The last few weeks have seen at least two posts calling attention to the potential use of the platinum coin in America’s political economy. The first to appear was Rob Urie’s piece in Counterpunch provocatively titled: “The Trillion Dollar Catshit Coin” And the second was Mike Sandler’s post in The Huffington Post called “Greece and the U.S. Senate: Economics for the 99%.
Let’s begin looking at these with Sandler’s effort. He reports on two challenges to austerity. The first is from Syriza’s victory in Greece and its promise to Greek voters that it will end austerity. The second:
The austerity mindset faces a new foe in the U.S. Senate as well. The re-shuffle of the last U.S. election that put austerity-minded Republicans in power has ironically resulted in a new anti-austerity economist being hired by Senator Bernie Sanders (I-VT) in the Senate Budget Committee — Professor Stephanie Kelton of the University of Missouri-Kansas City. Professor Kelton is a proponent of Modern Monetary Theory (MMT), a very pro-stimulus economic approach. Her hiring represents the biggest step forward for MMT, since the PR coup of the Trillion Dollar Platinum Coin in 2013. At that time, Kelton reportedly created the #mintthecoin hashtag that was featured in columns by Paul Krugman and others.
Sanders’ hiring of Kelton is a break from the more conciliatory “balanced budgeting” approach of some Democrats, such as former treasury secretaries with ties to Wall Street and fiscally-conservative “deficit hawks.” Kelton and her MMT colleagues go beyond the traditional Keynesian stimulus of short-term deficit spending. They seek to unleash the power of monetary policy to circumvent the scarcity mindset imposed on government action, perhaps even bringing the Trillion Dollar Coin back into the discussion.
Of course, Sandler means to say fiscal policy in the above, since MMT economics greatly favors reliance on fiscal, rather than monetary policy, in spite of the “monetary” in its name. But apart from that, he projects that we may see the platinum coin come back into prominence soon.
Rob Urie’s article is even more focused on the likely return of the platinum coin. He says:
Some fair proportion of readers are already aware of the proposal to have the U.S. Mint produce a $1 trillion face amount coin to be deposited at the Federal Reserve and credited to the account of the Treasury Department to pay Federal bills. The $1 trillion would render the ‘debt ceiling’ debate irrelevant because it wouldn’t be funded with debt. It would demonstrate the contrived nature of the austerity ‘debate’ in Washington. . . .
This isn’t quite right because money issued by the US Government is a liability of the Government; a debt in the sense that it is a tax credit that must be accepted in payment of taxes by the Government. However, had Urie said “interest bearing debt” rather than debt, then he would have been right, since Government issued money, cash or reserves, isn’t interest bearing debt that counts against the debt ceiling.
Urie’s point that using a $1 Trillion coin to render the debt ceiling irrelevant would demonstrate the “contrived nature of the austerity ‘debate’ in Washington . . . “ is however, right on. It’s also true, in addition, that the larger the face value of the coin is, the more convincing would be the demonstration that the ‘debate’ is a contrivance to fool people. So, if that coin were to have a $100 Trillion face value, then the contrivance aspect of the debate would be clear to all but those willfully blind to the truth that the Constitution provides the Government with the authority to create as much money as it wants to create to fill the pubic purse.
Urie goes on:
What is useful in the platinum coin idea, and the central point of derision amongst protectors of the status quo, is if taken to its logical conclusion, there is no need for debt—government could create and distribute as much money as is needed via public policies in the public interest. . . .
And so it follows that:
What the platinum coin idea should generate is a robust dust-up over the use by plutocrats and their servants in government of contrived emergencies such as the debt ceiling and the ‘fiscal cliff’ to pose existing institutional arrangements as immutable facts in order to push ever more social wealth up the income and wealth ladders. . . . the direct issuance of money by the government would remove the rationale for the moral chide over government spending from deficit hawks and could explicitly establish serving the public interest as the goal of government spending.
Or as I’ve said elsewhere, using the platinum coin, especially with extremely high face values in the many trillions of dollars would be a progressive game-changer in politics, because it would remove the moral foundation of austerity in claimed scarcity of Government money. And the new standard for fiscal policy could not be either deficit reduction or budget balance, but always and everywhere would have to be whether Federal spending, deficit or otherwise, was intended to accomplish the public purpose. So, the platinum coin would enable the economics for the public purpose that John Kenneth Galbraith envisioned in the 1970s.
So, Urie ends with this very significant point:
Regardless of whether or not official Washington uses the idea, radical versions of the platinum coin idea should continue to be put forward. The broad frames used in political-economic debates in Western Capitols are designed to bring about outcomes in line with the interests of Western plutocrats. In fact, without effectively calling into question these frames the cognitive disjuncture needed to shift these institutions back toward the public interest won’t be found. The existing money system is at the heart of these institutions and it is not socially ‘neutral.’ And only by putting it forward as if it was does the existing order retain control of ‘the conversation.’
That is a conclusion I heartily endorse, and I would also add these thoughts on how to break the austerity frame.
– There are two key Congressional deadlines coming up that may be occasions for more fiscal crises that Republicans will use to try to impose further austerity on the nation. First, there will be a deadline, unknown at this time, for the Republicans to agree to raise or suspend the debt ceiling. Right now, the debt ceiling, suspended since February 14, 2014 is scheduled to be re-instituted on March 16, 2015. Shortly thereafter, the Treasury will have to take extraordinary members to continue to spend its mandated 2015 appropriations.
At this point, we don’t know whether it will be a month or two or three until those measures and the Treasury’s credits at the Fed are exhausted. But at that time the Government will be facing another shutdown and a hard negotiation with the Congress that may result in hurting millions. As has been the case since 2011, such negotiations can be avoided by minting a very high value platinum coin and depositing it at the Federal Reserve. Will the President do it this time?
The only chance that he will is if enough people know about and believe in the platinum coin option that the President comes to know very well that if he refuses to mint the coin with a high enough face value to remove the rationale for austerity from the playbook of Republicans and Democrats that have used spending cuts and austerity morality as their coin of the political realm, he will be unmasked entirely as the servant of the plutocracy that so many already think he is. There is no guarantee, of course, that he fears unmasking himself so much that this will provide the motivation needed to get him to move. But perhaps this, along with the humiliating terms the Republicans impose on him, will be enough to get him to do it. For if he does not, he will then be the proverbial lame duck, unable to mobilize the Democratic wing of the Democratic Party for anything he may want to do for the rest of his term.
– The second upcoming deadline is the date on which a 2016 budget resolution is due from the Congress. That date is April 15, 2015. Of course, the Republicans might postpone that and let the pressure build until the Government needs a continuing resolution to avoid a shutdown at the end of September or the beginning of October. Then again they will negotiate for more tax and spending cuts crying poverty all the while. Of course, a huge balance in the Treasury’s spending account, would make it very hard for them to justify draconian cuts by pleading poverty. So, again, the platinum coin would break the framing of their argument.
– The platinum coin if used with extremely high face values introduces cognitive dissonance in the ideological belief that the Government is just like a large household that must live within its financial means, because this belief is inconsistent with the demonstration that the Treasury suddenly has, for example, $100 Trillion in financial resources to repay all its interest-bearing debt instruments as they fall due, and also “pay for” all deficit spending appropriated by Congress for many years to come without issuing any more interest-bearing debt instruments counting against the debt ceiling. This dissonance would kill the Government is like a household belief in short order. And then the political debate over spending and tax cuts would have be carried out on the basis of what serves the public purpose and then the red herring of financial poverty would be gone from our politics as we move into the election of 2016. But for all this to happen, the President will have to act. He will have to mint the coin.
So, will we see the return of the coin? I think the President will do what he can to stop its return to the public debate because it makes things much more difficult for the plutocrats to maintain their long-term mission to increase inequality and end political democracy.
Since this is the case, it will be up to us to bring the coin back again, and this time not to cease talking about until the public knows that there is no reason to cut or privatize Social Security or to have unemployment, or to tolerate the most stingy and inadequate social safety net among Western so-called Democracies, or to avoid addressing the many, many, problems that are currently casting a dark shadow across the future of the United States and our Grandchildren. It is the platinum coin and its use that will allow us to take back the frame of acting in the name of our children and grandchildren from the plutocratic austerians who have stolen that rhetoric from progressives. Time to take it back!
The trouble is, it’s all still ‘money’.
What we need is the antithesis to money – a currency that serves the public interest by being earned into existence for behaviour that is giving in nature.
Money incentivises greed and envy, and encourages mindless consumerism. MMT doesn’t go far enough, but it is a step in the right direction.
Why not go further though? A coin that is earned for contribution to the common good and accepted by the wider community as a token of that contribution. Backed by the wider community’s willingness to accept it.
Money destroys community along with the earth’s other precious resources. A credit system that builds community and rewards resourcefulness would counteract money’s corrosive effects.
Surely it’s time to go beyond MMT?
mikeriddell62 :A coin that is earned for contribution to the common good and accepted by the wider community as a token of that contribution. Backed by the wider community’s willingness to accept it.
Money destroys community along with the earth’s other precious resources. A credit system that builds community and rewards resourcefulness would counteract money’s corrosive effects.
That’s right, except that it is an integral part of MMT – and its predecessors for centuries – already. This is just the Job Guarantee, which is “a coin that is earned for contribution to the common good”, a “credit system that builds community and rewards resourcefulness”.
Amen. I have long supported action to prohibit selling of treasuries by the US Treasury thereby forcing either minting the coin(s) or modifying the monetary system to recognize the full fiat nature of money.
I always admire your writings, Sigñor Rockin’ Fire, even when I get critickle… I think that a fine distinction to be made in the coin-seigniorage discussion is that — theoretically speaking — it doesn’t matter if the coin is made of wood, lead, plutonium, cat doody, or scribblings on a cocktail nakkin. Therefore the zillion-dollar coin SHOULD be minted A-double-S-A-P for as many reasons: Our most urgent debt is the measure of where we could be minus where we are now (as a nation), not some dumb number called the (nat’l) debt. This land is your land. This land is my land. …And we have a galaxy of unknown wealth out there and inside (our minds) that can’t be appraised, and as such the numbers we hicks are using are all absurdly small. The negatives should be far more negative as should the positives. Scientific notation. 14th-grade basics, peeple, hello. Let’s pass the TPPP so I can sue over the fact that fiscal policies have deprived me of the harem I coulda had and the ten thousand cattle I coulda had… that’s a deficit of ten to the ten thousandth-power, measured by what could have been. (BTW I went off the rails with this train of thought as I don’t eat cow meat). This comment was an exercise in creativity as is essential to the process of open-minded problem-solving.
That said, it’s heartening to see Varoufakis making and shaking, and Dr. Kelton in the halls “of power” such as that is…
Joe, thanks for a terrific post, especially theCongressional timeline.
Also found this very helpful:
“This isn’t quite right because money issued by the US Government is a liability of the Government; a debt in the sense that it is a tax credit that must be accepted in payment of taxes by the Government. However, had Urie said “interest bearing debt” rather than debt, then he would have been right, since Government issued money, cash or reserves, isn’t interest bearing debt that counts against the debt ceiling.”
Pingback: Return of the Coin? – New Economic PerspectivesNew Economic Perspectives | Underground.Network
In terms of identifying constituencies that might gravitate towards “minting the coin,” it seems to me that the single-payer supporters would rank high on any list, because they likely would all gravitate towards Warren Mosler’s ideas for a Medical/Dental Debit card.
http://moslereconomics.com/2009/03/02/mosler-health-care-proposal/
Another suitable group might be all of us who favor “reparations” for the descendants of U.S. slaves. Being able to pay those reparations without raising federal taxes is critical to moving that forward.
OT, “balance as bias,” is imho a big messaging hurdle when it comes to those who support a “balanced” federal budget.
“servant of the plutocracy that so many already think he is.”
I think very few of his supporters think he is the servant of the Plutocracy. Virtually nobody voted for McCain or Romney because they thought that. The vast majority of both Democrat voters and Republican voters believe that Obama is the savior of the poor and downtrodden. “Low information voters”, for sure, but still a vast majority.
But, you may have something in this: “the humiliating terms the Republicans impose on him, will be enough to get him to do it”. It would take more than just rejecting his budget proposals. It would take a threat to something he cares about. The only policy item he, or even the Democrat party when they were in the majority in both Houses, has ever shown any serious concern for is: Obamacare. The good news is that a rollback of the employer and individual mandates in Obamacare is likely to be the Republicans’ major policy objective in the coming debt ceiling conflict.