An MMT Fiscal Responsibility Narrative: Some Truths

By Joe Firestone

Many MMT posts and other writings on fiscal responsibility, including my own, focus on the myths of neoliberalism, pointing out why they are myths and developing an alternative MMT perspective in some detail. Off  hand, and I may have forgotten something, I couldn’t think of a brief positive MMT narrative containing primarily the truths, rather than the myths. So, here’s my version. Comments, criticisms, recasting in more effective form, are all welcome.

– The US Government can’t involuntarily run out of fiat money because it has the constitutional authority to create it without limit. Congress constrains and regulates this ability; but its existence is still a stubborn fact!

– In addition to taxing and borrowing money and, most importantly, the Government has an unlimited capacity to create it. When it taxes and borrows, it removes it from the private sector. When it creates it, over and above what it taxes or borrows, it adds it to the private sector.

–The Treasury can keep borrowing money if we want it to. There’s no limit on the Government credit card except the one imposed arbitrarily by Congress.

– Bond markets don’t control US interest rates; the Federal Reserve Bank does by exercising its authority to meet its target interest rates. Bond vigilantes have no power against the Fed. If they fight against its interest rate targets; then they “die.”

– The bond markets will most probably buy US debt for the foreseeable future; but if they don’t, then the US won’t be forced into insolvency; because the Government can always create the money needed to meet US obligations.

– We’re obligated to pay all US debts as they come due. Nevertheless, our national debt cannot be a burden for our grandchildren; since we have an unlimited credit card to incur new debt at interest rates of our choosing, or, alternatively can create all the money we need to pay off debt subject to the limit, without incurring any more debt; unless they wish to make it so by stupidly taxing more than they spend.

– Since the US Government has no limits on its authority to create/spend money other than self-imposed ones, neither the level of the national debt, nor the debt-to-GDP ratio can affect the Government’s capacity to spend Congressional Appropriations at all. That’s why a fiscal policy that measures its success, not by its policy impacts, but by its success or failure in reducing deficits isn’t fiscally responsible, or likely to be sustainable.

– The Federal Government is not like a household! Households can’t make their own currency and require that people use that currency to pay taxes! So, their supply of dollars is always limited; while the Government’s supply is a matter of its decisions alone.

– Social Security has no solvency or “running out of money” problems. The SS crisis is a phoney one. So, no solution to this “fiscal crisis,” bipartisan or partisan is needed. What is needed is a solution to the political problem of getting SS’s funding guaranteed in perpetuity  by Congress, just the way it guarantees funding for Medicare Parts B and D.

– However large the Federal Debt becomes it cannot be a “crushing burden” on our Government, because federal spending is virtually costless to the Government, if it wants it to be.

– Greece and Ireland are users of the Euro, not issuers of it. So, their supply is always limited and that’s why they can run out of Euros. The US is the issuer of Dollars; so it’s supply of dollars is limited only by its desire to create them, and that’s why it can’t become Greece, Ireland, or any other Eurozone nation.

– Austerity cannot work in the United States economy because budget surpluses, defined as tax revenue exceeding spending, destroy net financial assets in the private sector. Unless, these financial assets are replaced through revenues acquired by running a trade surplus; the continuous loss in net financial assets by the private sector is unsustainable, eventually leading to credit bubbles, recession or depression, and the return of deficit spending. For a Government and economy like the US, with both a trade deficit and a substantial output gap, evidenced by high unemployment and under-employment, a policy of deficit reduction aiming toward budget surpluses (austerity) is destructive and will only push the economy further into recession or depression.

– REAL Fiscal Responsibility is a pattern of fiscal policy intended to achieve public purposes, while also maintaining or increasing fiscal sustainability viewed as the extent to which patterns of Government spending do not undermine the capability of the Government to continue to spend to achieve its public purposes.

– It is fiscally irresponsible to frame and follow a deficit reduction plan when both a trade deficit and an output gap exists, because by definition, such a plan is one that must remove net financial assets from the private sector every year the plan is pursued. Eventually, if pursued for long enough, declining financial assets will exacerbate the output gap by lowering aggregate demand and causing both labor and capital to deteriorate, thus reducing the productive capacity of the economy and the Government’s ability to sustain productive deficit spending producing outputs of real social value.

So, current claims that we have a fiscal crisis, must debate the debt, must fix the debt, and must immediately embark on a long-term deficit reduction program to bring the debt-to-GDP ratio under control, all misconceive the fiscal situation because they are based on the idea that fiscal responsibility is about developing a plan to bring the debt-to-GDP ratio “under control,” when it is really about using Government spending to achieve outputs that fulfill “public purpose.” There is no fiscal crisis that will require “a Grand Bargain” and cuts to popular discretionary spending and entitlement programs. It is a phoney issue.

The only real crisis is a crisis of a failing economy and growing economic inequality in which only the needs of the few are served. MMT policies can help to bring an end to that crisis; but not if progressives, and others continue to believe in false ideas about fiscal sustainability and responsibility, and the similarity of their Government to a household. To begin to solve our problems, we need to reject the neoliberal narrative and embrace the MMT narrative about the meaning of fiscal responsibility. That will lead us to fiscal policies that achieve public purpose and away from policies that prolong economic stagnation and the ravages of austerity.

166 Responses to An MMT Fiscal Responsibility Narrative: Some Truths

  1. Joe, there are a number of smallish and grammatical issues that should be sorted for an improved draft. Simple sentences when addressing a broad audience are always best. You have at least one double negative and several compound sentences. Semi-colons tend to be too complex for the more public discourse. When writing for my own interests and to a not as public audience, I can fill half a page with one sentence without much assistance, and it will fail its intent in a more public context. What you have is a very good start. The literacy level of most people in the US even with a nominal collegiate degree tends to lowered also by their attention span. I could tale stab at rewriting it to be more explicit, and then we would have work through issues of consistent “voicing.” I’m sure that you will receive additional input here, as well.

    • Thanks Tadit. Feel free to give it a try. I mean for this to be a collective effort.

      • Great to see this interaction between Tadit and Joe, including Joe’s invitation to contribute to an MMT-focused “collective effort.” It seems like a good place to restate the gist of my comment on Michael Hoexter’s recent post and some of the comments it received:

        I’d suggest creating a volunteer working group focused specifically on refining and expanding MMT’s set of public communication content and tools. The goal would be to more effectively get the message out to citizens, public policymakers, and advocates of progressive policies whose efforts and arguments would be strengthened by an understanding and integration of MMT principles (and, yes, maybe even some more economists).

        This might include multiple subgroups (e.g., overall communication/outreach strategies; written content development/editing; audio/video content development/editing; graphics development; alliance building, etc), to reflect the range of needs and community-members’ skills and interests.

        Since we’re involved in a long-term education process here, it seems to me that we might as well leverage all the skills, ideas and available time of the expanding MMT community. Though most of us will probably have relatively little time to devote to this, it seems to me that, when aggregated and coordinated, the total contribution of time and skill could be quite substantial and productive. And, frankly, I think it could be fun!

        Tomorrow (for better or worse) we’ll be selecting a president and a new session of Congress. Seems like a good time to “kick it up a notch” in terms of conveying the MMT message, especially as they head ignorantly toward the so-called fiscal cliff and other key decision (or indecision) points.

  2. “The bond markets will most probably buy US debt for the foreseeable future; but if they don’t , then the US won’t be forced into insolvency; because the Government can always create the money needed to meet US obligations.”

    It is my understanding that the treasury always makes sure there are enough primary bond dealers to purchase any additional debt the treasury wants to issue. This is facilitated by the fact that they know the Fed will always purchase any bonds that the primary dealers don’t want to hold. However, maybe your original is easier for laypeople to understand.

  3. Joe, could you please explain for a dummy like me whether MMT and its view of debt/ money creation will work if the dollar is no longer used internationally for trade exchanges. It seems China and Russia are trying to use their own currencies, and perhaps and alliance of China, Japan, and South Korea will do likewise. Other countries like Venezuela may also get into the act.

    • George, in order to export to the United States, you have to accept dollars in payment for goods and services. Do you really think that nations like Korea, China, and Japan that have built their economies on this trade will suddenly stop and only trade with one another. And, if they do, then guess what? All our manufacturing jobs come back to the United States. A fate worse than death!

      It’s true that over a period of many years nations may decide to move away from the dollar as a reserve currency. I think there will be two primary effects of that. First, the exchange rate for the dollar will fall, helping us to export. And second, it will be relatively more expensive for us to fight wars or station US military overseas. Wouldn’t that be great?

    • George, I am a dummy, too. (I’ve been sampling this blog and moslereconomics.com lately.)

      My rough understanding is that, MMT and its view of debt/money creation would work even more smoothly if the national currency was NOT also the global reserve currency AND the nation in question had sufficient natural resources (energy, food, etc.) to sustain itself AND it had no enemies coveting its resources. For such a country without (need for) foreign entanglements, the public debt is equal to the savings of the citizens, and what’s the problem with that?

      On the other hand, when foreign sovereign countries with armies of their own have savings in your currency, then they are keenly interested in how well it maintains its value, which is clearly a complication compared to isolationist utopia above. As far as I can tell, MMTers are not fazed by this aspect of the picture, but the point is, no, the dollar’s being the global reserve currency is not something that propels MMT per se.

      • All that China is doing for us is net saving our currency essentially suppressing the money supply domestically. Not an acute problem unless you make money through wages. The only thing I would say to the Mosler position of the free lunch we are getting is contracting Dutch disease( making money as a rentier). We are not adding enough domestic credit to the system to make use of it. The Chinese work while we stand around. It should allow us the opportunity to work on something else, but our policy of allowing over saving financially, especially in the high income brackets, rent seeking and ponzi squanders it while we ignore both public and private physical capital. Tax the cash hoards or run deficits. Do something.

      • “On the other hand, when foreign sovereign countries with armies of their own have savings in your currency, then they are keenly interested in how well it maintains its value, which is clearly a complication compared to isolationist utopia above.”

        Not just keenly interested; they prop up the currency to prevent it from freely floating and peg their own currencies to it. My own view is that the props and the pegs hurt our export trade. So any time they want to stop propping and pegging that’s OK with me. On the other hand, if they don’t stop but insist on shipping us real goods in return for electronic bits of information, then I propose we take advantage of that by refusing to allow any of our citizens to remain unemployed because we are taking these imports. We’ve got plenty to do. Give people who want to work a job at a living wage, and if foreign nations think this is weakening our currency, then they can just stop exporting more to us than we sell to them.

    • The one thing that comes to mind is that it does not seem possible in a global savings glut. I could see the dollar being more vulnerable in “good times”. The reason is because the dollar creates liquidity now. Not only will that cause immediate liquidity problems with their “new money” they will stick with the fiction that money must be stable in volume. I see a Euro zone problem. Once net savings take their toll beggar thy neighbor via exports to anywhere will take hold.

      I see buying power scarcity not capacity scarcity. Anything is possible but one thing I know is domestic credit starvation isn’t the answer nor is the real estate inflation plan which is what is destroying our global competitiveness in the first place.

  4. Excellent idea, but needs serious editing.
    The 7th paragraph needs a lot of work.
    We should all pitch in.

  5. Joe,
    Really great job.
    But woven throughout these truths are unspoken other truths, the absence of which promote misunderstanding. I point them out to clarify their understanding, with a view that they can be corrected.
    That sovereignty grants all governments the power to create their fiat currencies is a given – by legal definition, not by an accounting identity and not only since 1971.
    That governments can and DO constrain the issuing authority is a real fact, and these constraints include, in the actual case of the US government, specific legal and regulatory limits, the effect of which is that the government does not presently create any real money except coins.
    So, to be clear, before the sovereign government can create any (non-coin) money, laws and regulations must be changed.
    The existence of the government’s authority to create money remains a stubborn fact indeed, however, that latent authority will remain economically impotent without us all doing something about those very real, legal monetary constraints.

    For that reason, for every example in this post where it says that the government “has” the unlimited power to create money, the reader should be thinking that it COULD have that power, if certain laws and procedures were changed. At that point, we begin to line up the list of legal changes that, as I believe you remember, I asked for at the Fiscal Sustainability Teach-In, some two and a half years ago.

    The other aspect of the unspoken truth has to do with government debts and our socio-economic future.
    This is the opposite of a neoliberal response, and comes from a progressive tradition on matters monetary, more so than that offered by MMT.

    There is NO reason for the government – with its money-creation powers – to ever borrow any money from anyone. Remember they are sovereign and can create all the money they NEED.
    I offer that this MMT notion that understanding accounting identities makes everything OK, and that seeing monumental and ever-growing very real debt-obligations as merely “someone else’s” monetary asset is terribly misleading, and misinforming to the readers.
    The existence of all debt has a socio-economic effect of passing real wealth from the interest-payer to the interest-collector.
    The interest-collector is the holder – of these monetary assets.
    The continued transfer of wealth “upward”, as it were, is what Dr. Bernd Senf calls The Deeper Roots of the World Financial Crisis.
    http://blip.tv/file/4111596

    I find the NEED to transgress these MMT tenets that socio-economic progress is available simply through accepting debt in all of its unnecessary constructs, with the system of debt-based money at the core.
    My sovereign government should never be borrowing anything that it has the ability to create on my behalf to promote my economic welfare.

    Government has the legal authority to issue all f the nation’s money – and it should.
    Government has no need whatever to issue any debt – to borrow any money from anyone – and it shouldn’t.

    At that point today’s discussion of austerity amid debt limits of any kind becomes eminently clear for what it is – the last ditch attempt of monetary-asset holding scoundrels to achieve servitude-by-paper when our true economic freedom is within grasp.
    For the Money System Common.

    • Yes, it would be very helpful to have a clearer delineation between what “is” and what “ought to be” or “can be.”

    • Clonal Antibody

      Joebhed,

      The passage of the “Platinum Coin Act” in 1997 effectively took out the restriction on the ability of the US Government to mint an unlimited amount of money. Effectively, the US Government does not have to issue debt (as required by the debt ceiling laws, and the limitations on the US Treasury to issue T-Notes) in order to fund itself and its activities.

      • Platinum Coin Act.
        Fine.
        But recognize what is necessity to implement the power that is seen behind this Act.
        Funding governmental operations is certainly not something that was contemplated in its passage.
        But I’ll agree that it is potentially there.
        What is NEEDed is to incorporate the public policy mechanism of fiat money creation by whatever mechanism is actually available, in order to enable the government to carry out its sovereign and Constitutional right to create money.
        But we would NEED to do so within the same breath that espouses that the government “can” create all the money it NEEDs – such that, upon approval, the budget will be balanced with a $1.7 Trillion coin next year.

        This would recognize the truth about how this specific amount of money is created and, with the LEGAL passage of the budget accepting the $1.7 Trillion, then, and only then, will there be any truth to the adage that the government creates money when it spends.
        For that, in fact, will be the effect.
        Given the NEED to include the source of budgeted funds, passage of the budget would provide the Congressional stamp of authority.
        Only THEN could the second part of your statement be true.
        And, at that point, the government would not NEED to issue any debt, nor to borrow any sums from anybody.
        And there would stop the transfers of public wealth to the private and sovereign holders of our Treasury Securities.

        We all agree.
        The government should create all the money that is NEEEDed for approved public functions. And, the Platinum coin proves it can be done debt-free.
        Let’s get on with it.
        For the Money System Common

    • Thanks for all the comments Joe B, here are some replies:

      That sovereignty grants all governments the power to create their fiat currencies is a given – by legal definition, not by an accounting identity and not only since 1971.

      Yes, but one’s constitution and laws may limit that power. In our case, the Constitution supported a fiat currency, but our laws constrained us to a gold standard and to a commodity-backed currency. That changed in 1933 for the domestic economy; and for the whole economy in 1971 when Nixon closed the gold window. In the case of the nations of Europe, their treaties and laws constrain them to live under a foreign fiat currency, the Euro. As currency users, rather than currency issuers, their supplies of currency are limited.

      That governments can and DO constrain the issuing authority is a real fact, and these constraints include, in the actual case of the US government, specific legal and regulatory limits, the effect of which is that the government does not presently create any real money except coins.

      So, to be clear, before the sovereign government can create any (non-coin) money, laws and regulations must be changed.

      We go round and round on this Joe. I think you’re making a semantic point. First, you’re viewing bonds and securities as not being a kind of money. Not everyone agrees on that. Second, The Federal Reserve is considered by itself, and by many of us to be part of the Government, and it certainly does, with the authority of Congress add money, narrowly-defined, to the money supply. Furthermore, if PPCS were used as I’ve outlined many times, then it would not be the Mint adding to the money supply. What would happen is that the Mint would deposit coins with Trillions of more in face value at the Fed. But those coins would be kept at the Fed in a vault, and the Mint’s account would be credited with the face value of the coins in the form of reserves. Then after the seigniorage profits are swept into the Treasury General Account, the Government would be ready to both pay off old debt and deficit spend those reserves into the economy. When they are spent, that is new money, initially supplied by the Fed, but spent into the economy by the Treasury. So, the operation makes use of the Fed’s authority to generate reserves out of thin air. Those reserves would not be created without the coin or coins; but nevertheless the coins don’t become the new money spent into the economy. They just represent, if you will, the order from the Executive that mandates the Fed to use its money-generating authority to credit the Mint’s account.

      The existence of the government’s authority to create money remains a stubborn fact indeed, however, that latent authority will remain economically impotent without us all doing something about those very real, legal monetary constraints.

      Who’s us? The current law allows the Mint to create those coins on order of the Secretary and the President if they choose to so order. There are no legal constraints on this current ability under the law. So, if this authority isn’t latent or impotent. It is there now. It is just not being used by our Presidents. So, all of us don’t have to anything about the legal constraints. All that has to happen is for the President to quit fooling around and use his authority to fill the public purse.

      For that reason, for every example in this post where it says that the government “has” the unlimited power to create money, the reader should be thinking that it COULD have that power, if certain laws and procedures were changed. At that point, we begin to line up the list of legal changes that, as I believe you remember, I asked for at the Fiscal Sustainability Teach-In, some two and a half years ago.

      I do remember. But again, when I say the Government, I’m not referring only to the Executive Branch of the Government. I’m referring to the Governmental system including: the Congress, the Executive Branch, the Supreme Court, and the Fed. It’s the interactions of these four that produce our money. And this system does have an unlimited power to create money in the here and now. That doesn’t negate your point about constraints on the Fed, and the Executive. Those do exist. But nevertheless the combination has the continuing power, and even the Executive Branch alone has the power to create as much new money as it needs to meet all its obligations through the PPCS process.

      The other aspect of the unspoken truth has to do with government debts and our socio-economic future.

      This is the opposite of a neoliberal response, and comes from a progressive tradition on matters monetary, more so than that offered by MMT.

      There is NO reason for the government – with its money-creation powers – to ever borrow any money from anyone. Remember they are sovereign and can create all the money they NEED.

      Joe B, Presenting this as new and not MMT is nonsense! I know there is no reason to borrow money from anyone, and many MMT economists and commentators have said so. Hasn’t Warren said so? Hasn’t Randy said so? Hasn’t Bill Mitchell said so many times and also said that he prefers an end to debt issuance? Hasn’t Stephanie said so on occasion, and Mat Forstater? Haven’t I said so? Have you seen this, and this, for example?

      I offer that this MMT notion that understanding accounting identities makes everything OK, and that seeing monumental and ever-growing very real debt-obligations as merely “someone else’s” monetary asset is terribly misleading, and misinforming to the readers.
      .
      The existence of all debt has a socio-economic effect of passing real wealth from the interest-payer to the interest-collector.

      Joe, your characterization of what MMT says would be a lot more persuasive if it were accompanied by quotes. As it is I can’t recognize this as anything that anyone in the MMT mainstream has said.

      I find the NEED to transgress these MMT tenets that socio-economic progress is available simply through accepting debt in all of its unnecessary constructs, with the system of debt-based money at the core.

      Huh? Where do you see this in MMT? I really don’t recognize it! You sure it’s not more semantics?

      My sovereign government should never be borrowing anything that it has the ability to create on my behalf to promote my economic welfare.

      I certainly agree, and also I don’t know anybody in the mainstream who thinks the Government should be borrowing its own or anyone else’s currency. Where do you get this from? Quotes please!

      • Joe,

        I offer that this MMT notion that understanding accounting identities makes everything OK, and that seeing monumental and ever-growing very real debt-obligations as merely “someone else’s” monetary asset is terribly misleading, and misinforming to the readers.
        .
        The existence of all debt has a socio-economic effect of passing real wealth from the interest-payer to the interest-collector.

        Joe, your characterization of what MMT says would be a lot more persuasive if it were accompanied by quotes. As it is I can’t recognize this as anything that anyone in the MMT mainstream has said.

        I beg your pardon, but this is a major stumbling block for me, a beginning amateur student of MMT (otherwise a dummy in economics). At moslereconomics.com, I learned that the size of the debt is nothing to worry about. Also, as far as can tell, this is one major way deficit doves and owls are distinguished. Isn’t it? E.g., Krugman and Reich believe in running surpluses when the economy is strong; hah ha, how unnecessary of them…

        • The MMT position is that the size of the public debt and the level of the debt-to-GDP ratio don’t affect solvency and are nothing to worry about in that respect. It is not that the amount of public debt has no effect; or that the amount of private sector debt doesn’t matter. All MMT econmists know very well that high levels of public debt result in risk-free interest payments to the wealthy and foreign nations. I think attitudes among MMTers vary in how they evaluate this fact. But most certainly want to pursue policies that minimize these payments. And MMT economists have favored ceasing debt issuance in print.

          Also, private debt bubbles are anathema to MMT, and MMT economists have advocated debt forgiveness and debt write-down programs. So, it is not the case that MMT economists think that debt doesn’t matter, and it’s very important to quote people when you want to impute certain views to them.

          • The MMT position is that the size of the public debt and the level of the debt-to-GDP ratio don’t affect solvency and are nothing to worry about in that respect. It is not that the amount of public debt has no effect; or that the amount of private sector debt doesn’t matter.

            Joe, that’s how I thought it ought to be, too. But that’s not the vibe I’d gotten.

            • Why not? Did I say something above that calls that into question? Please correct me, if so, because that is certainly not my view.

              • Oh no, not from you, Joe. The counter-vibe was from my engagements at moslereconomics. com (not necessarily or entirely with W. Mosler by the way). And to be fair, I partially came to an understanding with folks there. (To their credit: they bothered to engage a dummy; to my credit: I am not in the we-can’t-afford bandwagon :).

        • Clonal Antibody

          The size of the debt is nothing to worry about, because the interest rate on the interest bearing debt is determined as a policy instrument of the government. The choice whether or not to pay interest is the choice of the government. Whether the government issues dollar bills or T-Bills is the choice of the government and not the people loaning the money.

          New money can always be issued to pay the interest so there are no constraints other than inflation (which only occurs at full employment – even the 4% U3 rate of the 2000 did not result in much inflation – inflation was roughly constant at 2.5% while the nominal GDP was growing at 5%) In fact the U-3 has been as low as 2.5% in the mid 1950′s when inflation was around 2% and the nominal GDP was growing at at about 6%. Inflation could also come about because of critical shortages of key resources, e.g. oil, or energy – but that is not the inflation one talks about when discussing “money printing.”

          • Okay, this is a good place for delineation of “is” and “can be.” CA, you say “New money can always be issued to pay the interest,” and I ask: is it readily possible to do so in the existing regime, or would it require some legislative/regulative changes like joebhed talks about?

            • Both Clonal and I have pointed out that the legislation authorizing PPCS allows the Executive to create legal tender coins with arbitrarily great face values. So, it follows that since 1996 it is legal for the Executive Branch to cause the public purse to be filled with as much money as it thinks is necessary to pay any amount of interest or meet any other financial obligation of the Federal Government.

              • Okay then, some behavioral changes are required (on the part of our executive, like you said in some other comments, too. Fine).

                One more question: is this PPCS procedure something that also trumps the borrow-what-is-not-taxed rule? It’s gotta be, I think, for it to be most meaningful.

                Also, I am not clear about why that borrow-what-is-not-tax is. I was told by W. Mosler that congress had passed a law to that effect (legal requirement). And I heard S. Kelton explain it as soaking up excess liquid to meet fed funds rate or something (practical requirement). Maybe both are right. Right?

              • Clonal Antibody

                Nihat,
                The problem comes from two laws that remain on the books (though they should not!) One from the US Civil War era, and the other from just prior to the US entry into WW-I (1917) The first one prevents the US Treasury from issuing more than $450 Million in US Notes (as opposed to Federal Reserve Notes – which came in 1913) The second puts a limit as to how much outstanding debt the US Government can have at any given time (the debt ceiling act) Both taken together constrained the US Government in the manner you outlined. The Platinum Coin Act basically goes around both of the ancient laws, and finally allows the US Treasury a free hand in allowing the US Government to meet its obligations using a pure fiat currency.

              • Clonal, thanks. I appreciate the explanation.

              • Clonal and Nihat, there’s also the restriction written into law that the Fed can’t provide credit to the Treasury, preventing Treasury from running a negative balance in the TGA.

                In fact, one way to look at PPCS is that it is device to get the Fed to issue dollar credits to the TGA without violating the existing legal constraints. It gets around all three constraints.

      • Joe F. -
        A lot there. Thanks for your earnest reply.
        Starting here:
        “First, you’re viewing bonds and securities as not being a kind of money. Not everyone agrees on that.”

        I do distinguish between ‘money’ and ‘debts’ of all kinds (public and private Bonds and Securities) as they are not the same thing. While claim is made that government bonds/securities are “like” money, that is a matter of business and commerce transactions. But they must all ultimately be settled with money.
        Legally, instruments of debt are not money. They are monetarily-denominated business assets that are bought and sold with money. They are different, so, yes I distinguish between them.

        “The Federal Reserve is considered ….to be part of the Government, and it certainly does, with the authority of Congress add money, narrowly-defined, to the money supply.”
        Not sure what you had in mind with that statement.
        “Narrowly-defined” money is inadequate to describe WHAT the Fed adds, which is reserves and not money, and ‘the money-supply’ is not what it adds it to.
        Let’s be clear. The Fed adds reserves to its internal bank account balances of ITS depository institutions – within the Fed system. The Fed adds no money to the economy. If it was money it could be spent or lent or used to pay legal obligations – which reserves clearly do not accomplish. Only the Fed can add or remove reserves from the internal CB system. The velocity factor for reserves in the real economy – which I and MMT want to repair – is zero. Reserves, in a legal sense again, are not money. They are a reserve-based Central Bank accounting mechanism and nothing more.

        Re the PCCS authority:
        I think the discussion of how the PPCS coin gets to become the medium of exchange is a valid point to discuss. I don’t agree it can happen without the Congress’ budgeting approval. And, more important, it shouldn’t. We want all of the actions of our elected government to be as transparent as possible.
        Budget Item – Revenue – Platinum Coin Seigniorage – $1.7 Trillion.
        THAT would be fine.
        But I don’t agree with this -
        “”The current law allows the Mint to create those coins on order of the Secretary and the President if they choose to so order……this authority …. is there now. … All that has to happen is for the President to quit fooling around and use his authority to fill the public purse.”"

        So, a differentiation between the Executive’s authority to mint coins and that of “filling the public purse”.
        I’m not sure where that latter Executive authority might reside.
        More important, this is where we must look for the practical effect of the Platinum Coin proposal.
        Msg from the White House:
        ““Hello, Congress. Listen we just created $1.7 Trillion (or $6 Trillion) in new money by using the Platinum Coin method of money creation. Trust me, it’s legal. Check your Fed account.
        So, tell the Budget Committee to go home, and that there is no longer a need to worry about that debt-ceiling thing.
        Your friend, Barack.
        PS If any of you need a Trillion, send a note to my friend Tim Geithner, because now, thanks to you, both the Executive branch AND the private banks can create all the money we want..””

        When Greenbacks were authorized by the Congress for Treasury issuance, it was for specific amounts to support the War budget. The people empowered the Congress with the authority to create the money, and the Congress authorized the creation of the Greenback balances. Look at the Statutes authorizing the Greenbacks. It is not up to the Executive to create the money to fund the budget. That just will not work.
        The next day, the Congress will de-authorize, and the following day override the veto.
        More…..

        • Joe, you still arguing about how many angels can dance on the head of a pin?

          You argue for your definition of money. Silly. Do you believe M0 is money? Is M1 money? Is M2 money? Is M3 money. Is L money? Is DODNS money? Answer: They all are. So isn’t it time to stop claiming that yours (whatever it may be) is the only correct definition of money?

          Further, every form of money is a form of debt. Tell me a type of money, and I’ll tell you why it’s debt. There simply is no type of money that also is not debt.

          Meanwhile, the answer to the angels question is 1,527,846. Or is it 1,527,847?

          • Jeez, Rodg. You give me the question and then you give the answer.
            This is not at all relevant, but…..
            they’re not all what I call ‘money’.

            “M”s are measures of money-things that are included in the measure, including money. The degree to which they are ‘money’ depends on the definition.
            M-zero is partially money.
            M-1 is money, including the part of M-zero that is money.
            M2 is money….
            which makes part of M3 money, and part just liquidity preference.
            The non-existence of the M-3 measure has no effect on the supply of money.
            Adding L to the M-3 adds nothing that is money – just more MAs.
            And my answer for the more ubiquitous DODNS is in two parts.
            First – WTFDDODNSSF anyway
            Second – WYBMADIITY.
            Again, not a lot of relevance there to funding the public purse.

            “Tell me a type of money, and I’ll tell you why it’s debt.”
            Some Colonial currencies – Massachusetts Bills, f.i..
            Greenbacks.
            Coin Seignoirage – Government balance sheet recognition.

            Today all money is created as a debt under existing endogenous money economic theories.
            But it does not follow that all monies must be created as a debt, or must always be a debt.
            Monies created under Lerner’s ‘money-printing’ remedy would not be debt.
            There is no reason for money to be debt.
            Unless, of course, you define the reality of what money is as a debt.
            And are in a paradigm-capture situation.

            • Joe, thanks for the usual gibberish. “M0 is partly money.” “Paradigm capture.” “Funding the public purse.” “Balance sheet recognition.” Gotta love it.

              DODNFS is the broadest definition of money — Debt Outstanding Domestic Non-financial Sectors.

              • Thanks for that.
                Obviously, if DODNS is “debt” outstanding, then it’s not money.
                It’s debt.
                M-zero is partly cash – the money part, and part reserves, the non-money part.
                Pretty simple really.
                The paradigm-capture for MMT is Innes ‘ Money-IS-Debt” foundation for the “debt-based’ system of money ; a.k.a. ‘endogenous money’.
                It’s all in Wray’s book.

                Balance Sheet recognition is only important in response to your question because that is where both debt and equity show up – on the Treasury’s balance sheet. So, having an equity balance shows that money is not debt. All real government-created money – again as in Lerner’s “money-printing’ is EQUITY money.
                “Funding the public purse” was actually Joe F.’s description of what happens with the Platinum coin seigniorage.

                Anything of substance, Roger?
                Or is it all empty rhetoric that intends insult?
                Thanks.

                • Joe, your differentiation between money and debt simply is wrong.

                  Do you consider the balance in a checking account to be money? It’s a debt of the bank. The collateral is the assets of the bank.
                  What about a savings account? Is it money? It also is a debt of the bank.
                  Travelers Checks? They are part of M1, M2, M3. They are the debt of the issuing company, for which the collateral is the assets of the company.
                  Money Market Funds? They are part of MZM. They are the debt of the money market.

                  Even a dollar BILL is a Federal Reserve NOTE. The word’s “bill” and “note” are used to signify debt (as in “T-bill” and “T-note”) The dollar bill signifies a debt owed by the U.S. Treasury, the collateral for which is full faith and credit.

                  Every form of money in existence is a form of debt. No exceptions. Previously, I challenged you to name a form of money that is not debt. Still waiting.

                  You mentioned Randy Wray. Why not drop him a note and ask him if money also is debt. I’m curious as to his answer.

                  Rodger Malcolm Mitchell

                  • Rodger, first, funny you didn’t respond to Greenbacks and Coin seigniorage as NOT BEING DEBT.
                    Some basic understanding is needed here.
                    We live in the debt-based money paradigm.
                    By the endogenous money definition, ALL money is created as a debt – except coins.
                    THEREFORE – all money created as a debt is a debt as long as it exists.
                    Collecting interest – as long as it exists.
                    Going to and fro the checking and savings account.
                    Can you say “compounding interest”?
                    Can you see the problem of debt-based money – the problem to we the interest-paying people?
                    No, MMT cannot see that problem.

                    That is why the M1 money is both money and a debt.
                    There is no conflict.
                    The bank account balances are not money.
                    They are an account of a claim on money.
                    Which is settled through the payments system.
                    All money is debt.
                    But all debt is not money.
                    And, much more importantly, there is no NEED for any money to BE debt until it is saved and loaned to someone else – there by contract creating the debt.
                    Again, it is not that important.
                    It may be a little difficult to get your head around.
                    So, try to answer the Greenback part.
                    Thanks.

              • Why is it though that government issued money is debt? I have never heard a good answer.

                Debt is a promise to pay money when it comes time to redeem. Government does not make such a promise. If fact, it does not make any promises at all! Government’s money can be used to pay taxes but not if the government would cessate taxation next day. Which it could do because it does not promise to tax anything. It is just an discretionary choice.

              • PZ, I figure, there are two answers.

                1) Government money is issued created by deficit spending. That is, the government spends a sum total, collects part of it back by taxation, and borrows the remaining deficit part. So there is public debt attached to government-created money.

                2) The currency represents the government’s debt (promise) to you to cancel your tax liability. Warren Mosler prefers to call it tax credit. The word out there is, without taxes, the demand for the currency (hence its value) will fizzle away.

                • @nihat
                  Apologies as this was not directed at me, but, IMHO….
                  1. NO government money is created when the government deficit spends. All Bonds are initially funded through already-existing monies, money already owned by the “persons” who purchase the Bonds from the PDs.
                  2. Currency(FRB Notes) does not represent a debt of the government. They are merely a claim on the national economy. The government prints the (FRB) notes for the cost of the ink and, under the debt-based money system, they become private debts when they are ‘collateralized’ and the private banks put them into circulation.
                  3. That ‘taxes drive-money’ in a modern fiat money system is absurd. Money is a legal, social construct. All the sovereign government needs to do is establish the money system and pass legal tender laws to enforce contracts. What people do with ‘money’ is to purchase and sell all the goods and services they can afford in the national economy – including government services paid through taxation. What gives real value to a nation’s fiat money system is the confidence that users of the system have in the potential of their national economy.
                  Thanks.

              • “By the endogenous money definition, ALL money is created as a debt – except coins.”

                I wonder what the bare-bones [historical] story behind this is.

                I mean, I watched Michael Hudson and Randall Wray in a seminar explaining how taxation creates demand for currency. It went like (paraphrasing): some king-to-be dude asserts his authority to tax you, then comes over to your farm, picks up your goat and hands you a tally stick that you can use to pay your tax when it becomes due (i.e., govt spends first, taxes later). Very well. This explains a lot. For example, it makes clear that the king had to spend more than he would tax in order to kick-start and sustain a growing economy running on his currency.

                I am looking for something just as illustrative as it is simple for the government money created as debt. I think, one plausible story would involve various lords that might rival the king, challenge his authority. The king, by issuing debt to them, would be granting them interest revenue, thus appeasing them, making them stakeholders in his enterprise, etc.

                I wonder if there is any better, less cynical (or historically more accurate) story than that?

                • @nihat
                  Why create another fable?
                  I saw that video and it was Wray’s typical ‘taxes-drive-money’ explanation, ostensibly based on Knapp. Hudson merely listened as far as I could see.
                  MMT is full of stylized history that does more than illustrate.
                  Back then the king-to-be created the coin-of-the-realm.
                  Today private banks create ALL the money.(c.e.)
                  It makes the ‘government-must-spend-first-and-tax-later theme implausible and irrelevant.
                  You and I use the money we get from the private bankers to pay the government’s tax.
                  (Actually I don’t earn enough to pay any government tax but that’s another story.)
                  True, the bank-credit money needed to be created in order to use it to pay the tax.
                  But there is zero connection between government spending the money first in order to collect it in taxes.
                  None.
                  The government is the user and not the issuer of the nation’s money.
                  Otherwise, there would be no government debt.
                  Thanks.

              • Joebhed, no need to apologize. I appreciate your critical input. I am new to this stuff, like a student. So when people who know more disagree openly, it’s a field day for me:)

              • PZ:Why is it though that government issued money is debt? I have never heard a good answer. Tried to give one a number of times, Wray too, IIRC.
                Debt is a promise to pay money when it comes time to redeem. Government does not make such a promise. If fact, it does not make any promises at all!

                NO! NO. NO. The problem is largely because people (un)consciously redefine the word “debt” when talking about money. That. Is. Not. The. Definition. Of. Debt.

                That is not the primary, important definition. That is not what “debt” means. Look at a dictionary. Debt just means – liability, obligation, something you owe, a promise. Above all, it is a relationship, not a thing. Money is not an object, a thing. Money is debt, an arrow. “Money” is defined in terms of “debt”. Not vice versa.

                The government emphatically does make a promise when it prints money. The argument about cessation of taxation doesn’t work. What government promises is “I will redeem your money if I tax you” – not “I will tax you” (although in reality it always does, as long as it exists.) The only point there is that no money, no government, no human can ever be or make an unbreakable promise – simply because nobody knows the future, nobody can ensure they can carry out the promise in the unknowable future, because they don’t even know they will exist. However, the existence & power of the government in the future is a very, very, good bet, which is why its promises = debts including money are so valuable. My Borders gift certificates are not worth anything since the bookstore went bankrupt. That doesn’t mean they weren’t debts, liabilities, promises of Borders Inc.

                Nihat: Your (2) is right, (1) is wrong. Don’t listen to Joe when he says things like “By the endogenous money definition, ALL money is created as a debt – except coins.” Wrong, wrong, wrong! No, by the MMT, Mitchell-Innes, universally correct “endogenous money definition” All money is created as debt, including coins, always. It’s like saying all mammals are “created as” animals. All shades of green are “created as” colors. If you don’t understand money that way, you don’t understand money.

                What Joe calls “not debt” IS “debt” according to the universally understood, wired into the brain, dictionary/MMT definition. What people need to do is more to unlearn nonsense rather than learn new stuff. Joebhed, maybe PZ and others who seem to think that there could be such a thing as debt-free money are making things MUCH MORE COMPLICATED THAN THEY REALLY ARE. The truth is very, very simple, very intuitive. “So simple it repels the mind”.

                P.S. : Your lords (actually merchant princes)–> stakeholders story is kind of true regarding the emergence of modern banking with the Bank of England. But money as a form of debt is much more basic and has nothing to do with interest and bonds.

                • All money is debt, because that debt — that promise by the government — is what gives money its value. Without that promise, dollars would have no value.

                  All debt requires collateral, and the collateral for the dollar is “Full faith and credit,” which is described at: http://rodgermmitchell.wordpress.com/?s=%22full+faith+and+credit%22 as follows:

                  –The government will accept U.S. currency in payment of debts to the government
                  – It unfailingly will pay all it’s dollar debts with U.S. dollars and will not default
                  – It will force all your domestic creditors to accept U.S. dollars, if you offer it, to satisfy your debt.
                  – It will not require domestic creditors to accept any other money
                  – It will maintain a market for U.S. currency
                  – It will continue to use U.S. currency and will not change to another currency.
                  – All forms of U.S. currency will be reciprocal, that is five $1 bills always will equal one $5 bill and vice versa.

                  That is a very valuable collateral for debt/money.

                  • If Rodger would only read Frederick Soddy, he might begin to untangle his own web.

                    Let me see – money is debt because the government promises to “receive” something – which is merely the same money – in exchange for goods and services.
                    This promise to receive applies not only to taxpayers, but also the people buying the government’s actual “debt-securities”, or booklets on Modern Money Mechanics.
                    This “promise-to-receive” construct of what makes money a debt of course contradicts the definition of debt, which is a promise to “pay” something. In money.

                    Rodger skinned by the truth by noticing that the only real thing that backs the money is not any real debt but the full faith and credit of …..something.
                    That something is the national economy of the issuer.
                    It is confidence in the national economy that brings confidence to the money.
                    And brings about exchange, commerce, and prosperity.
                    Without debt.

                • @Calgacus
                  Thanks for advancing the discussion of what money IS.
                  Because if we do not comprehend what money is, we will fail to correct the error of design that has caused this major PHUQUEUP.
                  You jumped from logic to dogma with the claim that – because Innes (who wrote two whole books on money) said so, therefore money is debt.
                  Here is the American Monetary Institutes critique of Innes’ posit on ‘What is Money?’.
                  http://www.monetary.org/wp-content/uploads/2012/06/8-pages-on-Innes.pdf

                  There is never a question of what is debt.
                  It is all the things you mentioned, but DENOMINATED IN MONEY.
                  See F.A. Mann’s The Legal Aspect of Money.
                  So money is not debt.
                  Debts are monetarily denominated assets.
                  For all the reasons you mentioned above.

                  Broaching the subject of debt-free money, endogenous money and coins.
                  That coins are not debt by any definition is verifiable by review of the balance sheet of the issuer.
                  Coins enter circulation as equity, and remain equity, regardless of what is accounted as “parts-of-a-dollar” on any balance sheet. Those are just accounting numbers.
                  If coins are issued as I said, and as Treasury says, then how can they BE debt?

                  The endogenous money system identity is that money ‘happens’ by mutual agreement when borrowers need loans.
                  That is what makes our money system a private, debt-based system.
                  Greenbacks were issued debt-free.
                  Hundreds of Millons of USD-denominated Greenback MONEY.
                  That’s a sufficient example to quiet any vacuous claim that there can be no such thing as debt-free money.
                  Again, review the Greenback Statutes.
                  Thanks.

              • Calcagus,

                By “without taxes,” I meant definite elimination of taxes for good. So, not much disagreement there. I am not sure if legal tender laws to enforce contracts are sufficient to support demand for a particular currency as Joebhed suggests. With [the possibility/treat of] taxes, everyone needs this currency, and it becomes most efficient for everyone to deal with it. Furthermore, even though a subset of the population might dabble in other non-government paper (even have their own private contract enforcement mechanisms), any such activity of note is first met by tax evasion charges. Without taxes, some further threat is needed to keep rival papers & sovereigns from popping up, e.g., outright ban on such deviance? I don’t know, something to think about a bit more.

                About debt-money points (1) and (2), I take it that you take semantic exception to (1), and mean that (2, tax credit interpretation) is all there is to it. Otherwise, (1) appears like very real question to me. The practice is and has been, I am told, for the government to cover what it spends by taxes and borrowing (issuing interest-bearing securities). I am not hung up about whether this is bad or not, or how bad it is. But, imho, its being a requirement is bad (the government’s alleged ability to set the interest rate as it wishes and roll the debt over doesn’t make it any less bad, but makes it more meaningless). The government should be able to spend and tax as it needs (subject to the outcome constraints), and issue no more securities than is necessary to meet the savings desire.

                (But, remembering your acknowledgement of my analogy of appeasing rival lords, I kinda feel there isn’t much disagreement here, either.)

              • Calgacus, sorry, I misspelled your name above.

              • Nihat: Yes, we basically agree, you have gotten things basically right. Those were answers to PZ’s question Why is it thought that government issued money is debt?True, people do confusedly associate (1) and “money is debt”, but it has nothing to do with it.

                The government should be able to spend and tax as it needs (subject to the outcome constraints), and issue no more securities than is necessary to meet the savings desire. A major point of MMT is that the government can already do this, can spend and tax as it needs. We already have a MMT system. All there are is smoke & mirrors disguising the underlying simplicity. As you say, they’re meaningless.

                But the smoke and mirrors don’t really mean anything, don’t really do anything. Except confuse people, guided by the charlatans of modern mainstream “economics”, that the smoke and mirrors mean something – confuse them into cutting their own throats. So the smoke & mirrors ARE very important. And stupendously destructive.

                The main benefit by far of a “money-printing”, a (so-called) “debt-free” “no bonds” ZIRP policy is that it would make it clear to everyone what is going on, what has always been going on. The direct macro effects of issuing bonds are confused, confusing, self-cancelling and utterly trivial in comparison.

        • Hi Joe B. I agree with Rodger’s reply to you on “money,” and also think that debating semantics isn’t productive.

          Next,

          “So, a differentiation between the Executive’s authority to mint coins and that of “filling the public purse”.

          I’m not sure where that latter Executive authority might reside.”

          Not sure what you mean here. The 1996 law provides the Executive the authority to mint coins with arbitrary face value. The seigniorage involved ends up in the Treasury General Account (or the public purse). Once it’s there the Government can spend the seigniorage if it needs to, but only on Congressional Appropriations. So, let’s say $60 T is minted. Then the Executive, after the Fed credits the coin, can use the seigniorage to pay back previously incurred debt, and to deficit spend Congressional Appropriations, but only for those things. So, there are still Congressional constraints on the purse strings; but not on the size of the contents of the TGA (the public purse).

          On your idea that as soon as the President fills the public purse with Trillions, the Congress will repeal the power; I just don’t agree. The President can give a speech like the one I offered here, explaining his action. The Democrats have a Senate majority; they’re not going to repudiate his action. Especially when they realize it means no more debt ceilings and no more debts.

          Even if some of them balk, there won’t be enough to sustain a Presidential veto. Finally; even if there is such a veto, what’s done is done. If the coin is a $60 T coin as I advocate. The TGA will have enough money in it for 15 -20 years of deficits, even after enough money to pay all the debt subject-to-the-limit is set aside.

          Once people see that the President’s move is resulting in the disappearance of the debt they thought was going to “so burdensome” on their grandchildren, all resistance to the President’s action will subside. Since the President can pay off $6.7 in debt held by Government agencies during the first week after minting the coin, the public would become very aware that the debt crisis was passing right then before their very eyes, and support for the President will grow rapidly.

          • “… the President can pay off $6.7 in debt held by Government agencies during the first week after [the revolution], …”

            Joe, quickly:

            1) Such debt (you meant trillion?) is owed to whom?
            2) Wouldn’t such a huge release of money into the economy possibly cause inflation?

            Admittedly naive questions, but consider yourself taken to task of educating the laymen.

            • The Fed holds a lot of the $6.7T “debt” – T-bills – and things like the Social Security Trust Fund hold parts of it. The Treasury could simply exchange them for dollars in their accounts. The Fed won’t spend the dollars, it doesn’t buy much of anything, and when it does buy T-bills or MBS it creates dollars out of thin air as needed. The SS Trust Fund can’t spend the dollars except as benefits come due over the next 35 years, or however long it is supposed to last. They would have cashed in part of their bonds for $ as needed anyway, this would just do it sooner. So, no impact on the economy. No additional creation of money, just an asset swap within the walls of the government.

            • The main holders of this debt, about 60% are SS and the Fed. Other Government agencies and “Trust Funds” are owed the rest by Treasury. The point about paying off this Government debt is that it involves no spending into the economy, so it can’t be inflationary. At the same time, paying it off has the effect of cutting the subject to the limit by about 40% of the $16.2 T outstanding. Of course, the debt-to-GDP ratio doesn’t mean anything from an MMT point of view. But, politically, those who worry and propagandize about it would suddenly no longer be able to say that it was over 100%. It would have to quote 60% instead which immediately weakens the messaging of the deficit hawks. Avery good thing politically accomplished within a week or less.

          • Joe F.
            Thanks.
            There exists within MMT a false premise that government creates the money.
            While monetary sovereignty conveys that right to the government, and our Constitution reserves that right to the Legislative Branch, it can be abdicated, or delegated, as the claim is made.
            Despite perturbations around the nuance of reserve accounting in a stylized, combined CB-Treasury accounting system, there is absolutely ZERO example or proof provided by MMT that government( the Treasury) creates any money.
            Rather, in fact the private banks create all the money under an endogenous money system. (coins excepted)
            The government ACTUALLY creating the nation’s money supply would involve an exogenous public money system.

            So the “government-as-money-issuer” tenet of MMT is left HERE, Joe, with the Platinum Coin of what has now become some $60 Trillion in issuance.
            GREAT, I say.
            This is exogenous, public money creation.
            (We still NEED to eliminate the private money-creation privilege in order to avoid chaos.)
            Of course, this Platinum Coin seigniorage is totally unnecessary, but it is legions ahead of what we have now.
            So, go with it.
            But, in so doing, it is NOT possible to usurp to the Executive the power of the Legislative Branch to create the money. It is a Constitutional thing. It cannot happen.
            And it is just plain wrong to claim that the Legislative Branch delegated to the Executive its Constitutional money-creation powers by failing to delineate the denomination values of platinum coins that were to be minted and sold to the public.
            I’m just afraid that what you’re advocating as readily done is not only infeasible – it would be seen as an Executive power grab – with the most serious of long-term consequences for our money system.

            Given that MMT offers zero proof of the government-as-monopoly-issuer-of-the currency, and given the problematic nature of exercising the contentious numismatic authority contained in the Platinum Coin Bill, would we not be better availed of a teaching-moment on public money administration through a Bill presently before the Congress as HR 2990?
            http://kucinich.house.gov/uploadedfiles/need_act_final_112th.pdf

            It GIVES to the Treasury the power to create the nation’s money – what we really NEED.
            It does so for the purpose of providing for full-employment and enables elimination of government debt.
            For the Money System Common.

            • Joebhed,

              Please explain how both these things can be true, or why the Cornell web site is incorrect?

              “And it is just plain wrong to claim that the Legislative Branch delegated to the Executive its Constitutional money-creation powers by failing to delineate the denomination values of platinum coins that were to be minted and sold to the public.”

              “(k) The Secretary may mint and issue platinum bullion coins and proof platinum coins in accordance with such specifications, designs, varieties, quantities, denominations, and inscriptions as the Secretary, in the Secretary’s discretion, may prescribe from time to time.” ( http://www.law.cornell.edu/uscode/text/31/5112 )

              • I read joebhed to mean that that clause (k) to be constitutionally flawed. It hasn’t so far been exercised/tested (in non-trivial denomination values), has it?

              • It’s an interesting idea that the Constitutionality would depend on the face value of the coin. I wonder where the line would be drawn? Would it be adjusted periodically by the Supreme Court for inflation? Is there also, then, a limit on the number of words we’re allowed before freedom of speech becomes unconstitutional?

              • Golfer1john, without noting Joe F’s point that filling the purse and spending off of the purse are different things, such nonchalant delegation of power to the executive should give anyone pause. Don’t you think? To me, Joe F’s point appears quite credible and also crucial in resolving the question.

              • @golferjohn
                “”Please explain how both these things can be true, or why the Cornell web site is incorrect?””
                First, I’m not sure which of ‘these things’ you are referring to both being true. Please explain. Thanks.

                Second, if I understand correctly, I did not claim that the Legislative Branch DID delegate its money-creation authority to the Executive Branch with Amendment to 31USC; 5112.
                I said they could NOT do that and did NOT do that.
                However, if the Legislature’s authority to create the nation’s money was NOT specifically delegated or abdicated through Statute, then just what is implied in the Executive Branch HAVING the authority to fill the public coffers?
                Only the Congress has the authority to create money.
                Everyone agrees that this clause (k) in the Amendment to the coinage act is out of sync and lacking normal constructs. The open-coining format leaves a lot for interpretation.
                What I know is that there was no Bill in the Congres,s in 1996 as everyone says, to pass off its money creation powers to the Executive Branch.
                Which makes The Trillions in coin seigniorage a hard sell for any President or Treasurer or SecTreas.
                Point is there are real legal avenues for achieving the same thing.
                The Money System Common.

              • Out of reply links …

                Joebhed,

                I think I see now what you meant. Congress did intentionally (not nonchalantly at all, I would say, Nihat) leave to the secretary of the Treasury the authority to prescribe the details of the platinum coins, including the value, with no limits imposed. But that act, you say, did not delegate any of Congress’ Constitutional powers. I agree with that. Congress retains the power of the purse, and the executive cannot spend a dime (or a $60T platinum coin) except as authorized by Congress.

                As for the wording of it, the easy thing to do would have been to add a platinum coin to the section on numismatic gold or silver coins, and specify the face value as they did for all the other coins. They didn’t do that. They didn’t leave anything out, they specifically delegated to the Secretary the decision on the value of the coin. It seems clear to me that they said exactly what they intended. These people are lawyers, and they don’t use language carelessly.

                But minting a coin is not spending. Holding a coin in a vault at the Mint or at the Fed is not spending, and dos not create money or help the economy or violate any separation of powers.

                The legal good done by the legislation (there was, in fact legislation passed by Congress, or (k) would not be there in the law) is to allow deficit spending, authorized by Congress, to occur without also having to raise the total of outstanding T-bills, potentially above the limit set by Congress in legislation that contradicts their spending authorization legislation (the “debt ceiling”). It doesn’t allow the executive to spend anything he couldn’t spend before, or to create any money he couldn’t create before.

                • Thanks especially for the attempt to clear up the “intent” of the Congress.
                  I totally agree on its import.
                  It’s just that I have no way of knowing what it was.
                  I hope you can provide me with a link to the legislation authorizing (k).

                  At different times I have tried to research this – as it is critical to the legal standing of any action taken.
                  All say it is 1996 Legislation.
                  There were several thousand Bills in Congress in 1996.
                  Some 932 Bills had to do with government operations and finance.
                  I researched them all. Nothing.
                  There were four specific Bills that dealt with “commemorative coins” – everything from Dolly Madison to Jackie Robinson, also the 50 States Coins.
                  This is relevant because the sections BEFORE and AFTER (k) all have to do with commemorative coins.
                  For a time, the 50-States Legislation had the identity of the new (k) in 5112.
                  When it passed, it occupied it’s present (l) identity.
                  I have a request in to the Library of Congress for the Bill Amending 5112 and containing the (k) provision we are discussing.
                  My request has been forwarded to another Library(???).
                  But I would be really pleased if you could pass it along – just so we could all be clear that, as you said, Congress intentionally, maybe even purposely, gave the Treasury unlimited power of money-coinage.
                  Finally, not sure I agree about the power of the Executive to “fill the public purse”.
                  And, specifically, Article 1, Section 8, Clauses 1 and 2 reserves to the Congress power to levy taxes and issue debt for the purpose of promoting the general welfare.
                  BUT – and that is a big but, this is totally separate from the matter of Congress’ power “To coin Money”.
                  Thanks.

              • John, I think we’re saying the same thing. Furthermore, you say that a most sensible hybrid system (of debt–money and debt–free money) is legally available if not exercised yet. That’s good.

              • Joebhed,

                The only link I could find is the one I posted, to the text of the law as it stands now. I have no idea which HRxxxx it was before it became law. If you find something, please share. Legislative history is considered by the courts, sometimes even when the language is clear, but the court has a desire to ignore or expand on the language. Who knows, there may even be penumbras and emanations in there somewhere.

                As for Congress issuing debt, that one seems to have been delegated to the executive, don’t you think?

                • Thanks for that and a quick reply.
                  I will share if I get the Amending Bill.
                  As to delegation to the Executive of Congress’ Monetary power – that would only square with my reality that it is the private banker aristocrats that are running this country.
                  Other than that.
                  No.

              • This is actually a reply to Joe B. because I’m out of links. The Congress did not delegate its power to create money out of thin air to the Executive Branch. It delegated its power to create a coin(s) with arbitrary face values to that Branch. To turn these coins into money, the Executive Branch has to turn to the Fed and deposit the coins there. Then the Fed is obligated to create the $60 T or whatever the amount in the Mint’s PEF account. The Fed can take the coins and create the face value in electronic credits in return because Congress delegated its power to create money out of think air to the Fed, which Congress insists is an independent agency. Now there is your unconstitutionality. There are only three branches of Government, the Congress cannot create a fourth which it did with the Fed, and the Executive Branch to its discredit has never challenged them on that, to its extreme discredit.

                • Thanks.
                  Glad to discuss the powers issue.
                  We have an Executive Branch to execute the laws passed by Congress.
                  Congress makes the laws regarding money and the money system.
                  This includes every aspect of money.
                  Treasury is the ‘printer’ of the coins-and-currency money with whatever guidance comes along with the authority to act.
                  And the private banks “issues” that money into existence(circulation).

                  That is why the Platinum Coin sub is an anomaly.
                  There is no guidance – only license.
                  If you understand the legislative intent for such an outcome, please advise.
                  When the Congress decided we needed $100 Million in Greenbacks – it defined the Greenbacks by law. See the Greenback Statutes.
                  That was the authorization to “create” the Greenbacks.
                  The actual printing was done by the Executive Branch, and paid into existence by same.
                  That did not give the Executive Branch the power to create the nation’s money.

                  The power to determine the denomination of a $60Trillion coin IS, if legally constructed, the power to create THAT money. But only that money.
                  Congress remains with its power to coin money vis-a-vis Lerner’s “pay-it-into-existence”, or by issuing Greenbacks.
                  And the private bankers still have the legal power to create all of the nation’s money as a debt.
                  Your claim that Congress acted unconstitutionally in creating the Fed has been shared for the past century. Big supporter of Chairman McFadden here.
                  I would not deny the claim.
                  Thanks.

            • Joe B,

              There exists within MMT a false premise that government creates the money.

              I think this is semantics. It’s clear that Congress has delegated the money creation function to the Fed which exercises it on behalf of the Government and the economic system. The Fed is not a private bank. It is a system that according to law is part of the Government. The Fed itself say so on its web site. Unless you want to contend that the Fed isn’t part of the Government. It’s just flat out false to say that the Government doesn’t create money.

              I note that in talking about “the Government” you’re restricting it to the Treasury. But this is semantics again. MMT doesn’t say that the Treasury alone creates money. It says that system comprised of Congress, the Fed and the Treasury creates it. This is clearly true. Congress has delegated the unlimited power to “print” to the Fed and the unlimited power to mint to the Treasury (the US Mint), and the power to issue debt to both. Now, when Treasury borrows and then deficit spends into the economy, as I’ve indicated somewhere else in these comments, what’s added to the private sector is a debt instrument. I understand you don’t want to call this money. But eventually, as deficit spending goes on, the supply of what you call money becomes tight because the instruments are out there, rather than “money.” So, what happens then? Answer: the Fed engages in open market operations, or QE and swaps “money” for the instruments. The end result of the system of Treasury, public, and Fed interactions then is “money creation” by the Government, assuming that the Treasury and the Fed are both part of the Government.

              Of course, this Platinum Coin seigniorage is totally unnecessary, but it is legions ahead of what we have now.

              So, go with it.

              But, in so doing, it is NOT possible to usurp to the Executive the power of the Legislative Branch to create the money. It is a Constitutional thing. It cannot happen.

              As it is now the Congress HAS delegated its power to create “money” to both the Fed and the Treasury. The Fed “prints.” The Treasury “mints.” Until the SC rules that delegation unconstitutional, it is the law of the land. It has happened. What neither the Fed nor the Treasury has the authority to do is to spend money when the spending hasn’t been appropriated by Congress.

              And it is just plain wrong to claim that the Legislative Branch delegated to the Executive its Constitutional money-creation powers by failing to delineate the denomination values of platinum coins that were to be minted and sold to the public.

              If Congress failed to delineate the denomination values of the coins but left that up to the Mint, then, from a legal point of view, that is clearly a grant of authority. Neither you nor I can read Congress’s “mind.” But we can read the law and that clearly allows minting 1 oz. proof platinum coins of any face value the Executive cares to specify.

              I’m just afraid that what you’re advocating as readily done is not only infeasible – it would be seen as an Executive power grab – with the most serious of long-term consequences for our money system.

              I agree it will be called and perhaps seen as an Executive power grab, especially by those who want to continue to blackmail progressives into sacrificing the safety net using the filibuster, debt ceilings and governmental budget paralysis. But it is that kind of activity that is the REAL power grab, and it is one that is allowing a small minority to tyrannize over heavy majorities who want SS, Medicare, and other entitlement programs. When the Executive engages in this “power grab” he can ask what the power he has grabbed is for. The answer is that it is for letting him pay off public debt when it falls due without issuing any new debt, and that it is also for performing deficit spending already approved by the Congress. That’s all the power that minting the coin gives him. I think it’s a power he should have to counter the tyranny of the minority which has paralyzed the legislative process and thwarted the expressed will of the majority here in the United States for many years now.

              Bottom line: Please don’t tell me about power grabs in opposing PPCS, because I’ve had illegitimate power grabs by the Republicans and the fiscal hawks up to here for many years. I want an end to them. Those bozos are a clear minority in this country. Enough of them running things and preventing teh changes we need without a majority.

              • I am not sure if this discussion is about semantics or technicalities, but it is interesting for sure.

                Taking it to the very basics, I can conceive two systems, both subject to price stability constraints.

                System 1:
                Government creates money by deficit spending out of thin air, without issuing debt; savings desire are met exclusively within the private sector.

                System 2:
                Government creates circulates (stirs?) money by deficit spending against debt, meeting the savings desire partly or wholly.

                I hesitate to call the government act in system 2 ‘money creation’, but I presume that the debt issued corresponds to what the private sector wants to save rather than spend anyways, so maybe it’s a close approximation to money creation as it fuels active economy just the same.

                And the system we have now is system 2. A hybrid would probably be better. (A nagging problem I see: system 1 is self-starting, but system 2 is not.)

                Am I on the right track?

                If yes, and if reaching the average Joe is a goal, why don’t you consider presenting system 1 as a totally possible system, and reach system 2 as a modified version?

              • @JoeF

                Perhaps the semantics, like beauty, lies in the eye of the beholder.
                These first two paras – with so-called public money in “quotes” – because it is obviously not money…..
                Again, the private banks create ALL the money, except coins.
                When there is a deficit, and a public debt is issued, it is funded TO government BY the private sector, taking already-privately-created money (from those ordering the purchase of securities by the Primary Dealers), and moving that to the public sector, where, just like tax monies, it is ‘used’ once by the government and then returned to the private sector.
                The government is the user, and not the issuer, of the currency.
                Because of this, the public pays interest forever.
                Monetary assets be damned.

                There is no public money-creation.
                Purchases of Debt and Repos by the Fed do not create any money.
                They are a Balance-Sheet transaction involving assets and liabilities of securities and reserves – neither of which is money.
                AS reserves, they provide the basic ability to the private bankers to create MORE money by issuing more loans – so, more privately-held, monetary assets are created.
                Where in this scenario did any government entity create any money?
                We should do another thread for why the private central bank in New York is established as the bankers’ bank and not the public’s bank.
                As in – the BAILOUT.

                Third para – Please explain where the Congress delegated its money creation powers to the Fed and Treasury.
                As I have said – Treasury coins are the only public money creation.
                The BEP prints currency at no cost(printing) to the PRIVATE Reserve Banks – who collateralize it (make it a debt) and “issue’ it into circulation by its Member banks.
                To be clear. The private banks issue the currency into circulation.
                Before they issue it, it is worthless paper.
                Upon circulation, it is Federal Reserve private Bank Notes – part of M1.
                The government is the user and not the issuer of the currency.
                I’m not sure where the semantics comes in.

                Para re Platinum Coins.
                The best that can be said regarding the failure to delineate denomination of the Platinum coins is an ‘implied’ power to coin in any denomination. The inference derives from a negative action, from a failure to act. So, that’s an argument to be expected.

                Last para.
                I agree wholeheartedly.
                There is good reason to pursue the public coinage route.
                And a mind full of socio-economic transgressions to be righted.
                That’s why I’m here.
                Thanks.

          • Joe B,

            “money is debt because the government promises to “receive” something – which is merely the same money – in exchange for goods and services.”

            I didn’t know I was a buyer of goods and services from the government. Can I stop buying, or buy less, if I don’t want so much of their goods and services?

            Of course not. Government is not selling things for money, they are taking the money at the point of a gun, or nowadays a lethal injection needle. We don’t have the option of not paying taxes, and the only thing they will accept in payment is the money they have created. That makes that money pretty valuable, about as valuable as our freedom.

            • Your dollar is money and it is debt, because the government owes you full faith and credit.
              Your bank checking account is money and debt, because your bank owes you the money.
              Your bank savings account is money and debt, because your bank owes you the money.
              Your money market account is money and debt because the money market owes you the money
              Your travelers checks are money and debt because the issuer owes you money.

              Every form of money is a form of debt, but if you doubt it, name any a form of money you believe is not debt, and I’ll show you why it IS debt. However, if you are unable to think of any form of money that is not debt, may we end this seemingly endless debate?

              • Repeat!
                Repeat!
                “” Every form of money is a form of debt, but if you doubt it, name any a form of money you believe is not debt, and I’ll show you why it IS debt.”"
                Rodg – I did this earlier.
                Provided 3 forms of money.
                Colonial currencies – eg, Pennsylvania Bills of Credit.
                GREENBACKS.
                Coin Seigniorage.
                No debt is associated with any of them.
                They were/are all EQUITY – a form of liability that is not a debt.
                Just stick with Greenbacks.
                Check the Greenback Statutes.
                The reason they stayed around for 150 years is because they were Equity, and never a debt, on the government’s accounts.
                Thanks.

            • @golferjohn
              Interesting observation.
              A little off the mark, but, interesting.

              Government is providing goods and services for which we pay taxes.
              None of us like all of those goods and services – for whatever reason.

              Government Debt is a monetary asset to the holder of the security instrument.
              It is a financial good. The government sold it for money.
              Is a financial good not a good.
              Have you ever bought government bonds?

              Social Security is a service received by many, me included, from the government – as are all social services.
              As are Parks.
              As is the Intercoastal Waterway.
              Are national parks not a government service?
              Have you ever visited a national park?

              Your quarrel is becoming a bit pedantic, and angularly conservative.

              My point – which apparently you missed – is that Rodger’s claim, and that of MMT generally, that money is debt because the government agrees to receive it back in taxes is a direct contradiction of what a debt is – which is a promise to pay something – in money.
              One is paying, and one is receiving.
              They are opposites.
              Sorry if it went over your head.

              • “. . . Rodger’s claim, and that of MMT generally, that money is debt because the government agrees to receive it back in taxes . . . ”

                I see you are doing your impression of Mitt Romney, by making so many false claims, I suspect you have come to believe them. Anyway, you are wrong, as always. I NEVER have made that claim about taxes, and I don’t believe MMT has made that claim, either. So much for your understanding of MMT and Monetary Sovereignty.

                MMT says taxes give value to money, which nowhere is near saying “all money is debt.” I even question MMT’s tax comment.

                I say all money is debt, not only because the federal government OWES the holder of a dollar full faith and credit, but also because, with the exception of dollars in hand, every form of money is OWED by someone — banks, mostly.

                But, I notice that despite repeated requests, you never have listed even one type of money that is not debt. As my grandson says, PUSU — put up or shut up.

                • Rodger, please.
                  That Mitt Romney thing.
                  I mean………Ouch!

                  And you ignored the gist of my full quote – which was the obvious error where MMT says the only thing that makes money a debt is a promise by government to accept it, while the only thing that makes something a debt is a promise to pay.

                  But, first, maybe we’re on different threads here, but I have repeatedly given three examples of non-debt based money and invited comment on only one – Greenbacks.
                  Were Greenbacks government-issued money and were they ever debt?
                  Again, please.

                  Second, after agreeing that MMT is pretty much defined as the “taxes-driven-money-system”, and then sort-of questioning that “taxes” tenet of the theory, you also claim that neither you nor MMT have made the claim – again, that what makes government money a debt is the government’s “obligation” to accept that money in payments for taxes that are owed;, i.e., that THAT obligation IS a debt.

                  From Randy Wray’s recent book: Modern Money Theory
                  Ch 8 – What is Money: Conclusions on the Nature of Money ; p 262

                  “”What we have tried to do in this monograph is to present a careful and coherent exposition on the nature of money……
                  We have argued that all those money things, in turn, are liabilities, obligations, IOUs of their issuer.
                  The bank that issues its demand deposits as liabilities must accept its demand deposits in payment on the loans it holds as assets.
                  The government that issues currency as IOUs in its payments must accept its currency in payment to itself (for fees, fines and taxes).
                  So there really is something behind the money things: the promise of the issuer to take them back.””

                  So, Rodger, avoiding the balance sheet examples, this is the latest and apparently ultimate finding of the monetary economist most often quoted in MMT. With all due respect for Dr. Wray’s work, it doesn’t make any more sense to hear him say it – in monograph of course – than it does to hear you say it.

                  As you said: So much for my understanding of MMT and Monetary Sovereignty.

                  Now despite this being the essence of the ‘taxes-drive-money-system’ MMT construct, you say that you have NEVER …….made that claim about taxes.

                  And when you say “that claim”, I assume you mean the claim that there IS a relationship between (so-called government-issued) money “being” debt, and the “acceptance” scenario (taxes, etc) of Dr. Wray.

                  IF money does not derive its “debt” status from the government’s “acceptance” promise, then please explain what it is that makes the nature of all money a debt.
                  Or what exactly is it?
                  Absent Dr. Wray’s Innes-Knapp construct, we are left with a vacuum of what it is that causes money to be debt here.
                  It would perhaps be good to have a discussion with Dr. Wray on your concerns.

                  Perhaps in researching his book, he never realized that the government was backing the money only with its full faith and credit – which is true.
                  Which is also why government issued money would not need to be a debt.
                  Creating yet another conundrum.

                  But since you and MMT believe that all money IS debt and, according to you and MMT, the government creates money when it spends – what is it that makes that money a debt?

                  The answer Rodger is that the government does not create any money.
                  The private bankers create all the money.
                  And they create all the money BY ISSUING DEBT.
                  And, as a result, in a debt-based system of money, all money IS debt. (c.e.)

                  I have always been confounded with WHY MMT found it necessary to engage the Innes theory that money is debt.
                  It is not necessary to show that today, in fact, money is debt.
                  Endogenous money explains the whole thing.
                  In reality, the nature of money is not debt.
                  It is law in basis, exchange in commerce and wealth distribution in economic function.
                  I believe that anyone who reads Frederick Soddy’s The Role of Money would come to that understanding.
                  Thanks.

                  • Green backs were debt, backed by the full faith and credit of the U.S. government. Even Confederate dollars were debt — backed by the full faith and credit of the Confederacy. As often happens with debt, sometimes its collateral becomes worthless.

                    Your comment, ” . . . the government does not create any money. The private bankers create all the money” is laughable.

                    In fact, the government creates money by instructing banks to increase the numbers in checking accounts. You seem to feel that the banks, mechanically following the instructions of the federal government, actually are the creators. By your pseudo-logic, I didn’t create my book. Instead, the guy who ran the printing press was the actual creator. How creative of him.

                    I’ve lost patience for this sophistry, and will discuss it no more.

                  • While Rodger is correct that Greenbacks had the backing of the full-faith and credit of the government, as the authorizing Statutes declare, Rodger apparently does not realize that any money that was created without issuing any debt would have the same full-faith-and-credit backing.
                    Rodger declares it is because the Greenbacks have the government’s backing that this makes them somebody’s “debt”; or that it makes them “debt”.
                    Of course it doesn’t.
                    Not legally, not contractually, and not in fact.
                    Greenbacks are not debt on anybody’s books.
                    Who holds the Greenback debts?
                    None of the definitions of what makes things “debts” fits the description of the Greenbacks, or of any equity-money created by the government.

                    Rodger calls my comment that the banks create the money “laughable”, “pseudo-logic” and even “sophistry”.
                    But any casual reader of the Federal Reserve’s Modern Money Mechanics publication would quickly realize this truth.
                    It is the banks that create the money using fractional-reserve banking.
                    And the banks are never “mechanically following the instructions of the federal government”.
                    This truth is the essence of the MMT ‘endogenous-money’ construct.
                    What we call money is created in a mutual transaction between creditor and debtor.
                    The bank doesn’t have the money-balance prior to making the loan.
                    The bank agrees to create it for the borrower, and the borrower agrees to pay it back.
                    The promissory note and the security agreement result in new money creation.
                    The bank now has the money-balance, expanding its balance sheet.
                    All day. Every day.
                    Me thinks that Ralph’s litany of charges reside, like beauty, in the eye of the beholder.
                    For the Money System Common.

              • Taxes don’t pay for government services.

                • g1john
                  I got the memo.
                  The purpose of taxation by the government is to remove excess funds from the private sector.
                  Please send a note to those in government who might be listening here.
                  The problem in the economy is idle workers, idle capacity and too much debt.
                  There is not enough money in the private sector to pay the debt, to put people back to work and get production up to capacity.
                  Please do not take any more money from the private sector.
                  That would be all taxpayers.
                  Also, please send a note to all taxpayers.
                  The government does not need your tax monies to pay its bills.
                  It needs your tax monies to remove money from your ability to pay your bills, and put people back to work in commerce.
                  There is too much money for that.
                  To be clear, somehow you will need to pay your bills with less money.
                  This is what is called a taxes-driven-money-system’.
                  Do you get the joke?
                  Thanks.

  6. Been reading with great interest. But George’s question seems significant…

  7. george: The answer to your question is that these things have no effect whatsoever since the USA is sovereign in it’s own currency. The fact that it is currently regarded as the major trading currency is irrelevant to this. The country I live in, Canada, is in the same position and has the same ability to purchase anything for sale in Canadian dollars as the USA has to purchase anything for sale in US dollars.

    Plus: MMT is not a “view”, it is a factual description of what actually goes on, as opposed to what people who should know better tell you what goes on.

  8. The article, while excellent, should probably deal with the “inflation” boogy man up front otherwise people will just scream “inflation” and go away convinced you are nuts.

    • Thanks, Ed, I’m trying to provide a set of positive talking points about the MMT view of fiscal responsibility. I debated about including a few on inflation, but decided that the inevitable inflation bogeyman response should be debated when it is offered up as a criticism so we can avoid defensive framing up front!

      • If you are going to publish this or even try to spread it around in blogs people may not get back to,you about inflation and, in any case, may not be keen on debating about it. It could be perceived as the dirty little secret about MMT. It results in deficits that cause inflation just like we always said. Better also explain why you simply can’t give everyone a few million if all you do is create it. But, in the end these explanations, as someone said, should be designed to fit on a bumper sticker aka as short and to the point as possible. Better to say so and then work around it.

        • JonF. Among the first things people raise is always inflation. I’m always prepared to reply. Nevertheless, I don’t want to muddy the water before the issue is raised. You see inflation shifts the ground of the debate. The Peterson austerity is based on insolvency fears not inflation. So, when inflation is raised, I like to come back, point out it’s a separate issue and find out if there’s agreement on the solvency point. If there’s not I want to go back and handle it. If there is, then it becomes an inflation vs. employment issue; and that’s one that is easy to win with most people except rich people who are worried that their money will be worth less.

  9. It’s pretty good, Joe.
    Your edit depends on who you are trying to reach. The general public is not particularly interested in economics, seldom understands the terms and will quickly lose attention if it is to intricate or lenghty. But they have been conditioned to believe that debt is oh so bad, that we are going bankrupt or that SS is running out of money. OTOH, it can’t be too brief or you lose the message.

    So I would try hitting it right up front.

    Despite what they tell you, the federal government is not going going broke, nor is SS, and deficits are meaningless with our high unemployment. Here’s why:
    - The federal government prints (i.e. creates) its own money. That simply means the federal government can always pay any debt or buy anything payable in dollars. That includes our national debt without limit and any debt for Social Security. And the Federal Government can spend without limit to end unemployment, poverty and the lack of adequate health care. Education need not be the province of the well to do. Money should be used for the public purpose.
    - Future generations will not need to pay higher taxes to cover the debt. It is no burden on our children or grandchildren. Know why? You guessed it, the federal government can never run out of money, not now, not ever.
    - It is often said that the bond vigilantes will cause the interest on our debt to rise, like in Greece. Wrong! The Federal Governemt decides what it will pay in interest. It is not at all like Greece or even a household. You guessed it. Those folks do not print money. You can’t do it and neither can Greece. Greece gets its money from the European Central Bank.

    Well you get the idea. somewhere in here, maybe near the end, you will have to address why we can’t just give everyone a million dollars, if we can print money, and you have to address inflation. That one is tricky.

    Well you get the idea. Just a thought.

    • If it is not debt in the sense that a sovereign issuer of fiat currency does not need to borrow, maybe you should stop calling it debt, period. Call it private and foreign financial savings. The thing, whatever the name, comes about not because we need it but because people want it. That still doesn’t answer whether it is good or bad though; a distinction without difference maybe?

      • Unfortunately, the legal term for it is debt-subject-to-the-limit. We really can’t fight against the term. We have to spend our time distinguishing the national debt from any other kind of debt or people wouldn’t know what we’re talking about!

      • In Soft Currency Economics II, Warren refers to the debt-subject-to-the-limit as the Interest Rate Maintenance Account (IRMA). This is accurate. But if we use IRMA to label it, no one will know what we mean.

    • Nice, comment, Jon. Try recasting the whole thing that way.

  10. MMT, technically, does not care about the source of sovereignty when we talk about a sovereign currency and that the government is the only entity that can issue it. However, in the US at this time we have an increasing portion of the people who have been convinced that the government is some external entity “doing” things to or for them. Those who talk about a public purpose generally tend to think of the things the government does (or should do) as benevolent. For thirty years the increasing view (as popularized by President Reagan) is that what the government does is largely malevolent (“Gov’t isn’t the solution. Gov’t is the problem.) This leads many people to see government as only a necessary evil — a view which precludes using government to promote a public purpose. Indeed, some in this year’s election cycle openly proposed that the concept of a public purpose itself was illegitimate, to say nothing of using government policy to pursue it. Indeed, throughout history, government malevolence has been the norm. Indeed, that is the very reason for the existence of ours, which is aimed toward the opposite.

    In the US and most other popular democracies since our revolution the government is not sovereign. The people are sovereign: through their political processes and, for their common purposes as expressed in their constitutions and laws, form a governmental structure to act on their behalf to achieve their ends.

    This may seem like a semantic difference, which it may be in economic terms. But in terms of why and how things are done it is huge. For, in this case, the sovereign (i.e., the people) issues currency on its behalf — by definition, the public purpose (most basic of which is to facilitate exchange of goods and services). The government is merely the mechanism by which the sovereignty of the people is carried out.

    Without getting people back to understanding the fundamental mechanism by which authority is granted (who is sovereign and how does the sovereign become such) the tendency will tend toward antipathy toward “authority”, especially in difficult economic times. In our system, the government is us, regardless of how we botch its implementation. I think this matters when we talk about the way money works (or can work) in an economy.

    • Not sure quite how to respond to this Lyle. Of course, the constitutional authority comes from the Constitution whose legitimacy comes from the people.

      • Just pointing out that there is a lot of de-legitimizing of government going on with people talking as if “the government” is an entity external to “the people”. I’m not suggesting you or other MMTers imply that. However, if we only speak of “the government” doing these things without reminding people that our government is only a proxy for our collective selves, the idea of government spending money on public purpose isn’t necessarily a winning argument for lots of people.

        Sovereignty has not typically rested in the people and certainly does not exist everywhere today. Yet, the principles of a sovereign currency as MMT describes them could still exist, even if that sovereign was a ruling family, a party, or some other entity or sub-set of the people. The advantage a society has when sovereignty is vested in “the people” should be popular legitimacy, stability, and longevity. And this is what should make the idea of public purpose more acceptable and popular than it appears to be at this time in the US. In the US our collective understanding the concept of “sovereignty of the people” is not improving. It would be interesting to see how many people actually understand the word “sovereignty”. I suspect the percentage is not high. This is a problem.

        No doubt, we have many challenges with “the government” equalling the will of the people, especially when we personally disagree with decisions. We’ve lost a lot of the “we’re in this boat together” sense, partly because so many do not grasp that “the government” and “us” are the same. I think JD Alt’s Oct 25 post, “The NEW USA…. A Thought Experiment”, did a nice job of framing the process of the decisions that need to be made if we could start all over. Because it was framed as a something WE have to decide, the clear understanding is that we’re doing this as a society and the government isn’t just doing it to/for us — it is simply the implementor and facilitator. That is a thought model that applies well and is understandable for societies in which the people are sovereign.

        To the extent that MMT can frame the message to reduce the perceived distance between “sovereignty”, “government” and “us”, MMT’s arguments will be strengthened — especially the public purpose aspect.

      • I agree! I’m all about people deciding what “public purpose” is. But that doesn’t mean I don’t propose my own notions of what it means!

  11. It’s gotta fit on a bumper sticker.

  12. Thornton Parker

    Good start, Joe — congratulations on both the draft and the effort. I have two questions about the second bullet. First, it says, in effect, that when the government borrows, it removes money from the private sector. Is this true? I understood that the act of running deficits creates net new money, and that the government goes through the motions of borrowing in the process of running deficits. Viewed this way, the amount of money the government “borrows” equals the amount of net new money it creates, and this is hardly consistent with removing money.

    Second, and a minor point, if this bullet is rewritten, would it be possible to remove the references of “it” to two different entities, the government and money?

    Keep it up,

    Tip Parker

  13. When it taxes and borrows, it removes it from the private sector.

    This is somewhat perplexing, because it depends on what “it” is that Treasury “removes” from the non-government sector when it “borrows.” (Sorry for the overuse of “rhetorical quotes.”) A primary Treasury auction doesn’t remove net financial assets from the non-government sector, because it’s an asset swap, in which a primary dealer agrees to trade some of its cash for an equally-valued Treasury security. I think (as a non-expert on the subject) that it’s safe to say that the Treasury “borrowing” in this manner reduces the overall liquidity of the non-government sector, and in this sense, the act of “borrowing” is more like an open market operation: it changes the amount of cash, but it doesn’t change the total value of financial assets.

    Hence, the conclusion is that if the government runs a deficit and “finances” it with bond issuance, the total amount of the deficit is still being added as financial assets to the non-government sector. Bond issuance just changes the composition of those assets.

    • That’s right Sean. See my reply above. However, please note that I didn’t say net financial assets were destroyed by bond sales in connection with deficit spending, or by taxation. I said that “money” in the private sector was destroyed. Perhaps, I shoudl have said “reserves.”

      • Joe:

        Yes, that certainly clarifies matters. I think the point of confusion here is that, when most people think of money, they think deposits rather than reserves, because that’s the way in which normal people interact with the monetary system. Now of course, I should know better, since we’re talking about government money, and the government issues reserves while banks issue deposits, but it’s still murky enough to have tripped me up while reading it.

        More importantly though (and the reason I’m responding), this now makes for a strange thing to lay out as an MMT truth. In an idealized sense, at a Treasury auction, primary dealers swap cash for bonds, then sell the bonds into the reserve system (or something like that). A commercial bank buying a bond doesn’t alter deposits, since deposits are a leverage of reserves anyway, but then, what is changed by the reduction in reserves? If I understand correctly, it’s something like, more bonds lowers their yield, which, if the central bank doesn’t use a support rate to hit its policy rate, lowers the floor on the interbank lending rate — but then, if the central bank doesn’t like the yield change, it’ll buy the bond with new cash, and the whole process has been nothing but performance art.

        So my point is, if we’re laying out the “important truths” of MMT, then this one seems either confusing (if presented simply) or cerebral (if presented precisely). Or, I suppose, the issue is that “government borrowing” is a complex topic (even/particularly in an MMT sense), so right now you’re more likely to trigger someone’s preexisting (and probably massively incorrect) intuitions about the meanings of the words “money” and “borrow” with this. As for how to talk about T-bonds without stepping on someone’s incorrect intuition, maybe that’s the great challenge of marketing MMT.

      • Well, actually, rereading my post, there is another element to all this, which is, the issue of whether reserve quantity matters at all. My current understanding is that reserves are a binary matter: there either are enough reserves, or there aren’t. If there are, then the interbank rate gets bid down to the next best thing — the short-term Treasury yield, the support rate, or zero. If there aren’t, then the interbank rate gets bid up to the discount rate, or if there is no discount window, there’s a bank panic/financial crisis. Hence it seems that what matters about the bond auction is not the effect on the supply of reserves (i.e., the central bank will cover the difference if there’s a problem), but the effect on the Treasury yield (which, anyway, was something in my post).

        So that’s probably why this was nagging at me: if I’m interpreting things correctly, then MMT generally holds that reserve supply in itself isn’t particularly important, which means it’s not really a subject that’s worth laying out as an important truth (except maybe explicitly laying it out as an unimportant truth). On the other hand, I believe the inflation risk of budget deficits comes not from the effect on reserves, but the effect on deposits — that is, normal people having more money to spend.

        I’m sure I’ve talked around in circles, so sorry about that.

  14. Why is MMT concerned about unemployment? The unemployed aren’t as concerned about lack of a job as they are about having money to spend. Everybody wants a job but nobody wants to go to work. That’s why they demand payment for labor. So they can spend those wages on beer, cigarettes, cable TV and overpriced housing. Why not just skip the intermediate stuff and send them all checks in perpetuity? Or the government can simply enpixelate the funds and put them on a special credit card, pretty much as it does now. No need to even plug in the printing presses or worry about counterfeiting. As you folks say, the government isn’t running enough of a deficit so it’s a matter of talking somebody into hitting the keyboards with some crooked numbers and then the economy will start rolling again. Maybe they’ll have to try and hire some more help at the breweries but, just like the roofing industry, some trabajadores from down south can fill those spots.

    • Chuck, I just don’t believe in your view of man. In fact, I’ve been fighting it all my life. In any case, everyone I know wants to go to work. They rely on work for many things other than money, including social status, a place in the social matrix, friends, meaning, challenges to give them a sense of accomplishment. Of course, people don’t want to work in some of the soul-sucking meaningless jobs available at minimum wage in private sector companies at Walmart. But that doesn’t mean that a well-designed, well-run Job Guarantee program can’t provide jobs that are worth doing, both from the standpoint of a living wage and from the standpoints of both doing the job and appreciating the contribution it makes to value.

      • As Eric Hoffer pointed out in The Ordeal of Change, work as we know it is a very recent development in human history. The idea of laboring any harder than necessary to obtain the basics was unknown in the past and is still a foreign concept to much of the world’s population, including many Americans. Assuming that the value system you embrace, including the dignity of employment, is universal is narrow-minded arrogance.

        Well-designed, well-run Job Guarantee program? By the government, of course, so good at designing other things, like the Transportation Safety Administration, FEMA, IRS, the educational establishment, the Dept. of Agriculture, and wow, how about Indian Affairs! Just ask any reservation resident what they think about the good ol’ federal government. The feds have failed for over 200 years to make things better for the original inhabitants, why should things be any better in other avenues? Who, by the way, are these altruists that are going to design and run these programs? Are they a different sub-species from the general run of Homo sapiens? Haven’t the last three speakers of the Massachusetts House been convicted of felonies? How many Illinois governors are incarcerated at the moment?

        • Yes, we need to do better at choosing our leaders. That’s how we got into this mess, too. You don’t have to be a crook to do lots of damage.

        • Chuck, These are just conservative philosophical excuses for doing nothing and not trying to improve the world as it is. They are based on anecdotal references and have no basis in empirical data or objective evaluations of people or programs. That is, they’re BS, like Alan Simpson’s pronouncements.

          Look there are public programs that are successful, others that are less successful, and still others that are failures. The same is true with private businesses. At various periods in history, such as the one we’re in now, private sector businesses seem much more venal, corrupt, and unsuccessful than public sector operations. At other times, it was gospel that private businesses were the gold standard and that public sector organizations were a model of both inefficiency and ineffectiveness. These things, move in cycles, and success or failure depends very much on who’s running the government programs politically, and whether or not business has escaped all bounds of control by other social, political, or cultural institutions.

          But I think we need to be pragmatic about the public vs. private thing, and get away from ideology. We have to look for both private and public solutions to our problems, and also coldly evaluate both types of solutions to see if they really work or not. At this point, it’s clear that private businesses aren’t creating full employment. We’ve been far from having that over the past 40 years, after living through a period (1945-70) when we were often close to it. The real costs of unemployment are very high. So, why not implement a Job Guarantee program and see if it doesn’t improve the situation over what we have now? If it doesn’t work we can always count on the Republicans to get rid of the program. Hell, they might do that even if it’s working perfectly.

          • At this point, it’s clear that private businesses aren’t creating full employment.

            I must have spilled coffee on my copy of the US Constitution and obliterated the part where the government is required to insure full employment. Be that as it may, it’s not the role of private business to create full employment, either. What private business does is satisfy consumer demand. Airlines don’t exist to provide jobs for pilots and stews, they occasionally make a profit by transporting people from places like Detroit to Memphis. If insufficient travelers wish to make that journey, then fewer trips are made and fewer pilots and stews are needed. Or should the airline fly planes filled with paid crewmen reading Vogue or watching Will Farrell movies?

            Newspapers don’t print papers to keep pressmen busy and pay the bar tabs and greens fees of bad writers like Tom Friedman. They want to profit by selling their papers and consequently selling advertising in them. They’ve been doing a bad job of this lately, do we need a government newspaper program? Maybe we’ve already got one but perhaps we should be a little more direct about it.

            Oddly, we have short memories about circumstances directly related to this subject. No one seems to mention or remember the disaster that engulfed the world of buggy whip braiding when the automobile took over transportation. Bands of unemployed whip artisans wandered the urban streets and alleys, picking through the ashcans of nuevo-riche car salesmen hoping to find the remains of a T-bone to gnaw. When they died of starvation their emaciated bodies were quietly consigned to the least important part of the cemeteries. We don’t want to go through that again.

            • Chuck, this isn’t about the Constitution. It’s about how we want to define “public purpose.” I think it includes full employment and other rights specified in FDR’s economic bill of rights. The MMT Job Guarantee is the way to implement economic right of every one who wants a job and can fill one to have one. The Job Guarantee is actually a guaranteed job offer. After that, it’s up to the individual to accept or not, and to perform well enough to retain the job.

        • Clonal Antibody

          Chuck,
          Let us look at some historical models for what a job guarantee program might look like. Aprime example of this is one of the first ones tried in this country – the CCC and let us see what it did in a conservative state like Utah

          When Franklin D. Roosevelt took over as president in March 1933 the country was in the midst of the worst depression ever experienced in the United States. Among the organizations established to help relieve the situation was the Civilian Conservation Corps, not only one of the first to begin operations across the country but also one of the most successful of the various “alphabetical agencies” of the New Deal period. Originally referred to only as Emergency Conservation Work (ECW), Roosevelt’s CCC designation had been in popular use from the beginning, and its nicknames “Three C’s,” “Triple C’s,” or simply “The C’s” were widely used. The CCC was designed to simultaneously solve two of the major problems facing the country: provide financial relief and help implement conservation projects.

          Several government departments were included among the “technical agencies” which supervised the work of the 116 camps that existed at one time or another in twenty-seven of Utah’s twenty-nine counties over the nine-year life of the CCC. The United States Forest Service supervised forty-seven camps; the Division of Grazing–now Bureau of Land Management–had twenty-four camps working on erosion control projects and building reservoirs. The six Bureau of Reclamation camps worked primarily on irrigation schemes, especially the construction of the Midview Dam and lateral canals on the Moon River Project in the Uinta Basin, one of the biggest projects in the state. Range reseeding was one of the main activities of the eight camps of the Soil Conservation Service. The National Park Service had seven camps, primarily in Zion and Bryce National Parks, and it also, along with the city of Provo, jointly supervised the only “Metropolitan Area” camp in Utah. In addition to these, there were also camps assigned to the state of Utah for erosion control and work on state parks, as well as for the U.S. Biological Survey, the Bureau of Indian Affairs, and the U.S. Army. Work assignments for the camps were laid out and supervised by the technical agency in charge, although each camp was under the command of a regular or reserve office of the U.S. Army, which handled the logistics of supply and administration for the program.

          The first CCC camp to be completed in Utah was located about ten miles up American Fork Canyon. After establishing a temporary camp, forty young men, or “enrollees,” most of whom were between the ages of eighteen and twenty-three, began construction of two barracks on 17 May 1933. It was July, however, before seventy-five LEMs, or “local experienced men,” arrived from Salt Lake County to fill the complement of two hundred men. The LEMs were hired from the ranks of unemployed carpenters, farmers, lumbermen, miners, and others who had experience in handling horses, men, and equipment, and who could serve as project leaders. While the population of the state determined the number of junior enrollees, the quote of LEMs was based on the number of camps in the state.

          On the other side, what did the people enrolled in the program experience? You may get a feel from Remembering the Civilian Conservation Corps

          It’s easy to think of CCC enrollees as wide-eyed teenagers, plucked from familiar surroundings and dumped in the wilds of the American west and certainly that general scenario is borne out in the many personal histories that we have at our disposal. On the other hand, the recorded exploits of the young men in the CCC simply cannot be overlooked. The primary record shows scores of examples of individual heroism and self-sacrifice, indeed at least one Carnegie medal went to a CCC enrollee for his courage in saving fellow enrollees during a barracks fire.

          In all likelihood, for every instance of selflessness that made headlines, there were many others for which word never left the camp or local community in which the act took place. Buried deep in the text of a personal narrative published in 1941 is an account of an action by a single CCC enrollee that typifies this notion.

          Albert W. Jernberg’s book My Brush Monkeys: An Army Officer’s Story of the CCC is the account of one army officer’s stint as commander of CCC camps in the latter years of the program. Jernberg’s text contains occasional offhand comments that hint at a sense of superiority over his young charges, and given the era and the circumstances, such an attitude may be somewhat understandable. By the same token, Jernberg’s frequent praise of the enrollees seems all the more sincere given what might be considered a cultural or class bias on the part of the young captain.

          One event recounted in the book is the inspiration for this blog post so I’ll quote it at length here:

          Toward evening, after the crews had come in, it was discovered that an enrollee was missing. Pete instituted a search. After an hour they found the youngster fighting a fire, all alone. He had come upon a small roadside fire, caused by some careless smoker, no doubt, and as the wind was blowing strong, he no sooner killed it in one quarter when it sprang up in another. He could have left and summoned aid – and in that time the fire would have gotten out of control. He had chosen to stick with it and fight alone. When they found him, stripped to the waist and covered with dirt, he was tired out – at the end of his rope. But he had stuck to the job. With the help of Pete and the truck driver the fire was put out and the tired enrollee brought in.

          The incident revealed to me the character of the American boy; the American boy – who can’t be licked. There was a job to be done – and he had done it, sticking to it, the odds all against him. I decided then that the rest of the world could have bigger navies and bigger armies, but while we had kids like that we had something! How could you lick the kind of spirit that brush monkey showed fighting that fire by himself?

          Odds are that enrollee’s one-man battle against a small wildfire went unreported in the local press

          • While the population of the state determined the number of junior enrollees, the quote of LEMs was based on the number of camps in the state.

            So how is that a Jobs Guarantee program?

    • Why is MMT concerned about unemployment? Because they aren’t insane. All economists are. Neoclassicals of all stripes are the ones who say “LA LA LA I’m covering my ears. I’m not listening to the real world” – and say unemployment doesn’t and can’t exist (for very long).
      The unemployed aren’t as concerned about lack of a job as they are about having money to spend. And the unemployed know that the only real, solid, permanent way to get the latter is to get the former. So this is a false distinction.

      Everybody wants a job but nobody wants to go to work. Contradicting your previous sentence.

      Why not just skip the intermediate stuff and send them all checks in perpetuity? Or the government can simply enpixelate the funds and put them on a special credit card, pretty much as it does now. No need to even plug in the printing presses or worry about counterfeiting. As you folks say, the government isn’t running enough of a deficit so it’s a matter of talking somebody into hitting the keyboards with some crooked numbers and then the economy will start rolling again. This would work, partially, in the short run to get out of the current depression. This is the BIG (Basic Income Guarantee) proposed by some as a substitute for the JG, because they don’t understand the JG.

      But it won’t work, never has worked, in the long run and on large scales, because it is inflationary. It won’t work because it is something for nothing, which is unsustainable, except perhaps for a small elite (bankster) class. The numbers would be “crooked”. The JG is something for something, which can and will work, forever. Numbers input for a JG wage are NOT “crooked”. They’re a lot less crooked than numbers input to buy gold, governments creating a gold bubble for millennia.

      The JG is simple sanity, the simple reciprocity that people have an absolute right to in return for the government creating a monetary economy, creating markets and prices. People in modern monetary economies understand their economies less well than people in “primitive” pre-monetary economies understood their economies. The JG just incorporates and brings the higher “primitive” level of understanding into a modern monetary economy.

  15. Joe,

    I did this same thing a while ago. I included this about inflation, in the context of explaining why taxes are necessary:

    “The operational reason is that taxing destroys money. It is the opposite of government spending, which creates money. Without taxing, or with too little taxing, the amount of money could increase faster than the amount of goods and services produced in the economy. If that were to happen, the result would be price increases. Persistent general price increases are known as inflation, and too much inflation is a bad thing. Taxes are the way government can ensure that its spending does not create money too quickly.”

    My full blog entry is at http://twosysprogs.blogspot.com/2012/09/one-more-economics-rant.html

    I don’t have a lot of followers, but I am well on the way to converting my brother from a deficit hawk to a deficit owl.

    Feel free to use what you want from my effort. I did it in the sequence I did because I thought that was how to lead an average educated, politically aware, but non-economist American through the things that he had to change his mind about. I think there is room for more than one sort of approach, tuned to different audiences.

    • Oh, and it’s too long, but I just couldn’t help myself. I tried, but I can’t find anything that could be deleted without making it incomplete. That’s part of the problem, there is no way to state all of this succinctly enough to be contained in a single sound bite.

    • Thanks John, I think you did a really good job and in a nice simple writing style. I’d probably use different wording here or there revolving around the use of the word “money” and a few other matters. Also, I don’t think what I’m doing here is quite the same as what you were doing. Here, I’m trying offer an MMT fiscal responsibility narrative; while I think your treatment is an overview of some of the key points in MMT. So, the emphasis is a bit different as are some of the key points. I’ll get back to your post later and leave some comments at your site.

  16. Chuck, the government is pretty good at designing some things right? It did put a man on the moon, developed the protocols still used today for the internet, manages 5000 + nuclear warheads, operates 11 nuclear powered small city sized aircraft carries, designed, launched and operates the gps satellite system, manages US airspace to keep planes from colliding into each other. Just like private companies, there are some really well managed ones, and some not.

    • Thanks, Rumble. A little common sense for our ideologue. Btw, our SS and Medicare programs are pretty good ones too. And, even though Medicare costs are rising fast; they’re growing much less rapidly than private sector insurance costs; and it’s also arguable that these rising costs could be best contained by socialized insurance, otherwise known as single-payer; or Medicare for All.

      It’s a bit harder to make the case for full-on Socialized Medicine. The UK has a good system of this type in its National Health Service; but other nations like Australia, Canada, France, NZ, and Taiwan are doing at least as well with versions of Medicare for All.

    • There’s a little machine wandering around on Mars right now. While the technical achievements of the US space program are impressive, what does all of this government allocation of scarce resources do to other endeavors? It could very well be that wealth and energy devoted to interplanetary investigations might be better employed solving problems here on earth. “Government” as such, didn’t develop the protocols of the internet, Al Gore did. We really need 5000+ nuclear weapons, especially when only a half-dozen or so would probably eliminate life as we know it on earth and our eleven carrier task forces are a relic of WWII thinking that are essentially giant floating targets. It’s difficult for the ordinary citizen to evaluate the “success” of the space program but we don’t have any problem judging more mundane institutions, like Amtrak or the Departments of Education or Agriculture.

      • ” . . . government allocation of scarce resources . . . ”

        If you’re talking about dollars, dollars are not scarce to the government, which has the unlimited ability to create them.

        Mostly, government itself doesn’t create. Mostly, it pays private industry to create, and that’s good for the economy.

        • I thought it was clear that he meant real resources, not financial resources. “Wealth and energy”.

  17. Come to think of it the best response to the inflation bogy may be to point out that by raising it the questioner is conceding the main point, namely that the government is not limited in it’s ability to create money. That is, if you are worried about the government “printing” too much money then you are agreeing implicitly that the government can do that, which concedes the starting point of the MMT argument. So in that way perhaps we are using a kind of judo to use the energy of an opposing argument against itself. If that is so then perhaps, as you suggest, it is better to not raise it in the first place and wait for the audience to raise it.

    • Yes, provided you hammer that point home and then ask: So now would you like to put the false issue of insolvency behind us and discuss the types, causes, and effects of inflation?

    • Inflation is not a problem unique to fiat currencies. The US had inflation while on gold and bi-metallic standards, from time to time. There was also deflation from time to time.

      What I hear often is that by 1913 the dollar was worth about what it was worth in 1791. 1913 is when the Federal Reserve system was created. Since then the dollar is down 97%, far more than it ever was down during 1791-1913. Part of that occurred during the gold standard days, including a devaluation relative to gold by FDR. Another part occurred during the 1970′s, following oil price shocks.

      MMT is quick to explain the 1970′s inflation, and the devaluation was obvious, but MMT usually insists that there has never been a period of demand-pull inflation in recent US history (e.g., the 99 years of the Fed). And yet there is this chronic, low-level syndrome of 2-3% a year that seems to be incurable, even by a GFC, for more than a few months at a time, and it persists even when unemployment is higher than anyone considers an acceptable tradeoff for price stability.

      If there was a good explanation for that (more than “that’s what the Fed has set as a target”), then that would be a big help to the cause.

      • Clonal Antibody

        My guess is that the 2% is what the private banking system takes as its cut – call it the “rentier tax.” It works as long as the nominal GDP grows much above that rate. If the GDP growth rate falls close to the inflation rate, it leads to widening income/wealth disparities.

        • Interesting. How does that work? I would think that if the private banking system were to remove money from the system to the tune of 2% of GDP each year, it would cause deflation, not inflation. And how is it different from the profits of any other businesses? And why not offset by additions from government which are today much larger than 2%?

          • Clonal Antibody

            A major part of inflation is inflation from asset bubbles. Let us consider two similarly sized real estate markets – San Diego and Pittsburgh. One had a real estate bubble and the other did not. Pittsburgh until recently had a “Land Value Tax.” The real estate prices in Pittsburgh were consistently low. This is because the property owner can afford $X a month to pay for the ownership and use of that property. That $ X gets divided between taxes and interest. If the taxes are high, then the real estate prices will not be bid up – resulting in smaller loans, and smaller profits for the bankers. The municipal government (a currency user) uses the monies to provide better services to its residents (Pittsburgh until recently was the most liveable city in the US)

            Think of the constant 2% inflation rate as the bubble effect caused by credit expansion – which is a transfer of wealth from the bottom of the social structure to the top. If GDP growth is much higher than this level, the bottom shares in the additional wealth. If not, inequalities worsen.

            Let us take the case of education. Federal funding cuts to educational institutions, beginning with Reagan, caused the educational institutions to raise their fees. This causes students to go into debt to educate themselves. This increases profits to the bankers, and is also inflationary in the process. Compare the growth rates of credit money, government deficits, and GDP. Private credit growth outstrips the other two.

            • I still don’t get it. San Diego (and other housing bubble cities) real estate prices have been falling since 2006, and yet inflation, except for a few months in 2009, has continued.

              Besides, a rise in one price relative to another is not inflation. If Pittsburgh and San Diego and coffee and gasoline and nearly all other products and services were all going up, that would be inflation. I don’t see how expansion of private credit would cause that. If people are paying more in interest charges, they have less to spend on everything else, and so demand for everything else would drop, and then the price would drop, not rise, in order to clear the market.

              Some sellers (monopoly or oligopoly, like universities) might have some market power and be able to maintain or even raise their prices, but, again, that only puts more pressure on other prices to fall, not rise, as the residual spending power of those consumers drops.

        • The 2%-3% inflation is the Fed’s target. Many economists believe a small amount of inflation benefits the economy by stimulating consumption, today, in advance of increased prices. In the opposite scenario — deflation — people continually wait “until tomorrow” to make purchases, figuring the price will be lower then. That “waiting until tomorrow” kills an economy.

    • I wonder, if one were able to engage an Obama or Romney (in a few hours I’ll be able to pick just one) about this, they might say, “Well, of course, if Congress passes a law and the President signs it, there is no limit to how much money can be spent, with or without taxation to cover it. There is no limit to how high the Congress could raise the debt ceiling. And even if free market interest rates rise, there is no limit to how many T-bills the Fed can purchase to hold the rates down, and no limit to how much interest can be paid on the debt, simply by issuing more debt. And if nobody wants to hold our paper, the Fed could buy it all. The danger is not that our computers or printing presses will fail under load, it is that using them too much will flood the world with dollars, and thus destroy the value of the dollar, and our prosperity, our status as the only superpower, and could even threaten our ability to defend ourselves” and perhaps more like that.

      Inflation is the implied constraint, really, even for those who use the rhetoric of “we are broke”. They don’t mean that we can literally run out of dollars, like a household, but that our dollars will become worthless, and we will be broke no matter how many of them we have.

      I’m becoming more convinced in the political necessity of a JG as part of an MMT-inspired plan for full employment with price stability. It should be called Workfare 2.0, though, so as to gain the support of deficit hawks. And along with it must be some limited authority to raise and lower a new, broad-based Inflation Control Tax (a FICA-like levy would do, but a business gross receipts tax would be better, I think) vested in a board similar to the Federal Reserve Board, and operated with a primary mandate of price stability, and a secondary mandate related to the size of the JG workforce. They have to be able to deal with extraordinary events like oil embargoes and such, when their price stability goal would be subordinated to one more on the lines of survival. Or maybe the President can suspend their authority to raise (or even lower) taxes, subject to a Congressional Veto. Checks and balances. Congress can, of course, pass tax legislation anytime it wants in order to exercise its control, but the actions of this Board would be quicker and less drastic. Or maybe they make a recommendation on the first day of each quarter, and if Congress does not act by the first day of the next quarter, the recommendation goes into effect.

      Anyway, such a board would do a lot to alleviate the fears of inflation hawks, especially any who are aware of MMT and see it as a Progressive political ploy rather than a truly economics-based movement.

      • Inflation is the implied constraint, really, even for those who use the rhetoric of “we are broke”. They don’t mean that we can literally run out of dollars, like a household, but that our dollars will become worthless, and we will be broke no matter how many of them we have.

        Sorry, John, I just don’t accept this. If they’re concerned about inflation, then should say so, and debate whether particular deficit spending proposals will be inflationary. Right now, however, that’s not what they’re saying. They’re claiming there’s a solvency problem and a shortage of money. This is either a false idea in their heads, or they are lying. Which is it?

        I’m becoming more convinced in the political necessity of a JG as part of an MMT-inspired plan for full employment with price stability. It should be called Workfare 2.0, though, so as to gain the support of deficit hawks.

        I don’t favor the JG for political reasons. I want to implement the right to have a job at a living wage, which I believe is a human right. I also think an employed buffer stock is a better support for price stability than is an unemployed buffer stock. However, I don’t want to call this “workfare” because 1) I don’t like the “welfare” association with that term, or the connotation of “make work” often associated with it; and 2) workfare is compulsory, while a JG is not. Last, I don’t care about the support of the deficit hawks. The first thing we have to do is to discredit the ideas and policies of the deficit hawks. Once we do that we won’t need their support. We just need them to go away. So, second, we must never let them forget that as long as want to import more than we export deficits are a good thing, not a bad thing, and their views on deficits are harmful to the economy and the nation.

        And along with it must be some limited authority to raise and lower a new, broad-based Inflation Control Tax (a FICA-like levy would do, but a business gross receipts tax would be better, I think) vested in a board similar to the Federal Reserve Board, and operated with a primary mandate of price stability, and a secondary mandate related to the size of the JG workforce.

        I don’t see it that way. The JG program would be self-adjusting as to size. That’s the whole point of it. The JG offers are guaranteed to people. When the private sector recovers the people get hired away into the private market because that market provides better jobs, wages, and benefits. If it doesn’t then people stay at their JG jobs. That’s how this buffer stock must work or it won’t be a buffer stock.

        I agree that the Executive should have authority to raise taxes when demand-pull inflation manifest itself; but I don’t believe this should be vested in any Board of technocrats. They are always biased toward the 1%. Neutrality is a fairy tale. And there never be a bias toward price stability over full employment because that leads to NAIRU nonsense. The political authorities must be responsible for results so that it’s fair to hold them accountable. So let them raise Real Estate taxes, FICA taxes, or business taxes as the case may be. I prefer Warren Mosler’s Georgist real estate and also luxury tax proposals here, because they’re easy to enforce and targeted on consumption.

        They have to be able to deal with extraordinary events like oil embargoes and such, when their price stability goal would be subordinated to one more on the lines of survival. Or maybe the President can suspend their authority to raise (or even lower) taxes, subject to a Congressional Veto. Checks and balances. Congress can, of course, pass tax legislation anytime it wants in order to exercise its control, but the actions of this Board would be quicker and less drastic. Or maybe they make a recommendation on the first day of each quarter, and if Congress does not act by the first day of the next quarter, the recommendation goes into effect.

        Again I don’t believe in unaccountable boards of “technocrats.” It should be the President’s decision.

        Anyway, such a board would do a lot to alleviate the fears of inflation hawks, especially any who are aware of MMT and see it as a Progressive political ploy rather than a truly economics-based movement.

        I’m not interested in alleviating their fears. We won’t get MMT policies through until we’ve beaten them anyway. And when we do, we’ll soon prove that demand-pull inflation is not a serious factor and that cost-push is best controlled with vigorous government action including rationing and price controls. That will take care of the inflation hawks.

        • Lots of people are concerned about inflation. They believe the tripling of the Fed’s balance sheet since the GFC will cause hyperinflation when the economy recovers. They are wrong (a false idea in their heads, as you say), but they are sincere. They don’t distinguish between different types of deficit spending. It is all about the size of the deficit. They believe a balanced budget is not only possible, but is the key to prosperity. They do know that unlimited spending is possible, and they are very afraid of it.

          Most importantly, they are in charge. And they are teaching the next generation of those to be in charge the same economics that they learned. Unless you have enough UKMC students to take over the government, you must change their minds. I don’t know what you mean by “beating” them. It is not a war, it is persuasion. Beating may force compliance, if you are the stronger party, but it is not persuasive, and it is not currently an option for MMT.

          Workfare was never compulsory. You only had to participate if you wanted to be paid, and were willing and able to work. Just like working a private sector job. And just like JG.

          “we must never let them forget that … their views on deficits are harmful to the economy and the nation.”

          You make my point. You must change their minds. Not “beat” them, or “make them go away” (“disappear them”, we used to say about the Soviets).

          The JG is a more powerful automatic stabilizer, but even with JG the levels of spending and taxing must be right, else the JG workforce grows too large or too small. Tax policy is the best way to adjust. I would favor putting that authority in the executive as well, except that it is too easily manipulated for political gain. The Fed is not perfect, but imagine what would have happened over the years if the President or the Congress were doing its function?

          I should have included the deficit doves along with the hawks. You need their support, too, at least a large number of them. The owls are way too small a minority to carry the day. Turning hawks and doves into owls, by education, is the long-term answer, but we don’t have the time. Forging a political compromise that they as well as you can accept is the more immediate way.

          • What I mean by “beat them,” is to overcome them politically. Most polls show that the deficit/debt problem isn’t one of the main concerns of people, and “jobs”, “the economy” and “health care” all outrank “debt/deficit” as a major concern of people. So, there is room to build support for deficit spending programs, especially assuming the debt would be getting paid off through PPCS, if those programs bring the economy all the way back, create full employment, and bring us Medicare for All. So there’s no reason to persuade the hawks or even the doves about inflation. They can bleat about it all they want. But people won’t respond to that kind of appeal until they feel the inflation. Since, we’re not going to deficit spend beyond full employment, and we’re also going to very actively respond to any cost-push inflation that may appear, people won’t be suffering from inflation. It is the experience of full employment with price stability that will persuade both the hawks and doves over time as they see that PPCS combined with the right kind of deficit spending is producing growth, full employment, and price stability as well.

            I’m sorry to be so negative about persuading people and compromise. They certainly have their place. But in recent history the rhetoric of persuasion and compromise has been an excuse for letting problems fester rather than solving them. One reason why I favor the $60 T PPCS plan is because it changes political reality in Washington quickly. No more solvency or debt BS. After that, it would immediately be full employment, Medicare for All, economic prosperity vs. the prospect of inflation. I think that if that’s the debate people will support doing the first three and will wait to see if we get inflation, and the neoliberal economists will just have to swallow that. The proof of the pudding will be in the eating. And even if there is some inflation thereafter, working people will thank God that they have jobs, a living wage, health care, an improving educational system, and a movement towards new energy foundations and they will accept any moderate level of inflation that may result with equanimity.

            • Yes, jobs and the economy are the ultimate goal. Debt and deficits are symptoms, but there are important historical correlations between jobs and deficits.

              Winning politically means getting votes, and that means changing the minds of the voters.

              People are very much influenced by the conditions in which they grew up. My generation remembers the 1970s stagflation, and the cure to it being painfully high interest rates. They fear inflation, and they fear the cure as much as the disease. My parents’ generation remembers the Great Depression, when unprecedented spending on social programs and jobs programs did little good, and the cure was a world war. Young voters today remember the late 1990′s as a period of happiness, growth, and budget surplus.

              All these memories work against you. These people are tuned in to the austerity message, because their experience is that good times are associated with low inflation and low or negative deficits, and bad times (like today) are associated with high deficits. They are not economists, but they know what they like, and the things they like are associated in their minds with low deficits, not high.

              Never mind that the deficit today, the highest ever in nominal terms, is too low, and that is the cause of the bad times. The very idea contradicts their life experience.

              The deficit hawks and doves whose minds you need to change are not the Pete Petersons, but the voters. Some prominent people are so invested in their past pronouncements that they are unable to change their minds, because that would be admitting that they were wrong all along. The voters don’t have a vested interest in high or low deficits, they just want an approach that promises prosperity.

              If you want the voters of my generation to support you, then you must assure them that you’re not going to recreate the policies of the late 1960′s that created the economy of the 1970′s. If you want the voters of my parents’ generation to support you, you must assure them that JG is not ineffective make-work, and that there is a solution other than world war. If you want my son’s generation to support you, you have to show them how the surpluses of the Clinton years caused the recessions of 2000-2002, and that the surplus was caused by the good economy, not the other way around.

              Virtually no non-economists are even aware of MMT. They don’t know that what is being taught now in economics courses outside Kansas City is obsolete. That’s why I started my piece the way I did. The rules have changed. The strategy should change, but it has not. Our leaders should wake up and change the strategy to fit the new rules.

              “Try it for a while, and you’ll see” is not convincing. You have to explain why it will be different this time. And you can’t be so cavalier about a little bit of inflation. If you’re retired with a $2000 pension and $800 rent, everything is fine. Then 10 years later your rent is $1200 and everything else has gone up, too, except your pension, and things aren’t so fine anymore, and you can still expect to live another 20 years. Yes, Social Security is indexed now, but for most retired people most of their income is still fixed. 2-3% inflation may be fine as long as you have a job, but not after.

              It is about changing people’s minds, but not those of the political elite. MMT will start making headway as soon as the first MMT politician is elected to federal office.

              • That’s a good reply, John. I’ll only say in reply, that times have changed, that people know that, and that they know that something other than the neoliberal policy nostrums are necessary to fully recover from the GFC. So, I think they are more open to new solutions than they been for a long time and the polls indicate the heavy majority of people are against cuts in all parts of the safety net and for higher taxes on the rich. If the big coin were minted and the public debts were being paid off I think people would be open to deficit spending without debt if the President supported a cautious phasing in of that kind of spending with careful monitoring to guard against demand-pull inflation. In addition, an initial substantial increase in SS benefits as compensation for the collapse for most people of the so-called three-legged retirement “stool” along with a more aggressive COLA formula covering both CPI inflation and medical cost inflation would ease the minds of the retired and those nearing retirement.

                I understand what your saying and appreciate the reasonable of your position, but the only thing that is perhaps clear about the political future is that it is not like the past, and that it is difficult to project how people will react to substantial changes. Over the past 60 some-odd we have done our best to avoid the unpredictable by being quite risk averse with respect to change. Yet we have failed to stop uncomfortable changes anyway, and now are close to losing our democracy to the plutocrats. I am against moving slowly on MMT-induced changes out of fear of people’s previous experiences. I would rather move quickly and provide new experiences that weaken, rather than reinforce their views of the world. That is what we need to open them up to MMT thinking. They will accept MMT only after they experience how it works. Not before.

              • What MMT needs is not so much better arguments as a bigger megaphone. Get somebody elected to something, or get somebody a TV show on a real network. Or a job as an editorial writer, or even a columnist in a big paper or Time or Newsweek. Yes, that’s it, do dueling columns with Krugman every week.

                “cautious phasing in of that kind of spending with careful monitoring to guard against demand-pull inflation.”

                Yeah, that’s what I was trying to say. That’s the point of removing the tax adjustment function from the political arena, to a committee dedicated to that function. You can retain accountability in the Congress and Executive by whatever checks and balances you want, as long as you don’t let them take their sweet time when something needs to be done.

                I’m all for a SS boost, but being a recipient now I’m reluctant to advocate it. Seems too much self-interested. I’d go for means-testing of the increase, though. There’s really no reason to give it to Buffett and Gates (they don’t want it anyway), and even though I could use it, I can get along without it. I think broad tax cuts, like FICA, and increases in transfer payments, like extending or increasing UI and SS are the best ways to satisfy private savings desires and stimulate private spending and jobs. And JG, of course, but that will take some time, whereas the others could be done quickly if the need were recognized.

                Unfortunately, now it seems the only arguments between Obama and the R’s will be how much and on whom to raise taxes and how much and on what to cut spending. Nobody who won an election this year promised to do anything that would help.

                I appreciate that you would like to move quickly, and so would I. The problem is that you and I can’t make it happen. Politicians can, and our task is to educate them and educate their constituents so that they will be motivated to make it happen. It won’t be quick.

  18. Third paragraph in:

    In addition to taxing and borrowing money and, most importantly, the Government

    I think there is a word missing, probably “spending” after “importantly. So should be “… most importantly, spending, the Government …”

  19. Joe,

    Do you think the best defense is a deflection to endogenous money?

    I’ve found that trying to explain to non-economic people that when the economy isn’t at full employment and full productive capacity then deficit spending leads to an increase in output, not inflationary pressure. This sounds very abstract to them, and thus unconvincing.

    What I’ve to be more convincing is to explain that the majority of “spendable” dollars and actualy spending in circulation comes about through loans creating deposits, which is the result of the publics demand for credit. When they can wrap there mind around the idea that most “money creation” occurs that way, it starts to seem less convincing to them that deficit spending obviously causes inflation.

    What do you think?

  20. Joe,

    Obama is an intelligent man. He has surrounded himself with intelligent men. For years, you and I and many others have written about Monetary Sovereignty. It’s no secret from these intelligent men.

    So the question is: How is it possible that these intelligent men not seem to understand the simple economic facts of Monetary Sovereignty? The answer: They don’t want to. They want austerity. They want the public to believe austerity is necessary.

    Austerity widens the gap between the rich and the rest. The 1% bribe politicians, the media and even many economists, to brainwash the public into believed the deficit should be reduced.

    Yes, the facts are important, but understanding the motivation is equally important, and has been given much less attention. Every time you present the facts, you also should present the motive, so the public will understand not only that they are being lied to, but why.

    Revealing that context is important if we are to change minds.

    Rodger Malcolm Mitchell

    • Hi Rodger,

      Obama is an intelligent man. He has surrounded himself with intelligent men. For years, you and I and many others have written about Monetary Sovereignty. It’s no secret from these intelligent men.

      Being a little more specific about it, Obama and his people may understand it and it may be no secret to them, but it seems likely to me that much of the Senate, and also the House are unaware of the basics of a fiat currency system; and I also think that the informed lay public has almost no understanding of it. So, I think we can’t assume that people understand, but have to keep educating

      So the question is: How is it possible that these intelligent men not seem to understand the simple economic facts of Monetary Sovereignty? The answer: They don’t want to. They want austerity. They want the public to believe austerity is necessary.

      For many of them, I think this is true!

      • Mosler recently said something to the effect that it is understood at the staff level, but not at the leadership / political levels.

        If they are deliberately sabotaging the economy, then there is no hope. They will never be “persuaded”, and will take actions to protect their positions of power. I think ignorance is a sufficient explanation, and see no reason to attribute evil intentions.

        • Evil intentions? Does that include wanting it all for themselves? Or wanting to drive down real wages? Or wanting to severely cut back the social safety net?

          The PTB — including the MSM — all know that SS has nothing to do with the shape the country is in. They all know the real problem is health care costs in the U.S., not Medicare or Medicaid. They all know that we bailed out the banks with “money” created out of thin air — $29 trillion — enough to run the Pell grant program for 725 years!

          Sorry, ignorance of the PTB — including the bankrupt economics profession — has nothing to do with it. Ignorance of the public? Yes.

          But the public doesn’t need to know what money is. They don’t need to know about sectoral balances. They need to know that they are getting screwed. Well, actually, they know that already.

          MMT has to simplify its message. And become far more strident in tone. And take it to the streets.

          IMHO. As always, YMMV.

          • Well, am I not strident enough to piss off the right people? But, seriously, I agree with this. I think we have to get a lot more pushy to get this out to the public. It’s a matter of working different sides of the street. Some of us are persuaders. Warren Mosler comes to mind. He is an unflappable persuader and is great for talking with the neoliberals. Bill Mitchell, Randy, Bill Black, and Michael Hudson are rabble-rousers. Stephanie seems to do both very well. Send our persuaders out to the economists, and our rabble-rousers out to the people. You can’t talk morals to the economists anyway!

    • Joe,

      You said, “The Treasury can keep borrowing money if we want it to. There’s no limit on the Government credit card except the one imposed arbitrarily by Congress.”

      I still have concern about the so-called “borrowing” and so-called “debt.” It is not at all like personal borrowing and debt, and is not owed in the same way personal debt is owed.

      Federal debt is nothing more than the total of dollars held in T-security accounts at the Federal Reserve Bank. A T-security account essentially is a savings account. So the federal “debt” is just the total of certain savings accounts at the FRB, and should be looked at in the same way as any bank savings accounts — only safer.

      I never hear criticisms of banks for having too much in their savings accounts. Banks used to offer toasters to obtain savings accounts, and banks sometimes boast about how much their savings accounts total. It’s one of the measures of a “big” bank.

      But because of the incorrect use of the word “debt,” people are all aflutter about the size of the savings accounts at the FRB. If instead of “debt,” we merely called them “FRB savings accounts,” we wouldn’t have to suffer so much misinformation and hand-wringing.

      The government should stop issuing T-securities, so the FRB no longer would accept deposits in its savings accounts, and we could use your “platinum coin” solution to put the final nail in the coffin of federal “debt.”

      • Thanks Roger, I agree with all you’ve said here; but I don’t know what to call it accept debt. In Warren Mosler’s Soft Currency Economics II he introduces the Acronym IRMA, Interest Rate Maintenance Account, to replace the public debt tally. It’s an interesting suggestion, but clearly before people will accept it, they have to accept the MMT view on why Government borrows, which is a counter-intuitive idea. The “FRB Savings Account total” probably requires less explanation; but I think it will still take a long time to get the public used to it. Time for me to switch to the new thread on the revised version of the narrative.

        • I agree that debt is a wrong word to use. Hononym at best, that is, same word for different meanings. Just because of that clarification would be in order.

          Maybe debt with some adjective to signify non-burdening nature of sovereign debt? Or better yet get to the asset nature of these debts. We have ‘public infrastucture’, so it could be called ‘public financial assets’ or ‘public assets’ for short.

          And… who writes the vocabularity? Who else than founders of the theory. MMT founders are in unique position to rename things.

      • I’ve got it. Let’s call them “Savings Bonds”.

        • Or, to eliminate any false association with debt, we could call them “T-security account deposits” (like savings account deposits, which they resemble closely).

          • Yes, but savings deposits are debt of the bank, so you don’t get away from the debt thingy. Savings Bonds are something people like, and like for the government to make available. Nobody ever complains about there being too many savings bonds out there, just like nobody complains about there being too many bank deposits. The idea is for them to have a better name, a name that doesn’t imply bad things. Savings Bonds is a name that is known and liked. Grandparents give them to their grandchildren at Christmas.