Mitchell’s laws:
●The more federal budgets are cut and taxes increased, the weaker an economy becomes.
●Austerity is the government’s method for widening the gap between rich and poor, which leads to civil disorder.
●Cutting the deficit is the government’s method for taking dollars from the middle class and giving them to the rich.
●Until the 99% understand the need for federal deficits, the upper 1% will rule.
●To survive long term, a monetarily non-sovereign government must have a positive balance of payments.
●Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
●The penalty for ignorance is slavery.
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Google “Platinum Coin Solution” and you will see what correctly is being touted as a solution to the inane federal debt ceiling. One paragraph of the U.S. statute on money and finance (revised by Congress in 2000) reads:
The Secretary may mint and issue bullion and proof platinum coins in accordance with such specifications, designs, varieties, quantities, denominations, and inscriptions as the Secretary, in the Secretary’s discretion, may prescribe from time to time.
What this clearly and unambiguously says is: The Secretary of the Treasury (currently Tim Geithner) has the power to mint a platinum coin in any denomination. He can, if he chooses, mint a $1 coin, a $1 trillion coin or a $100 trillion coin.
The Platinum Coin Solution proposes that the Secretary mint a $1 trillion coin and deposit it with the Federal Reserve Bank as an accounting partial offset to the federal “debt.” No new dollars would enter the economy. There merely would be a balance sheet adjustment made in Federal Reserve Bank accounts. So there would be no inflation implications.
For those of you who think this somehow is “cheating” or accounting slight-of-hand, you are correct. It is both. Of course the so-called federal “debt” also is cheating and accounting slight-of-hand.
The reason: The federal debt is quite unlike your debt or mine or your state’s, county’s or village’s debt, or even the debt of Greece and Italy. Because the U.S. government is Monetarily Sovereign, it creates the dollars to pay its bills. It never needs to borrow the dollars it already has the unlimited ability to create.
So, its “debt” is nothing more than the total of deposits in T-security accounts at the Federal Reserve Bank. The so-called “debt” is created this way:
Someone (you, me, China et al) decides to buy U.S. T-securities. So they instruct their bank to transfer already existing dollars from their checking account to their T-security account at the FRB. I stress “already existing” to show there are no inflationary implications to the purchase of T-securities.
A T-security account essentially is a bank savings account, so the purchase of U.S. “debt” simply is a transfer of already existing dollars from a checking account to a savings account. To pay off the “debt,” the FRB merely transfers the already existing dollars back. The only new dollars: Accumulated interest. So there are no inflationary implications to paying off the “debt.”
The Platinum Coin Solution provides an internal (actually, needless in the real world) accounting justification for making the above transfer. In summary, the federal “debt” really isn’t a federal debt, and the debt limit is a nonsensical limit on the size of deposits in the Federal Reserve Bank.
(Why anyone would want to limit these deposits of existing dollars, is a testament to the power of myth and semantics. Mistakenly call something “debt” and everyone wants to limit it.)
The Platinum Coin Solution makes the mythical federal debt disappear, instantly solving the mythical debt crisis. That is the reason it has been recommended. But there are other good reasons for the PCS.
The discussion about the Platinum Coin Solution will reveal the truth about the federal “debt,” that it not only is meaningless, but concerns about the debt harm those of us not part of the upper .1% income group.
If the Platinum Coin Solution achieves the level of national discussion, you will see great outrage expressed by the media (owned by the .1%) and by all politicians who receive campaign contributions from wealthy donors — especially of course, Republicans who have vowed slavish allegiance to the wealthiest.
Not only will the Republicans not be able to hold the nation hostage to the nonsensical “debt ceiling,” but the discussion will open the way to ending the suicidal austerity plans promoted by the bought-and-paid-for politicians and media.
No more need to cut Medicare. No more need to cut Social Security. No more need to extract FICA (the worst, most regressive tax in U.S. history) from the pockets of salaried people. Instead of cutting the the programs that support the middle- and lower-income classes, the federal government would be able to support programs to grow the economy and reduce unemployment.
And this panics the upper .1%. The austerity the rich have brainwashed the public into supporting, actually has one purpose only: To increase the income gap between the rich and the rest. It is the gap that makes some people rich and others poor. Without the gap, no one would be rich.
Watch for it: The screaming, hysterical rantings by politicians and the media, the innuendos and outright lies, the predictions of doom.
But, no, the Platinum Coin Solution will not cause inflation. New dollars will not be created.
No, the PCS will not give the government free rein to spend endlessly. Congress and the President will continue to control the purse strings, just as they always have, and just as they control the mythical “debt” limit. Nothing changes their ability to spend or not to spend.
What the PCS will do is end the destructive drive for a program that never has worked anywhere in the world or at any time in history: Austerity, i.e. deficit reduction. And it will help narrow the gap between the rich and the rest. And it will reduce unemployment. And it will allow Medicare for everyone. And it will allow Social Security to pay a living benefit.
And it will increase research and development for improved, life-giving drugs, scientific progress and education. And it will allow for improvements in our roads, bridges and dams, air and water. And many, many other benefits.
The majority of suggestions see a $1 trillion coin. I suggest a $100 trillion coin, so the mythical federal debt disappears forever, never again to rise from its stinking grave.
Good riddance, federal debt, for all the damage you have done, and continue to do, to America. And good riddance, ultra-rich, to your lies that brought the austerity monster to our nation.
The only question is whether the Supreme Court, which also has a romance with the ultra-rich, will find some reason to overturn the clear reading of the law.
Rodger Malcolm Mitchell
Monetary Sovereignty
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Nine Steps to Prosperity:
1. Eliminate FICA (Click here)
2. Medicare — parts A, B & D — for everyone
3. Send every American citizen an annual check for $5,000 or give every state $5,000 per capita (Click here)
4. Long-term nursing care for everyone
5. Free education (including post-grad) for everyone
6. Salary for attending school (Click here)
7. Eliminate corporate taxes
8. Increase the standard income tax deduction annually
9. Increase federal spending on the myriad initiatives that benefit America’s 99%
No nation can tax itself into prosperity, nor grow without money growth. Monetary Sovereignty: Cutting federal deficits to grow the economy is like applying leeches to cure anemia. Two key equations in economics:
Federal Deficits – Net Imports = Net Private Savings
Gross Domestic Product = Federal Spending + Private Investment and Consumption – Net Imports
#MONETARY SOVEREIGNTY
#Monetary Sovereignty - Mitchell 
Could the MMT folk get on board with the platinum coin idea? FWIW US inflation has been better managed within its projected range since the 1979 Iranian oil fiasco than in much of the pre-1933 internal gold standard era. I am beyond exhaustion with the incessant “debt for our children and grandchildren to pay” twaddle. The US never “paid off” the debt from WWI, WWII, Korea or Vietnam; oh the humanity!
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The MMT folk are already on board.
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I think Warren Mosler prefers selling nothing longer than 3 mo. Treasury Bills. That would capture Wall St. by the balls but wouldn’t capture America’s attention like the coin…
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The only problem is…the banks won’t permit it and will assassinate anybody that poses a serious threat of doing the platinum coin.
Why can’t the treasury just write a check?
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1.) Fritz Bassset asks, “Could the MMT folk get on board with the platinum coin idea?”
MMT people frequently discuss the Platinum Coin Solution, and it is another area where they fall on their faces.
The topic is as simple as Rodger explains it above, but when MMT people discuss it in their blogs, they make it boring, confusing, and ultimately meaningless. Their stupidity goes beyond a childish refusal to discuss motives and morality. It is manifested in their style of writing.
2.) Curt asks why the Treasury can’t simply write a check.
We might also ask why the Treasury can’t simply credit bank accounts from a computer keyboard, without even writing a check.
The reason is that federal law requires the US Treasury to sell enough T-securities each fiscal year to equal the U.S. government budget deficit each fiscal year. (That is, the formal U.S. budget deficit). The Platinum Coin Solution (PCS) circumvents the T-securities nonsense without violating a single law anywhere.
The Treasury Secretary already uses slight of hand to create as much money as he wants, any time he wants, without consulting Congress. He does it by creating and spending money through the Federal Financing Bank, for example. (Which is another reason why all media hype about the debt ceiling is nonsense.) With the Platinum Coin Solution, the Secretary can do it openly for all to see.
The law already exists. It’s only a matter of implementing it. No more “national debt.” No more justification for austerity. Of course the 1% and their wretched servants (politicians) would oppose this.
3.) Rodger writes: “Most suggestions see a $1 trillion coin. I suggest a $100 trillion coin, so the mythical federal debt disappears forever, never again to rise from its stinking grave.”
Yes, why limit it to $1 trillion?
Of course, average people would scream “inflation!” even though average people have no idea what they are talking about. The more miserable slaves are, the more they panic whenever someone points the way to freedom and prosperity.
Politicians and the corporate media would also scream “inflation!”
I have a mental image of a Treasury bureaucrat creating money on a computer keyboard. Ten billion here, fifty billion there, three hundred billion for a war — all of it out of nothing. (Which is exactly what happens.) The same Treasury bureaucrat rejects a hundred-trillion-dollar coin, saying, “Preposterous! Money doesn’t grow on trees! Besides, how would we pay it back?”
Then he resumes pecking on his keyboard, creating endless debt-free money out of nothing.
4.) Rodger writes: “The only question is whether the Supreme Court, which also has a romance with the ultra-rich, will find some reason to overturn the clear reading of the law.”
Yes, unfortunately the US Supreme Court does whatever it wants, regardless of the U.S. Constitution or the U.S. Code. Federal laws are nullified whenever the Court or the Congress declare an “emergency.” Consider the imprisonment of over 100,000 US-born citizens of Japanese ancenstry during WW II; or the “Mexican Repatriation” in which half a million Hispanics (many of them US-born citizens) were arrested, packed into railway freight cars, and deported to Mexico (1929-39). There was slavery, the treatment of Native Americans– the list is endless.
The USA has never been a “nation of laws.” But then, what nation ever has been?
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And slowly the snowball begins to roll downhill…MMT away!!!
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Very well stated, Roger.
The PCS has helped me get over my fear of the national debt. That, and viewing Treasury bonds as mere savings accounts.
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That’s my real hope for the PCS, that it will stimulate a discussion about the “debt,” i.e. deposits. Until now, there has been precious little discussion. The world merely has assumed debt is bad, and should be reduced.
The only popular discussion has been how to reduce the “debt” (deposits), not whether to reduce it.
I say to my friends, your bank has lots of deposits. Do you wish to reduce them, too?
Yes, change the word from, “debt,” to the correct word, “deposits,” and the entire discussion will change.
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Well stated Rodger. Yes, the point of the Platinum Coin Solution is to change the public mind. All our discussions are attempts to change the public mind.
Change the public mind, and you change the world, socially and physically.
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The platinum coin can only be done by congress returning the management of the currency from the fed to the treasury. The fed creates and destroys all currency as per the fed act of 1913.
Having said that, should the US implement this ludicrous idea, hyperinflation woul be the net result. The US funds it’s spending by taxing and by borrowing via the bond market. Major banks, broker dealer, lend the US money via auction operations. These are your ‘bond holders’.
I’ve mentioned japan and will do so again. MMTers, please don’t act like children by calling people names, keep an eye on the japanese bonds. They will be your guide as to what’s coming to a home near you
Now listen up MMTers, what would the bond holders do with their pie of the coin especially when they receive repayment in devalued currency? Let me give you a hint…. they will dump the garbage as soon as they can. And i’m sure that won’t cause inflation….no…it will cause mayhem, destruction.hunger….anger…revolt….
The currency runs on confidence people, if the government screws the bond holders why would anyone keep their purchasing power in that currency? This is too simple folks…too damn simple.
I would expect a government collapse shortly after.
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US bonds do not have an early call provision and a plan like the pcs would only pay off mature bonds being presented for redemption. As bond supply shrinks dont you think the bonds outstanding would appreciate in price? Would take several decades to retire all outstanding bonds
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1. Bonds are paid off at face value, not at market value.
2. The vast majority of outstanding bonds are short term — under one year
and the big one:
3. The platinum coin need not pay off the bonds. It only needs to offset the bonds on the balance sheet. The bonds can remain in existence.
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Great job!!! Should have seen the snickers on CNBC when the PCS was brought up…
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@Flash. What do these bond holders now have? A bond thats worth however many dollars back by the US government. Now lets say the government needs to sell $10 in bonds this year. but the debt ceiling says they cannot. The government, not the fed, could create a $10 dollar coin to pay it’s bills. $10 is going into the economy its just $10 from the coin not the bonds. No inflation that wouldn’t already have been there.
Debt, same deal. You hold a $10 dollar bond, the government holds nothing. You want currency instead of the bond. The government creates $10 and gives it to you. You give them the bond. They shred it, soak it in gas, light it on fire and shoot it into space. You have $10 dollars, the government, again, has nothing. Same ammount of money, and no inflation. Scary how simple it is.
Would the bond holders riot? I don’t know why. They have they same ammount they had before. Now its more liquid and not earning intrest. They could invest in something else.
Rodger, maybe we should keep treasuries as a safe investment tool. Or am I wrong that you would eliminate them in the nine steps?
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Hahaha what do bond holders have?
Bond holders have a stash of purchasing power stored in those bonds. They can exchange the paper, at any time btw, for good ol’ cash.
You don’t understand how pcs works and injecting 10 trillion into the economy has the same effect as paying off the bond holders. Here…
Remember supply and demand?
A theory that states the prices are set by supply and demand. Basically says that if supply increases and demand doesnt, prices decreases. If supply decreases and demand doesn’t, prices rices. If demand increases and supply doesnt, prices go up. If demand decreases, and supply doesnt prices go down. I think just about 100% understand this and agree, as i do.
So tell me. What happens to the price of the dollar when add 10 trillion in supply of dollars, with no demand increase. I will give you the answer, the value/purchasing power of the dollar collapses, that’s what.
Your statement above reads like this. Add money, no inflation, blah… sir, government issues a paper a certificate an agreement, the bond holder ponies up CASH which the government than spends. The fed does NOT hold all gov bonds, the private market does. Look at the fed’s balance sheet, ~4 trillion, in all (not only bonds).
Wake up America!
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The coin does not enter the economy, but rather is held by the FRB, so there are no inflation implications.
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PLUS, no increase in “new money” being needed because there is NO INTEREST CHARGED!
Perhaps a simple coin may make people aware of “What is really wrong with the present system, and step two could be -stop the stupid practice of paying interest to PFPB for the use of our own money. PFPB=Private for profit banks.
Quote RMM, “A T-security account essentially is a bank savings account, so the purchase of U.S. “debt” simply is a transfer of already existing dollars from a checking account to a savings account. To pay off the “debt,” the FRB merely transfers the already existing dollars back. The only new dollars: Accumulated interest.”
In 100 words or less-You have stated :Where we went wrong.
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I got it.
Let’s see if i can help make sense of this, perhaps i’m not familiar with economic principles.
I am a big shot bond holder managing, say 30 trillion dollars. Those 30 trillion on bonds represent my claim upon purchasing power in the economy. There are many others like me.
Now, the treasury tells the fed to send over liquid, spend me now purchasing power, worth 1 trillion of purchasing power.
You are saying the giving away 100 trillion of instantaneous purchasing power to the treasury has no impact of the suckers with existing claims? Are you guys serious?
Do you even know what counterfeiting is?
Back to supply and demand, you are adding 100 trillion in claims against a pretty much non-growing economy, and what happens to the value of existing claims.
Some don’t know what they talk, others do, but have an agenda to push. This is basic stuff. Krugman is a liar and himself knows.
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“…the bond holder ponies up CASH which the government than spends.”
Ok we’ll take this route. Instead of bond holders paying cash which the government spends, the PCS is the cash the government spends. They don’t need to take it from the bond buyers (Yes, Rodger will tell me it doesn’t work like that.) Or is a T-security not money? Is only cash the money that counts against inflation? More liquid more inflation? That maybe the answer to seek regarding the PCS.
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Rodger,
How precisely does the sale of securities by the Treasury fund the Treasury’s spending? Or does it really? If the buyer’s checking account is debited $1000 and his FRB security account is credited $1000; when and from what offsetting account is the Treasury’s spending account credited? If it funds the Treasury, doesn’t the T-bond sale result of $1000 result in $2000 in financial assets? I can’t quite grasp the mechanics. Thanks.
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The sales of T-securities does not fund spending.
If T-security accounts at the Federal Reserve Bank were $0, the government could keep spending as always. It spends by crediting creditor’s checking accounts, and can do so with no source of funds.
That is the difference between Monetary Sovereignty and monetary non-sovereignty.
You and I (and your state, county and city, and the euro nations) need a source of income in order to spend. The federal government needs no source of income. It is sovereign over the dollar, so can create dollar at will.
The U.S. became Monetarily Sovereign on August 15, 1971, when it went off a gold standard. The sale of T-securities is a relic of pre-1971 days, and no longer has a useful purpose.
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Sure, I get that and I know that any relationship between T-securities and spending is purely legislative fiction. But since Congress requires this so-called “borrowing”, what is the relationship, if any, between a T-security sale and any crediting of the Treasury’s spending account at the Fed? After the sale, the buyer’s FRB securities account is $1000 higher, but since the Treasury doesn’t need or use that $1000 what are the accounting transactions on the Treasury side? Any? How does that security sale even qualify as “borrowing”? Sorry if my question is too basic, but it’s not obvious to me how T-securities have anything to do with government spending. Thanks.
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FWIW – The PCS idea was headline 1 front page news on Huffington Post (which is now the #1 blog on the net, surpassing the NY Times), for this story: http://www.huffingtonpost.com/2013/01/04/trillion-dollar-coin-petition_n_2409704.html?utm_hp_ref=business
Also, there is now a petition on the White House site with 4500 signatures – it needs 25,000 to get an official response: https://petitions.whitehouse.gov/petition/direct-united-states-mint-make-single-platinum-trillion-dollar-coin/8hvJbLl6
It’s been on ABC news: http://abcnews.go.com/blogs/politics/2013/01/trillion-dollar-coins-the-ultimate-debt-ceiling-end-around/ and CNBC too.
This idea is not new. It goes back to at least 2007 when Ellen Brown and another writer independently proposed it.
Of course, critics compare it to a Zimbabwe-type idea, one critic going so far as to suggest stamping Robert Mugabe’ on the coin. But they forget that Zimbabwe effectively has no economy, whereas the United States has a 15 trillion dollar one.
Still, it would be better to put a trillion dollars to use in the REAL economy, instead of, yet again, using new money to pay off the banksters. There is no actual need to channel money through the banks to put it to work at all. Congress can, does, and has, created massive federal public works projects, and can pay for them directly through direct issuance of United States Notes, or their electronic equivalent, as Lincoln first did in 1862.
Interestingly, this report: “Monthly Statement of the Public Debt of the United States”. United States Treasury Department. 2011-06-31. Retrieved 2011-07-28, from footnote 30 of the Wiki entry on United States Notes: http://en.wikipedia.org/wiki/United_States_Note says $239 million in U.S. Notes is specifically excluded from being counted on or towards the debt limit – that is, U.S. Notes, by law, cannot be used to pay off the debt, nor are they counted towards it (this is the current amt. the Treasury estimates is still in circulation even after it burned its remaining stock in 1996). Of course the banks didn’t want to be repaid in money they did not generate – that’s how important their PRIVATE monopoly on money is to them, and yet more proof that the U.S. is NOT entirely monetarily sovereign (of course, that is like saying I do not own a car because it is parked in a garage that requires an attendant to fetch it for me. In the name of a bankrupt ideology, we choose to bankrupt ourselves for real):
Other Debt:
Not Subject to the Statutory Debt Limit:
United States Notes………………………………………… 239
National and Federal Reserve Bank Notes assumed by the United States on deposit of lawful money for their retirement ………….65
Silver Certificates (Act of June 24, 1967)……………………………………………………………..172
Other………………………………………………………………. 11
Total Not Subject to the Statutory Debt Limit……………………………………………………………… 487
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Rep Greg Walden (R-Oregon), a Republican, of course, has just introduced a bill to prevent the gov’t from issuing a platinum coin. Following the morons of his party, he compares the gov’t to his small business (maybe he’s just jealous?) and wants to prevent the gov’t from not “balanc(ing) the books.” Warren Mosler has already weighed in on the stupidity of this move here: http://moslereconomics.com/2013/01/07/greg-walden-to-introduce-bill-to-stop-u-s-treasury-from-creating-trillion-dollar-platinum-coins/ so you can read for yourself.
But this is how the morons win. They set up a straw man – preventing coining a platinum coin – and strike that down, while ignoring historical precendance and law going back to the Constitution’s Art. 1, Sec. 8 which allows Congress to “coin Money” and the Coinage Act of 1792, and SCOTUS in Julliard v. Greenman, and Lincoln and FDR actually doing so, etc. etc.
Walden is just stupid enough, perhaps, to get all his advice from the banksters, and buying into how they are looking out for the economy by monopolizing all money creation. He certainly doesn’t understand how money is created out of nothing but shaky appraisals of collateral, if even that, by private banks, or nothing at all, by the Central Bank.
The point is, the public is being diverted, once again, by a gimmicky side-show like the platinum coin when it really should be demanding the Congress simply “coin Money” and pump it into the REAL economy and not the banks, like the Fed has done for 4 years.
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