The Most Embarrassing Financial Column of 2013

By William K. Black

We are only two weeks in to 2013 and there is plenty of time for far more embarrassing financial columns to be written, but The Guardian’s financial editor, Heidi Moore, has opened up an early lead in the competition.  Moore’s column represents five embarrassing elements.  She entitled her piece:  “’Mint the coin’: why the platinum coin campaign doesn’t even work as satire.”

The first requirement to be a financial reporter is to understand the monetary system and the difference between a sovereign and non-sovereign monetary system.  Moore’s column demonstrates the multiple levels on which she fails this requisite when she tries to demonstrate that minting a $1 trillion platinum coin would not counter the Republican Party’s threat to cause the U.S. default on its obligations and would injure our economy.

Here is one big problem: the US Treasury spends approximately $100bn per month. A trillion-dollar coin would buy the Treasury only about 10 months of breathing room.

Another problem with the trillion-dollar coin is that the US mint probably doesn’t have the capacity to create one out of real bullion, which will likely be required for something with such a historical importance. The US mint no longer produces platinum coins, except in collector’s editions that retail for $1,892 at the moment. A real platinum coin – the American Eagle – that was produced as recently as 2009 contains 31.12 grams of platinum and has a face value of $100. There is not enough platinum in the US in a year’s supply to create that. The US produces all of 3,700 kilograms of platinum a year.

The mint could, on the direction of Treasury, just make a platinum-finished coin that bears the face value of $1tn, but that would just create a nonsensical level of inflation in the value of the US dollar.

Another point, perhaps, is that it’s no worse for the Treasury to print a trillion-dollar gold coin than it is for the Federal Reserve to buy trillions in mortgage securities to save banks and the bond market. There is more meat to this – the US government is not nearly done meddling in the world of the economy and the markets, and minting a new coin is very much in the interventionist mold of the past four years. But the Fed’s programs don’t require scouring the US reserves for platinum and creating some unnatural currency beast. It can at least masquerade as an intellectual exercise.

I will put aside the glitch in fourth paragraph in which her platinum coin transmutes into a gold coin that she thinks the Treasury can “print” and focus on how revealing these paragraphs are about Moore’s lack of understanding of the basics of the financial system.  Her first argument is that a $1 trillion platinum coin would only delay the Republican Party’s ability to use the debt ceiling to extort by about ten months.  She bases this claim on how much the federal government “spends” each month.

Embarrassment number 1

Moore thinks the debt ceiling constraint depends on the rate of federal spending.  It is a constraint on borrowing, not spending.

Embarrassment number 2

Moore thinks one could only issue a single platinum coin valued at $1 trillion.  It isn’t any harder to engrave the number 2 or 5 on a coin before the word “trillion.”

Embarrassment number 3     

“Another problem with the trillion-dollar coin is that the US mint probably doesn’t have the capacity to create one out of real bullion, which will likely be required for something with such a historical importance.”

Moore does not understand how a sovereign currency operates.  The U.S. has a sovereign currency.  When we issue coins we do not have to worry whether the metal in the coin has a market value at least equal to the value we engrave on the coin.  We deliberately use less expensive metals such as copper and zinc to make our coins. It would be foolish to use more expensive metals.  The value of our coins has nothing to do with their composition.  Everyone knows this, for we also use bills.  No one thinks our $20 bills’ value depends on them being printed on expensive paper that has an intrinsic value of $20.  The $20 bill has a value of $20 because the U.S. declares it is worth $20.  The U.S. requires us to pay taxes in dollars.

Moore’s assumption that something additional is “required” to make a sovereign coin or currency value demonstrates that she does not understand sovereign currencies.  Her assumption that currency has to be backed by “real bullion” when it has “historical importance” is bizarre.  She not only thinks the U.S. currency is still based on a precious metal standard, she thinks only precious metal standards are possible.  Precious metal standards are virtually non-existent for excellent reasons.  Moore has lived her entire adult life under fiat currencies – and she is a finance editor.

Moore’s beliefs about sovereign currencies are analogous to believing that the stork brings babies.  Governments create money – trillions of dollars of money – every year by making keystrokes on a central bank computer.  The money they create is real, and it is used constantly by all of us in transactions without being printed or minted, much less minted from .9995 platinum.

Embarrassment number 3.1

“A real platinum coin – the American Eagle – that was produced as recently as 2009 contains 31.12 grams of platinum and has a face value of $100. There is not enough platinum in the US in a year’s supply to create that. The US produces all of 3,700 kilograms of platinum a year.”

These two sentences are an expansion of embarrassment number 3.0.  It is hard to believe that a finance editor thinks that a $1 trillion platinum coin’s value would have anything to do with the value of the bullion in the coin, but Moore actually thinks her discussion of bullion demonstrates her financial expertise and wit.  That makes these sentences worthy of special attention as embarrassment number 3.1.  Her discussion is analogous Bishop Ussher’s claim that we know that the earth is only 6,000 years old based largely on his detailed mathematical computation of the “begats” listed in Genesis.

An ounce is 28.35 grams, so Moore is describing a roughly one ounce coin of nearly pure platinum with a “face value” of $100.  The phrase “face value” should have prompted Moore to understand her error.  Platinum’s current price is about $1600 per ounce ($25,600 a pound).  The calculations I present are based on a platinum price of $1600 per ounce.  Even in 2009, when platinum prices were lower (around $1000 per ounce) that means that the American Eagle cost the U.S. vastly more than $100 to produce.  The U.S. Mint is not irrational, so the “face value” of the American Eagle has nothing to do with the value of the coin.  The Mint sells precious metal coins like the American Eagle based on a mark-up over the current market price of the precious metal in the coin.  The Mint chooses the “face value” on the precious metal coins based solely on what its design and marketing people say coin collectors will find most attractive.  The “face value” has nothing to do with the coin’s value.  The American Eagle has nothing to do with normal sovereign currency.  It was designed not to circulate, whereas normal sovereign currency is designed to encourage circulation.  Normal sovereign currency’s value is always the face value.

Does Moore think the proposal is for the U.S. to spend $1 trillion to purchase approximately 39 million pounds of platinum at the current market price?  (Actually if we tried to purchase 39 million pounds (about 17.7 million kg) of platinum we would cause the price of platinum to soar and cause terrible shortages of a very valuable metal used in vital industrial applications.  World production of platinum in 2010 was 192,000 kg, so we would need to purchase nearly a 92 years’ worth of the current entire global production of platinum and cause catastrophic damage to the global economy by taking platinum out of productive uses and consigning it to a massive statue.)  Platinum is dense (21.45 g·cm−3), but a 39 million pound platinum coin would be slightly unwieldy and impossible to mint.  It would be a hill, which I propose naming Mount Moore.  It can serve as the centerpiece of her Fantasy Finance Theme Park.

The obvious question is why the people who developed the $1 trillion platinum coin proposal, financial pros, would think it made any sense for the federal government to spend $1 trillion to purchase most of the world’s platinum – and then to make a massive statue of it and call it a “coin.”  Remember, the context of the $1 trillion platinum coin proposal was to remove the ability of members of Congress to extort austerity by threatening not to raise the debt ceiling.  Paying $1 trillion to purchase platinum so that the federal government could issue a $1 trillion coin would not increase net federal revenues or assets.  There is also the question of how the federal government would purchase the $1 trillion in platinum.  The federal government can only spend appropriated funds.  There are no appropriated funds for purchasing $1 trillion in platinum.  There is no chance that Congress would appropriate $1 trillion to fund the purchase of most of the world’s platinum.  If Moore were correct (she isn’t) that purchasing $1 trillion in platinum would allow President Obama to counter the Republicans effort to use the debt ceiling to extort austerity, then the House of Representatives (controlled by the Republicans) would obviously refuse to appropriate $1 trillion to purchase most of the world’s supply of platinum.  That means that the financial pros who designed the #mintthecoin proposal were incompetent and crafted a plan that could only work if they assumed away the Republicans’ control of the House – the source of the extortion problem that the $1 trillion platinum coin was supposed to counter.

There is also an ironic problem with Moore’s straw woman $1 trillion precious metal bullion plan.  How would the federal government buy the $1 trillion in platinum?  It obviously would not be funded by a tax increase, so (under Moore’s concept of government finance) it would require the federal government to borrow $1 trillion to fund the purchase of the platinum.  The federal government does not have $1 trillion in additional debt authority under the current debt ceiling.  Moore’s straw woman proposal, therefore, would actually cause the federal government to breach the debt ceiling immediately, giving the House Republicans maximum leverage – when the purpose of the (real) $1 trillion platinum coin plan is to remove the ability to use the debt ceiling as a means of extortion.  Moore has devised a straw woman platinum coin plan that lives down to her description – “idiocy.”  Her plan bears no resemblance to the actual platinum coin proposal because she has no financially coherent criticism of the actual proposal.

Moore thought she was being funny, showing that the U.S. would have difficulty issuing a pure platinum coin containing platinum with a market value of $1 trillion.  Her effort has three problems.  First, the $1 trillion coin strategy was always for a platinum-clad coin with trivial platinum content.  Second, the people who developed the strategy understood financial operations, sovereign currencies, and platinum.  They knew far better than Moore that a platinum bullion coin would make no sense and they never considered proposing such a coin.  Her efforts to ridicule people who actually have financial expertise proved impossible because they had thought through the issues.  Moore, therefore, had to resort to creating a straw woman proposal that she could ridicule.  That reflects poorly on her.  Third, because Moore does not understand financial operations, sovereign currencies, or platinum she didn’t even make the obvious points set forth above that show how absurd a “coin” (aka a hill) composed of $1 trillion in platinum would be.  So, even as satire, she failed because she didn’t understand the world of finance.

Moore knows that the #mintthecoin proposal is to mint a $1 trillion platinum-clad coin with a trivial platinum content.  Gold-clad coins, for example, are often sold with a total gold content of 14 mg (.014 grams).  Platinum costs about $56 per gram, so the cost of the platinum required to clad the $1 trillion coin is about 80 cents.

Moore created a straw woman proposal to try to make the idea of minting a $1 trillion platinum-clad coin seem impossible to implement, but ended up further embarrassing herself.

Embarrassment number 4

Give an austerian a column inch or three and hyper-inflation is sure to emerge.

“The mint could, on the direction of Treasury, just make a platinum-finished coin that bears the face value of $1tn, but that would just create a nonsensical level of inflation in the value of the US dollar.”

The first part of her sentence reveals that she knew the #mintthecoin proposal was never to create a precious metal bullion coin.  The second part of the sentence demonstrates additional areas in which Moore does not understand the fundamentals of the financial system.  Minting a $1 trillion platinum-clad coin would have zero effect on inflation.  Moore, however, without any explanation or citation, claims it would produce not simply inflation, but “a nonsensical level of inflation” – hyper-inflation.  It is difficult to respond to Moore’s non sequitur about hyper-inflation because there is no logic to respond to.  She does not understand the financial system, fiscal policy, or hyper-inflation.  She also is not logically consistent.  Here is how she describes the #mintthecoin proposal.

“Their reasoning is this: the US Treasury has the power to create platinum coins of any size and denomination. It could easily print one with a face value of $1tn and deposit it at the Federal Reserve, thus immediately adding $1tn to the Treasury’s bank account and giving it breathing room to avoid the debt ceiling fight.”

Note Moore’s logical inconsistency – she admits that the proposal is not to create a bullion coin.  Her straw woman argument about a bullion coin was not an innocent error but a deliberate attempt to mislead her readers.  But the error I wish to emphasize is hyper-inflation, and this paragraph by Moore helps show why minting the coin has no effect on inflation.  The plan is to “deposit [the coin] at the Federal Reserve.”  That action cannot cause any inflation.  Remember the context – the debt ceiling.  We are not talking about a plan to increase spending or the money supply.  The effect of the plan would simply be allowing the federal government to spend money already appropriated by Congress.  The plan is not designed to have any effect on the money supply.

The next question is whether Moore believes that spending pursuant to existing appropriations would cause hyper-inflation.  There is a straight-forward answer to that question:  no.  Inflation is trivial, and the long-term bond markets for U.S. bonds show that the markets anticipate exceptionally low inflation over the next two decades.

As I have explained in an earlier article, Moore is a proponent of austerity despite witnessing austerity throwing the Eurozone into recession (and Spain, Italy, and Greece into Great Depression levels of unemployment) while modest stimulus in the U.S. produced modest growth.  She put in print the single most basic falsehood about austerity – the claim that a nation with a sovereign currency is just like a household and must balance its budget through austerity in response to a recession.

Moore may wish to claim that U.S. spending in accordance with existing appropriations will cause hyper-inflation and that the only means to prevent that is to encourage the House Republicans to use the leverage of the debt ceiling to extort the Obama administration into agreeing to inflict austerity on our Nation.  If she makes that argument we will respond to it.

Embarrassment number Five

“[T]he US government is not nearly done meddling in the world of the economy and the markets, and minting a new coin is very much in the interventionist mold of the past four years. But the Fed’s programs don’t require scouring the US reserves for platinum and creating some unnatural currency beast. It can at least masquerade as an intellectual exercise.”

The Guardian’s financial editor sounds just like the Tea Party.  The monetary system is a governmental system.  Central banks decide how fast the money supply will grow, what interest rates will be, which banks they will lend to, and in conjunction with their national Treasury, which banks’ creditors will get bailed out.  Moore describes the normal functioning of central banking as “meddling” and implies that it is illegitimate.  The “interventionist mold” of the Fed did save the bacon of the private banks and markets.  It is good to recall that the Fed’s intervention occurred largely because thousands of markets were ceasing to function as private bankers came to distrust other bankers’ asset valuations due to widespread, massive inflation of asset values by most of the world’s largest banks.

Moore’s inability to make any financially coherent criticism of the real platinum-clad coin proposal leads her to rely instead on ad hominem invective and a return to her straw woman pure platinum bullion $1 trillion coin proposal.  The second sentence in the paragraph I quote above exemplifies both weaknesses.  She begins with the straw woman claim that the platinum coin would require the “scouring of US reserves for platinum.”  Scouring the U.S. reserves for 14 one-thousandths of a gram of platinum – 80 cents worth of platinum.  How herculean!

Then comes the ad hominem – if one can use that term to refer to an insult to a coin instead of person.  The coin would be an “unnatural currency beast.”  Oh dread!  Maybe we should mint three of them, each with the face value of “666” billion so that Moore can call it demonic and cite Revelations to prove that it is a sign of end times.   Why are electronic bits (the form in which trillions of dollars in money is created, exists, and is exchanged) “natural” to Moore while a coin is not only “unnatural” but the sign of the “beast?”

Moore ends with this ad hominem criticism of those who developed the #mintthecoin proposal.  She has complete disdain for the Fed’s “meddling” in the economy, but she says that the Fed’s actions at least represented “an intellectual exercise.”  The intended implication is that the proponents of #mintthecoin failed to mount even a flawed “intellectual exercise.”

Moore was on Up with Chris Hayes on January 12, 2013 to discuss the platinum coin proposal.

Two of her fellow guests supported the plan, including my UMKC economics colleague, Stephanie Kelton.  Moore was unable to mount any substantive criticism of the real proposal.  Given the presence of financial experts who could expose her if she advanced her straw woman claim; Moore could not claim that the coin would have to contain $1 trillion in platinum.  Chris Hayes explicitly dismissed the canard that the coin would be composed of $1 trillion in platinum as silly in his introduction to the topic.  Moore’s one-word reaction to the actual proposal was that it was “chilling.”  Moore simply called the proposal “ridiculous” and made the false claim that Congress could not legally fail to increase the debt limit.  She later clarified this statement to be that Congress could not constitutionally fail to increase the debt ceiling.  She presumably means the 14th amendment, but that does not provide any useful remedy unless the Obama administration is willing to invoke the amendment and declare that the federal government will pay its debts.  The platinum-clad coin proposal would provide the administration with the ability to make such a declaration real, so under Moore’s logic she should be a strong proponent of #mintthecoin.

Moore’s final claim was that the proposal would destroy the credibility of our currency if we failed to pay our debts.  But that reverses the reality.  It is the Republicans who are seeking to extort austerity by refusing to extend the debt limit and forcing the U.S. to default.  The platinum-clad coin is all about making sure that no one can force us to fail to pay our debts.  Moore’s concern about a loss of “credibility” because we “fail to pay our debts” should lead her to support the platinum-clad coin proposal.

29 Responses to The Most Embarrassing Financial Column of 2013

  1. I always hesitate to recommend someone should be fired, because jobs are hard to come by. The economy is in a recession, you know, declared or not. But in this case, given the nature of Moore’s position, the Guardian’s reach (and it’s editorial credibility), and the unlikelihood that Black’s column here, or in the other places its been reprinted (I intend to provide a quicklink to it from Opednews – a top 100 blog – when I’m done with this comment, but that hardly matches the Guardian’s circulation either, and it likely won’t even be on the front page there very long), I see no alternative.
    That Black is right and Moore wrong should not need stating. Moore’s the pity. But the damage done to the popular understanding cannot be so easily erased, and erased so that people will understand and than hopefully demand Sovereign Money not usurped by the banking cartel for their own .1% enrichment.
    Our Electeds lead from behind, if at all. Moore’s column did perhaps irreparable harm to what public pressure should be built to “mint the coin” or, better yet, re-adopt truly sovereign debt-free money like U.S. Notes which could, over time via tax collection, be used to pay down, and off, the debt, FOREVER.
    Moore’s Straw Woman should be burned in a Burning Woman festival and its originator made to watch. Perhaps a writer of her talents can get a job writing dystopian novels like her obvious favorite, Ayn Rand.

  2. It seems reasonable to me to say that what you say about Heidi Moore’s ignorance of how modern monetary systems work is true of all the Guardian’s economic journalists. Despite many attempts by commenters on their articles going back several years attempting to correct their ignorance they seem to take a perverse delight in ignoring such comments. Indeed they fail to even make any attempt to run articles on Modern Money Theory if only to attempt to prove their view that it’s incoherent.

  3. Robert Lavergne

    I really enjoyed reading this – I broke out in laughter, at least three times. It doesn’t really surprise me that Ms. Moore has attained the position of “finance editor” at the Guardian. I work as a teacher (mathematics) at a local state university. There is a saying that my colleagues often quote which seems to apply to a number of different organisations, not just in education: “F***-up, then move-up”. In education this means that those who have consistently proven to be ineffective in the classroom, always seem to be the ones promoted to administrative positions. I guess the same disregard for meritocracy exists in many institutions.

  4. Dr. Kelton is being very “kind” to Heidi in the aftermath of their joint appearance on “UP with Chris Hayes” (on Twitter to be specific). No harsh words or further intellectual beat downs, but I do concur with Professor Black’s assessment here. It was sufficient an indictment of her intellectual paucity that she could do little more than call the coin “silly” and express herself in purely non-academic/economics terms – at one point she opined that the only place for such a coin would be a museum – Ooooooh, THAT is what I would call chilling, Heidi!
    In order to further the discussion without necessarily beating a “wounded horse” (not dead, #TheCoin abides!), I’d like to see the argument split a bit, and take TheCoin from the ad hoc to the everyday. The community should now hammer home the fact that money is spun out of thin air every day by the Fed as part of open market operations. Bang the pundits on how the Fed buys back Treasuries – with keystrokes! Let them explain how a bond that has already been issued by the Treasury can be bought back by the Fed (acting as the government’s central bank) without money from the Treasury. Dissect the paper trail for them and ask them what is fundamentally different about the coin? The bond is a piece of paper (from tyhe Gov’t) that promises a face value in the government’s unit of account. The Fed accepts the piece of paper and credits a bank’s reserve account at the Fed. #TheCoin is a piece of metal (from tyhe Gov’t) that promises a face value in the government’s unit of account. The Fed accepts the coin and credits the Treasury’s account at the Fed. Why is this doable for the private sector but not the public purse? What is the difference between a piece of paper and piece of metal?

    • Robert Bostick

      Excellent point. Congress Critters of all stripes should be asked to explain the significant differences between the paper and the metal. MSM, Fresh and Salt Water University mavens and neo-liberals should also be pinned to the wall of shame for their cynical subversion of these facts about debt free currency issuance.

  5. “Heidi Moore’s ignorance of how modern monetary systems work is true of all the Guardian’s economic journalists.”

    As a long standing Guardian reader, I can only say that Heidi Moore has been more than embarrassing in many columns since she started writing for the paper. Other columnists, like Larry Elliott, are better, but still don’t really get it. Over at the Observer, Will Hutton can be put in the same league, but William Keegan is probably the most enlightened, being a long-standing Keynesian and admirer of Wynne Godley.

  6. I’m reminded of a hilarious anecdote from childhood. My family lived north of Chicago in the day when boys played baseball and all girls took dance classes, as sure as the facts of life. My sister (aspiring ballerina) attended a studio in town where they practiced poise, form, the sequence of pli’es, pas de chat,and beginning exercises at the barre. The Maestro to encourage stance and poise would suggest the dancers imagine a silver dollar held tightly enough in the buttocks that it would not drop to the floor. This became sort of a family joke, we recalled for years. G.G. would say “Imagine holding a silver dollar tight in your po-po and don’t let it fall out.” A new hashtag dedicated to Ms. Moore seems appropriate to suggest. #don’tdropthecoin

    • Hahahahaha! Brilliant! :)

    • As an afterthought rewriting the concluding sentence to read: A new hashtag dedicated to Ms. Moore & Company (as impish and hapless as they may be, holding tightly to their sense of money and putting it where their mouths are) seems appropriate to suggest. #don’tdropthecoin Anyone who read her article would agree with these alterations.

  7. I saw UP on Saturday morning, and was really pleased to see Stephanie Kelton. I was less pleased with Ms. Moore, who came across as a garden-variety conservative non-intellectual with some silly talking points.

  8. Self-parody is probably best left to the professionals. In that regard, Heidi Moore and the Guardian financial editors are exceeded by none. Thanks Bill for showing us how it’s done.

  9. John Zelnicker

    Prof. Black — A question and a couple of comments. At what point did the coin become platinum-clad as opposed to pure bullion? I was under the impression that it had to be a bullion coin. In fact, IIRC, the first few posts about it referred to a proof platinum coin. (Proof coins are minted in a slightly different way to give them a polished finish.) However, having to be a pure bullion coin does not, in any way, affect your arguments or Heidi Moore’s idiocy. If the coin was going to be minted, there is no reason for it to weigh any more than an ounce and it could be less. So that’s maybe $1600 in cost of metal, plus manufacturing; it’s still less than a rounding error to $1T.

    The US Mint is currently selling 2012 American Eagle Platinum Proof one ounce coins for $1892.

    • Those same 1 oz. coins would provide the template for the Trillion and up coins even the $60 T coin. The difference would be the face value and whose head would be on the coin. That’s it. And, oh yes, it would a proof platinum coin due to convenience. The Mint is reported to have already acquired enough platinum to produce 15,000 such coins.

  10. Inquiring minds would like to know if her middle name “Moron”? Or is she pleading a case for a client and thinks the judge and jury are morons?

  11. malcolm gordon

    Professor Kelton was very kind, indeed. I thought it funny that the two people at the table with the most influence (Guarian financial times editor and a ‘market expert’ and former adviser to Bush) on public and political opinion knew by far the least about the economy. Depressing times.

    As an aside, Professor Black you need to get some UMKC gear. I watch the black report on RNN and you need an old gold and royal blue UMKC sweater! As a graduate from and employee of UMKC I’d love to see some of that ‘Roo pride!

    malgor

  12. I actually am glad she penned that article, because it truly shows how little the mainstream understands about the monetary system. As you search hi and low for a reason not to do the coin(s), the only reason continues to be: IT’S TOO EASY.

    I would like to see someone put up a website that asks the 23M unemployed this question: If congress could mint a couple of TDC’s without adding to the national debt and use those funds to provide just 10M jobs developing needed infrastructure projects etc. Do you think congress should do it?

    What do you think the response would be?

    btw, i did like this quote from cmathews: Economist John Kenneth Galbraith once said: “The process by which banks create money is so simple that the mind is repelled.” And the same can be said of how our government creates money……TOO EASY

    • The US government does not create money, it creates debt. It borrows money, because either it does not tax enough or spends too much, depending on your point of view.

      However, it could just as easily create money debt free as US Treasury notes, either as paper or computer entries, but there are vested interests that do not like their monopoly of money creation taken away from them. Who would if they had such power ?

    • You have to understand that the Guardian is a mouthpiece for Obama and the Democratic party. In other words, Wall Street money, which funded Obama’s candidacy and election. Obama is a right wing authoritarian, just slightly to the left of Romney, although the Guardian purports to be left of center, whatever that means today. Similarly MSNBC and Rachel Maddow think that Obama can do no wrong. The other five main stream media companies all support the Republicans. Fair and balanced ;-) Independent parties do not get a look in.

      The only difference between the Democrats and the Republicans is on the issues of gay marriage and abortion.
      In all other respects they follow the Washington consensus, especially on US foreign policy.

      Consider also that if you ever question the legitimacy of the nine eleven commission report on the Guardian cif, your post gets zapped and if you are persistent, you get banned altogether or “pre-moderated” in journalese. I wonder if it is editorial policy or are they obeying a D notice ?

  13. Hahahahahahaaha… … … … hahahahahahahaha… … … … HAHAHAHAHAHAHAHA! Really, you humans can be hilarious when you want to be. Personally, I wouldn’t put The Guardian in my litterbox and Heidi Moore is only one of the reasons. Seriously, this is a woman who intellectually looks up to Peggy Noonan.

    There are two things worth saying here. One is that the concept of putting Stephanie Kelton and Heidi Moore in the same discussion is illustrative of what is wrong with the American media. One of these things is NOT like the other. These two women are NOT peers. There are two sides to the Mint The Coin discussion (one of which is wrong and the other wants to mint some coins) and it only serves the conversation if two knowledgable, intelligent peers are involved. I like Chris Heyes but this thump-up is on him.

    Despite the remarks by the President this past weekend, I believe the conversation about PCS, especially about high value PCS (HVPCS), is only growing more important. All of us, humans and rabbits alike, need to be out there blogging, talking, tweeting and otherwise engaging in every way we can. The conversation has been irrevocably changed. The public (well, the ones with active thought processes) have started to think about the nature of fiat currency. Who woud have thought, even as little as three months ago, that this was even a remote possibility.

    Over on a thread at Daily Kos, for a diary by Joe Firestone, someone referred to the discussion of PCS as “counterproductive.” I replied and then pointed out the fact that our even having the conversation proved that talking about PCS was far from counterproductive.

    Momentum is a precious thing and the next couple of days, following the statement by POTUS, it is essential that we continue to push in every way that we can. You pros are all doing the heavy lifting. I’m trying to be simpler and maybe a little funnier. Certainly, I think, we need to be discussing what the next meme is that could realistically encapsulate the conversation around HVPCS.

  14. William Allen

    While we are at, let’s include some of the very opinionated but extremely uniformed on these matters at other institutions: CNBC (Steve Leesman, alleged Economics Reporter), Bloomberg (Tom Kean and Sara Iesen on th early morning Surveillance Show, who could not muster any critism other than “It is crazy and stupid idea” amongst their chidish yuk-yucks, and I could go on. What a pity for their careers as this slowly becomes absorbed into the minds of the masses that they are on record as sloven intellectual lightweights!

  15. Bill, very thorough and hilarious critique. I face-booked and tweeted it and laughed often. I have to admit that I thought of doing a critique of Moore’s article too. But there have been so may people to critique on this one, that I decided to do a more political piece on where the coin goes from here. Since it was political, I posted it at Correntewire, DailyKos, Firedoglake, CAF, and a shorter version was picked up at Naked Capitalism. You may be interested in the Kos and NC versions since they got the most discussion.

    Also, I agree with those who find it shocking that Heidi Moore and Dylan Matthews got on that panel. They provided no enlightenment. Ridiculous! How do these people get selected anyway. is it pure cronyism?

  16. I have a problem with the “no inflation” idea.

    On the whole, I rather like the whole seigniorage idea. Any growing economy requires new money to monetize new production and transform dormant assets and the central gov’t is the monopoly supplier of money. Normally, fractional reserve banking provides all the money a growing economy might need, but it can happen that demand for low-return financial assets far outstrips regular private money creation. It seems rather odd to me to require that a toll, in the form of interest, must be paid to bondholders every time someone wants to sell two widgets for the price of two rather than for the price of one. This causes a distribution of income issue that favours the consuming and investing demands of bondholders. But, still, real arguments against it need to be formulated and considered.

    Ok, money is moved from T-bill accounts to reserve accounts. Then what? Where does it go from there? Clearly, it won’t be spent buying Ford Focuses. If the people who owned those T-bills wanted Ford Foci, they would buy Ford Foci. What they want are highly secure financial assets. The Fed pays a small rate on reserve accounts, so anyone with a reserve account, banks and foreign gov’ts, can get that rate and keep owning a highly secure financial asset. Everyone else is stuck with cash earning 0%.

    So, where will they find another highly secure financial asset that pays more than 0%? A few possibilities…
    1. Foreign gov’t bonds – They’d need to sell US dollars to buy the foreign currency to buy these, potentially reducing the value of the dollar if foreigners are not eager increase their US dollar holdings.
    2. State, local, and big company corporate bonds – The result would be lower interest rates on these instruments, which might encourage such entities to borrow more, which could lead to more spending from these groups.
    3. Riskier assets like commodities, stocks, etc – Would the typical bondholder want to take on this much risk?
    4. Remaining outstanding T-bills – Even lower interest rates, bounded below by the Fed’s reserve rate.
    5. Other?

    Clearly, each of these possibilities indicate inflation in some form in some market. A major cost of seigniorage seems to be the loss of T-bills as a storage receptacle of choice for future savings and past savings as well if used to pay off existing federal debt.

    • You say “I have a problem with the “no inflation” idea.”

      And rightly so, otherwise we would have deflation.

      Inflation of the currency is built in to the fractional reserve banking system, whereby all money is created as interest bearing debt. More money has to be constantly created (also as debt) in order to pay the interest. How we get more money than that must mean even more debt. This results in defaults, but that is another story.

      You say that “a growing economy requires new money to monetize new production and transform dormant assets and the central gov’t is the monopoly supplier of money.”

      The first part is correct, but the central government is actually not the monopoly supplier of money. It is the private banks, who create the money out of this air as a multiple of their deposit and capital base. The government creates debt or negative money by selling US Treasury Bills. The US money supply was privatized in 1913. Take a look at a dollar bill – it says Federal Reserve Note. The Federal Reserve is owned by a consortium of private banks and they receive 6% interest.

      • Thank you for the response.

        The “monopoly supplier of money” statement is mostly lifted directly from Mosler’s book, but as I’ve thought about fractional reserve banking more since then, I’ve come to doubt the statement. Clearly, like you mention, the private banking sector does create money.

        It also seems that such private money creation is a cyclical phenomenon. During periods when the private non-banking sector has high demand for debt due to broadly rising sales and asset values, a lot of private money is created, then, when those sales lag or when asset values are revised downwards, much of that private money is destroyed through bankruptcies. I wonder how much of that private money is retained cycle-to-cycle, if any?

        As you say, government also adds to the money supply through deficit spending. This money, however, cannot be destroyed unless the government specifically chooses to default, unlike private entities. Is this the net amount of money created on average through an entire economic cycle?

        I’m not sure how “private” the Fed really is, I read somewhere that last year the Fed had a $90 billion dollar “profit”, of which $87 billion was turned over to the Treasury.

        • Thank you for your reply.

          The Federal Reserve Bank turned over $90 billion to the US Treasury, which was approximately $6 billion less that it made from interest on the US Treasury securities alone that it held. Well, that mighty big of the Fed. It did not return ALL its profits by any means.

          The Fed makes money from many other activities and it should also be remembered that US Treasuries are owned by many other private entities including foreign governments. The amount actually owned by the Fed is relatively small. “The Fed first shrank its holdings of Treasury securities — they declined from a peak of $791 billion on August 8, 2007, to a low of $475 to $480 billion between June of 2008 and March of 2009.” Compare this with the total US Treasury debt of $16 trillion.

          http://www.cato.org/publications/congressional-testimony/monetary-policy-debt-ceiling-examining-relationship-between-federal-reserve-government-debt

          You say “It also seems that such private money creation is a cyclical phenomenon.”

          That would account for the booms and busts in the economy.

          As Thomas Jefferson allegedly noted:

          ” 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…I believe that banking institutions are more dangerous to our liberties than standing armies… The issuing power should be taken from the banks and restored to the people, to whom it properly belongs.”

          Whether or not the Federal Reserve can regarded as a public or private entity is debatable, but it should be remembered that all money in our fractional reserve banking system is created by the banks from thin air as interest bearing debt. In other words the US lost control of its money supply and handed it over to private enterprise. Great boondoggle. Most members of the public think that banks just lend out other people’s deposits.

          “It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.”

          Henry Ford

  17. The Guardian is apparently trying to expand their readership in the US…’nuff said.

  18. James Tennier

    Ms Moore’s article doesn’t say much for her intellectual properties nor her observational skills.
    The reality is “peoples is peoples, what you expect?” Nick, Muppets take Manhatten.
    One only has to look to Europe to see austerity coupled with the inability to mint one’s own currency is an idea that does NOT work. We have a solution, readily at hand if we only had the leadership with the balls to use it!
    Recall PM Cameron trying to explain to the youth of Great Britain a few years ago, that the cost of education was tripling, when his, a generation before, had been free.
    There is a lot wrong with today’s world and idiots like Ms Moore are not helping, IMO.

  19. Erick Borling

    Next candidate for the Most Embarassing Financial Column of 2013 would be Rana Foroohar’s “Why Markets Won’t Crash — Yet” commentary in the March 18 2013 edition of TIME magazine.