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Coin Seigniorage: A Legal Alternative and Maybe the President's Duty

letsgetitdone's picture

[Cross-posted under a different title at Naked Capitalism -- lambert]

(Author's Note; Many thanks to lambert strether, beowulf, and Yves Smith for their reviews of this post)

Well, the debt limit crisis is upon us. Treasury Secretary Geithner says the US Government will not be able to meet all its obligations on August 3, unless the debt ceiling is increased by Congress. The Secretary says he is out of moves to extend this date. I don't think that's true. I think he can use proof platinum coin seigniorage to supply all the money needed to spend Congressional Appropriations. I do not know if the Administration knows about this idea yet. It may, and it may simply have been unwilling to mention it for its own reasons. But just in case it doesn't know, and also for the sake of the rest of us, I'm making another attempt to state the case for using coin seigniorage, so that as many people as possible know that the President has an alternative to the "shock doctrine," make a deal approach to cutting essential spending and services including the social safety net, in return for getting $2.6 Trillion more in debt issuance authority.

The idea of using coin seigniorage to remove the need for issuing debt, and so to always stay under the debt ceiling is due to a commenter (and occasional blogger) on economics and politics blogs whose screen name is beowulf. He first presented the idea in comments and then posted the seminal blog on coin seigniorage.

Throughout the next six months, a number of other posts appeared at various sites (See here for links) with increasing frequency as the debt limit problem received more attention.

In the last few days, as coin seigniorage itself climbed up the hierarchy of public awareness, Felix Salmon and Matt Yglesias, both well-respected, mainstream, and professional bloggers, have mentioned the proposal while taking issue with it for reasons I'll analyze below. Before, I do that however, here's what's involved in proof platinum coin seigniorage.

Congress provided the authority, in legislation passed in 1996, for the US Mint to create platinum bullion or proof platinum coins with arbitrary fiat face value having no relationship to the value of the platinum used in these coins. These coins are legal tender. So, when the Mint deposits them in its Public Enterprise Fund account at the Fed, the Fed must credit that account with the face value of these coins. This difference between the Mint's costs in producing the coins and the credit provided by the Fed is the US Mint's profit. The US code also provides for the Treasury to periodically "sweep" the Mint's account at the Federal Reserve Bank for profits earned from these coins. Coin seigniorage is just the profits from these coins, which are then booked as miscellaneous receipts (revenue) to the Treasury and go into the Treasury General Account (TGA), narrowing the revenue gap between spending and tax revenues. Platinum coins with huge face values e.g. $2 Trillion, could close the revenue gap entirely, and technically end deficit spending, while still retaining the gap between tax revenues and spending.

Recent Comments from the Mainstream

Here's Felix Salmon's treatment at Reuter's:

Even if Treasury can still sell bonds, however, that doesn’t mean for a minute that breaching the debt ceiling is something which should be considered possible for the purposes of the current negotiation. Tools like the 14th Amendment or even crazier loopholes like coin seignorage would be signs of the utter failure of the US political system and civil society. And that alone could mean the loss of America’s status as a safe haven and a reserve currency. The present value of such a loss? Much bigger than $2 trillion. (Coin seignorage, if you’re wondering, is the right that Treasury has to mint a couple of one-ounce, $1 trillion coins and deposit those coins in its account at the New York Fed. It could then withdraw cash from that Fed account to make all the payments it wanted.)

Felix Salmon does give an acceptable one sentence overview of the proposal, but doesn't make clear that there could be even a single coin (not a "couple of coins") of arbitrary value produced by the US Mint. More importantly, he doesn't make clear why using coin seigniorage would be a sign ". . . of the utter failure of the US political system and civil society," or why using it would be ". . . breaching the debt ceiling." He also doesn't say why he lumps in a 14th Amendment challenge to the debt ceiling with coin seigniorage as crazy ideas.

Addressing these points one by one, first, it's true that the Congress hasn't been able to come to agreement on the debt ceiling, but it's hard to see why this is a sign of "the utter failure" . . . "of civil society." Even more, the US political system has provided the tool of coin seigniorage as a legal, if not customary, way of generating revenue in addition to taxing and borrowing. Why does this count as "crazier" idea or a failure of the political system? From my point of view the only failure here is the President's in not using coin seigniorage, or perhaps not yet even knowing about it. But if this is a failure, I don't see that it's a systemic one as much as it is a failure of this Administration to look for alternative views that go beyond its own knowledge and imagination.

Second, it's hard to see why using coin seigniorage would be "breaching the debt ceiling." Certainly, challenging the Constitutionality of the debt ceiling and overturning the legislation mandating it might be described as "breaching" it. Also, just ignoring it on grounds that it is unconstitutional might be described in the same way. However, using proof platinum coin seigniorage with very high face value coins just spends Congressional appropriations, including paying down debt so that it's way below the debt ceiling, or even completely eliminated, using perfectly legal means. It's hard to see how this can be legitimately described as "breaching the debt ceiling."

And, third, why does Felix Salmon think that using coin seigniorage ". . . could mean the loss of America’s status as a safe haven and a reserve currency. " Why should a demonstration, using coin seigniorage, of the Treasury's power to meet US obligations even when Congress is in deadlock, lead to a loss of confidence, making investment in the US look any more dangerous than it is at present, or disturbing the status of the US dollar as the reserve currency? Surely if Felix Salmon wants to make such a serious charge he should at least give readers his reasoning.

It is possible that if coin seigniorage were used on a continuing basis to close the gap between taxes and spending, then US Treasuries would no longer be a safe haven for investing USD reserves, simply because, if no more debt is issued, then no investment in Treasuries is possible. But even if that happened, a low level of interest paid by the Fed on USD reserves would still leave US dollar reserves as safe a haven for holding "risk-free" US financial assets as short-term Treasuries are right now.

It is also hard to see why coin seigniorage, if used, would interfere with the status of USD as the reserve currency. Why should it, since continuous use of seigniorage would result in gradually eliminating the national debt? And what other reserve currency would the world use? The UK pound? The Euro, with its great potential instability? The Yuan, which if it became the reserve currency would force China to give up its peg to the Dollar and to even acquire a bit of a disadvantage in trading with us? What about the Yen? Sounds OK to me, but the world seems convinced that Japan, with its 200% debt-to-GDP ratio might have runaway inflation anytime now. So, will the world take the Yen? Probably not.

What about a market basket of freely floating currencies? Well, that would be fine, but it's hard to see how that would disadvantage us or cost us $2 Trillion. I also wonder where Felix Salmon got that estimate from. Also, is the $2Trillion an interest cost, a reduction in GDP? Is it over one year, or a decade? Isn't it a fact, that being the reserve currency costs us exports and jobs? How does that get factored into Salmon's $2 Trillion cost of not being the reserve currency?

Matt Yglesias is the second popular blogger mentioning coin seigniorage last week. Matt says:

This is an idea that’s circulating in Modern Monetary Theory circles, and I believe that it’s legally mistaken.

Perhaps it is. But don't you owe it to readers to tell them why?

That said, conceptually it highlights a very accurate point. If you think of the United States government as a consolidated entity, it’s not possible for us to "run out of money" or "go bankrupt." The government of Ireland owes euros, but it lacks the legal authority to create Euros. Governments of small developing countries often owe dollars, but lack the legal authority to create dollars. Under a gold standard, a government might owe gold and lack the physical capacity to create it. But the United States is owed dollars, and can create dollars, so it’s absurd to think that we might not be able to pay our bills.

Matt understands this very basic point of MMT, and that puts him miles ahead of most who pronounce on solvency. But it's also important to emphasize that Governments like our own can become insolvent voluntarily. That is, if Congress fails to raise the debt ceiling, or if, in the event they fail, the President fails to use coin seigniorage or another Treasury tool to create a positive balance in the Treasury General Account (TGA) at the Fed, then we can become voluntarily insolvent – a self-inflicted wound caused by a collective failure to understand our fiat currency and monetary system.

Now what might happen is that people lose willingness to lend us dollars in the future. We also might have inflation. Money was lent in the past on the assumption that dollars would be able to purchase real goods and services. Monetization of debt would reduce the real purchasing power of dollars, and might call into question the wisdom of agreeing to lend dollars in the future. But these are different issues.

First, if, as Matt recognizes, we can't "run out of money" then why do we need people to lend us our own currency in the future? Why can't we use coin seigniorage indefinitely for "deficit spending?" (From a technical point of view continuous use of proof platinum coin seigniorage would end deficit spending because it would close the gap between spending and taxes with miscellaneous receipts, a class of revenue. However, the gap between taxes and spending would remain and that "deficit" represents a surplus for the non-Government sector.) If we did that we'd avoid, as time went on, most spending on interest costs projected by CBO over the next 10 years. Indeed, if we project out to 15 years based on CBO 10-year numbers, we'd avoid nearly $12 Trillion in projected interest costs. Why borrow our own money back at all? The answer is we don't need to. So, we don't really have to care whether people want to lend us back our own money, or not.

Second, why would coin seigniorage in itself cause inflation? Coin seigniorage creates money to spend Congressional appropriations. As long as those appropriations are not so great that they exceed the potential productive capacity of our economy -- and right now our output gap is around 30%, and there is no sign of Congress deciding to spend enough to close that gap -- there will be no demand-pull inflation.

Would there be cost-push inflation? Not from coin seigniorage. The coins would just go into a Fed vault forever, and again the spending will be only what Congress appropriates. Coin seignorage will add to aggregate demand whenever spending exceeds taxes; but it will not cause cost-push inflation. That is caused by suppliers or speculators who are distorting markets. And the remedy for that is criminal investigations, price controls, rationing, and a thoroughgoing belief that markets must be very closely regulated by independent adversarial enforcers if they are to remain free.

Third, "money was lent in the past on the assumption that dollars would be able to purchase goods and services in the future." But, again, why should the simple fact of using coin seigniorage debase the currency? Matt needs to explain the transmission mechanism from using seigniorage to spend Congressional appropriations and pay down debt, to currency debasement. Saying that "we also might have inflation" is easy. But one really has to show that the likelihood of inflation is greater if we use coin seigniorage than it is if we issue more debt instead. My view is good luck with that, because there are very good reasons for thinking that coin seigniorage would actually be less inflationary than issuing debt to close the gap between taxes and spending would be.

Fourth, "monetization" is a term that is frequently thrown around whenever the Government wants to use its Constitutional power to deficit spend and create money in the process. But "monetization of debt" has a strict meaning in modern economies. It refers to the purchase of debt instruments by the Central Bank from the Treasury. That wouldn't be happening here.

Here's how coin seignorage works: Legal tender, money, in the form of proof platinum coins, not legally viewed as debt, is being exchanged for USD credits in the US Mint's Public Enterprise Fund account. The money goes into the Fed vaults, the USD credits go into the Mint's account. The profits from seigniorage go into the TGA. This is an asset swap, between the Fed and the US Mint, of money in the form of a coin, for money in the form of bank reserves. Both sides of the swap are money; so there is no "monetization of debt" involved.

[UPDATE] I now think this might be legal after all, provided the coin is made of palladium.

Palladium coins won't do; we need coins that can be legally given an arbitrarily high face value. The palladium coins are specified by Congress at $25 in face value. The platinum coins being discussed in the coin seigniorage proposal are proof platinum coins. The face value of these coins is arbitrary and has nothing to with the value of the metal. Platinum proof coins are strictly fiat money, and they can have as a large a face value as the Mint likes. Just like the USD reserves the Fed creates for quantitative easing, or to increase the money supply.

So, after months of blogging, commenting, and tweeting about the coin seigniorage option, it seems that enough activity has been generated in the blogo- and twitter-spheres to have attracted at least the passing attention of well-respected bloggers such as Felix Salmon and Matt Yglesias. It's pretty clear from my analysis, however, that both of them are offering conclusions about coin seigniorage that aren't based on careful analysis of the literature that's developed on the subject.

Put simply, they don't seem to have thought things through, and they don't seem to be in a position to guide their readers in learning about the coin seigniorage option. It's good that they've recognized that coin seignorage is, at least, analytically sound enough to merit attempted refutation, and have opened the door to discussion of it in the wider discourse. Thanks to both of them for that, and especially to Matt for pointing out that involuntary solvency isn't a problem for the US. Exposure for a policy proposal is always better than just continued burial in the non-visible portion of the blogosphere. Nevertheless, it would be so much better for all of us if well-known bloggers who take up a new proposal would investigate it with care before they pronounce a verdict on it.

What harm would have been done if Felix Salmon and Matt Yglesias had just mentioned coin seigniorage and admitted that they still had to research it before deciding on whether it would work, and that they were keeping an open mind pending that research? Certainly, the potential of coin seigniorage as a solution to our revenue problem merits that kind of consideration. How important is it?

The Importance of Coin Seigniorage to the President

I'll end this post by showing how important it is through an examination of our present situation with respect to the debt ceiling and the potential obligation of the President to use coin seigniorage to cope with it.

1. Congress has appropriated Federal spending for FY 2011 which the Executive is mandated to spend.

2. These appropriations exceed the tax revenue the Government is collecting. This was expected at the time the appropriations were passed. So Congress appropriated deficit spending.

3. Congress has mandated that whenever the Government plans to deficit spend, it must first issue and sell debt instruments in an amount a least equal to the planned deficit spending. In this connection, the Treasury is prohibited from having an overdraft in its TGA at the Federal Reserve Bank.

4. Congress has mandated a debt limit such that the Administration must stop issuing debt when that limit is reached. (The limit was reached in early May). Given the Congressional requirement that deficit spending must be accompanied by debt issuance, the debt limit, in the absence of other countervailing factors puts a stop to deficit spending, until the limit is increased. There is a very important countervailing factor. But it is not recognized or used. So, for the moment, at least, the debt limit has stopped any further deficit spending

5. The 14th Amendment, section 4, requires that the validity of the "debts" (broadly construed) of the United States never be questioned, and since the President has sworn an oath to uphold the Constitution, he is obligated to do all he can to see to it that these "debts" are paid. In fact, he's obligated to see to it that these debts aren't even "questioned." His suggestion that Social Security and other key payments won't be made on August 3, isn't living up to his obligations. Of course, he's not alone in this, since many law makers have been warning about the likelihood of a default for many months now.

6. Congress has provided the authority, in legislation passed in 1996, for the US Mint to create platinum bullion or proof platinum coins with arbitrary fiat face value having no relationship to the value of the platinum used in these coins. The US code also provides for the Treasury periodically sweeping the Mint's account at the Federal Reserve Bank for profits earned from coin seigniorage. These profits are then booked as miscellaneous receipts (revenue) to the Treasury and go into the TGA, narrowing the revenue gap between spending and tax revenues. Platinum coins with huge face values e.g. $2 Trillion, would close the revenue gap entirely, and technically end deficit spending, while still retaining the gap between tax revenues and spending.

7. If used routinely to close the revenue gap, such coin seigniorage would eventually reduce the national debt to zero, and remove it as an issue in US politics. In addition, the existence of platinum coin seigniorage as an option, removes the tension between the mandated debt ceiling and the 14th Amendment. It is the countervailing factor I mentioned earlier, because it provides a way to spend Congressional appropriations without issuing further debt.

8. The President has sworn to uphold both the Constitution, which prohibits a default, and also the laws of the United States including the mandates just mentioned.

9. These mandates, along with the platinum proof coin seigniorage authority, make using seigniorage, or another option like it that allows the Treasury to create revenue without either taxing or borrowing, the only viable options to: continue spending appropriations without violating the debt limit; fulfill all the other mandates, both legal and constitutional; and still be able to spend the money Congress has appropriated.

10. So, if no action by Congress raising the debt limit is forthcoming, it will be the President's sworn DUTY AND OBLIGATION to either use platinum coin seigniorage, or some other revenue creating tool legislated by Congress in past years, to make the money necessary to avoid default, since his failure to use an available way of creating revenue for continuing to spend appropriations, which he is mandated to do, would be a violation of his oath of office.

So, coin seigniorage isn't some crazy idea. Instead, it is a legal instrument that the President may, depending on how things work out, have to use in a bit more than two weeks to comply with his oath of office. It may be the only way for him to avoid breaching one of the laws which he is supposed to enforce. As such, it has to be taken seriously, and treated with more than just a few dismissive conclusions, accompanied by a lack of explanation.

Many writers on the current debt ceiling crisis have been taking the view that the 14th Amendment constitutional challenge route is the best thing for the President to do if there is no agreement on the debt ceiling. In e-mail communication yesterday, beowulf offered the following opinion on why this will not work, given the existence of coin seigniorage.

. . . No federal judge -- Supreme Court justices included -- will take the extraordinary step of enjoining an Act of Congress if the President who asks them to had an opportunity to sidestep the constitutional issue lawfully but neglected to do so. . . . .

. . . The moral of the story is if the Court thinks there is no alternative to breaching the debt ceiling, it probably would find it unconstitutional (or rather, it would decline to hear the case on Standing grounds, leaving the President's decision to ignore the debt ceiling in place). On the other hand, if the Court thinks the President had a lawful alternative-- like coin seigniorage-- but neglected to use it, they're not going to bail him out.

This argument is compelling to me given the history of the Court. The Court defers to the legislature if it possibly can, and prefers the President to avoid constitutional challenges if he has a means of doing so. In this case, he does, and the means is platinum coin seigniorage.

Appendix: The Coin Seigniorage Idea in the Blogosphere

The idea of using coin seigniorage, the profits made from minting proof platinum coins, depositing them at the Fed, and receiving electronic credits in return, to remove the need for issuing debt, and so to always stay under the debt ceiling is due to a commenter (and occasional blogger) on economics and politics blogs whose screen name is beowulf. The first comment of beowulf's I noticed on coin seigniorage was at New Deal 2.0 and I mentioned his proposal in a post I did on a possible Government shutdown due to the debt ceiling a couple of weeks later.

Beowulf continued his work on the coin seigniorage proposal as the weeks went by in various comments made at blog sites such as this one at FDL. We also began to exchange messages on coin seigniorage. On January 3, 2011, he posted the seminal blog on coin seigniorage. I followed two days later, raising the question of whether President Obama would use it to forestall an attempt to use the debt ceiling to extract cuts in the social safety net or not.

These posts were noticed by Warren Mosler, one of the originators of the Modern Monetary Theory (MMT) approach to economics, who sponsored what turned out to be a wide-ranging and very high quality discussion of the coin seigniorage option at his site. Beowulf contributed extensively and very creatively to this discussion, which remains one of the most important resources on the coin seigniorage option.

Throughout the next six months, I pushed coin seigniorage in blog posts at Correntewire, FDL, and DailyKos from time-to-time and in comments at various sites. Then, in late June and July a spate of posts on seigniorage appeared beginning, I think, with wigwam's at FDL and DailyKos. He's followed up since with a number of other posts including this one with a variation on how coin seigniorage might be applied by buying $2 Trillion in debt from the Fed to create "head room" relative to the debt limit. Other important posts have appeared this month by Mahilena, DC Blogger, Cullen Roche, Scott Fullwiler, and Trader's Crucible. Accompanying the last two are extensive discussions of coin seigniorage and constitutionality of the debt ceiling with contributions from beowulf. Scott's post also received extensive discussion with beowulf contributing at Cullen's site. In addition, I've added two of my own posts, one on constitutionality of the debt ceiling and coin seigniorage, and another on the President's obligation, if no agreement on the debt ceiling is forthcoming.

So, the proposal to use coin seigniorage to both comply with the debt ceiling and still spend Congressional appropriations has by now enjoyed the support of a growing number of bloggers. It has also received a great deal of discussion; receiving 246 comments at Warren Mosler's site; 206 comments spread over two post's at Cullen Roche's site, and 89 comments at Naked Capitalism. Readers checking out these discussions can see that the coin seignorage proposal has stood up very well to some very aggressive and forthright criticism.

UPDATE: Jack Balkin just blogged about coin seigniorage. It's put in the form of a conversation. Very non-technical. His definition of seigniorage is a pretty good summary:

"Seigniorage. Sovereign governments like the United States can print their own money. We have a system of fiat currency and we've been off the gold standard for many years now. With fiat currency, you issue coins and simply assert that they have a certain value, which may have little to do with the value of the raw materials you use to make them. But as long as people believe that your money is worth something, the system works.

"The difference between the face value of the coin and the cost of the materials it takes to produce it is called seigniorage. So if you create a hundred dollar coin made mostly of copper and nickel, the seignorage is likely to be close to a hundred dollars. That's new monetary value pumped into the system."

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Jack Crow's picture
Submitted by Jack Crow on

...are not our friends. You don't ask a rapist to watch your daughter. You don't ask the Feds to do the right thing.

You scare them until they crack. And then you go for their throat and kill the beast dead.

letsgetitdone's picture
Submitted by letsgetitdone on

don't understand your hatred of the Federal Government. I do understand that we need to get Congress under control again, and that we need to get a President elected who won't sell out to the first special interest that comes along. But in my experience there's a hierarchy of corruption and criminal behavior in this country and the Feds are very far from the top of it.

The State and some of the local Governments are much worse. Still worse are the big private corporations in the private sector. They've been robbing all of us blind and you are evidently too stupid to save some of your bile for them. My advice to you is to get lost! You won't find a friendly environment here at Correntewire with that kind of cranky, vicious, and historically moronic anti-government rant.

Jack Crow's picture
Submitted by Jack Crow on

Hatred?

No. A healthy disregard. Those who rule deserve only one fate. And it isn't a pretty one.

I don't trust the organization which:

1. Bombs children to death. Routinely.

2. Funds Israeli pogroms. And gives cover to them.

3. Hands billions to the bankers. While pretending to save the "economy."

4. Topples states to free up capital and resources. See Afghanistan. See Libya.

5. Runs the drug war. See the drug war.

6. Maintains a vicious and racially discriminatory, predatory prison system.

7. Criminalizes the possession of a uterus.

8. Works as a protection racket for the oligarchs. Has always been that protection racket. Always. Madison and Hamilton intended it. And they got what they wanted.

And that's an exceedingly short list.

I won't call you names in return, or disparage your intelligence. I won't stoop to that level.

But I do find your faith naive, to say the least. It's not like we don't have access to the history of the Feds.

Or the long memory of our collective history.

When the oligarchs of a region or country are not afraid, they do what they want. The Federal government is now and has been the State of the wealthy. It has never - not once - been the friend of the poor.

Ipso facto, ipse dixit, it is the state of our enemy.

And it merits only one end.

letsgetitdone's picture
Submitted by letsgetitdone on

which is now clearer to me. But I'll make two points in return. There have been times in our history when our Government has been friendlier to the poor and working people. We know that The Government of the New Deal was far different than the Government today.

Bur second, their is no society or human organization that doesn't have a political system. Political power is everywhere, and the organization characterized by the use of legitimate physical coercion is the Government whether it's called that or not. So, railing against the Government can't help. But maybe taking it over and ensuring that it works for public purpose can,

So, in the end I don't find your post helpful; because I see it as The Government is terrible, but I don't see any comparison to other human institutions, which are for the most part even worse; and I don't see any better alternative, and I'm not given to simply howling at the moon.

Joe's picture
Submitted by Joe on

Dear letsgetitdone,

A lot of this is way too over my head. I can't figure out if you're a crank or a genius. My bet is that you are a genius. I just wish that your posts would actually be responded to by some credentialed people, so that I could read their view. Yglesias knows some econ, but I'd rather see your arguments addressed by some real economic experts like Krugman.

Speaking of credentials, if you have them, you might consider letting that be known in a more public way. You also might want to consider posting under your own name considering the importance of the arguments you are making as we approach various economic crises.

If you post under your own name, and have credentials, I think your posts will get a lot more attention.

Thanks for your work.

Joe

okanogen's picture
Submitted by okanogen on

I have to agree.

First, I have been critical of the overly erudite manner used to describe what is a set of pretty darn simple concepts. When both Salmon and Yglesias give a more understandable explanation of the concepts, you know you have a problem.

What is needed is an "MMT for Dummies" and "Coin Seigniorage for Dummies or even for people who have no idea what the word "Seigniorage" means let alone how to spell it". Sorry, if someone challenged me to use "seigniorage" in a sentence without sounding like an asshat, I would admit defeat.

Again, these are extremely simple concepts, much simpler than something like evolution, or relativity, theories which ordinary people do have a grasp on, at least somewhat. But that is because they are described in ordinary terms. Ordinary people can't understand unfamiliar theories and concepts unless described in familiar terms. Or rather, they don't have the time, and can't be bothered to get over other people's inability to talk in a language they understand. The onus is on the writer, as it should be, our goal being to persuade or be understood.

Also, although I'm pretty sure your identity is an open secret, still it wouldn't hurt to show you have credentials.

Sorry, I don't fall in love with politicians. I'm not that desperate.....

Submitted by lambert on

Try this. It's a series of posts, and so not quite what you want for shortness, but it's pretty simple and lucid.

You might start here, and work back.

First they ignore you, then they ridicule you, then they fight you, then you win. -- Mahatma Gandhi

okanogen's picture
Submitted by okanogen on

I really, really do appreciate what letsgetitdone is doing, and I myself have "seen the light" so to speak thanks to his writing. But it took a long, long time, and a lot of investment to get it.

That's the point.

Not many people have that time to invest, even if it is very important to understand. So I sympathize, and hope that all posts can be written in a way that the unconverted, unenlightened, can be enlightened without the major investment in time of sifting through macro-economic theory lessons, etc. as at those sites, or cogent, but jargon-laden posts at sites like this one which are more of a broad audience (hopefully?). This site is not necessarily an econ blog, it's more of a multi-discipline, shared information and learning blog. It wouldn't be helpful for me, on those occasions when I do so, to load up my posts on my field with jargon that makes it more accurate, more qualified, but less comprehensible to a lay audience, which is what I was trying to get at.

Which I hope is not taken as offense, again, because I appreciate learning. Plus, I know it is not that cool to criticize other people's writing style, so I realize this is thin ice, but I'm trying to understand, and it is difficult, because I don't know the jargon.

Sorry, I don't fall in love with politicians. I'm not that desperate.....

letsgetitdone's picture
Submitted by letsgetitdone on

I'm not offended. I love to write; but I don't delude myself into thinking that I'm easy to understand. So, criticism is appreciated and I'm really very, glad that you've able to get it, in spite of my style of presentation.

letsgetitdone's picture
Submitted by letsgetitdone on

Thanks for your comment. I'll try harder to get simpler. I always try to make things commonsensical. Sometimes I succeed. But sometimes not! Answer on credentials already given.

Btw, I'm not sure what gets one readership. My identity is open at CAF, but it doesn't seem to get me readers there. I'm not even sure that readership is correlated to subject matter in a predictable way across sites. For example this one: http://www.correntewire.com/debt_ceiling... got 3674 reads here; but only 208 at DailyKos, a much more well-attended blog.

okanogen's picture
Submitted by okanogen on

Not at all, or in any way. I'm just wanting to understand, and I want others to understand as well. I would love to be able to provide a link to my friends that they can read and go, "Wow! Now I get it! That blows my mind!".

It's hard to get people to act to do something if they don't understand what it is, or need to put in an enormous effort in time to understand it.

Sorry, I don't fall in love with politicians. I'm not that desperate.....

letsgetitdone's picture
Submitted by letsgetitdone on

Hi Joe, my name is Joe Firestone. At Corrente you can get my Bio from my profile page by clicking on the link to my home blog.

A site that has my short bio without a link is myFDL here: http://my.firedoglake.com/members/letsge...

A url with my long bio is here: http://www.kmci.org/media/RESJOE.pdf

It's a little dated. Can't find the time to update with all my political blogs/

The identity vagueness is an accident of history. When I started blogging politics in January of 2009, I thought I wanted to do it under my screen name so that it wouldn't hurt my Knowledge Management Training business. After about 3 months of blogging I figured I didn't really care if people thought I was a dangerous radical. So, I began letting the secret out. First at FDL. By the time I came over here I figured I'd just put a link to my home blog to take care of the Bio thing.

Now, why not blog under my own name? Well, that would involve changing my FDL, Correntewire and DailyKos accounts and the transition would be a little painful. There are places where I do blog under my own name. These include Campaign for America's Future, where I blog frequently, and new Economic Perspectives where they've carried my blogs twice.

On this post, I'm going to update it today to make it clearer. I'll do this, by putting the history in an appendix and by providing the definition of seigniorage near the front.

On readers, I think I get a fair amount of them actually. This one: http://www.correntewire.com/debt_ceiling... got 3674 reads, and this one: http://www.correntewire.com/keynesian_de...
got 1912.

Generally I always do more than 400 reads and am frequently close to or over 1000. So, I think that's pretty good for Correntewire.

A version of this post will appear at Naked Capitalism soon.

Joe's picture
Submitted by Joe on

Thanks Joe. Believe it or not, I already knew your real name from some of those other places. I just think that all the Joe Firestone accounts should unite under one Joe Firestone brand. I mean, I like the "letsgetitdone" name... but experts like you who offer such Big Ideas should drop the semi-anonymity for the good of the nation.

Thanks for your consideration.

Eureka Springs's picture
Submitted by Eureka Springs on

Thanks for the updates and rebuttals. I'm well on my way to understanding this nowadays. I would encourage those above to keep reading... it does sink in...) Just as I would encourage "what's his name" (LOL lets) and Beowulf and wigwam etc. to keep hammering away... especially now.

Buzzed http://buzzflash.net/story.php?id=1651251

Miguel Sanchez's picture
Submitted by Miguel Sanchez on

your proposal. But I, Matt Yglesias and other bloggers aren't the ones you need to convince. You need to convince Tim Geithner because that's Barack Obama's principal adviser. I'm certain that Tim Geithner has no interest in this proposal. How do you intend to convince him?

letsgetitdone's picture
Submitted by letsgetitdone on

The first problem is to get the access bloggers like Matt and Felix on board with coin seigniorage. Then they need to blog about about. Then we all need to reach the progressives in Congress. Then we need the progressives to stand up up on their hind legs for a change and vote with the tea party crackpots to defeat the debt ceiling extension. Then what will the President do? Is he going to do nothing? Or is he going to live up to his 14th Amendment obligation. That obligation, at that point in time will be to use coin seigniorage whether Geithner likes it or not.

So what I mean to do is to persuade Geithner, by leaving Geithner and Obama no alternative, and I hope to get that done by making it possible for the debt ceiling extension to be defeated.

Miguel Sanchez's picture
Submitted by Miguel Sanchez on

Congressional Progressives to go out on a limb and vote against a compromised debt ceiling increase in order to force Obama to rely on coin seigniorage. They'll find it so much easier to go along with Obama's spending cuts. Aren't they the same group that proposed the 'People's Budget' which wants to raise taxes on working and middle class people? You'll have a hard time convincing such people that coin seigniorage won't be massively inflationary given their poor understanding of economics.

Which ones in particular do you think can be persuaded to do this? Are any of them leaning towards the idea? Is there a single 'progressive' in congress who even understands MMT?

letsgetitdone's picture
Submitted by letsgetitdone on

So, you and I and everyone who believes this, as you say you do, has a lot of work to do. broadcast it as far and wide as you can. Coin seigniorage can stop all safety net cuts and also create a realization that we are not short of money, and we can use that to fight the coming battle of the budget. That's when they really come after the safety net. We can't afford to give any ground now!

Miguel Sanchez's picture
Submitted by Miguel Sanchez on

I wish you the best of luck with this. I've seen this diary posted on a number of different blogs today and the idiocy of many of your critics is maddening. My problem is I'm just too damned cynical. I'm glad to see you are not. Keep up the good work.

Joe's picture
Submitted by Joe on

You can't get to Obama without going through a few layers first. For example, if you can get the attention of some B-listers, you can then proceed to get some attention from some A-Listers, and then possibly get some attention from the mainstreamers... for example, Krugman (mainstreamer) reads Yglesias (A-Lister) and Atrios (A-Lister).

Submitted by Alcuin on

Perhaps you have commented on this subject and I missed it since I was lost in Alternet-land. If not, could you touch on what basis the Fed provided $29 trillion to various entities during the financial crisis? Where did this money come from? Certainly not coin seigniorage, right? Isn't the "issuance" of $29 trillion proof of the soundness of MMT??

The important thing is to never stop questioning. - Albert Einstein

letsgetitdone's picture
Submitted by letsgetitdone on

doesn't have to use coin seigniorage, because Congress has delegated its authority to create unlimited reserves to the Fed. The specific authorities are covered by James Felkerson here.

Submitted by Alcuin on

I've read portions of that report before, but I find it very heavy going. I have a liberal arts degree, not a degree in economics! I'm still guessing that the report is proof that the MMT people are right in their ideas about commodity based money vs. fiat money. The chances of Congress reclaiming its authority to create money is between slim and none. And even if it was reclaimed, they'd piss it away on their buddies in the M-I-C complex. We're screwed.

The important thing is to never stop questioning. - Albert Einstein

letsgetitdone's picture
Submitted by letsgetitdone on

to both create money and appropriate spending. It has delegated the authority to fill the purse to the Fed and also to the Treasury (Minting of coins having arbitrary face value and realizing coin seigniorage profits). But the authority to appropriate spending is still Congress's alone. The $29 T bailouts were extensions of credit by the Fed. They were probably illegal because they went beyond the Fed's mandate. But we shouldn't hold our breath waiting for prosecutions.

Submitted by Alcuin on

I'm being sarcastic here, but since Congress has delegated its monetary authority to the Fed and the Treasury and its war powers to the Presidency, why do we even need Congress any longer? Just get rid of them!! If we got rid of Congress, then we wouldn't be able to blame them for not doing anything for us (when has that happened?) any longer. Heck, all the bills are written by ALEC anyway. I propose that we get rid of Congress and fill the buildings with ALEC people. Then, at least we will know where to find the enemy!

The important thing is to never stop questioning. - Albert Einstein

letsgetitdone's picture
Submitted by letsgetitdone on

because it's not the Executive. If it were we'd have a parliamentary system.

There's no way out.Wwe have to win an election overwhelmingly and then make fixes to the system that make our Congress sick and unrepresentative. We have to:

1. Get rid of the filibuster and the Seniority system in both Houses

2. Maybe just get rid of the Senate altogether, but, if not, then at least create a system of weighted voting reflecting population differences among the States

3. Get rid of the Electoral College system

4. Get rid of the influence of money in politics

5. Get rid of the corporate "personhood" nonsense. Corporations are instruments created for Commerce and for limiting the liability of individuals who act through them. The founders did not intend for them to have free speech. In fact, the founders were so anti-corporate that they came close to banning them entirely.

6. Get rid of the State-level restrictions on parties and candidates seeking ballot lines so that candidates other than the major party ones can run.

Of course, to do most of these things we have to change the Constitution. That's why we need to have an overwhelming victory. How do we get one?

A. The DOJ has to prosecute everyone who caused the crash of 2008 and jail them, maybe as many as 100,000 people.

B. The Executive must use PPCS to pay down the national debt, and get rid of technical deficits.

C. We must use the resulting pressure on Congress to spend enough Federal money to end the recession and pass HR 676 Medicare for All, effective within 3 months of passage date for purposes of signing up people.

D. Run an effective reformist campaign trumpeting these achievements.

Who's we. "We" are those of us who will take over the D and Parties to make them responsive to the people.

Why? Because logistically, it's easier to do that than to create a party with ballot iines in all 50 States, which the major parties already have.