●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.
The so-called “federal debt” is nothing more than bank deposits. It is the total of deposits in T-security accounts in the Federal Reserve Bank. The word “debt” is misleading. Unlike what the average person thinks of as “debt,” the federal “debt” is not a burden on the presumed “borrower,” the U.S. government.
The entire “debt” (deposits) could be “paid off” simply by transferring the dollars currently in those T-security accounts to the checking accounts of the T-security owners. The process is identical with transferring dollars from your savings account to your checking account.
If the “debt” properly were called “deposits,” the entire silly conversation would end. But of course, that is too sensible and easy for Congress and the President, so we have the spectacle of politicians intentionally chaining themselves, putting themselves in a box of their own making, then struggling to escape, like a bunch of Harry Houdini pretenders.
The Debt Ceiling’s Escape Hatch
By Edward Kleinbard, New York Times
Edward D. Kleinbard, a former chief of staff at the Congressional Joint Committee on Taxation, is a law professor at the University of Southern California.
Congressional Republicans have said they will demand immense cuts to popular government programs in exchange for agreeing to raise the nation’s authorized borrowing limit of $16.4 trillion. If nothing is done, the government will soon be unable to pay all of its bills in a timely manner.
Surprise: The “popular government programs” help the middle- and lower-income groups (Social Security, Medicare, Medicaid, food stamps, other poverty and unemployment aids). My question: Yes, the Democrats are bad, but really, if you’re not in the upper .1% income group, what impelled you to vote Republican?
So far, President Obama isn’t giving in. As he rightly said last week, he “will not have another debate with this Congress over whether or not they should pay the bills that they’ve already racked up through the laws that they passed.”
. . . supposed solutions — like the notion that the Treasury Department could create a $1 trillion dollar platinum coin and deposit it in its own account at the Federal Reserve — are even more fantastical.
The author doesn’t explain why the platinum coin solution is “fantastical,” but is it as fantastical as a Congress spending money, then deciding it would be fiscally prudent not to pay its bills?
However, there is a plausible course of action, one that the president should publicly adopt . . . He should threaten to issue scrip — “registered warrants” — to existing claims holders (other than those who own actual government debt) in lieu of money.
The scrip would not violate the debt ceiling because it wouldn’t constitute a new borrowing of money . . . It would merely be a formal acknowledgment of a pre-existing monetary claim against the United States that the Treasury was not currently able to pay. The president could therefore establish a scrip program by executive order without piling a constitutional crisis on top of a fiscal one.
. . . the scrip would not pay interest in most cases. And unlike debt, it would have no fixed maturity date but rather would become redeemable in cash only when the secretary of the Treasury was able to certify that there’s enough money available in the Treasury’s general fund to cover it.
Translation: “While my assistant is putting locks on my ankles, I secretly am picking the locks on my wrists. Then you will be amazed when I escape from my own, personally-built ‘water torture cell'”
The strategy may sound far-fetched, but beginning in July of 2009, California addressed its budget crisis by issuing 450,000 registered warrants, totaling $2.6 billion, to individual and business claimants, including recipients of aid programs, recipients of tax refunds and government contractors.
Would a federal scrip program be a painless way of resolving a debt ceiling crisis? Hardly. But it would be the least awful way to defang the most extortionate demands of Congressional hard-liners — and one that would not permanently damage America’s fiscal standing in the world.
No, the least awful way to defang the selfish hard liners would be to vote them out of office at the next election (in less than two years), as a lesson. Show all future hard liners the citizens of America will not put up with their political games threatening our poor and middle classes.
Identify the extremist nut-cases and throw the bums out. Meanwhile, change this incredibly stupid law. Is that too much to ask?
Rodger Malcolm Mitchell
Harry Houdini in his “water-torture cell”
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
5 thoughts on “Will the Harry Houdini Congress implement its next magic trick: Warrants?”
1.) Law professor Edward Kleinbard calls the Platinum Coin Solution (PCS) “fantastical.” I’ve seen countless condemnations of the PCS as crazy, kooky, silly, absurd, ridiculous, etc. No one explains why, but Kleinbard tries to give a “why” in the form of a childish attempt to confuse the public. Let’s issue scrip! “Registered warrants!” We’ll pay the holders of T-securities, but we’ll give IOUs for all other government expenses (e.g. Social Security). Why? Because the PCS is “fantastical.” Why is it “fantastical”? Because, well…it just is.
It’s like cave men who call the idea of an airplane “absurd.” Why? Because, well…it just is.
I’m a professor. A high priest. Who are you to question me?
Kleinbard tries to further confuse the public by noting that California once had to issue IOUs, thereby championing the lie that the Monetarily Sovereign federal government is the same as a monetarily NON-sovereign state government.
There’s an old saying…
Q. What do you call an attorney with an IQ of 70?
A. Your honor
Q. What do you call an attorney with no brain at all?
A. A law professor
2.) Rodger asks: “Yes, the Democrats are bad, but really, if you’re not in the upper 1% income group, what impelled you to vote Republican?”
I think that most lower-class Americans who call themselves Republicans live in a dream world. They imagine that if they, “think like Republicans” then one day they might escape from their slavery.
For example, I personally know an attorney, an ethnic Mexican who has a White wife, and is a Mormon. He only works on immigration issues (i.e. he is a “boutique” attorney). He is just one guy who rents a tiny one-room office, and he has a very small clientele. Income-wise, he seems to be in the lower middle class –- yet he calls himself a staunch Republican. I have never asked him why, since we are on opposite sides of so many issues that we could never agree on anything, but I do ask myself, “A Mexican immigration attorney who calls himself a staunch Republican? Why?” My only explanation: he lives in a dream world. (I am not defending Democrats. I am an independent.)
Democrats have a lie they can hide behind (i.e. “We champion the people”). Republicans used to have their “trickle down” lie, but now Republicans don’t even have that. Neo-liberalism, supply-side voodoo-nomics, “trickle down” nonsense, everything has been discredited. All that Republicans have left is dream worlds, plus the brainwashing about the “debt crisis” and “deficit crisis.”
Sadly, that’s all they need. That, plus mumbo-jumbo from clowns like Kleinbard.
A minor miracle occurred this morning. I happened to flip on Chris Hayes’s show on MSNBC and he had Stephanie Kelton on. She and another gentlemen were politely running circles around the usual “fiscal responsibility” rhetoric coming from a couple of no-nothing panel guests. Per the PC debate, they were ACTUALLY discussing how the Govt. cannot run out of money, the functions that can allow for such a thing, and how everything changed in 1971.
It’s a shame Hayes only gets weekend am slots because he is the only MSM feller (since Rattigan) that I’ve seen slice through the cloud of the MSM’s incessant herd mentality propaganda.
I think we all know that the coin concept (it exposes all the lies people believe)is going to be put down by the powers that be but I am still amazed to have witnessed a truthful discussion of our monetary system from ‘the people on the TV’. I’m still thinking Alan Funt is going to jump out though.
Is that a lighthouse I see?!
Were there any call-ins?
Pete writes that the MSNBC show was “Actually discussing how the U.S. government cannot run out of money, the functions that can allow for such a thing, and how everything changed in 1971. “
Whoa, slow down. I’m sorry, but that’s not what happened on the show I saw. There were three guests, plus Stephanie Kelton. All three were morons, as was the host.
Idiot #1: Joe Weisenthal of Business Insider admitted that we cannot run out of money, since Nixon took us off the gold standard, and also admitted that the platinum coin would not directly cause inflation. However, Weisenthal claimed that if the government actually minted a platinum coin, then the government would overspend, and we would have hyperinflation.
Idiot #2: Dylan Glenn (former special assistant to W. Bush) claimed that if the U.S. government minted a platinum coin, the USA would become Greece. (He actually said this!) “We would become the laughing stock of world financial markets.” Glenn also claimed that government spending on social programs crowds out private sector spending, and that the government has a spending problem, with no will to do anything about it. He is a total idiot.
Idiot #3: Heidi Moore said, “The only way we could make money from a trillion-dollar coin is to build a museum to hold it, and charge admission.”
Idiot host Chris Hayes, struggling with his speech impediment (he stutters endlessly) claimed that if the government minted a trillion-dollar coin, then “financial markets would go bananas.” Hayes said the PCS would have an adverse effect on the financial markets, and the credit worthiness of the government.”
Except for Stephanie Kelton, who was given very little time, it was standard sewage from media morons, all of which vomit the same excrement…
“We must worsen the depression by cutting government spending. Otherwise the world will end.”
The segment lasted about 16 minutes.
See Part 1:
See Part 2:
Mark, I said a “minor miracle”, as in, someone let the truth slip out. Hayes did not poo poo the notion, he opened the topic up without complying with moron A & B. I agree that Kelton was the only sane bobblehead in the room (who must’ve been itching to start a slapfest). How she made it through MSM security is wondrous. I disagree with your Weisenthal assessment. He basically concluded that inflation was NOT a real concern based on the proposal.
When was the last time you heard someone admit the Govt. cannot run out of money on the TV? (aside from Greenspan’s testimonial slip of the tongue)