By L. Randall Wray
In Part Three I argued that the government issues currency as its liability and imposes tax liabilities on its subjects/citizens that can be paid in that currency. When taxes are paid, both the government and its taxpayers are “redeemed”. I cited Innes’s argument that the universal law of credit is that the issuer of a debt must take it back. This is the fundamental notion behind redemption of debts.
To be sure, debt is much older than money. No human has ever escaped debt. At birth, you are indebted to your parents, your kin, and your gods. You spend your lifetime incurring new debts and repaying old debts and accumulating credits that are the debts of others. If you earn enough credits, you join the Redeemer and make it to the Promised Land after death; if you don’t you join Satan—the original tax collector–in hell.
Treasury and Central Bank Interactions
This post concludes our study of central banking matters (there would be a lot more to cover…maybe another time). The post studies how the Fed is involved in fiscal operations and how the U.S. Treasury is involved in monetary-policy operations. The extensive interaction between these two branches of the U.S. government is necessary for fiscal and monetary policies to work properly.
Once again the balance sheet of the Federal Reserve provides a simple starting point. The Treasury holds an account (called Treasury’ General Account, TGA) at the Fed, which is part of L3. To simplify, this post assumes that the Fed still follows the monetary-policy procedures that it followed prior to the 2008 crisis.
Sorry that it has taken me a while to get back to my multi-part series on debt-free money. This is the third part of the current series, although I had previously written several other blogs on the related topics of debt-free money, positive money, and 100% money. See links at the bottom.
This post will focus on the concept of “redemption” as the most fundamental requirement of indebtedness. This seems to confuse readers. For example, Eric Lonergan calls this a “fantastic linguistic contortion”, a “pure semantic confusion”, a “hidden definition slipped in between dashes”.
William K. Black
February 12, 2016 Bloomington, MN
The Bank Whistleblowers United announce the inaugural Financial Fraud Lemons of the Week award. There can be no more fitting recipient than the ironically named Department of Justice (DOJ). The “lemon” is used in the economics and criminology literature to refer to a car of surpassingly terrible quality. The quality is so bad that the car can only be sold through fraud. We will award it each week to an example of dishonesty or cowardice about financial fraud that is worthy of public ridicule. We want to leave room in our scale for truly spectacular examples, so this first award will only receive Four Lemons. The first award is for what has become a routine example of dishonesty and cowardice by DOJ. Its conduct should be a scandal of national proportions, but by now everyone expects DOJ to embarrass our Nation when it deals with elite bankers.
The New York Times has taken notice of Bank Whistleblowers United (BWU). You can read it here.
William K. Black
February 10, 2016 Bloomington, MN
I am writing as one of the four founding members of Bank Whistleblowers United. We came together recently to create a detailed plan that could restore the rule of law to Wall Street and dramatically reduce the risk and damage of future financial crises. We crafted it so that it could be implemented without any new legislation or regulation. We offered our aid in the implementation process to any candidate who wins the election – and pointed out that President Obama could implement it immediately. Our plan and approach virtually defines the word “pragmatic.” It would also transform finance and begin to end its corrupt culture.
Bill appeared on CCTV America discussing the American economy with Rachelle Akuffo. You can view it here.
Randy Wray and Bill Black appear on “Clearing the Fog.” You can listen to the podcast here. Bill, of the newly formed Bank Whistleblowers United, speaks about the plan they have outlined to instill the rule of law on Wall Street and end fraud with the hope of mitigating the effects of the next financial crisis. Randy, an expert in financial instability and macroeconomics, speaks about alternatives to the current financial system that would bring greater stability.
Bill Black reviews the highlights and holes of the film The Big Short in 2 parts on The Real News. You can view part 1 here and part 2 is here. Both have transcripts.
“Any request for loan level tapes is TOTALLY UNREASONABLE!!! Most investors don’t have it and can’t provide it. [W]e MUST produce a credit estimate. It is your responsibility to provide those credit estimates and your responsibility to devise some method for doing so.” [S&P 2001] [emphasis in original]
William K. Black
February 8, 2016 Bloomington, MN
This is second article in my series on the AEI and Brookings report on how to fight poverty. In my first article I dealt with their plan to oppose any material increase in the minimum wage being hyped by Eduardo Porter in the New York Times as a “bipartisan” plan to “champion an increase in the minimum wage.” Indeed, Michael Strain, an AEI member of the group continues to attack the minimum wage on the AEI web pages after the release of the report. I explained that the group was chosen to ensure that it was dominated by New Democrats and hard right Republicans who shared a core belief that poverty was caused by the poor choices of poor people, that it was verboten to even discuss how the economic and political system was rigged, and that a “new paternalism” aimed against the poor was essential. The word “rigged” never appears in the report though it is a dominant feature of any progressive critique of poverty.