“Fixing the Debt Without Breaking America” now available

NEP’s Joe Firestone has just published a kindle book  timed to coincide with the arrival of the sequester deadline. The book, Fixing the Debt without Breaking America: Austerity, the Trillion Dollar Coin, and Ending Debt Ceiling, Sequester, and Budgetary Crises, consists of reorganized content from Joe’s blogs plus three completely new chapters. You can follow this link to get a copy.

The book’s description – as it appears on Amazon.com:

This book is about a counter-narrative to austerity politics. It exposes its fallacies, and, I hope, its closed-mindedness and futility. It also offers a way out of austerity politics.

That way out, is through the perspectives and truths developed by the approach to economics called variously Modern Money Theory (MMT), Modern Monetary Theory, or Neo-Chartalism. And it is also through using the method of High Value Platinum Coin Seigniorage (HVPCS).

In this book, I relate neoliberalism, the Washington Consensus, and austerity politics to the perspectives and truths of MMT, including MMT ideas about fiscal sustainability and responsibility, and to HVPCS and its promising application to ending austerity by providing the Treasury Department with the capability to harness the Federal Reserve’s power to create Bank Reserves out of thin air. Treasury can use to this capabiliity to repay the national debt, and to deficit spend Congressional appropriations.

If used, HVPCS would end the possibility of repeated and further debt ceiling crises; and would also remove any reasonable justifications referring to the current national debt/deficit situation for the sequester, or for the upcoming budgetary crisis, which the Republicans intend to create at the end of March and then repeat periodically throughout this year and probably next.

Contents – provided by Amazon.com:

The book’s contents include: austerity, neoliberalism, and “fiscal responsibility”; a fix the debt narrative and counter-narrative; modern money theory truths; real meaning of “deficit”, “surplus”, “the national debt”, and “national savings”; two ways of fixing the debt without breaking america, origin and early history of Platinum Coin Seignorage (PCS); the trillion dollar coin and the debt ceiling crisis: the coin hits the mainstream; incremental vs. small ball vs. game-changing PCS; the $60 trillion plan, policy space, and the end of austerity, is PCS inflationary?; legal, political, economic, and institutional objections, high value coins and MMT, the promise of high value platinum coin seigniorage for america: no more debt ceiling, sequester, or budgetary crises and more . .


55 Responses to “Fixing the Debt Without Breaking America” now available

  1. golfer1john

    I suppose it’s too late for the first edition, but where you say the Treasury could “flood overnight bank reserves”, I think you meant the Federal Reserve.

    • The nice thing with a Kindle e-book is that I can update whenever I think there’s an error. In this context however, I think I meant the Treasury. Can you cite the location in the book you’re referring to. Find the quote and look for the location, then you can cite it.

      • golfer1john

        I get the feeling there is a special meaning in Kindlespeak for “cite” and “location” that I don’t grok. This is my first try using Kindle, and it’s on my phone, which is also new to me.

        If I touch the sentence, it says the location is 434 of 3525 . 12%

        If you mean flooding the banking system with reserves, that means buying bonds, which the Fed does. Treasury sells them, which drains reserves.

        • Yes, but the Treasury also spends, which “floods the banking system with reserves” too – the reserves needed to buy the bonds it sells to drain reserves. So since “flooding” doesn’t necessarily mean buying bonds, this isn’t enough to tell if there is an error or not. (Haven’t looked at the book, which I am sure is excellent.)

          • golfer1john

            You should look at the book.

            Treasury is only authorized to create reserves in the amount that it drains them, either by taxing or borrowing. Only the Fed can create reserves from nothing, thus the “flood”.

            If all the obsolete rules were revoked, and the Fed were consolidated into the Treasury, then … but it isn’t, and this part of the book isn’t talking about “what if”.

            • Don’t have Kindle, so haven’t looked at the book, and even with what is supplied below am not sure enough of the context. But there is no “what if” in what I said. As Mosler prominently displays on his site: “The funds to pay taxes and buy government securities come from government spending.” The Treasury has the real “ex nihilo” creation power, not the Fed, which is restricted to banking and is not really creating the reserves entirely “from nothing” but “from” the financial assets it swaps for them, while the Treasury just writes checks. (or alternatively, can create bonds out of nothing).

              As our MMT academics often say, it is better (and it is usually, actually, more historically accurate) to think of the spending- from the Treasury, as coming first. The Treasury spending doing the “flooding” preceding the reserve drain by bonds. A major point of MMT is that these “obsolete rules” don’t actually mean anything much really. We already have an MMT system. There is no error or illegitimacy involved in consolidating the Fed & the Treasury analytically – and of course as parts of the government, that is how it acts on the economy. You could equally well track the financial transactions of a person as coming from his left pocket or right pocket, but in reality, that is just an obsessive-compulsive disorder.

              Treasury is only authorized to create reserves in the amount that it drains them, either by taxing or borrowing.

              Again, yes, but the Treasury’s “borrowing” “needs” depend on its authorized creation of reserves, not vice versa. Saying it as above is veering into Loanable Funds territory, perhaps, and of course, government “borrowing” is not borrowing. So again, it is better to say that the Treasury is only authorized to drain reserves in the amount it creates them ( / has created them in the past 200+ years). Not vice versa.

              Look at Wray’s book, Understanding Modern Money – the outline given in ch4, Government Deficits and Fiat Money section, p.77-80, and the beginning of and whole of chapter 5, Monetary Policy and the Non-Discretionary Character of Reserves. E.g. “Thus it is fiscal policy that determines the amount of new money directly created by the federal government, rather than monetary policy, which really has to do with interest rate management.” p.97 Most of what the Fed does is defensive, non-discretionary.

              Stephanie Kelton’s paper Can [Do] Taxes and Bonds Finance Government Spending? is mostly on this point. And as she says, “Bonds, which are used to prevent deficit spending from flooding the system with excess reserves, allow the maintenance of positive overnight lending rates.” p.20

              • golfer1john

                “The funds to pay taxes and buy government securities come from government spending.”

                Yes, but the funds to pay this year’s taxes come from government spending since 1791.

                By law, the spending done this year must be offset this year by taxing and borrowing. I gather that Treasury has to follow the same rules for its checking account that the rest of us do, that is, they must first fill the account by taxing or borrowing before they can spend from it. So, except for whatever low balance they keep in it to avoid an overdraft, Treasury must first drain reserves before it can flood the system with them. Under our current laws. Of course, MMT is correct, Treasury COULD spend in unlimited amounts without borrowing or taxing, and thereby flood the system with reserves, but the Secretary would go to jail. (Well, maybe not this one.)

                “the Fed, which is restricted to banking and is not really creating the reserves entirely “from nothing” but “from” the financial assets it swaps for them”

                This is not quite backward, more like inside out. The Fed swaps reserves for the assets, not the other way around, when it creates reserves. If it swaps assets for reserves, it is draining reserves, which disappear. The Fed doesn’t store them in the back room or something. When it buys assets, it creates reserves by marking up the selling bank’s account.

                “Treasury is only authorized to drain reserves in the amount it creates them ( / has created them in the past 200+ years).”

                I think Treasury is limited in its reserve draining operations (selling bonds) only by the debt limit law. Other than that, I’m not aware of any restrictions imposed by Congress that would prevent Treasury from selling more bonds than required to just barely keep its spending account above zero. And, in fact, since spending and tax receipts occur daily and T-bill auctions more rarely, they would be required to do reserve drains enough to cover not just its current reserve adds, but also its anticipated reserve adds for some time to come. Probably a month or so, in practice, but they could do 3 months or 12 months or 12 years worth without violating any laws, either laws of the US or laws of economics (except the debt limit law).

                The fact is as I said, Treasury is only authorized to create reserves (spend) in the amount that it drains them (by taxing and borrowing). To spend without taxing or borrowing would violate the law, and is not authorized. Of course, it would be economically possible and has been done in the past, but it is currently illegal (unauthorized).

        • Thanks for the location.

          Your comment on the reserves is right under the present system. But if PCS were used and the Treasury stopped rolling over debt instruments, then it would be the Treasury doing the flooding, and the Fed maintaining the interest rate by paying interest on reserves. I’ll check the context now that I have the location and check what I meant to say. Thanks again.

  2. golfer1john

    Another one: “we won’t be forced into solvency” …

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  4. Thank you! Can’t wait to read it.

  5. “Purchases from the Amazon.com Kindle Store are not available for your current country settings.”

    Thanks anyhoo :)

  6. I received a similar message of a “network problem” on two tries. I will check again later.

  7. auresdelmulo

    I don’t think it is just that the Fed CAN use its money creating and issuing powers to pay off the national debt,
    it has already paid it off, every time it buys a Treasury security with money it creates out of thin air. But Joe, you show that the central idea of the GOP/TP is belief in the national debt, and if we can show it is an illusion, we may destroy their argument for austerity. I think we need to inform the President and the Secretary of the Treasury that rolling over the securities at the Fed is illegal, because there is no authorization for buying a security that already has been bought by the Fed for the government. The Fed is a government entity within the government. It is isolated from political influence in a number of ways, but it still acts for the government in buying Treasury securities from banks.

    The Fed no more has a valid claim to be paid by taxpayers the full value of securities it has bought than does a bank clerk who claims to be owed the full value of the securities it has bought from bank customers for the bank with bank money. The clerk is a servant and gets paid a salary for its handling of money and securities. That’s all it is owed.

    The Fed is an agent of the government and gets paid a transaction fee of 6% of the interest on each security it buys. That fee is for funding the Fed’s operations so it does not need to get appropriations from Congress and be thus subjected to political influence for its decisions and actions.
    There is no national debt at the Fed.

    The platinum coin solution would also be illegal if the securities have already been redeemed for the government by the Fed buying them.

    • aures, The Fed banks that actually buy the debt, aren’t part of the Government. The debt instruments they buy become assets of the banks, not. So, when they fall due, Treasury still has to redeem them. The situation is truly ridiculous. The banks have been delegated Congress’s power to create reserves out of thin air which they then use to buy the debt instruments. The instruments remain liabilities of the Treasury. But the Treasury itself, part of the Government, has no power to issue the money it needs to spend Congressional appropriations! Truly moronic!

      • davidgmills

        Joe I think it needs to be repeated often that the Federal Reserve System is comprised both of the Federal Reserve banks (which are not part of the government at all) and the Federal Reserve Board which is arguably (and in name only) an agency of the Federal government.

        As I have pointed out before, the idea that the Federal Reserve Board is an agency of the government is an oxymoron, because this agent really has no principal. It takes both a principal and agent, in law, for there to be an agency. Neither the executive branch, nor the legislative, nor the judicial branch of the government is its principal. The agency calls itself an “independent” agency (an oxymoron if there ever was one). A true principal has the ability to control its agent. There is no branch of government that really exerts any meaningful control over the Board. The executive with the consent of the legislative can put members on the board and take them off. But that is about all the government can do. It is a sham agency at best.

        • As I have pointed out before, the idea that the Federal Reserve Board is an agency of the government is an oxymoron, because this agent really has no principal. It takes both a principal and agent, in law, for there to be an agency. Neither the executive branch, nor the legislative, nor the judicial branch of the government is its principal. The agency calls itself an “independent” agency (an oxymoron if there ever was one). A true principal has the ability to control its agent. There is no branch of government that really exerts any meaningful control over the Board. The executive with the consent of the legislative can put members on the board and take them off. But that is about all the government can do. It is a sham agency at best.

          Hi David, I understand what your view. And I agree on the banks. They are private; and I don’t think they should b. The regional Fed Banks should be nationalized tomorrow. It is a travesty that they have the authority and influence that they do and are not public institutions completely transparent in their operations and accountable to the people. On the other hand, I also think that the Federal Reserve Board is an agency of the Government. Like some other agencies they claim to be “independent.” But, of course, they are accountable ot the Congress, whether or not Congress chooses to exercise its control. In addition, they are accountable to the Executive Branch, as I argue in the book and as the act empowering the Fed indicates. Ultimately, if there’s disagreement between the Treasury and the Fed Chair, the view of the Secretary is controlling according to Law. If the Fed Chair fails to agree he or she can be removed by the President for cause. That is the law and that is a very telling form of control if the Executive will only exercise it.

          • davidgmills

            Perhaps we are saying the same thing about what the Executive branch can do regarding the Federal Reserve Board but reaching different conclusions about agency. It seems we both agree that the Executive can remove a board member. But to me that is not the requisite control that a principal has over an agent, at lest not in law.

            A true principal must be able to control the details of the work — that is the standard for an agency. The ability to hire and fire your “agent” without the ability to exert any control over the details of what the agent is doing, actually makes for an independent contractor relationship, not a principal/agent relationship. Restatement of Agency Second, Section 220. I wrote a major brief on this issue a number of years ago for a case in the sixth circuit, and even the cite still is burned in my brain.

            It is technical. But that is my take and why.

            • davidgmills

              If the Executive or Congress or both can do (significantly) more than just hire (appoint) and fire (dismiss), then the Board would be a legitimate agency, but from what I have read (and my sources may not be that good) they can’t do much more than appoint and dismiss the Board Members. If I am wrong in this, please enlighten me because I don’t wish to spread a notion that is not correct.

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  9. Joe,

    Thanks for the book. I will read it while waiting for this so called snow storm to abate. Looking out my balcony window I can see the Washington Monument, a little. It’s a day for good chili good whisky and a good book. Thanks again.

    I was thinking about an exchange I had with Prof. Mosler a year or so ago and he agreed with me that there is no real financial constraint on funding, from Treasury, public purpose needs right down to the village. Who would object since it removes state and local political jurisdictions from the crucible of corruption called the bond market.

    I think MMT needs a strategy that convinces Congress of the absolute necessity to embrace the premises of monetary sovereignty. Current policies, absent real growth, require, unsustainable debt financing. An essential premise of MMT is government’s ability to issue thin air money independent of revenue but under the authority of Congressional Appropriations. A logical extension of this capacity for funding federal expenditures is to have appropriations which also fund, debt free, public purposes for all of America’s political jurisdictions.

    Moving the Federal government from the clutches of the bond vigilantes via PCS or the simple act of transferring money creation authority to the Treasury, eliminates debt financing at the Federal level and ought to be shared at all levels of government; state and local.

    Which elected official would resist debt free funding for his or her District? Federalism would not be broached anymore through PCS funding than through current Treasury Block Grant funding. As a matter of strategy, there should be no conditionality or other Federal control of funds distributed to America’s political jurisdictions via the PCS mechanism.

    Amounts for each political jurisdiction could be developed from the Annual Consolidated Financial Reports (CAFRs) submitted to OMB. Annual transfer amounts could be determined from 5-10 year moving averages to get to base and contingency funding levels for any fiscal year.

    MMT leaders could present this as the most efficient mechanism for state and local governments to achieve interest free debt reduction, phased in reductions of income and property tax rates, and other fees, used to fund state and local government.

    • I heard something less radical the other day, and I don’t remember where, but it seems like something the Fed could do now, no more “out of paradigm” for them than buying MBS and CDOs.

      Let the States borrow from the Fed at the discount rate, just as banks are able to do. There should be some limit, perhaps a few $thousand per capita of the state population (at least to start), so that they don’t adopt it as their primary funding means. It would be far less costly for them than the bond market. They could refinance existing debt, reducing carrying costs, or fund new projects. Maybe some part of it, perhaps also based on populations, should be required to be passed through to local governments.

      Unlike adding to already excessive bank reserves and just drive up asset prices, this sort of lending would very likely add to spending (aggregate demand), like a real “helicopter drop”. Even if it were all used to refi existing bonds, the help to the monetarily non-sovereign levels of government would reduce austerity on their part.

  10. The only issue I have with revenue sharing between the Feds and the states is that right-wing legislatures and governors would simply take the money and reallocate it to their pet projects or to wingnut welfare, and the people intended to recieve the aid would get frozen out.

    I’d much rather have a more direct aid to those who need it, without the middlemen interfering.

    Best solution would be to build a popular grassroots movement from the Left in opposition to both the Dems and the Repubs to enact the kind of economic policy initiatives that are needed. Playing to the better logic of liberal Dems simply won’t work, because they have no power against the corporate shills who dominate that party.

    • Sunflowerbio

      I tend to agree with your comment. I think Federally mandated controls would leave the gov. open to the charge of big gov. control and the specter of Big Brother. This could probably be negated with direct payments to individuals such as higher EIC payments, reduce payroll taxes (resume the holiday and make an apparently offsetting grant to SS Trust Fund), and other direct forms of aid such as a mortgage Jubilee or a housing grant for renters or a rebate for those who have paid off their mortgage. Same for student loans. Sort of targeted helicopter drops.

  11. golfer1john

    location 830, another “involuntary solvency”.
    And 910, same thing.

  12. Golfer,

    Right on all counts. The corrections are:

    Location 910: “But to educate people to that view, financial leaders have to stop telling people that they must suffer austerity because 1) the Government can only get money to spend through taxes and borrowing; and 2) the level of borrowing is limited by markets that, if they choose, can drive the US into involuntary insolvency.”

    Location 831: “The “national debt” of the United States presents no danger of involuntarily insolvency for it.”

    Location 438: “MMT answer: They’ll most probably buy it for the foreseeable future; but if they don’t, then we won’t be forced into insolvency, because we can always create the money we need to meet our obligations.”

    Location 434: “The Fed can flood overnight bank reserves and the Treasury can float short-term debt to meet targeted interest rates, however low they may be.”

    Thank you for the corrections.

  13. Sunflowerbio

    Joe, I just down loaded your book and have read several chapters. I sent an email this morning to the Charlie Rose Show suggesting you as a guest and tried to cc you, but didn’t have a valid email. I am making notes as I go along where I think there is either a syntax error or where I think something needs clarification. When I have finished I will send the list. Congratulations and keep Getting It Done.

  14. I think the book title has a spelling mistake. Should be “Fixing the Debt Without Bricking America” :P

  15. This is an extremely disappointing “book.” Wow. Glad it was free. I’ve read more than 50% of it, and have encountered the basic assertion maybe a dozen times, replete with a lifetime permissible dose of exclamation marks, and a lot of typos.

    • Well, tweeder, you know sometimes repetition is the key to getting certain basic insights through. But other than the things you mentioned, what part of the substantive content did you find disappointing, pray tell?

      • Well, aside from the putative HVPCS certitudes buttressed by repeated exclamation marks, I haven’t seen that many hedges since “The Shining.” And while indeed “sometimes repetition is the key to getting certain basic insights” when you’re trying to sell this concept to Louie Lunchbucketistan, this author is not making the case with any useful clarity (not that that demographic would ever even know about this blog and “book”).

        It’s a series of repetitive blog posts gussied up into a “book.” The core points remain obtuse, and the writing quality is poor. JMO.

        • BS, tweeder. Get specific about content, you’re still talking style. What don’t you like, about what I said, rather than how I said it? What wasn’t clear? What’s not “useful clarity”?

          Who are you and what do you believe? Where are you coming from? How do I know you’re not just an austrian troll?

          • “How do I know you’re not just an austrian troll?”

            Are your internet skills really that limited?

          • “What wasn’t clear?”

            Pretty much everything. Explain to Bubba and Bobbie Sue why this stuff is not just more Beltway BS.

            Without exclamation marks.

            • Well, Bobby, maybe that’s your problem. I didn’t write the book for Bubba and Bobbie Sue. I wrote it for the financial, political, economic, and governmental types, one finds in the major cities. A book for Bubba and Bobbie Sue doesn’t have to written, because if the President mints the very big coin, then his actions in paying off the debt will speak a lot louder than words, and Bubba and Bobbie Sue won’t care anymore about the debt because it will be disappearing fast.

              • Prediction: Not gonna happen.

                • Sunflowerbio

                  Won’t take at even money. Give some odds.

                • Well, I agree. I even make that clear in the book. But that’s not the point is it. The point is that he should do it; and that he is more likely to do it if another groundswell for #mintthecoin develops. He shut down the one in January. Let’s see if he can shut down the one that’s going to come up if they get close to legislating chained CPI using the excuse that we’re running out of money.

                • 19 -1. At such low odds; it was certainly worth a shot to write the book, considering the possible outcomes if austerity goes away!

                  Oh, wow, there’s another exclamation point! 20 lashes for me! I guess I’ve violated Mr. Gladd’s manual of style.

                  -:) -:) -:)

                  • A career in standup is not recommended. Stick to “Knowledge Management.”

                    Oh, yeah, btw, “phony,” not “phoney.”

                    Look, it’s obviously that you think very highly of yourself, and you certainly have the Sheet of a Deep Thinker (“phd” in your twitter handle to boot; priceless), but clear, concise, and stylish communicator you are not.

                    And, I didn’t start out calling you names; I criticized your book. It was a disappointment. After all, I downloaded it and began reading it because I thought I might learn something that had thus far eluded me with respect to this MMT thing. 51% of the way through (plus the conclusion) left me with the conclusion that

                    I was wrong.

                  • Fair enough; but you still haven’t provided any content specifics. Only stylistic ones. So, there’s still no reason for people to believe what you say or take it seriously.

                    And you haven’t really given me anything to think about substantively; however, I do thank you for the spelling and typo corrections.

                  • Dude, quit digging. I don’t like your “book.” In any event, nobody cares. This theory is going nowhere.

                    “The $ 60 T in coin seigniorage would allow the President to pay off all the debt instruments held by the regional Federal Reserve banks and by Federal Agencies. Since the reserves used to redeem these instruments would not be spent into the economy, they can’t possibly cause inflation without a causal transmission mechanism. That’s a pay off of nearly 40% of the debt subject to the limit. If the Treasury pays that off in the week following minting and depositing of the coin, the most likely reaction on the part of the public will be very strong approval of this action.

                    Really? I come from a discipline wherein if I used the phrase “most likely” I’d have to back it up with scientifically-defensible data.

                    “without a causal transmission mechanism.”

                    There you go. One of those muddled hedges.

                    Bro, you are a target-rich environment. You are the Korengal Valley of Economics. Maybe you should stick to “Knowledge Management.”

                    “Knowledge is Good.” – Faber College, 1962.

                    – debt rapidly disappearing;
                    – the end of any need for austerity and no entitlement cuts; -
                    - no battles with Congress over debt ceilings or fiscal cliffs or austerity budgets;
                    – Congress still controls the purse strings; and — attention turned to real issues about how to create good times here in America.

                    Really? The Reeps are just gonna roll over on this? Kinda like ol’ Hootie vs the late Anne Richards in the old TX Guv race.

                    Are you SERIOUS?

                    Yeah, you are.

                    Y’all can’t have it both ways. Either there is “debt” or there is not.