Here is what true experts say about Monetarily Sovereign entities like the United States government and the European Union:
Alan Greenspan: “A government cannot become insolvent with respect to obligations in its own currency.”
Alan Greenspan: “There is nothing to prevent the federal government from creating as much money as it wantsand paying it to somebody.”
Alan Greenspan: “The United States can pay any debtit has because we can always print the money to do that.”
Ben Bernanke: “The U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost.”
Quote from former Fed Chairman Ben Bernanke when he was on 60 Minutes: Scott Pelley: Is that tax money that the Fed is spending? Ben Bernanke: It’s not tax money… We simply use the computer to mark up the size of the account.
Statement from the St. Louis Fed: “As the sole manufacturer of dollars, whose debt is denominated in dollars, the U.S. government can never become insolvent, i.e., unable to pay its bills. In this sense, the government is not dependent on credit marketsto remain operational.”
Press Conference: Mario Draghi, President of the ECB, 9 January 2014 Question: I am wondering: can the ECB ever run out of money? Mario Draghi: Technically, no. We cannot run out of money.
Here is what people who are ignorant of Monetary Sovereignty say:
Although it’s volatile (like personal bank balances often are), the treasury’s cash pile of $57.3bn, recorded last Thursday, is by far the lowest figure for more than a year — and it’s well below the $150bn minimum that the treasury reportedly likes to keep as a buffer.
The X-date Treasury Secretary Janet Yellen has said to lawmakers that the “X-date” — the date when the US can no longer guarantee its ability to pay bills— is June 1st.
If the US government does run out of money, the biggest problem is a default on its debt.
Most analysts agree that a default would lead to complete financial chaos but the reality is that it’s anyone’s guess, because it’s never happened before.
“Will someone please get me a longer rope, so I don’t have to kill myself.”
The current debt ceiling stands at a whopping $31.4 trillion, legally limiting how much the treasury can borrow.
Because the government has the infinite ability to create dollars, it never borrows dollars. Sadly, the public doesn’t comprehend that simple fact.
Talks between President Biden and Speaker Kevin McCarthy are set to resume today, as each side negotiates the latest fiscal package that would raise the limit, though both parties remain ideologically opposed on whether the new debt ceiling should come with deep cuts to, or caps on, federal spending.
The U.S. federal government has the infinite ability to pay its bills simply by pressing a computer key. It also has the infinite ability to raise the phony debt ceiling, which it already has done 94 times.
The spending that resulted in the current debt had been authorized by previous Congresses and previous Presidents. The current Republican House essentially is saying, “Even though the money already is spent, by both Democratic and Republican Congresses and Presidents — and even though we have infinite money to pay our bills — we aren’t going to pay what we owe.”
Sounds like something six-times-bankrupt Donald Trump would do. Despite being a billionaire, he has cheated many creditors, and now his party threatens to do what he has called “smart business.”
This is exactly what the 14th Amendment was written to stop.
(“The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned.”)
Now, the party of the biggest crook in Presidential history threatens to cheat our creditors unless the current President yields to their demands to raise your taxes (though not the taxes of the very rich) or to cut your benenfits (though not the benefits of the very rich).
Ironically, if President Biden invokes the 14th Amendment, the party that wants to cheat our creditors will claim that this is cheating the Constitution.
The question is, will the Democrats follow the Constitution and end the ridiculous “debt ceiling,” once and for all.
Then, we can leave it up to the right-wing SCOTUS, beholden to the “party-of-law-and-order,” to wriggle a way to claim that the Constitution really doesn’t say what it says.
Hey, they did it for the 2nd Amendment with regard to well-regulated militias; why not the 14th?
Funny, but so many people would rather see Biden negotiate a disaster than print more money. I don’t get it, becsuse negotiation will hurt millions of people, while printing more money hurts no one. Where is the compassion in that? Where is the humanity? They act as if the Gold Standard still has some relevence to the economy when it does not. Or am I wrong?
Seems to me they like political theater instead of a quick and easy solution. Where’s the attention-getting drama in that? Then, again, there’s not enough time to pull it off; an appeal to the Supreme Court would lengthen the process.
I suspect his friend is a Republican making the claim that Democrats are bigots because the South once was Democratic and Lincoln was a Republican. This demonstrates three things:
1. Republicans understand their party is the party of bigots, so they essentially accuse Democrats of being Republicans!
2. Thurmond became a Republican in 1964.
3. Thurmond, the bigot, was the perfect Republican. He championed states’ rights to block integration. He opposed black voting. He tried to establish a national prayer. He accused enemies of being communists. He espoused conspiracy theories, notably about Cuba and the assassination of Kennedy. He was obsessed with the dangers of pornography. He supported Nixon when Nixon was about to be impeached.
What is so terrible about leaving reserve balances in the system rather than draining them via bond sales for the GQP Thurmonds of today?
You have any posts where you went into detail about doing that with the ‘interest on reserves’ mechanism? Someday I’d like to see someone show what all needs to be changed in the statutes to simplify everything for out fiat currency reality of credits and debits on electronic ledgers. Basically a draft of potential legislation to actually function as a monetary sovereign without self-imposed limitations.
“Reserves” are unnecessary for a Monetarily Sovereign nation having instant access to infinite dollars with the simple press of a computer key.
Interest on reserves would be unnecessary if the federal government owned all banks, as I often have suggested.
He did the right thing for the wrong reasons. The correct reason is to remove the profit motive from the one sector of the economy that does not benefit from a profit motive. In fact, that motive leads to criminality. No public purpose is served by having banks be privately owned.
As for the Job Guarantee, that is the worst idea in economics other than the debt ceiling and austerity. By “stabilizer” do you mean “an idea that is loved only by economics professors, none of whom would accept a JG job, but think it’s fine for everyone else”?
Some might be confused and think you are actually in favor of making central planning great again: “Gosbank (Russian: Госбанк, Государственный банк СССР, Gosudarstvenny bank SSSR—the State Bank of the USSR) was the central bank of the Soviet Union and the only bank in the entire country from 1922 to 1988. Gosbank was one of the three Soviet economic authorities, the other two being “Gosplan” (the State Planning Committee) and “Gossnab” (the State Committee for Material Technical Supply). The Gosbank closely collaborated with the Soviet Ministry of Finance to prepare the national state budget.”
“In the Soviet Union the system of “State Labour Saving Offices” (государственная трудовая сберегательная касса) was instituted in 1922. The first was opened in February 1923, in Petrograd (now St. Petersburg). Eventually, Soviet sberkassas were outlets of the only Soviet bank, USSR State Bank, or Gosbank until 1988 and Sberbank (USSR Savings Bank) after the “perestroika” of the Soviet bank system. Additional functions included accepting various payments, e.g., for public utilities or fines, and depositing salaries.”
“Since the system of consumer credit was virtually absent in the Soviet Union, in order to make a major purchase an ordinary Soviet citizen had to save for a long time. Therefore, like postal savings systems in other countries, the system of sberkassas was a form of government debt, a system where the Soviet state borrowed from the population.”
The references are to a complex blend of public/private banking. I recommend that all banks be federally owned.
The purpose is to eliminate the dangers of bank runs and the creation of entities like Ginnie Mae, which lend themselves to products that even their creators don’t understand.
The trick is to determine exactly what a bank is. It should provide:
1. An interest-paying place to store unused dollars (Savings accounts and T-securities accounts)
2. A check handling (writing, cashing, and depositing) service
3. Guarantee service (as with bank-certified checks).
4. Foreign exchange services.
5. Lending service (Mortgages, personal and business loans)
Private citizens and companies still would be able to make private loans, but no entity could make a business of it. Criteria would be needed.
There would be no need for the FDIC or CDs.
A safe-deposit service, which currently is part of private banking could remain private as it is not very subject to profit-motive risk-taking.
Life insurance and annuities would be handled by private insurance companies, but all healthcare insurance would be handled by Medicare for All. Other types of insurance — liability, homeowners’, specialized coverages would be handled in the private sector.
‘Government money’ takes two forms: cash and reserve balances. Cash comprises notes and coins. Reserve balances are required for final settlement of transactions. Government is the sole issuer of both cash and reserve balances.
Government money is issued in one of two ways: through government spending and government lending.
Government spending adds net financial assets (which are the sum of cash, reserves and outstanding government bonds) because it involves the crediting of reserve accounts. The added reserves may be exchanged for government bonds (if government deficits are to be matched with ‘bond sales to the private sector’) or left as reserves (in the case of ‘interest on reserves’ or ‘overt monetary financing’).
Government lending has no direct impact on net financial assets. It is a swap of one non-government financial asset for another (e.g. a reserve add in exchange for bonds).
Commercial bank deposits are lower in the ‘hierarchy of money’. They are a promise to provide government money at par to the amount of the account holder’s balance. The account holder can demand cash either at any time or after some duration of time. And the account holder is assured that the commercial bank will obtain reserves as necessary for final settlement of purchases made out of the account.
The government’s monetary authority, however, stands ready to provide reserves as required by the commercial banking system, though at a price and on terms of its choosing. So long as it is profitable, commercial banks will lend. If short of reserves, they can obtain these after the fact. In this way, the endogenous creation of ‘private bank money’ (deposits) necessitates an accommodating creation of government money (in the form of reserve balances) by the monetary authority.
The first avenue to government money creation is democratic. The second is undemocratic. In the first case, the decision to issue government money is arrived at collectively through a governmental budgeting process. Any charges applied by government function as taxes, which enrich nobody and function in part to drain government money, income and spending power from the economy. In the second case, a for-profit institution pursuing its own purposes issues private loans, creating commercial bank deposits in the process, and applies private charges (in the form of interest) that enrich the lender. Government money in the form of reserves is created as necessary to accommodate this undemocratic private credit creation in accordance with the monetary authority’s lender-of-last-resort function.
The resistance of a large part of the economics profession to the notion of endogenous money perhaps partly reflects a desire to conceal this second, undemocratic avenue to government money creation.
Biden’s first term as Senator began in 1973 so we should be able to find out how he voted on stuff passed in 1974:
“Under the Congressional Budget and Impoundment Control Act of 1974, Biden has the duty to pay for what Congress has passed. This should supersede the 1917 act that created the debt ceiling.”
Sen. Whitehouse on debt ceiling:” To be clear, it’s not just the 14th Amendment.”
1. Every appropriations act includes language the funds shall be spent
2. Impoundment Act – prohibits President from any “line item veto” power
3. Independent authority to pay US bond interest
RMM: Should the President instruct his administration, without comment, to continue the payment on all obligations, as required by the impoundment act of 1974?
The latest news is that Biden is trying to negotiate cuts and limits but the Repubs aren’t satisfied yet.
In the end, this looks like the “Grand Bargain” that Obama was ready to agree to with the Repubs to cut the social safety net but was interrupted by other circumstances (sorry, can’t remember which).
Biden has long supported cuts to our pitiful social safety net even though we can always cover the costs.
In addition, his administration has filed a brief in a lawsuit brought to overturn the debt ceiling. Their position is that the litigation should not go forward.
Biden has made it clear that he won’t invoke the 14th Amendment or mint the coin. He is a neoliberal through and through and he will throw all of us under the bus to make a deal with the Repubs.
#Monetary Sovereignty - Mitchell 
https://news.harvard.edu/gazette/story/2023/05/laurence-tribe-explains-how-14th-amendment-can-help-biden-avoid-default/ How best to correct the good professor that it isn’t really even ‘debt’?
http://heteconomist.com/government-money-and-democracy/
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Funny, but so many people would rather see Biden negotiate a disaster than print more money. I don’t get it, becsuse negotiation will hurt millions of people, while printing more money hurts no one. Where is the compassion in that? Where is the humanity? They act as if the Gold Standard still has some relevence to the economy when it does not. Or am I wrong?
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Seems to me they like political theater instead of a quick and easy solution. Where’s the attention-getting drama in that? Then, again, there’s not enough time to pull it off; an appeal to the Supreme Court would lengthen the process.
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https://twitter.com/LeonardPittsJr1/status/1661055029388754946 Could this be true?
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I suspect his friend is a Republican making the claim that Democrats are bigots because the South once was Democratic and Lincoln was a Republican. This demonstrates three things:
1. Republicans understand their party is the party of bigots, so they essentially accuse Democrats of being Republicans!
2. Thurmond became a Republican in 1964.
3. Thurmond, the bigot, was the perfect Republican. He championed states’ rights to block integration. He opposed black voting. He tried to establish a national prayer. He accused enemies of being communists. He espoused conspiracy theories, notably about Cuba and the assassination of Kennedy. He was obsessed with the dangers of pornography. He supported Nixon when Nixon was about to be impeached.
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What is so terrible about leaving reserve balances in the system rather than draining them via bond sales for the GQP Thurmonds of today?
You have any posts where you went into detail about doing that with the ‘interest on reserves’ mechanism? Someday I’d like to see someone show what all needs to be changed in the statutes to simplify everything for out fiat currency reality of credits and debits on electronic ledgers. Basically a draft of potential legislation to actually function as a monetary sovereign without self-imposed limitations.
LikeLike
“Reserves” are unnecessary for a Monetarily Sovereign nation having instant access to infinite dollars with the simple press of a computer key.
Interest on reserves would be unnecessary if the federal government owned all banks, as I often have suggested.
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Ah yes channeling you inner Mitterand. https://www.cambridge.org/core/journals/journal-of-public-policy/article/abs/nationalisation-of-the-banks-in-mitterands-france-rationalisations-and-reasons/4145B318D64A8BBE2789A347E5C469B3 Will the federal government own all of the banks before or after the rollout of ‘automatic stabilizers like the Job Guarantee?
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He did the right thing for the wrong reasons. The correct reason is to remove the profit motive from the one sector of the economy that does not benefit from a profit motive. In fact, that motive leads to criminality. No public purpose is served by having banks be privately owned.
As for the Job Guarantee, that is the worst idea in economics other than the debt ceiling and austerity. By “stabilizer” do you mean “an idea that is loved only by economics professors, none of whom would accept a JG job, but think it’s fine for everyone else”?
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So you want public owned locally and/or regionally focused lenders like the Sparkassen & Landesbanks in Germany https://en.wikipedia.org/wiki/Sparkassen-Finanzgruppe with the option of a parallel system of cooperative lenders https://en.wikipedia.org/wiki/German_Cooperative_Financial_Group#Group_structure_and_operations
Some might be confused and think you are actually in favor of making central planning great again: “Gosbank (Russian: Госбанк, Государственный банк СССР, Gosudarstvenny bank SSSR—the State Bank of the USSR) was the central bank of the Soviet Union and the only bank in the entire country from 1922 to 1988. Gosbank was one of the three Soviet economic authorities, the other two being “Gosplan” (the State Planning Committee) and “Gossnab” (the State Committee for Material Technical Supply). The Gosbank closely collaborated with the Soviet Ministry of Finance to prepare the national state budget.”
“In the Soviet Union the system of “State Labour Saving Offices” (государственная трудовая сберегательная касса) was instituted in 1922. The first was opened in February 1923, in Petrograd (now St. Petersburg). Eventually, Soviet sberkassas were outlets of the only Soviet bank, USSR State Bank, or Gosbank until 1988 and Sberbank (USSR Savings Bank) after the “perestroika” of the Soviet bank system. Additional functions included accepting various payments, e.g., for public utilities or fines, and depositing salaries.”
“Since the system of consumer credit was virtually absent in the Soviet Union, in order to make a major purchase an ordinary Soviet citizen had to save for a long time. Therefore, like postal savings systems in other countries, the system of sberkassas was a form of government debt, a system where the Soviet state borrowed from the population.”
LikeLike
The references are to a complex blend of public/private banking. I recommend that all banks be federally owned.
The purpose is to eliminate the dangers of bank runs and the creation of entities like Ginnie Mae, which lend themselves to products that even their creators don’t understand.
The trick is to determine exactly what a bank is. It should provide:
1. An interest-paying place to store unused dollars (Savings accounts and T-securities accounts)
2. A check handling (writing, cashing, and depositing) service
3. Guarantee service (as with bank-certified checks).
4. Foreign exchange services.
5. Lending service (Mortgages, personal and business loans)
Private citizens and companies still would be able to make private loans, but no entity could make a business of it. Criteria would be needed.
There would be no need for the FDIC or CDs.
A safe-deposit service, which currently is part of private banking could remain private as it is not very subject to profit-motive risk-taking.
Life insurance and annuities would be handled by private insurance companies, but all healthcare insurance would be handled by Medicare for All. Other types of insurance — liability, homeowners’, specialized coverages would be handled in the private sector.
LikeLike
‘Government money’ takes two forms: cash and reserve balances. Cash comprises notes and coins. Reserve balances are required for final settlement of transactions. Government is the sole issuer of both cash and reserve balances.
Government money is issued in one of two ways: through government spending and government lending.
Government spending adds net financial assets (which are the sum of cash, reserves and outstanding government bonds) because it involves the crediting of reserve accounts. The added reserves may be exchanged for government bonds (if government deficits are to be matched with ‘bond sales to the private sector’) or left as reserves (in the case of ‘interest on reserves’ or ‘overt monetary financing’).
Government lending has no direct impact on net financial assets. It is a swap of one non-government financial asset for another (e.g. a reserve add in exchange for bonds).
Commercial bank deposits are lower in the ‘hierarchy of money’. They are a promise to provide government money at par to the amount of the account holder’s balance. The account holder can demand cash either at any time or after some duration of time. And the account holder is assured that the commercial bank will obtain reserves as necessary for final settlement of purchases made out of the account.
The government’s monetary authority, however, stands ready to provide reserves as required by the commercial banking system, though at a price and on terms of its choosing. So long as it is profitable, commercial banks will lend. If short of reserves, they can obtain these after the fact. In this way, the endogenous creation of ‘private bank money’ (deposits) necessitates an accommodating creation of government money (in the form of reserve balances) by the monetary authority.
The first avenue to government money creation is democratic. The second is undemocratic. In the first case, the decision to issue government money is arrived at collectively through a governmental budgeting process. Any charges applied by government function as taxes, which enrich nobody and function in part to drain government money, income and spending power from the economy. In the second case, a for-profit institution pursuing its own purposes issues private loans, creating commercial bank deposits in the process, and applies private charges (in the form of interest) that enrich the lender. Government money in the form of reserves is created as necessary to accommodate this undemocratic private credit creation in accordance with the monetary authority’s lender-of-last-resort function.
The resistance of a large part of the economics profession to the notion of endogenous money perhaps partly reflects a desire to conceal this second, undemocratic avenue to government money creation.
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When I said “reserves are unnecessary,” I was referring back to the federal government owning all banks.
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Biden’s first term as Senator began in 1973 so we should be able to find out how he voted on stuff passed in 1974:
“Under the Congressional Budget and Impoundment Control Act of 1974, Biden has the duty to pay for what Congress has passed. This should supersede the 1917 act that created the debt ceiling.”
Under the 1974 Act the budget is its own ‘debt ceiling’. https://www.reuters.com/article/us-the-budget-debt-ceiling-idUKBRE99A00120131011
Sen. Whitehouse on debt ceiling:” To be clear, it’s not just the 14th Amendment.”
1. Every appropriations act includes language the funds shall be spent
2. Impoundment Act – prohibits President from any “line item veto” power
3. Independent authority to pay US bond interest
RMM: Should the President instruct his administration, without comment, to continue the payment on all obligations, as required by the impoundment act of 1974?
https://thehill.com/opinion/white-house/4013218-heres-how-biden-can-avoid-default-and-a-constitutional-crisis/ -shame this guy thinks trillion dollar platinum coins are flaky
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The latest news is that Biden is trying to negotiate cuts and limits but the Repubs aren’t satisfied yet.
In the end, this looks like the “Grand Bargain” that Obama was ready to agree to with the Repubs to cut the social safety net but was interrupted by other circumstances (sorry, can’t remember which).
Biden has long supported cuts to our pitiful social safety net even though we can always cover the costs.
In addition, his administration has filed a brief in a lawsuit brought to overturn the debt ceiling. Their position is that the litigation should not go forward.
Biden has made it clear that he won’t invoke the 14th Amendment or mint the coin. He is a neoliberal through and through and he will throw all of us under the bus to make a deal with the Repubs.
doG help us all, for we are truly screwed.
Stay safe out there.
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