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Posts Tagged ‘trillion dollar coin’

4 Ways to Change the Fed: A Users Manual

November 7, 2011 17 comments

Here's the sizzle, the last post was the steak

I’ve had a few inbound links to the 4 Ways to Change the Fed .  That post was intended to be very detailed for long time readers – but unfortunately, not many people can understand it easily.

Here is a quick and easy guide to why we want to do these things.

#1. The Fed isn’t under any control at all.  It can do almost anything it wants with monetary policy. It’s not accountable to the president or congress in any meaningful way.  It’s like a rogue bank in the middle of our government, funded by our government, that tries to control our entire economy.

But the Fed flips the middle finger to U.S. citizens when they ask for accountability to minimizing unemployment.  It’s an anti-democratic institution that’s literally out of control.

The solution?  Place the Federal Reserve Under Treasury Control.

Why?  The Treasury reports directly to the President.  If we can trust the president with the nuclear launch codes, we can and should trust him with money.  Put the Fed under the Treasury.

#2.  Normally, banks issue debt, and companies issue stock.

But for the U.S. government, the bank (the fed) issues the stock, and the company (the treasury) issues the debt.

The the fed tries to alter the yield curve with their open market operations.  It’s ass-backwards.

It should be fixed, so people recognize the government can create money at will.  Not only that, this is the way its done in the constitution.

The solution? Have the Treasury and Fed switch places.  The Treasury issues money, the Fed sets the yield curve.

#3: The U.S. is the richest country in the known history of the world.  Yet,  somehow the richest country in the history of the world doesn’t have enough money. Does this seem completely stupid to you?

It should.  We’re can’t run out of money, because we can make all we need.  We can make the money to pay for China ripping us off, and to stimulate the economy.

The Solution? Make several trillion dollar coins.  Deposit them in the Treasury account at the Fed.

We now have the money to pay for programs.   Don’t spend too much- we might get inflation.

But do spend enough to get people working.   In fact, you can spend it on a huge tax cut for working people as #4 will tell us.

#4.  We know a simple fact: Businesses hire when they are swamped with demand!  Don’t believe me? Just ask Mitt Romney! (h/t beowulf!)

Business have high profits right now, but they don’t want to hire because the demand for their products is low.

So how can we boost demand when we need it – and cut back when we don’t need it any more?

The solution: Give people more money when times are tough, and cut back when times are good.

The best way to do this is through a payroll tax holiday.  When times are tough, people get laid off.  But if your buddy gets laid off, you’ll get a raise!

I hope this helps!

Delong Gets on Board – for Coinz!!

August 4, 2011 18 comments

Guess who is next in getting on the “Why not use the Trillion Dollar Coin anyway” bandwagon?

Brad Delong!  Welcome Prof. Delong!

“100,000 of them, worth $10 million each. Billionaires will want to hold some to be cool. Multi-millionaires will want to hold some so that people think that they are billionaires. Use the proceeds to buy back a lot of long-term debt: that’s $1 trillion of quantitative easing by the Treasury right there. And if the Fed sterilizes the duration component, that is a massive money stock increase.

Easy to undertake. Intus vires. Gets headlines. Effective. On a large enough scale to matter…”

Glad I posted that comment on his blog a few days ago.

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Now that we’ve got a “deal”, Why not use the Trillion Dollar coin anyway?

August 1, 2011 24 comments

There is a deal, apparently.

The deal is horrible for the U.S. economy and almost certain to push it back into recession.  We’re cutting defense spending – a kinda good thing – but at the exact wrong time, and not replacing it with any other spending.

Spending Cuts are Tax Increases,” to paraphrase  Timothy Geithner.  It’s one of the few ideas he gets right.  We need more stimulus, not less.

Consumer spending is diving of a cliff. Corporations are laying off the equivalent of large towns everytime you turn around.  Brad Delong estimates -0.4% off GDP – I’d say more.  He was already asking “Where’s the demand?” before this stupid deal.

Now with this deal, the economy is doomed.  The spending cuts happen right away – and we’re at the brink of a recession.

Prior to this stupid debate, we were trying to cut taxes to stimulate demand. Of course, we haven’t felt any effects of that tax cut due to an increase in oil and gasoline prices.

These spending cuts – plus our current higher energy costs – will equal doom for the U.S. consumer and U.S. economy.

So why not just use the Trillion Dollar coin anyway?  Why not take the debt deal, and then use the Trillion Dollar Coin to makes lots of space under the debt ceiling?

We could use that extra space for huge payroll tax cuts to the U.S. consumer.  We could use it to stimulate demand where it will have the most impact.

Why not use it?  It’s widely regarded as legal.  Why not use the Trillion Dollar coin to get our economy moving again?

beowulf responds to Dave Weigel of Slate

July 31, 2011 16 comments

beowulf asked me to post this response to David Weigel of Slate Magazine.

Here is David Weigels half-assed, zero research, and zero curiosity post that doesn’t even bother to question why the greatest country is human history is forced to resort to extraordinary measures.

Here is beowulfs response:

There’s nothing fanciful about it.  The strange thing is that the USG is constrained by debt ceiling but a part of the USG (The Fed describes itself as “an independent government agency”) is unconstrained by a debt ceiling.  Even more anomalously, Fed-held Treasuries are counted against the USG debt ceiling.

This isn’t about selling drilling rights on the moon but a practice almost as old as the Republic. The US Mint has used coin seigniorage continuously since the Coinage Act of 1792 (in a legal sense, a single $1 trillion platinum coin is the same as trillion $1 coins but with far less expense and effort). It violates no laws nor federal regulations nor prior obligations for the USG to transfer debts from the constrained whole to an unconstrained part (that is violates all logic is the fault of Congress).

The idea actually originated in a note I sent the Department of the Treasury on a collateral issue (as it happened, I had “buried the lede”).  I posted about this on Firedoglake (and Correntewire) only after discussing the issue at Warren Mosler’s blog (Incidentally, I’m hardly a lefty. I voted for Romney in the 2008 GOP primaries, will probably do so again next year).

Writer Joe Firestone suggested to me that the platinum coin seigniorage issue was something worth posting a blog about and bugged me until I did (after which, Joe took the leading oar on developing the idea).  I’d point out that Warren Mosler also picked up on the economic ramifications very early.  But I trust that every reader here with an interest in economics has already read his book The Seven Deadly Innocent Frauds  (you can download for free from his site if you haven’t), so that should come as no surprise.

http://moslereconomics.com/2011/01/20/joe-firestone-post-on-sidestepping-the-debt-ceiling-issue-with-coin-seigniorage/Of course, there is historical precedence for using coinage to pay the national debt, the Legal Tender Act of 1862 authorized the issuance of fiat currency, US Notes or “Greenbacks” (the predecessor of today’s Federal Reserve Notes) required that Tsy pay debt service only with US Mint-issued coins. Of course Nixon freeing us from the gold standard changed everything, but if our politicians understood that, we wouldn’t have a debt ceiling now would we?

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Who’s face should be on the Trillion Dollar Coin?

July 30, 2011 7 comments

Rep. Cantor poses for the Trillion Dollar Coin

Inquiring minds want to know.  Commenter Kris Smith provides the obvious-after-its-said answer:

Eric Cantor

 

[Update: Tom Hickey points out that Grover Norquist (in the comments and over at Marginal Revolution) has a strong claim to this honor.]

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Funny Money made necessary by Crazy, Evil People

July 29, 2011 8 comments

Let’s face it.  The “Trillion Dollar Coin”  is the most certain option we have now to avoid a default on our debt.  Lot’s of people have talked about it already – some of the readers of this blog are the originators of the idea.

Joe Firestone and beowulf began talking about a huge coin months and months ago.  I have little or nothing to add to the discussion over legality and implementation.

This gigantic coin seems crazy to people.  You can see how people react to it over at CNN.  It’s a partizan divide.

The coin is made necessary because one political party wants to risk destroying our economy.  They would rather push our economy into chaos rather than compromise.  They value balanced budgets more than men and women having jobs.  They would rather see less government spending than a kid able to eat breakfast.

The richest country in human history is being forced to issue a massively valued coin because extremists will not compromise.

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