The Coin Abides

By Dan Kervick

Matt Yglesias has posted a sharp post-mortem on the platinum coin debate.  This weekend, the White House imperiously declared that debate over.  And perhaps it is – for now.  But Yglesias remarks on the salubrious effects of the debate:

All that said, I’m glad we had this conversation. Direct discussion of the platinum coin was a good reminder that many people, including influential media figures, appear to have no idea what money is or how the monetary system works. Apart from the shockingly widespread view that the value of coins is determined by their metallic content, there was a lot of insistence that creating money was somehow an act of “magic.” In fact, the way all legal currency is created is that a government agency creates the money.

I would go a bit further.  The coin debate triggered something.  The platinum coin is a big shiny, reminder that in some way, somehow, the monetary authority of the United States rests with the American people, even if the plutocratic architects of our financial system and the owners of our country have succeeded over time in burying that authority under many layers of convoluted technocracy and confusing delegations.

The current system of public finance that we have evolved in the US treats the US Treasury operationally as though it were just another commercial enterprise that depends for its financing on the Federal Reserve, that Bank of All Banks that rules us all, and at which even the US government itself must stand behind the rope line as a mere depositor.  Since the financial power of the US government and the financial power of the Treasury are often taken to be one and the same thing, then a consequence of this deeply-ingrained perception is that the government is seen as monetarily subordinate to a mysterious, external financial power.  Given that subordinate status, in must either acquire dollar assets by taxation, or compete for borrowed dollar assets in the credit markets with other borrowers.

But this is absurd.  The Fed is itself a branch of the US government, established by congressional legislation to act as the agent of Congress’s inherent monetary power – despite the Fed’s pretentious “independent within the government” self-description.   The Treasury is thus not equivalent to the total financial power of the United States government, but is only one account at the Bank of All Banks, and that bank is itself wholly the creature of the American people and their government.  The Fed account is one US government account, and the Treasury account is another.  And we can change the structure and hierarchy of accounts whenever we want to by reforming the very acts of legislation that created the current system in the first place.

We have it within our power to make sure the Treasury account is fully funded to accomplish whatever we might want to do with it, subject only to limitations on the real assets of the Unites States and the energies and capacities of its people.  Currency assets can be created at will, and allocated to whatever tasks we select for them.  It is entirely a matter of public policy choice whether we pay people interest in exchange for temporarily transferring dollar balances from their own accounts to the Treasury account.  If we don’t want to pay the interest, we can either tax away those balances, or create new balances directly in exactly the same way the Fed creates them every day in the exercise of monetary policy.  People now see that if you can create a balance in the Treasury by minting a coin and depositing it, you can also create a balance in the Treasury without the interposition of any barbaric and anachronistic metallurgy.

A strong form of central bank independence has been the foundation of neoliberal financial rule for the past three decades, and during that period the capacity of democratic governments to guide the economic destinies of their nations has been weakened, and surrendered to private wealth and private corporations.   But the glaciers of central bank independence, seemingly so frozen in place and imperceptible in their movements, are beginning to crack and groan.  Central bankers and the financial community have already begun to wring their hands publicly about the impending loss of independence, autonomy and power.  And increasing numbers of Americans are beginning to understand the nature of their own monetary system, and the reality of their latent and untapped economic power.

Washington will revert back to normal for now.  After resolving the standoff over the debt ceiling, both parties will return to their misguided pursuit of austerity and slashed deficits, their defense of the privileges of wealth and ownership, and their neglect of the unemployed and the struggling.  But the chain reaction of liberating ideas that hve been unleashed by the coin debate will continue.

So the coin abides.  I don’t know about you, but I take comfort from that.

 

46 Responses to The Coin Abides

  1. Dan – - -

    Nice summary. It has been a teachable moment.

    Maybe another few hundred people learned something about the mechanics of money.

    • casino implosion

      All it takes is a few thousand—-of the right, influential people.

      A similar-sized cadre was behind supply-side economics.

  2. ” The Fed is itself a branch of the US government”

    But is not owned by the US government.

    The Federal Reserve creates money as debt out of thin air and then lends it to the US government at interest. The fed takes US Treasury Bills as an IOU. If the US government owned the Federal Reserve, it would not be necessary for it to borrow money; it could just create money at will without debt.

    The Federal Reserve is supposed to ensure full employment, but has failed miserably, since the real unemployment rate is 18% of the workforce or 33 million people without a job.

    • Potomac Oracle

      Well said.

      The Platinum Coin Kerfuffle should also have highlighted the important fact that public purposes can be funded debt free. How many Americans really grasp that notion?

      How many politicians understand the extraordinary implications of funding America’s needs without adding one dime to current debt?

      That point is what should have been trumpeted by MMT proponents, not just the fact that PCS provides debt relief for additional spending.

      Maybe the debate can take this turn since it’s something to which Americans can really relate.

  3. I, for one, don’t believe the debate is over or that PCS is dead for now, despite the White House’s imperium. As long as seniors keep pressure on Congress not to cut SS benefits, Obama will have to come up with an acceptable alternative. I don’t see another on the horizon. Turn up the heat.

  4. Not owned by the US govt ?

    Ok, sure.

    I’m curious though: what sort of “private” company does not pay dividents to it’s shareholders, has it’s CEO appointed by the govt and has to follow the dictates set out by congress/govt (and not it’s shareholders)?

    • The Fed.
      What is it?
      A system of many parts.
      A small one IS part of government – the policy-setting Board.
      Members of the Board,including its Chair, are ‘confirmed’ by the Senate.
      Do you think it would be the public’s Kucinich/Nader or the bankers’ Lew/ Rubin to put the names forward?
      All of the names support the system, all went to or teach at the financial schools and learned only the private Fed business model, so what’s the difference?
      I can’t remember a down vote on banker-recommended Policy Board Members.
      What exists as a theoretical government power here is not a right to reject, but a duty to confirm.
      “Step outta line, the man come and take you away.”
      As Durbin said of DC – “The bankers own this town.”
      It’s a silly argument.

      The rest of the system is the 12 Regional Banks – all private corporations, and their thousands of Member banks – the same.
      Those who create the money and profit forever with compounding interest from its use, paid by the Restofus and OUR government, are all private corporations.
      The FRBNY, which manages the payments system and is where the GUVUS has its accounts is a private corporation.
      Politics and political economics are about power and interests.
      The power and interests of those who run the Federal Reserve system are private.
      That’s why it’s known as ‘the bankers’ bank’, and not the nation’s bank.
      Which is why ‘nationalizing’ the money system is step one to true socio-economic reform.
      For the Money System Common.

    • If the US government owned the Federal Reserve bank, there would be no need for the US Treasury to borrow money, since the Federal Reserve creates money at will as debt. The US Treasury should have the ability to create money without debt.

      The money in circulation in the US is in the form of Federal Reserve notes. It could just as easily be US Treasury notes without involving the Federal Reserve. The Federal Reserve is obsolete and a hindrance to good governance.

      The creation of the banker owned Federal Reserve in 1913 was the biggest scam ever perpetrated on the American people.

      “Give me control of a nation’s money supply and I care not who makes its laws”

      Meyer Amschel Rothschild.

    • foo, there are several kinds of gov-private hybrids in existence. Not sure which of your criteria each meets, but USPS, Freddi Mac, and Fannie May come immediately to mind. TVA is another. I’m sure there must be more.

  5. “The coin debate triggered something. The platinum coin was a big shiny, reminder that in some way, somehow, the monetary authority of the United States rests with the American people”

    What it ought to have done is impressed upon the American people that “the monetary authority” had been outsourced to the private banks who by way of gratitude are only to happy to blow inflationary asset bubbles beyond the carrying capacity of the real economy just as soon as they can corrupt democracy. Somehow I don’t think that was the main understanding that hit home. More the “How dare the Republicans hold the nation hostage.”

    http://www.huffingtonpost.com/2013/01/13/paul-krugman-debt-ceiling_n_2467718.html

  6. “The coin debate triggered something. The platinum coin was a big shiny, reminder that in some way, somehow, the monetary authority of the United States rests with the American people”

    Or the more “sophisticated economic viewpoint” that the actual amount of the Federal Deficit is much overblown by the Republicans:-

    http://www.calculatedriskblog.com/2013/01/no-trillion-dollar-platinum-coin.html

  7. And if as one of the American People you are not too much concerned about “the monetary authority” of the United States being outsourced to the private banks you might consider this:-

    http://www.ritholtz.com/blog/2013/01/the-governments-entire-bailout-strategy-was-to-cover-up-the-truth/

    • There was no need to involve the US Treasury in any bank bail out. It could have easily been handled by the Federal Reserve, by buying the bank’s shares or bonds. Paulson engineered grand theft Treasury and should be in jail for conspiracy to defraud Congress and the American people.

  8. Related to the ritholtz link is Matt Taibbi’s recent article “Secrets and Lies of the Bailout.”

    http://www.rollingstone.com/politics/news/secret-and-lies-of-the-bailout-20130104

    In short Ritholtz and Taibbi are telling us that 12 out 13 of the United States’s major banks were bankrupt in 2008 and both Democrat and Republican Treasury Secretaries, Paulson and Geithner, have lied to the American People about this. This provided cover for the government working in conjunction with the Federal Reserve to create trillions of dollars ( non-bond money ) out of thin air to bailout these 12 major banks together with other major financial organizations such as AIG which along with the rating agencies and major banks in Europe and the United States were operating a giant Ponzi scheme. The American People’s government was manipulated through lies to forms part of the Ponzi mechanism.

  9. On the US Federal Reserve part, the control can be driven home by the Emergency Banking Act of 1933 and the Banking Act, often described as Glass Steagal, can be cited to drive home that the US Federal Reserve is an agency of the US government, as well as it not being taxed at all by IRS though it is also set up as a private corporation otherwise. The “ownership” issue needs to be demonstrated to be as also an artifact of the Gold era. It may not be literally owned by the US government, but it is actually controlled by the US government. FDR went so far as to appoint not just the chairman, Marriner Eccles, but several others to its executive committee. In the deference given to it by presidents since FDR the illusion that it is separate from the US Government has been strengthened. I believe that the Emergency Banking act included measures that established that the regional Reserve Banks act as part of a centralized system. The point being that previously they had operated more independently from the US Federal Reserve admin.

    The coin debate was always a sort of Trojan Horse to expose the fiscal shakedown in promoting corporate banksterism, operating from behind the faux gold/commodity standard framing. The exposure of the double standard basis of capturing the control of both the fiscal and monetary processes has to be continued. It becomes a way to segue people’s literacy, better than explaining the whole process as it actually operates directly. Frankly the obsession with the platinum coin here lapsed on presenting several important side points. The platinum coin concept has to be used further because it has gained national notice and because it is in a sense based upon parodying the gold standard framing and that is a simple concept that many people can latch onto without an academic or wonkish lecture.

  10. I take the view that human nature is ambivalent and struggles to resolve the difference between self-enhancing and self-transcending behavior. Accordingly the ability to create money from nothing is subject to this ambivalence with politicians pursuing “pork” and Banksters corrupting governments and central banks to become part of their Ponzi schemes. For me it still makes sense that the ability to create money should be shared between government and private banks on the basis of Hayek’s “Use of Knowledge” arguments and to maintain incentive for private banks to exercise due diligence and under-writing standards in making loans because it affects their bottom line in making a profit. What we don’t have at present is a system that offers effective democratic control of the money creation process that prevents abuse by either government or the private financial sector ( Banksters ).

    http://cliodynamics.info/PDF/Spinney_NewScientist2011.pdf

    http://www.princetonphilosophy.com/background/Hayek.pdf

    • Schofield (are you my cousin? )

      You say “For me it still makes sense that the ability to create money should be shared between government and private banks.”

      I would take it a step further. All US money should be created debt free by the US Treasury. Then it can be used by the US government to fund necessary government functions and programs. It should also act as the sole money wholesaler and be able to lend to private banks at interest, which would be determined by supply and demand. Fractional reserve banking is a big scam, which enables private banks to create money out of thin air and should be ended.

      in order to fund government programs

  11. casino implosion

    “… the monetary authority of the United States rests with the American people, even if the plutocratic architects of our financial system and the owners of our country have succeeded over time in burying that authority under many layers of convoluted technocracy and confusing delegations….”

    This sentence should be engraved in stone over the entrance to this blog, since it’s the most important idea of all.

    Wm Black quotes one of the propaganda operators for the “owners of the country” as finding the coin idea “chilling”.

    What they find so chilling is the possibility that the American people might wake up one day and realize with whom the monetary authority of this country really rests.

    To defer that day: lie, propagandize, mislead. Anything to keep the status quo a-rolling, or as I call it “MMT for the elites and Austrian Economics for the rest of us”.

    • Succinctly put.

      The problem with fractional reserve banking, whereby all money is created as interest bearing debt, is that it expands the money supply exponentially, because more money has to be constantly created, also as debt, in order to pay the interest. Thus for the few to be rich, the many must collectively be in debt to them, either directly or indirectly. Since the rich are becoming much richer, it means that more debt has to be paid by the rest, but we have a problem Houston. Incomes are not rising fast enough to pay the debts and there are loan defaults. So the government responds by bailing out the banks. This is socialism for the rich and capitalism for the poor.

      This concentration of wealth means that less money is spent into the consumer economy as excess money is stored offshore and used instead to speculate in the stock, bond and commodity markets. This has led to a contraction of the economy and mass unemployment in the US with 18% of the workforce out a job, which represents 33 million people, who cannot pay income tax and government support is needed for their unemployment benefits, if they have not run out, and is a burden on those who can afford to pay taxes.

      The minimum wage has not been increased since 2009, although there have been substantial increases in the cost of living and many workers have seen their wages stagnate or decline. The median income has been dropping for some years. This has been compensated by increased consumer borrowing, using homeowner loans, credit cards and student debt. ( Many graduates enroll in higher degree courses, because they cannot find a job) It is also offset by government borrowing (from the rich?) to hopefully stimulate the economy. Thus the debts get bigger as a rich elite gets richer. Everyone is filled with admiration as a new victor ludorum is added to the Forbes rich list, but what they do not seem to appreciate, is that they owe him money. Instead they hail him as a job creator.

      But then what happens is that many debtors cannot pay off their loans and mortgages and their homes are foreclosed. So the governments steps in and rescues the banks at great expense, but the blame is placed on those with either no or lower paid jobs, who do not pay income tax as they do not earn enough to exceed the personal allowance.

      Then there is pressure from the right wing to cut benefits, which would further contract the economy, put more people out of work with consequent more loan defaults.

      Money was originally devised to facilitate trade, but it has now become another commodity to be stored in bank computers, rather than be spent into the economy. If this trend continues, one man will own everything and everyone else will be in debt to him, but there will be hardly jobs that enable him to be paid. But never mind, they can always eat cake, as Marie Antoinette so wisely pointed out. Swish, clunk.

      • The logical conclusion to the pyramid of wealth is that there will be one winner, who will own all the money but won’t have anything to buy with it because no one else will have a cent to buy or produce anything to sell. Like the “winner” of a Monopoly game. Then we can redistribute the money to every one (who hasn’t starved) and start a new game. At least that’s how we used to do it in my neighborhood when I was a kid.

      • Fractional reserve banking is cyclical. This occurs regardless of inputs or withdrawals of money from a central government. There are periods when banks expand debt and money naturally in response to demand for money in the economy to monetize production and assets. Then those periods are followed by panics (the correct pre-1930s term) when the perceived value of those monetized assets is re-evaluated, triggering a sequence of deleveraging and bankruptcies, destroying bank created money and the associated debt. The reforms like Glass-Steagall in the ’30s was a recognition of this process and an attempt to dampen its impact. The TARP bailout of ’08 used gov’t to block the bankruptcies stemming from the panic (private money destruction) portion of the cycle of certain favoured constituencies through public money creation.

        • The booms and busts are engineered.

          “If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children wake up homeless on the continent their Fathers conquered.”

          Attributed to Thomas Jefferson.

  12. To put the $1.2Trillion Dollar Platinum Coin proposal into perspective after Congress had forced a one-time audit of the Federal Reserve and Bloomberg had won the right to publish the result of the audit it revealed that the Federal Reserve had secretly issued $7.7 trillion of credit to the financial sector both here and abroad and including the major banks. How much of that will ever return to the Federal Reserve is mute. Today the Republican Terrorist Party is attempting to stop the American People’s government from lending just over 15% of the $7.7 trillion figure as credit into the economy. See page 4 of Matt Taibbi’s article “Secrets and Lies of the Bailout”:-

    http://www.rollingstone.com/politics/news/secret-and-lies-of-the-bailout-20130104?page=4

  13. I don’t really see why the administration felt obligated to rule out the TDC in particular while we are still several months out from the debt-ceiling. There was a peculiar vehemence behind setting the record straight on this one issue that we do not see on, for example, changes to SS or Medicare.

    ..Time to start sharpening the pitchforks.

  14. The “peculiar vehemence” relates to the fact that many of the pay-masters for Democrat and Republican politicians are rentiers who benefit from holding large sums in Treasury bonds and receive large amounts of interest as they sleep.

  15. Frank. I agree with the “wholesale” concept but struggle to think of the benefits of a “mark-up.”

    • There is a vast network of local bank branches in every town and city in the US, 90% of which are owned by large banking concerns. It provides a great convenience to account holders to deposit money and withdraw cash from an ATM . There are probably way too many, but the profits are so huge it does not seem to matter, since they all charge the same price. (Same with gas stations every few miles of road, but there is little real competition, because prices are clearly displayed and adjustable at the touch of a button.)

      I would not wish to throw every bank teller out of work and so the banks could be the retailers, who would have to make a profit by borrowing all money from the US Treasury (the wholesaler) and lending to the public and businesses at a mark up dictated by supply and demand.

      In the UK this system worked quite well, when the Building Societies accepted deposits from savers and loaned these funds to homeowners as mortgages. But the banks bought them out…

      How we would deal with the credit card companies, whose rates of interest are usurious is another matter.

      • The Kucinich Solution is very straight-forward on interest rates – an 8 percent cap, and a rule against interest costs exceeding the principal for any loan, except for L/T mortgages.
        As to the creation of credit-card debt and the need for ‘fully-reserved’ or non-reserve banking, this is no problem.
        At the end of the day, the bank must hold investments equal to the balance outstanding.
        Can you imagine – asset and liability management???

        • Why has Kucinich become so conservative and gone in for these old-fashioned monetarist obsessions with the “money supply” a la Friedman and Fischer? Where is the positive program for expanded progressive government, prosperity, radical change and equality? It just doesn’t matter whether bank deposits are “fully reserved” in a modern, centralized system. He barking up trees that were cut down in the 20s and 30s.

          I’m so sick of economic discussions that consist 100% of monetary crankery, and never seem to get around to the big questions of actual public investments, programs, innovations and the social organization of production, work and income distribution.

          • Dan,
            I have more respect for this NEP medium than to reply in kind with hyperbole-laden, vacuous charges in trying to establish who is more ‘modern’ or more ‘progressive’ or just plain right. Really, Dan, “crankery”??

            And your charge that Kucinich, the most progressive Congressman on the Hill in modern times, is taking a “Fisher-Friedman” “conservative’ turn with his revolutionary reform proposals really holds no water at all. First of all, Fisher was perhaps the most socially progressive of monetary-economists of his day. Look at the purposes laid out in his 1939 Program for Monetary Reform. And, Randy Wray’s new book has a whole section on Friedman’s “Fiscal and Monetary Framework” proposal.

            I’m not sure if you’ve read the Kucinich Bill. FYI, it is not a 100 Percent Money proposal. It is a complete monetary-system transition to a non-reserve based currency.
            Perhaps this is something of which MMTers just cannot perceive.

            So, Dan, what I fear is that we have perhaps achieved the “and then they attack you” phase of our discussion? I really wish not.

            Re- these ‘old-fashioned monetary obsessions with the money supply’.
            First, MMT claims to have come to monetary awareness somewhat through Minsky – thus Randy’s penchant to using HPM in discussing the “Base”, as they are also Hy’s initials.

            I have opined on several blogs here at NEP about the fact that y’all seem to be missing Minsky’s very clear conversion to the Fisher-Friedman 100 Percent Money monetary management measure. Why is that, with all these Minsky scholars running around? Why doesn’t somebody dare to make a correction?

            Minsky’s Working Paper No.127 lays out very clearly why we can gain financial and economic stability by separating the banking from the money-creation functions within the money system – something fully accomplished in Kucinich’s HR 2990.
            http://www.levyinstitute.org/pubs/wp127.pdf
            Financial Instability and the Decline (?) of Banking:
            Public Policy Implications
            Hyman P. Minsky October 1994.

            In this paper, he calls for a 21st Century National Monetary Commission, so that we can achieve the gravitas needed to bring to question the existing structural and institutional frameworks around money.
            Perhaps Minsky was also becoming ‘conservative” ??
            Perhaps MMT’s identity with preserving today’s institutions is misplaced.

            From WP 127 :

            “ Thus, as the 21st century is about to be ushered in, an idea
            which was on the table during the 1930′s discussion of reform can
            once again be on the table. One virtue of the 100% money scheme
            is that it separates the two functions that the monetary and
            banking system has to perform: the provision of a safe and secure
            means of payments, and the capital development of the economy.

            By separating these functions it makes us aware that an economy
            can have too little, as well as too much, government debt.
            We now are in a position to realize the dual set-up of 100%
            money: financing the capital development of the economy by
            contingent-valued liabilities such as mutual funds, and a
            payments mechanism that is based upon a portfolio of government
            bonds that is held by the authority responsible for the payment
            system.”

            And Minsky’s modest proposal as a Conclusion.

            “”VII. A Modest Proposal
            The time has come to open a national inquiry into the structure of the banking and financial system. The radical changes now underway in technology, computing, and communication
            mean that much of what we now have may be obsolete. The sluggish economy of the past decades, combined with the apparent reluctance of the Federal Reserve to give full employment a chance, can mean that our financing structures are not consistent with the needs of a progressive democracy.

            In the past, serious changes were the result of serious public inquiries. I suggest that enough is amiss in our financial and banking structures that it is time to go back to the drawing board and determine what the monetary, financial, and financing arrangements should be in the 21st century. A late 20th century National Monetary Commission should be on the public policy agenda.

            Again, in case you missed it:
            “The sluggish economy ……. can mean that our financing structures are not consistent with the needs of a progressive democracy.”

            A progressive democracy, Dan.
            Let’s get on with it.
            Together.

            • I can’t escape the feeling that you are proposing misguided and tunnel-visioned solutions to non-problems. And you do it incessantly, propagandistically, without ever taking a single breath to discuss anything else, and without ever bothering to explain in clear non-circular language exactly how it is that your proposals will make things better, and what they are even designed to achieve. It’s just an endless repetition of slogans. I’ve asked you to try to explain the intended impact of your proposals in terms of concrete examples, and to bring them to bear in concrete terms on some of the issues that come up, but you just double back over the same ground, over and over repeating the same slogans.

              • Gee, Dan, it’s obvious that you did not enjoy me pointing out that you folks have missed the reality that Honorable Doctor Minsky had completely come around to embrace the monetary reform ideas of Fisher (and Friedman), ideas that you were trying to equate with the goldies and cranks. Was Minsky a crank? If not, then why are you attempting to shoot the messenger by your strong criticism of my writings. Sorry, but this response speaks volumes in denial of my efforts to have a very serious dialogue.

                This comment also makes it obvious to me that either you have never read the Kucinich Bill, or that you are in denial of its purpose and methods. MMT has no counterpart to the K-Bill, though many have said that only legislation will free the sovereign fiat money system to its inherent potential for good.
                I have been presenting more of a contrast with MMT’s tenets than getting into the K-Bill as the model for change, but that has been in respect of and deference to all of your work here. I have only referred folks here to the Kucinich Bill for their own education, and explaining only if there is a specific connection between something in the Bill and the dialogue, which in this case, there was.

                You jumped on me here because I pointed out how HR 2990 cures two flaws in our modern monetary economy, that of burdensome interest rates for those who can least afford them – with an 8 percent cap – and that of compounding interest – where no loan can have a greater interest cost than the principal of the loan (m.e.).

                The first is important, and necessary, because the K-Bill implements monetary policy directly through the money metric, by having the government issue new money directly through its budgeting process as needed to achieve our economic goals – a bridge that MMT is yet to cross.
                MMT rather escapes this important reform mechanism through its alibi of non-necessity. It makes a completely vacuous claim that right now the government creates money when it spends – a tenet which I have repeatedly shown to be untrue.
                The government must have money in order to spend.

                Once the bridge of state-monetarism is crossed and the real money is supplied, and managed, directly as to quantity by the government, then interest rates become a matter of a market variable. No more pushing-on-the-string as monetary policy. Being in honest commerce, with an adequate supply of real money, they will reside near zero.

                However, with all lending being privately originated, the possibility for contrived hoarding of commercially loanable funds exists, and the interest rate cap puts a limit on the power of the lenders. Yes, it applies to credit cards.

                Dr. Michael Hudson, certainly an MMT ally, speaks volumes about the problems of compounding interest, and how it is truly a cause of the debt-saturation we see in society that leads to our present debt-servitude (peonage) results, but he really does not propose any solutions.
                I have pointed out here, and do again, that the work of German economist Dr. Bernd Senf goes much further than Dr. Hudson in identifying the social, economic, environmental, political and human crises that are a result of the debt-based system of money.
                http://bli¬p.tv/file/¬4111596

                Those willing to invest the time in Dr. Senf’s only English-language lecture will learn more about the mechanics of debt-based money as the basic cause of today’s global disastrous economic reality than what will come out of reading everything that has ever been written under MMT. Sorry, but that’s the truth.

                At last year’s Levy-Misnky Conference I pointed out Dr. Senf’s work to Dr. Hudson, hoping he would see the connection between his own findings and the Kucinich Bill, which ends private debt-based money forever. Despite his comment that he doesn’t usually listen to 2+ hour lectures, I hope he has.

                From Dan:
                “”And you do it incessantly, propagandistically, without ever taking a single breath to discuss anything else, and without ever bothering to explain in clear non-circular language exactly how it is that your proposals will make things better, and what they are even designed to achieve. It’s just an endless repetition of slogans.””

                It should be obvious to many readers that this is not true. I try to do the opposite. I am very disappointed in your inability to engage.
                My one slogan.
                For the Money System Common.

              • So Dan, did you ever read the text in the bill for HR2990? http://www.govtrack.us/congress/bills/112/hr2990/text
                It reads as if it solves a lot of the current structural connundrums with the current way we operate.

                “the chain reaction of liberating ideas that hve been unleashed by the coin debate will continue.”

                If HR2990 doesn’t fit the quote above, I’d be interested to hear your thoughts on what is wrong with it. thks

  16. The Monetary Reform people argue that perhaps the most pernicious thing about independent central banks is that they turn what should be “debt-free” government money into debt.

    For example, coins issued by the Treasury are counted as “equity”, not debt, whereas notes issued by the Fed are counted as government debt, which can only be acquired by the Treasury, under current arrangements, if the Treasury issues more interest-bearing debt in the form of bonds (even though the Treasury actually prints the Fed notes in the first place!).

    Interestingly the US Code states that Federal Reserve notes can be redeemed at the Treasury for “lawful money”, which might mean “debt free money”.

    • It’s all well and good to demand debt free money, but it is also important to understand the crucial role that government issued securities play in providing safe interest-bearing assets to the private sector. There’s an article I read somewhere – maybe here on NEP or on NakedCap – but it basically explained how the scarcity of “government paper” in the aftermath of the Clinton surplus and reducing deficits provided the subtext for the explosion in Fannie/Freddie securities. Of course, you and I both know there is a big difference between a bond issued by a sovereign currency issuer and one issued by a quasi-private RE sector entity, but to bond traders or money managers rendered frantic by (then) dwindling T-bill availability, the logic either seemed to escape them, or the screams of their portfolios were too much ti bear.

      • “crucial role that government issued securities play in providing safe interest-bearing assets to the private sector”

        That is precisely the problem. In a capitalist economy, the government should have no role whatsoever in providing interest bearing assets to the private sector. The government a does superb public service by having insurance and savings programs for retirement benefits and health care: i.e. Social Security, Medicare and Medicaid. These are not really taxes in the accepted sense of the word, but constitute a social safety net, not subject to the predations of Wall Street spivs.

        The government should have no function in bailing out private banks or private business.

    • Why does any of that stuff matter. What does it matter whether money is classified in the accounting books as a “liability” or a “debt” or a “credit” or “equity”? What does this have to do with how the monetary system functions?

      • Under our current fractional reserve banking system, all money is created as interest bearing debt.

        No debts = no money

        The few own it and the many owe it.

      • What does this have to do with how the monetary system functions?

        The answer could have been “nothing” had the said system functioned. With the debt ceiling law and its abuse, it is as fair a question as any other to ask why a sovereign people must by law borrow to deficit spend. The strange thing is, while the role of taxes in suppressing inflationary pressures government spending might cause is clear (to me, at least), the similar rationale offered for mandatory borrowing/debt issuance is highly questionable. One, were those borrowed funds going to be spent into the economy if they were not borrowed? Two, are they really tied-up and non-spendable once borrowed? It appears to me that MMT arguments explaining public debt and why it’s not a big deal are also arguments explaining why mandatory debt issuance is meaningless.

  17. Will NEP please consider starting and hosting a ‘drive’ to raise enough money to buy the new Treasury Secretary some platinum? It could be delivered to him so that he always has some “on hand.”

    There could be a little reminder note along with the chunk of platinum that he could, singularly, fund an entire Green New Deal himself, should he so desire. Maybe the option is off the table for now but he could maintain an immediate platinum ‘stash’ under the table with the help of our generosity.

    I just think it might be a nice activity; full circle, so-to-speak. I would through in $20 to $100 bucks for “the chunk.”

    Maybe the drive could be called “send the chunk” or something similar … or maybe, “if you desire, it is up to you, you may now at any moment … ‘mint the Deal’ Mr. Lew” … [maybe 'Mint the Coin' has a little buddy in 'Mint the Deal' ?]

    We could start a petition in support? Just some ideas; take, ignore, adapt, whathaveyou … hearts to all.

  18. I’ll send a tube of super glue to cement the deal.

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