one lasted for 1815 – 1914, almost 100 years; and then was gone with the wind. How about the social norm, that Russia would always be ruled by a Czar? That one lasted for hundreds of years, until 1917, even if we date it from the first Romanov? How about the gold standard? How about slavery in the US? How about no taxes on income? How about the norm of not having a Central Bank in the United States?

Fourth, it's important to keep in mind that social and cultural norms are properties of social systems, and that there are many levels of social systems ranging from families and small friendship groupings to international social systems. J. D. Alt says that there's a norm against using the TDC as a plausible solution to the national debt, and he flat out claims that this is not how our society pays its bills.

Well, it's certainly true that we haven't done it in the past; and it's certainly true that people working for, or identifying with, the FIRE sector are opposed to using PCS as a solution to the debt problem and take refuge in ridiculing us and trying to activate a social norm and frame that they think is dominant. But these things don't show that there really is a social norm preventing this in the United States when viewed as a large-scale political/economic system. Or that President Obama has to move incrementally to change “the social norm” because he would have a problem with implementing High Value PCS with a bold lightening strike minting a $60 T coin, since the country as a whole would rise up in opposition to such a move due to the strength of the social norm that we shouldn't use PCS.

There's no evidence to suggest that this would be the case, and every reason to believe that most people don't care how the national debt is paid off; so long as it's paid off, and is not there to burden themselves, and “their grandchildren.” After all, most people are completely unaware of how deficit spending and debt instruments work, and completely unaware that "debt is not debt” as we MMTers like to say. What they do know is that the United States has more than $16.4 T in debt instruments out there. That scares them, because they've been made to believe that it's their debt, and I think they really don't care if this “debt” is paid off by taxing more than we spend, or through using platinum coins to get the Federal Reserve to create money out of thin air for Treasury to use in a way that has no obvious short-term effects on them.

Joe Wiesenthal and Inflation

Joe Wiesenthal's formulation on inflation during the Chris Hayes panel discussion was a good one. But in Joe's writing he's taken pains to point out that while the inflation issue doesn't affect the Trillion Dollar Coin (TDC); Higher Value PCS applications are likely to create inflation and perhaps even hyperinflation. Joe Wiesenthal has no basis for saying this that is apparent in his writings. But, it is a position opposed to HVPCS, and biases him towards what I've called “small ball” PCS applications, rather than game-changing ones.

Paying Your Debts and Living Within Your Means

I agree that this meme is powerful and representative of our cultural norms, and also that it needs to countered with explanations of why the public debt exists, and also that the issue of “means” is not financial, but involves our resources and our productive capacity. But I don't agree that telling or teaching people this is the “only” way to counter the norm as applied to financial means.

Telling and teaching is important for both the short and long terms; but even more important is action that will remove the public debt, while not tanking the economy or causing inflation. This is what a $60 T PCS solution will do, that small ball PCS activity will not.

In fact, if the President used a $60 T solution to pay off large chunks of the national debt, people would quickly get the point that the debt existed only because Congress and the Executive blocked using coin seigniorage on the debt and the deficit and insisted that only taxing and borrowing could be used for spending. Using the coin would illustrate that there was never any issue of financial means. When that debt began to get paid off quickly it would be “a teachable moment;” one in which we could get the message across that the real constraints are in resources and capacity, and that we need to quit worrying about the financial end and start building a prosperous sustainable economy characterized by economic and social democracy.

Currency Issuing Incrementalism

J. D. Alt's last point is that “issuing” currency to pay for deficit spending might be introduced incrementally, “instead of threatening the bond market with total annihilation.” He thinks that if we propose to use seigniorage to do deficit spending on specific policies that would be clearly of benefit to the nation, and these policies were legislated than as people saw the benefits, and also saw that there was no inflation accompanying the currency issuance, then the social norm against using seigniorage or just issuing currency without debt would change, and then there wouldn't be “so much giggling” about us PCS advocates, by panelists on TV shows representing the FIRE Sector.

The first problem with this is that people like me who favor HVPCS, don't favor “threatening the bond market . . . “, but rather, destroying its foundation, new debt issuance, nearly over night. I don't intend this flippantly. I don't think the President should threaten HVPCS. I think he should just do it; and let the chips fall where they may.

The second problem with this and similar proposals, is that neoliberal deficit hawks will be unalterably opposed to PCS, no matter the context in which it is used. They will work as hard as they can to prevent the PCS camel from getting its nose into the public financing tent.

They will do everything possible to repeal the PCS legislation. And they will try to impeach any President who uses PCS for any significant purpose at all, because they know very well that if either small ball or game-changing PCS works, then their austerity politics game, so important for the developing plutocracy, is up.

J. D. Alt assumes that “small-ball” or incremental PCS will be less threatening to the FIRE sector than game-changiing PCS, and so, will elicit less vigorous opposition. It is the same kind of assumption that led progressives to turn away from supporting Medicare for All, and to push for the “public option” sparkle pony, prior to caving in to the ACA, because "it's better than notihing," and the same kind of assumption that led the Clintons to propose managed care rather than Medicare for All in the 1990s, which got them a great, big fat loss to the opposition.

These kinds of “pre-compromises" do not work, because they elicit just as vigorous opposition as a “full-monty” option, would, but don't offer the same level of benefits to people. That is, people often don't love the compromise legislation, so you can't get them to support it, or to support you in the next election. That's certainly what happened with the ACA, which was a big factor in costing the Democrats the election of 2010.

In the case of PCS, incrementalism will lead to a series of exhausting political conflicts in which progressive victories will be pyrrhic, because they will drain political capital, but won't solve the problem that people are concerned about, and that the deficit/debt hawk/austerians use for leverage to make austerity politics seem reasonable. That problem is not getting PCS or currency issuance accepted. But acceptance WILL occur as a by-product of solving the problem that most people care about.

That problem is a national debt that seems self-evidently outrageous in size  to most people and opposed to common sense. We can't solve that problem in a visible way that people will instantly understand with 'small-ball“ PCS. We can only solve it with game-changing PCS, that eliminates the national debt, covers projected deficits for a long time to come, and so transforms the basis of progressive politics addressed toward the economy.

Conclusion

The idea that we need to move slowly with policies that will significantly change politics and economics, because social norms are arrayed against such policy changes is perhaps the central idea of Conservative Ideology (notice I'm using the capital “c” and not the small “c” here). Edmund Burke might have made the same argument against PCS as J. D. Alt put forward in his post.

It is an argument that is vague in nature, lacks criteria for application, and is opposed to the rational progressive temperament that is in the tradition of long-time MMT authors like Bill Mitchell, Randy Wray, Warren Mosler, Mat Forstater, Stephanie Kelton, Scott Fullwiler, and Pavlina Tcherneva. And it's also opposed to the temperament of newer MMT writers like Marshall Auerback, Mike Norman, Bill Black and Michael Hudson.

The position of MMT is that the preferred situation for a nation sovereign in its own fiat currency is that its Treasury Department simply create currency in the act of deficit spending without issuing accompanying debt. Let's be clear here.

A $60 T or $100 T platinum coin would, if minted and deposited, achieve this MMT preference for some time to come. Not forever, but it would be the proper pilot experiment for legislating that MMT preferred change, because it would give people years to assess how that kind of system would work. So why aren't all MMT writers supporting this change? It isn't quite pure MMT; but it's damned close, and much closer than incremental PCS would be.

The counsel of pursuing incrementalism makes no sense here. There are some problems that incrementalism just won't fix. Getting rid of the national debt, and the discomfort of people with it, can't be done incrementally, because the opposition to incremental initiatives would be too fierce, and the benefits from those initiatives too little, to justify the political conflicts that would ensue. Also, there's the question of opportunity.

Right now, the President has the opportunity to make High Value $60 T PCS a fait accompli, and to eliminate fiscal austerity politics forever. How long that opportunity will exist I don't know. But it is much more risky to give the opposition a chance to mobilize against PCS, than it is to just mint that $60 T coin, get the electronic credits into the public purse (the TGA), and the begin to pay off huge chunks of the national debt quickly.

That is what will get “issuing currency” accepted. But incremental “small ball” PCS that will be fought with propaganda, money, law suits, mass media opposition, and constant ridicule, before it has had a chance to be effective, won't work, and we shouldn't advocate it.

The right  kind of answer to Heidi Moore, Matt O'Brien, and others who ridicule HVPCS, isn't PCS incrementalism. It's an answer like the ones here and here. It is, more directly, #mintthe60Tcoin

(Cross-posted from New Economic Perspectives.)

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Comment Preferences

  •  The economy is based on social norms. (1+ / 0-)
    Recommended by:
    4CasandChlo

    You might take that as reason to believe PCS is viable, since it's something other than "laws" (statutory or economic) that influence against it, but it seems awfully selective to waive the social norm against seigniorage while keeping the others on which the economy is based.  It's like imagining "free love" in a society in which people continue to be puritanical about everything else.  

    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 21, 2013 at 05:50:33 PM PST

    •  I don't think you understood the diary (0+ / 0-)

      Discussing "social norms" and their impact is fruitless twaddle if you're unwilling to say what yo mean by that term or specify criteria for its application. Your comment, like Alt's post is fraught with this difficulty.

  •  Who cares about social norms? (0+ / 0-)

    Since the social norms involved have zero economic impact, let's just ignore the debate about social norms.  Changing them would have no value one way or the other.  

    What we should be concerned about is what is politically and legally possible.  

    On that account, minting a $60T coin and using it to pay off the existing debt is not legally possible.  Minting the coin is allowed.  Using it to pay off the debt isn't.  You would have to have congress do that.  In which case, you might as well just get them to raise the debt ceiling (which it appears they are already now prepared to do, anyway).

    The debate about the size of the coin was always silly, since it makes no difference.   The only point of the coin was to avoid the debt ceiling.  You could even issue a separate coin every day just enough to stay above that ceiling.  Any number higher than that is just a number, with no real world meaning or consequences.  Nothing different happens if you put a $60T number on that spreadsheet rather than a $1T number there.

    •  According to whom is it not legal? And why? (3+ / 0-)
      Recommended by:
      psyched, Nada Lemming, cynndara

      I've read a lot of opinions by lawyers and economic experts who've said that it is legal, but I'd like to know who of high credibility says that it isn't.

      As for whether Obama would ever use the option, I don't believe there's any chance of that, so the questions is academic.

      •  because Obama! (0+ / 0-)

        and that's all the people need to know.  

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

        by Nada Lemming on Mon Jan 21, 2013 at 06:48:13 PM PST

        [ Parent ]

      •  The coin is legal (0+ / 0-)

        You can't do anything with it that isn't authorized by congress.  

        Constitutionally, it's congress which has the right to spend, to collect tax revenues, to issue debt, to repay debt, or to issue coins.  The president can only do what has been delegated by congress.  

        In this case, congress has said he must spend the money, and has said he can issue the coins.  So if they say he can't issue new debt, then he can probably still issue coins as needed to fund the spending they are requiring.  

        But I'm not convinced he can repay existing debt on his own, in effect single handedly expanding the supply of dollars in circulation.  Control of monetary policy has been delegated to the Fed, so they do have the power to buy up existing debt.  And by law they are supposed to have some independence from the President.

        So I would think there would be a difference between using a commemorative coin loophole to fund existing spending, something congress has required the president to do, and using it to pay off existing debt, something the congress has not required the president to do.  

        •  Can't Treasury override the Fed? nt (0+ / 0-)

          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 Mon Jan 21, 2013 at 07:46:35 PM PST

          [ Parent ]

        •  it can be used to retire Tsy Bonds as they come (1+ / 0-)
          Recommended by:
          cynndara

          due, thus retiring the debt.

          When new spending is authorized, Tsy can spend.

          Just as it does now -- when it issues coins out of thin air.

          •  Agree (0+ / 0-)

            Yeah, I agree there.  The Fed right now has $1.7T in bonds it can sell anyway if it wants.  And its buying more.  So you would probably have no issue there for the first $2T in spending, or bonds due, as the Fed can sell it's own if it likes to counteract that.  Get beyond that though to where you might be interfering with monetary policy, and maybe it would raise some legal issues.  

            •  Again, (2+ / 0-)
              Recommended by:
              katiec, cynndara

              there are no legal issues. the Treasury has an absolute right to pay off the debt it has issued when that debt falls due. If it affects monetary policy then the Fed will have just have to adopt to what Treasury is doing. However, it won't affect monetary policy; since the Fed can always issue Interest On Reserves (IOR) to target and achieve the federal Funds Rate it wants. Remember the Fed can always control that interest rate, the bond markets really have no say. That's why interest rates on Treasuries went down, after the credit agency downgrades of Treasury debt instruments.

        •  See the link (2+ / 0-)
          Recommended by:
          katiec, cynndara

          I provided just above. It is legal to pay down the debt, using seigniorage, since Congress has already given Treasury the authority to pay back the debt instruments it issues. Think about it, if Treasury didn't have that authority then even if the debt ceiling were raised it wouldn't have the authority to roll its own debt.

          •  Does retirement of debt require an appropriation? (0+ / 0-)

            The retirement of debt as it matures (comes due) is perhaps automatically appropriated.  But what about premature retirement of debt?  Does that require specific appropriation by Congress?

            •  Sorry, didn't see this earlier (0+ / 0-)

              No appropriation's required if you use either tax revenues, debt financing, or seigniorage to do it. Think it through, the Treasury's obligated to pay the principal plus interest anyway, so why would it be an issue if were paid off before it was due, provided the Treasury had the money.

              Another way to approach it. Congress already gave Treasury permission to incur the debt; so clearly the authority is implicit to pay it back whenever one can.

              Yet another consideration, you wouldn't want to pay off any debt to the public before it falls due anyway. Debt you pay back to other Government agencies using seigniorage doesn't actually get sent out to the economy except as scheduled, so that dosn't involve any special Congressional appropriations. So, what the question comes down to is whether the Fed debt can be retired early using seigniorage. That depends on whether the Fed will sell it early to Treasury. But why wouldn't it? The Fed can always get more by buying it from the private sector.

      •  Bmaz, the legal guru at emptywheel.com (0+ / 0-)

        He claims that it's patently unconstitutional, besides being "absurd."  And, he claims that Edwin Chemerinsky, Dean of the Law School at UC, Irvine, agrees.  Also, Michael Dorf and Neal Buchannan, e.g., http://www.dorfonlaw.org/...

        •  I know (1+ / 0-)
          Recommended by:
          katiec

          But look at the logic of his argument. There isn't any. I'm serious about that. I read the bmaz he's not offering an argument based on reading of the law and related parts of the US code. he says he's making the constitutional argument. But where is there anything in his post that's anything but his own opinion and Chemerinsky's, which as far as I can tell involved no serious argument. I thought selise and masaccio pretty much demolished bmaz in the comments, and that all he could offer in reply to them was authoritarian statements.

          Thanks for the Dorf reference, which is the best counter to the legality/constitutionality of the coin I've seen. But this latest discussion initiated by beowulf's latest post contains an exchange that I think contains the elements needed to easily refute Dorf's argument. Perhaps I'll do a critique of that myself later on in a more quiet time. But for now, I need to push the $60 T alternative again the "loser liberal" small ball folks who really don't want to do anything about austerity.

          There are many very good legal people who think the coin is constitutional including Lawrence Tribe of Harvard Law, Jack Balkin of Yale Law, and beowulf himself, who's a pretty mean lawyer. I haven't seen a post on the coin from Jonathan Turley who is a great Con Law professor at The George Washington University; but back in the summer of 2011 he published a legal analysis by a colleague that also concluded that PCS was legal.

          Also, Philip Diehl, former Director of the Mint, who co-wrote the 1996 with Mike Castle, and who knows a lot about coinage-related law has no reservations about legality, as you can see from the exchanges on beo's post.

        •  It's too late to rec, but thank you. (0+ / 0-)

          This is exactly what I was asking.  I'd find a debate among lawyers and economists on this issue to be helpful.

    •  No, it's legal alright (2+ / 0-)
      Recommended by:
      katiec, cynndara

      to pay off the debt using seigniorage. We've explored this question since the beginning at the start of 2011. The seigiorage gets accounted for as miscellaneous receipts, and these can be used to pay down debt. Check out the debate here.

  •  What's MMT? (4+ / 0-)
    Recommended by:
    Gooserock, Nada Lemming, katiec, cynndara

    The first appearance of an acronym should be spelled out.

    That aside, you have to go full tilt with the Coin, no incremental measures. Go incremental, and you can be sure some crisis, probably along the lines of hyperinflation, will be let loose immediately. And then it would be blamed on the Coin.

    Go for at least the 1TR Coin, and you can show in next year's budget how this reduced the debt, as that much compounded debt-service from selling bonds instead simply disappears from the balance sheet.

    This would give the one-short-sentence proof of its wisdom and efficacy.

    As to Social Norms: Hell, it was just 5 years ago that killing American citizens without warrant or trial was a cause of shock and outrage. Norms are hard to maintain in a time where a) everyone is well-trained by our various media and personal devices to have a short attention span, and b) where new ideas can get spread in days.

    Case in point: The Trillion Dollar Coin itself. It was just a year ago that the casual, generalist, reader might have first heard of it. Well, a bit more than casual. Now the most known economists, and politicians, are weighing in on it.

    "Norms" today don't have the same force of "Norms" of 1890; actually, not even 1980. Remember when it was the norm that if you got caught in a major corruption or sex scandal and you were a politician your career was over? Done.

    Now you can get a tv show and $50,000 for a twenty minute speech to "prestigious pillars of corruption society."

    Coin: all the way. 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 21, 2013 at 06:24:52 PM PST

    •  Modern Monetary Theory, Check This Diarist's (1+ / 0-)
      Recommended by:
      Jim P

      diary history. As to whether you can easily figure out what it is, your mileage may vary.

      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 Mon Jan 21, 2013 at 06:40:06 PM PST

      [ Parent ]

      •  I knew. Just as some people hate the (1+ / 0-)
        Recommended by:
        cynndara

        improper apostrophe in "its" I think a writer has an obligation to the reader when it comes to acronyms.

        You'd think with resources, currency, and debt dating back through all of recorded history, we'd be a bit past the "theory" stage in economics by 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 21, 2013 at 06:53:39 PM PST

        [ Parent ]

    •  The $1 T coin (0+ / 0-)

      is incrementalism and won't work to deal with austerity.

      This:

      That aside, you have to go full tilt with the Coin, no incremental measures. Go incremental, and you can be sure some crisis, probably along the lines of hyperinflation, will be let loose immediately. And then it would be blamed on the Coin.
      Neither incrementalism nor the $60 T will cause demand-pull inflation. See here.
      •  Not saying the Coin will cause inflation. (1+ / 0-)
        Recommended by:
        cynndara

        You've already shown that it wouldn't if handled with minimum common sense. Because it cuts out the bond-players, it would certainly help the deficit everyone is just so so upset about.

        I was talking about a Intermediate Coin, and then the bankers doing what they could to discredit that coin as a way to put a stake in the heart of the idea.

        But before going full-out on the 60T, I think you'd have to demonstrate a one-year success with the 1T. Although that's a period of vulnerability.

        Have to quote this comment I made elsewhere:

         
        Started looking at "Triumphant Plutocracy" at the wonderful openlibrary.org.

        1921. Page 32:

        ... The banking business is a parasite business; the banker is a member of a parasite class; yet so completely does he dominate the present order of society that, instead of being punished by society and compelled to take a position and earn his living like the masses of the people, through the pursuit of some useful occupation, the banker is generously rewarded; laws are passed in his favor and he is encouraged and assisted in his efforts to pluck his fellow men.

        ...[description of the author's visit to Japan, who had adopted our banking system, and why they dropped it according to an official] four years had convinced them that the system was entirely unworkable because under it the bankers could cause an expansion of the currency whenever it was profitable for the bankers to expand, and a contraction of the currency whenever it was profitable for them to contract. The resulting panics benefited the creditor class and ruined the producing class; ...

        This is 90 years ago, someone wrote this.


        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 21, 2013 at 09:21:44 PM PST

        [ Parent ]

        •  Doesn't surprise me! (1+ / 0-)
          Recommended by:
          katiec

          There was a lot on anti-banker sentiment all through the period from the 187s - 1930s, when FDR took them down quite a few pegs.

          "But before going full-out on the 60T, I think you'd have to demonstrate a one-year success with the 1T. Although that's a period of vulnerability."

          I just don't believe in demonstrations that give the opposition a chance to mobilize their base. My objective is to get this to Obama, so that if gets into trouble, it will be in the back of his mind, along with the realization that he's got to go full bore if he's going to be successful.

  •  In a more enlightened society, perhaps: (0+ / 0-)

    I am not economically literate enough to address whether the coin would address the austerity movement as stated above.

    I do know that there is a significant portion of our society that already believes that the VERY moderate steps that Obama has taken to address social/fiscal issues are indicative of a totalitarian regime.

    True, it is an absurd accusation on its face, likly rooted in racism combined with normal right wing hysteria directed at anything promulated by a democrat.

    But, absurd as this position is, it is held by a significant enough portion of this country as to be dangerous.  The diarist acknowledges that impeachment will follow from the House - - with a not guily verdict from the Senate.  This does not concern me nearly as much as the potential violence and civic disobediance that would result.  These people are nuts and they are well armed.  Sad as it is, it is reality and one that dictates evolution of norms and not unprecedented unilateral action.  There are other effective means to address the problem.

    Blessed are the peacemakers, the poor, the meek and the sick. Message to Repug Fundies: "DO you really wonder "what would Jesus do?" I didn't think so.

    by 4CasandChlo on Mon Jan 21, 2013 at 06:27:09 PM PST

    •  No, there aren't (2+ / 0-)
      Recommended by:
      WheninRome, katiec

      If the debt remains in place, then austerity will too.

      As for people engaging in widespread violence because we minted a $60 T coin and are repaying all our debt when it comes due, I think that notion is ridiculous. We are much more likely to get violence if we don't live up to our obligations, than if we do. If we  meet these by using seigniorage and ceasing to borrow further, then I think people will be ecstatic.

    •  I doubt (0+ / 0-)

      that you will see rioting in the streets over a financial issue that actually IMPROVES the personal finances of most working-class individuals.  If it led to inflation, sure, they'd quickly blame it on the coin.  If it actually caused economic harm at the street level, you would see massive reaction.  But if things improve, while the ignorant won't attribute it to The Coin, they won't feel in the mood for rioting any more.

    •  The more likely backlash would be from elsewhere (0+ / 0-)
      This does not concern me nearly as much as the potential violence and civic disobediance that would result.  These people are nuts and they are well armed.  Sad as it is, it is reality and one that dictates evolution of norms and not unprecedented unilateral action.
      I doubt that Americans would riot over an end to further increasing "our skyrocketing, crushing, out-of-control debt."

      The more likely backlash would come from other countries, who could/would claim that were exploiting out position as the reserve currency of the world to get something for nothing from them by inflating our currency with money created from nothing but thin air.  Or words to that effect.

      But the fact is that already all dollars are created from thin air.  The only difference is that coins are issued by the government and backed by its power to tax, while all other money is created by banks (when people borrow) and is backed not only by the fact that the federal taxes must be paid in dollars but also the fact that the borrower must gradually take the money created for them out of circulation by paying down the principal of that loan.

      •  Well, (1+ / 0-)
        Recommended by:
        katiec
        The more likely backlash would come from other countries, who could/would claim that were exploiting out position as the reserve currency of the world to get something for nothing from them by inflating our currency with money created from nothing but thin air.  Or words to that effect.
        So, they could always shift to a market basket, which would help our exports and our unemployment and also help us stay out of wars. All good, I'd say.

        But also, there won't be any deevaluation of our currency unless our trading partners want it to. Right now they're pegging their currencies to the dollar. So, they'll just have to keep on pegging if they value exporting to us. If they don't, then we'll get a chance to put more people to work here.

        Anyway, I don't believe in magic fairies. The initial repayment of debt to other government agencies and the Fed will be about $6.5 T. That money won't be spent into the economy, but will lower the debt subject to the limit by about 40%. The rest of the debt repayment is just an asset swap like QE. That's not inflationary.

        The only thing that can possible be inflationary is deficit spending; but we've got a long way to go before that becomes a problem still 20 - 25% of our capacity and getting to full employment.

  •  Remember how Obamacare is incremental (2+ / 0-)
    Recommended by:
    psyched, katiec

    and likely to be extended with a public option, then onto single payer?  Neither do I!  Either you are for this theory or you stand with the banks.  There is no baby step to take.  

    And there will be no public option, because they all have moved on.  Austerity!  Gun Control!  Immigration Reform!   Oy vey.  

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

    by Nada Lemming on Mon Jan 21, 2013 at 06:46:19 PM PST

  •  Social norms change all the time. (1+ / 0-)
    Recommended by:
    cynndara

    Only today I saw that snowboarding is in eclipse, when for several years it was a major winter sport. But society changes and social norms change with it.

    I suspect that those who use the social norms defense against MMT are just saying that they are not ready for change.

    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 Mon Jan 21, 2013 at 07:15:52 PM PST

  •  Wiesenthal annoys me. His (0+ / 0-)

    argument just doesn't make sense to me.

    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 Mon Jan 21, 2013 at 07:20:08 PM PST

  •  I really like your idea about paying (1+ / 0-)
    Recommended by:
    katiec

    off our national debt.

    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 Mon Jan 21, 2013 at 07:21:34 PM PST

    •  Thanks (3+ / 0-)
      Recommended by:
      hestal, katiec, cynndara

      You understand, I hope that from an MMT point of view the debt and debt-to-GDP ratio have no financial impact on US solvency. So, this whole issue is one of messaging and politics. In the short run we can't educate people to the truth about debt; so we need to use another MMT idea, that the Government has no financial limits in the fiat money it can create to pay off the debt and to take the political issue driving austerity off the table!

      •  It does get silly. (2+ / 0-)
        Recommended by:
        wigwam, katiec

        Realistically, fiat currency is nothing but a government IOU.  So when we borrow from banks, we borrow our own IOUs from the bank (or rather, future IOUs that we haven't issued until we borrow them!) in order to give them to employees, contractors, and Social Security recipients.  But oh, how the banks hate the idea of being cut out of that loop!

  •  Very good argument on currency (2+ / 0-)
    Recommended by:
    katiec, wigwam

    issuing incrementalism.

    Another excellent diary.

    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 Mon Jan 21, 2013 at 07:24:06 PM PST

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