Joe Firestone: Austerian Obama Kisses Platinum Coin Bargaining Chip Goodbye, but the Coin May Rise Again

By Joe Firestone, Ph.D., Managing Director, CEO of the Knowledge Management Consortium International (KMCI), and Director of KMCI’s CKIM Certificate program. He has taught political science as the graduate and undergraduate level and blogs regularly at Corrente, Firedoglake and Daily Kos as letsgetitdone

Yesterday, Ezra Klein mouthpieced for Treasury and Fed reported in the Washington Post that:

The Treasury Department will not mint a trillion-dollar platinum coin to get around the debt ceiling. If they did, the Federal Reserve would not accept it.

That’s the bottom line of the statement that Anthony Coley, a spokesman for the Treasury Department, gave me today. “Neither the Treasury Department nor the Federal Reserve believes that the law can or should be used to facilitate the production of platinum coins for the purpose of avoiding an increase in the debt limit,” he said.

The inclusion of the Federal Reserve is significant. For the platinum coin idea to work, the Federal Reserve would have to treat it as a legal way for the Treasury Department to create currency. If they don’t believe it’s legal and would not credit the Treasury Department’s deposit, the platinum coin would be worthless.

This statement from Ezra Klein would have us believe that the Federal Reserve is an independent agent in this matter, and that it can refuse to credit the deposit of a newly minted high face value proof platinum coin, if the Treasury makes such a deposit. It also assumes that if the Treasury insisted on the deposit of the coin, that the Fed would be in a position to go Court to contest that; that it has a choice in the matter.

It does not appear that either of these things are true. They are just a rationalization, so the President, who most probably decided to pretend that this isn’t his decision ; or at least can be partially blamed on the Fed. Let’s review some critical aspects of the relationship between the Fed and the Treasury.

Fed Independence?

First, here are a some quotes from the US Code and comments.

“…banks, when required by the Secretary of the Treasury, shall act as fiscal agents of the United States; and the revenues of the Government or any part thereof may be deposited in such banks, and disbursements may be made by checks drawn against such deposits.”12 USC 391

The coins are legal tender, and disbursements can’t be made unless a deposit is credited. So, both imply that all banks that receive such deposits must credit them, and that the Bank officers at the New York Fed cannot refuse to credit the face values of a deposit of coins by the US Mint in its Public Enterprise Fund (PEF) Account. As for the Board of Governors, including the Fed Chair, forbidding the New York Fed from crediting the deposit, there is this part of the USC:

“. . . wherever any power vested by this chapter in the Board of Governors of the Federal Reserve System or the Federal reserve agent appears to conflict with the powers of the Secretary of the Treasury, such powers shall be exercised subject to the supervision and control of the Secretary.” 12 USC 246

The US code says that the Secretary has supervision and control, not the Fed Chair, or the bank officers at any of the banks, however exalted, within the Fed system. So, if anyone in the Fed system wants to go to Court about this, it’s hard to see that they could get standing even to file an injunction. In fact, if they attempted to get an injunction and to sue after a Treasury order prohibiting them from doing that, apparently the Treasury Secretary could fire the offending parties if “supervision and control” means what it usually means.

In short, the Platinum coin is still on the books. The legal rationalizations of the Treasury and the Fed are a smoke screen to obscure the President’s deciding not to use the authority he is granted by the Platinum Coin Seigniorage (PCS) legislation. And finally the coin certainly would work if the President decided to use it, provided he ordered the Secretary to mint and have a platinum coin deposited in the Mint’s PEF at the New York Fed; and provided the Secretary sent instructions to the New York Fed and the Board of Governors ordering that the coin be credited and no attempts be made to contest the Secretary’s action in a Court of Law.

The Wrong Kind of Coin

After a hiatus of 16 months the Trillion Dollar Coin (TDC) surfaced again in the mainstream blogging and MSM World at the beginning of December. The outbreak of posts and discussions was fairly intense as people began looking beyond the “fiscal cliff “crisis and started looking ahead to the debt ceiling fight to come. During the second half of December however, posts and commentary slowed as we got closer and closer to the “cliff,” and most commentary focused on that.

But at the beginning of the New Year, after the “cliff” was partially circumvented, new posts from mainstream bloggers on the possibility of minting a Trillion Dollar Coin (TDC) to avoid the debt ceiling appeared, including a post from Paul Krugman. In addition, Jerrold Nadler (D-NY) became the first Congressman to advocate for the TDC to get around the debt ceiling, the TDC was suddenly ubiquitous on MSNBC, and began being treated seriously on other networks as well.

The ground swell for the TDC continued through the first week of January and kept growing larger and larger facilitated by the #minthecoin twitter campaign. The hashtag #mintthecoin was originated by Stephanie Kelton of the Economics Department of the University of Missouri at Kansas City. Joe Wiesenthal, blogging at Business Insider, picked it up, used it to name a White House petition, and marketed a viral petition drive urging the President to mint a TDC and use it to pay down debt so the debt ceiling could be avoided.

The Twitter campaign became a phenomenon and a trending topic, accompanied by more and more blog posts across the political spectrum, both pro and con, about using the TDC. Signatures on the petition grew fast, finally resulting in questions at White House news conferences about the TDC, asking whether the President had considered it or was going to use it.

Increasingly, after January 5th, the platinum coin was everywhere even getting covered by the Colbert show. Finally, on June 12, as the web frenzy continued to grow and after a very notable panel discussion of Platinum Coin Seigniorage on Chris Hayes’s Up show, including both Wiesenthal and Kelton, among others, this past Saturday morning at MSNBC, the Treasury and the Fed tried to put an end to speculation by announcing that the Administration would not mint the coin.

So, now the web echos with cries that the platinum coin is dead. Some of the cries are joyful. Some of them are angry. Perhaps they’re right. Perhaps the coin is dead. But perhaps also it will come back again, in a new guise, when conditions are right. How can that be?

Well first, we need to recognize that the TDC, with its intense and frenzied web-based campaign was based on the wrong coin and the wrong cause.

The cause or the problem it was addressed to was getting past the debt ceiling by creating some head room below it with the seigniorage proceeds. After that, the TDC bloggers envisioned that deficit spending would continue to require issuing debt instruments, and that there would be no further “disruption” in the normal way of doing things, and also that the President would cope with the coming sequester, and continuing resolution (CR) conflicts separately.

So, the TDC, even if used, would really change very little. It wouldn’t stop the Republicans from pursuing spending cuts in entitlements and important discretionary programs. It wouldn’t change the fundamental drive for austerity in both parties, fueled as it is by the view that “national debt” is both frighteningly large, and also unsustainable. So, at best, the TDC was a tactic to put off the day of reckoning with the Republicans, and perhaps to use the law authorizing it as the basis for a swap with the Republicans of the PCS legislation for the debt ceiling law, a very silly and odious idea proposed by a mainstream blogger, wanting to return the system to “normal” but not change it.

Considering this background, it is easy for the President to say that we won’t use PCS. Maybe not as easy he would have liked. But still the TDC was only a tactic. The President can abandon it and talk about other tactics, or his apologists can talk about his desire to avoid default by having a government shutdown that will break Republican resistance, as President Clinton was able to do. If they and he can do that for long enough, then the President can keep Democratic Congresspeople in line for as long as it takes for him to make his “grand bargain” for austerity with enough Republicans to join with the supine Democrats to pass it. Regardless, it is undeniable that Obama has thrown away another opportunity to defang one of the big threats the Republicans have in their plan to force through spending cuts. Obama has given that up because he too favors austerity; the only comparatively minor point of difference between the Republican and Democrats is how brutal the cuts are to be, and whether the rich will be largely or entirely spared.

Even though I have blogged more frequently about PCS than anyone, I have never been for minting one TDC and returning to normal Treasury/Fed procedures for deficit spending. I have always proposed substantial and significant change in the financial system, change that would end with paying off the national debt, and with destroying the underlying political rationale for austerity based on the debt and the related idea of fiscal unsustainability.

During the whole current TDC campaign I have blogged constantly about High Value Platinum Coin Seigniorage (HVPCS) and its potential for changing the fiscal and political landscape and destroying the basis for austerity politics, while changing the game radically for progressive attempts to create greater economic and social justice. I referred to HVPCS as the big story the mainstream was missing, and also as game-changing PCS that would change the context of politics.

I believe that if the MSM bloggers hadn’t set up one of their usual “only talk to fellow villagers” echo chambers, but instead had embarked on an honest discussion of PCS options, they would have ended with a groundswell of support for HVPCS to fight austerity and that idea, since it is more strategic than tactical, would have been much harder for the President, Geithner, and Bernanke to dismiss, after a campaign that had identified it as the way out of austerity for the United States.

The President must, if he’s going to be successful in making the “grand bargain” continue to present himself as preferring not to make serious cuts to entitlement and other valued domestic programs, unless the Republicans “make him do it.” To the extent possible, the Democrats who will support him, also want to deny responsibility for the actions they will take. For the President and his Democrats to be seen as forced into the “grand bargain,” the President cannot be seen as acting to take an important way out of the austerity trap “off the table.” And that is what he would have had to do if the TDC campaign had been replaced with an HVPCS campaign sold as an answer to austerity.

The MSM and the blogosphere generally has missed the chance to generate such a campaign with the really heavy pressure it would have placed on the President and the Democratic Party. That is its failure; yet another disservice to the American people by the conventional media.

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  1. steve from virginia

    Good grief!

    Thank goodness the platinum coin ‘idea’ is dead because using them is no way to run a country.

    The creation of currency is a joint issue of the Treasury and Congress (‘the People’) not the prerogative of whoever happens to be sitting nearest the door at any given time.

    These subterfuges are failures on their face. The US government has had decades to come up with a policy to manage its — and the country’s — cash flows. Instead, it has provided a ‘blank check’ to the plutocrats and favored overseas’ clients … to heck with everything and everyone else.

    The government — and people — who faced down the Great Depression, Hitler and Imperial Japan has become a coward.

    The party has ended b/c credit creation offers diminishing returns. This has nothing to do with austerity: adding credit does not increase output: the credit ‘system’ is saturated … by the previous rounds of credit offered. The establishment can technically offer unlimited credit however each dollar borrowed has a (real) cost and a requirement of ultimate repayment. Both are cumulative, cost increases are exponential, the country (world) has reached the point where credit costs absorb all borrowings.

    This is reality, not prejudice.

    The US government has not had a budget for years, limping along with continuing resolutions … you bet there will be a fight over that along with sequester. It’s not the quantity of the funds-in-play that are the issue as much as the (hideous) quality of the funds’ management. Right now, the citizens have lost confidence in the government because it cannot restrain itself. This absence is manifesting itself in gun shops around the country, there are murmurs of breakdown and insurrection. Not even a plutonium coin can fix that.

    Meanwhile, military spending is out of control, subsidies for big business are out of control, there is no strategy to manage the demands of millions of retiring baby boomers, there is no policy to manage the onrushing permanent shortages of fossil fuels, no strategy to confront carbon emissions … no strategy at all! Government credit is a part of government credibility … where is it?

    The reason for the Federal deficit in the first place is because the government alone can lose money perpetually and remain in business. The public sector deficit is the private sector surplus. The Feds deficit at the moment is sufficient to service the country’s $55 trillion in posted public AND private debts. Tomorrow?

    It’s past time for the establishment to start looking at the big picture, to face reality, to scrutinize the construction of our massive debts not just the quantity of them, to start dealing with our creditors — Wall Street finance — in a meaningful way. That is, to perceive financiers as bands of criminals that have conned the country into taking them seriously. It is time for the government to become the government … and clean house … instead of being a bunch of valets!


    1. First Followup

      Good grief, indeed. An exquisite demonstration of ‘first-poster syndrome’.

      I think most around here have rejected the premise that the government must balance its finances like a household does. “The Great Depression, Hitler and Imperial Japan”, wow, I never saw that coming.

      If you were sincere, it’s too bad we couldn’t hear the background music to go with the post.

      1. ambrit

        Dear FF;
        I suspect you either misunderstood Steves comment or are willfully being obstructionist. His point has nothing to do with budgets being balanced like a ‘households.’ It does have to do with ‘balance,’ as in an equitable division of risk. No major financial player, as far as I know, has taken a significant ‘haircut.’ Yet the general public is being sold the Big Lie that they have to suffer to ‘Save the Economy.’
        Look closely at Steves comment and you will find something much more frightening to the Financial Overlords than any new regulation, or slap on the wrist fine. You will find a questioning public so fed up with the present regime that they are looking around for a new way of doing things. This is one of the sites where people come right out and discuss alternatives without feeling constrained. Don’t muddy the water.

        1. from Mexico

          So what you’re saying is that countering error with error, wrong with wrong, is enlightenment?

          1. JTFaraday

            I think his comments about corruption, disorder, and general policy failure were far more honest than some notion of a spending cure-all that this other person single mindedly promotes.

            You give a corrupt government more money and then what? Wait for the magic to happen?

          2. JTFaraday

            We seem to be beset with problems in basic literacy today.

            As I assume you’re an adult and not a twelve year old in need of my instruction, if you need to read it twice, feel free to do so without requiring my handholding.

          3. djrichard

            I’ll be more direct. You say, “You give a corrupt government more money and then what? Wait for the magic to happen?”

            Umm, yes.

            Or to make it more MMT-palatable: you make the corrupt government spend money and then magic happens.

          4. from Mexico

            JTFaraday says:

            You give a corrupt government more money and then what? Wait for the magic to happen?

            A deep pessimism and distrust of government — the conviction that honest democratic governance is not achievable — lies at the heart of both liberalism (the original, 18th-century variety) and Marxism.

            A more optimistic view of government — the conviction that somewhat honest, but certainly not perfect, democratic governance is achievable — lies at the heart of both liberalism (the modified, post 1929 variety) and conservatism.

            When anti-government sentiment and the critique of democracy is taken to an extreme, such as in Bolshevism or neoliberalism, then what is the alternative that is offered up? Didn’t we get our answer in Stalinist Russia, or in the 1970s when Friedrich von Hayek told a Chilean reporter of Pinochet’s brutal dictatorship: “My personal preference leans toward a liberal dictatorship rather than toward a democratic government devoid of liberalism.”

        2. Aquifer

          JT – i know it’s your style and all, but could you be a bit more patient with posters – it isn’t always easy to discern someone’s intent, and often the tone of your replies can only serve to intimidate or offend folks who are only seeking clarification … Unless that is your intent …

          1. Cugel

            Obama wants to cave (“negotiate”) over the sequester fight and the budget negotiations, NOT over the debt limit. He’s made this blindingly clear. And the GOP is going to let him have his way (which is their way):

            National Republican Congressional Committee Chairman Greg Walden: “Chuck, I think what I’m saying is that we’ve got sequestration coming up. We’ve got the continuing resolution coming up. We’re going to have in this same period of time a debate over a budget that we hope to pass by the middle of March, early April. We’ll meat our deadlines, and you’ve got the debt ceiling issue. All of those are in the mix right now, because they’re all coming to a head at the same time. We’re going to need to deal with all of them. Can’t we be responsible? Can’t we work collaboratively on this?”

            Translation: We’ve got sequestration. We’ve got the budget by early April. We can always allow a vote on the debt ceiling increase (which will pass with all Democrats and a few Republicans)and still keep our leverage to force deep cuts to Medicare, Medicaid and Social Security.

            Debt limit is a fake issue within a fake issue. All else is posturing. In fact, the debt limit is a red herring to crow to Democrats unhappy about the coming Age of Austerity “we won a round (debt limit!)” Thus, obscuring the real capitulation.

        3. different clue

          What “demands of the boomers” do you think Steve referred to as “having to be managed” ?

          The demands that they be repaid the Social Security benefits they have spent decades PREpaying DOUBle for with their new improved FICA taxes ever since 1983? Are those the “demands” that you believe Steve is referring to as having to “be managed”?

      2. JTFaraday

        “the government must balance its finances like a household”

        That not what he said. Can you read?

      3. Lambert Strether

        I don’t think this is an example of first poster syndrome. And it doesn’t feel Austrian to me; where’s the ranting about gold? [Adding, apparently I’m wrong; it’s credit, in this case. Oh well…]

        * * *

        If one believes, as I do (and MMT does) that money should be created for public purpose, there are a number of follow-on questions, like: Who determines the public purpose? Do those who claim to speak for the public really do so? What would it mean if MMT were implemented, but by a state that’s corrupt to the core? (Oh, wait….?)

        The commenter doesn’t raise these issues the way that I would, but that doesn’t invalidate the comment.

        1. djrichard

          Isn’t this the same as “never let a good crisis go to waste”? I think the argument being made is that holding our feat to the fire of the debt ceiling gives us a window of opportunity to solve other problems. And so if we remove the debt ceiling problem (e.g. through the platinum coin), then we’ll miss out on these opportunities.

          I think we can solve things like national priorities and corruption without having a gun pointed at our head.

        2. Aquifer

          Yup, Lambert, that’s my concern – as i said (para phrase) below, to Sto, to “give” MMT to the current crowd is like, at best, giving scissors to a 2 year old, or, at worst, an AK 47 with unlimited ammo clips to a serial killer ….

          So the problem is, ISTM, the necessary price of utilizing such a tool being eternal vigilance at least at the polls, in deciding whether to forge such a tool, I would think that at least we should take a good hard look at the odds we will not exercise due diligence …. If past is prologue, i wouldn’t want to lay odds on it …

          1. from Mexico


            All the questions which you and Lambert raise are legitimate questions.

            However, as I have heard Stephanie Kelton explain it, all those concerns lie outside the realm of MMT, and to my knowledge MMT is not being hyped as some elixir that will solve all mankind’s problems. What MMT does is to expand the policy space. It removes arbitrary, capricious and self-imposed limits on the policy space, limits which are selectively imposed.

            It is absolutely necessary to understand what the debt ceiling is, and what it is is a rhetorical strategy. It is an argument that is used only when it is convenient for its creators to use it. Did you hear anybody invoke the debt ceiling argument when TARP was being rammed through at lightening speed? I would be much more sympathetic to your point of view if you could point out instances where the debt ceiling was invoked to argue against the massive expansion the security state, Wall Street bailouts or tax breaks for the 0.1%, and not just the welfare state.

          2. Aquifer

            Mex – I know perfectly well what this “debt ceiling” due date is all about, just as the “fiscal cliff” and all that other nonsense – it is an artificial deadline set to end the discussion about what we want to spend our money on. When the discussion is about spending it on the MIC – there is no disagreement – so no “ceiling”, when the discussion about social programs comes up, so does the “ceiling” – i am well aware of that dynamic – but that dynamic has to do with the drama in DC and the MSM – the rest of the country knows it is BS, the rest of the country knows that that “ceiling” can be raised at the drop of a hat for banks. etc.

            However, ISTM that a dynamic that says we can spend on any and everything -“whatever is for sale”, i believe the phrase is – is an invitation to mayhem – I think we, as a species, are much better off if we understand there ARE limits, that choices must be made, and that we can’t have it all – if anything the past several decades demonstrate what a mess we have made in the pursuit of “having it all”

            I want the debate to be about making choices – so a system that says we don’t have to is going the wrong way, ISTM …

            That is Pt 1 – the philosophical part, Part 2 is the practical part – the one that says OK, if you really want to grant the gov’t the fiscal equivalent of a nuclear chain reaction, remember they may choose to make a bomb, in fact they have … Do I want this gov’t, any gov’t, for that matter, to have that much power ….

            You can, and lots of folks here do, argue they already HAVE that power and use it for their own ends – so we should let folks know they have it so we can make ’em use it for good ends … But, frankly, if they do have it – maybe the best thing is to argue to curtail, not expand it – they used it to empower the big banks, to make ’em bigger, they used it to bomb the bejeebers out of folks all over – do we WANT them to have the power to do that? THAT is what I want to see injected in the discussion ….

            Sometimes it is best to limit power – and if the way to do that is to limit money – OK – we can put limits out there so we can have enough to bomb the crap out of the planet and finance CDSs or CDOs or PDQs or whatever, OR enough to feed, clothe, educate, provide health care, etc. for our people, but we CANNOT have both – THAT is the discussion I think we need for our survival and that of the planet and we need it lickety split. So when a system comes along that says “hey, we don’t have to have that discussion, we don’t have to choose!”, I say “Oy vey!”

          3. different clue

            To “from Mexico” actually . . .

            So “MMT” would expand the “policy space”? What is the point of expanding the “policy space” when the Upper Class Catfood Conspirators will merely fill that expanded space with yet more of their political nerve gas? Better to have an interClass “war of extermination” right now. Better to make the Class Enemies in the Congress and White House stand up and be counted.

        3. Aquifer

          dj – be careful what you ask for – the “crisis” will, indeed, be used – to bargain away safety net programs – it COULD be used for better things, to trade war for education, healthcare, etc – but it won’t be by this crew ….

          We won’t be able to use the coin, or the debt ceiling, or anything else to further public purpose as long as we have schmucks in office – conversely, if you have folks who give a damn about public purpose, you can do wonders without any of that stuff …

          1. Aquifer

            dj –

            oops, sorry, i just reread your comment and realized my first paragraph was NOT relevant to what you said (you weren’t defending the “debt ceiling” BS) – I’ll stick with the second however … :)

    2. from Mexico

      steve from virginia said:

      …adding credit does not increase output…

      Well that certainly is the fiction touted by Austrian economists. However, as we saw in the 2000 to 2007 era in the US, even if most of the newly added credit (and remember almost all the new credit creation during that time was by the private sector) ends up in Ponzi finance — that is the blowing of asset bubbles — it still increases output. The stimulus provided by the new credit may have leaked off, having increased China’s industrial output and not ours, but there was nevertheless an increase in output.

      Where the stimulus has its effect is dependent on government policy, those policies which regulates trade and capital flows.

      1. steve from virginia

        Credit is a substitute for output not its enabler.

        Resources + labor produces output. Resources are capital, credit (money) is not capital, it is a cheap fake. Money does not produce anything because it is a claim, not a thing. Only things can be turned into other things.

        This is physics, not economics.

        Redefining loans as ‘capital’, resources as ‘substitutable inputs’ and consumption as ‘production’ are the great lies that have allowed a handful of tycoons to pillage the entire world.

        I’m not sympathetic to those who desire economic growth or recovery/return to waste-based business as usual. Growth destroys the life support system on the only spacecraft we have … upon which we all depend.

        “Keep in mind the following is an accounting identity, not a theory. If it is wrong, then five centuries of double-entry bookkeeping must also be wrong:”

        The Cost of Fuel + The Cost of Credit Needed to Pay for Both Fuel and Fuel Use/Waste Infrastructure – Returns on the Use of the Fuel = 0

        Considering that the organic returns on ‘use’ of the fuel are negligible and that credit is a substitute for ouput it is easy to see how the world has fallen hundreds of trillions of dollars into debt … and how the debts can never be repaid.

        1. from Mexico

          @steve from virginia

          What you’re touting is pure Austrian dogma.

          The problem is that von Mises was peddling the same line that you’re now peddling back in the 1930s when the US was awash in a sea of oil and other natural resources and before the idea that growth “destroys the life support system” was even imagined. (see von Mises, “The ‘Austrian’ Theory of the Trade Cycle,” 1936)

          And by the way, there exists a way in which growth could be directed towards preserving the life support system.

          1. Aquifer

            yeah, Mex, maybe, but you can’t really argue (dunno, maybe you can, but not convincingly, methinks …) that we could indeed “outgrow” our life support system …

          2. Aquifer

            Good grief – I better go back to bed, i’m messin up all my posts – I meant to say, of course, that you can’t really argue AGAINST the idea that we could “outgrow” our life support systems …

          3. steve from virginia

            “What you’re touting is pure Austrian dogma …”

            LOL! I’m called a “#@%&Keynesian” elsewhere.

            BTW: you might wanna look up Herman Daly before jumping to conclusions …

          4. from Mexico

            Aquifer says:

            …you can’t really argue AGAINST the idea that we could “outgrow” our life support systems…

            And that’s why I never argued that. What I said was this:

            …there exists a way in which growth could be directed towards preserving the life support system.

            Granted, we are not doing that, but that does not mean that it couldn’t be done.

          5. from Mexico

            steve from virginia says:

            LOL! I’m called a “#@%&Keynesian” elsewhere.

            You say what you are advocating is not Austrian, so let’s have a closer look. Here’s what you said:

            Resources + labor produces output. Resources are capital, credit (money) is not capital, it is a cheap fake. Money does not produce anything because it is a claim, not a thing. Only things can be turned into other things.

            Now here’s what von Mises, the seminal Austrian, said:

            The material means of production and the labor available have not increased; all that has increased is the quantity of the fiduciary media which can play the same role as money in the circulation of goods. The means of production and labor which have been diverted to the new enterprises have had to be taken away from other enterprises. Society is not sufficiently rich to permit the creation of new enterprises without taking anything away from other enterprises.
            — LUDWIG VON MISES, “The ‘Austrian’ Theory of the Trade Cycle”

            And here’s what Schumpeter said:

            yet there is another method of obtaining money for this purpose [productive investment by the entrepreneur], which … does not presuppose the existence of accumulated results of previous development, and hence may be considered as the only one which is available in strict logic. This method of obtaining money is the creation of purchasing power by banks… It is always a question, not of transforming purchasing power which already exists in someone’s possession, but of the creation of new purchasing power out of nothing…

            And what Minsky said:

            If income is to grow, the financial markets, where the various plans to save and invest are reconciled, must generate an aggregate demand that, aside from brief intervals, is ever rising. For real aggregate demand to be increasing, . . . it is necessary that current spending plans, summed over all sectors, be greater than current received income and that some market technique exist by which aggregate spending in excess of aggregate anticipated income can be financed. It follows that over a period during which economic growth takes place, at least some sectors finance a part of their spending by emitting debt or selling assets.

            And to illustrate just how grotesquely nonsensical what you and von Mises are saying is, I would point you to the following graph:

            “Long-term real growth in US GDP per capita 1871-2009”

            If our policy makers had listened to von Mises said back in the 1930s, which was identical to what you are saying now, per capita GDP would still be stalled around $5000, or maybe even less, instead of the more than $40,000 it is today.

        2. Susan the other

          I agree the debts can never be repaid. Which makes “austerity” an oxymoron, death spiral. But we do have to go forward systematically. A good place to start is to wipe out the debt and initiate sane legislation. (The sane legislation is the hard part.)

          When Joe Firestone says “I have always proposed substantial and significant change that would pay off the national debt and eliminate the underlying political rationale for austerity…” it’s pretty hard to disagree. Debt drives the destruction of the environment, both physical and financial. He recommends a “high value” PCS. I think he’s talking 60T. It is not a coin in any sense except it is round, metallic and official. It is a round, metal declaration for MMT.

          Obama’s grand bargain is the opposite; it is “one ring to bind them.”

          1. Susan the other

            I’m assuming that under MMT the private financiers will be tightly ring-fenced and the corporations will need less help via tax breaks, etc from the federal government and local governments. What goes around, comes around. And finally then the money that we as a country decide to spend and invest will “trickle up.” If the government does the right things: pays for health care; funds living retirement for those in need; pays for college tuition and invests in all things of a high social value, then corporations will have much less of a burden, they will not lobby for their absurd profits – they will actually make them in properly subsidized enterprises like environmental cleanup; clean energy; public transportation; even health care. MMT will allow the government, that’s us, to spend for the right reasons. The economy will thrive. It’s the only way out of this vicious circle that most people are calling a ponzi.

          2. Aquifer

            “I’m assuming that under MMT the private financiers will be tightly ring-fenced ….. And finally then the money that we as a country decide to spend and invest will “trickle up.”

            If the government does the right things:

            MMT will allow the government, that’s us, to spend for the right reasons.”

            An awful lot of assumptions, there …

            STM like putting the cart in front of the horse – MMT “will allow”, but NOT REQUIRE, the gov’t to spend for the public purpose, just as it “will allow” the gov’t to spend for a whole lot of crap – it’s doing that now, but at least with a modicum of opprobrium, with MMT it can do it without raising an eyebrow …

            That is my major problem with MMT, it allows, in theory, government funds for any and everything, and the way “we the people” have been handling our politics, I shudder to think of the obvious outcome .

            ISTM that before we think about allowing such power, we ought to get our house in order first – put folks in office that want to provide for the public purpose, THEN forge the tools for them to do that ..

            Right now it, ISTM, that pushing MMT is like giving sharp scissors to a 2 year old, or an AK47 to a serial killer, take your pick …

          3. djrichard

            Fed Gov fiscal operation is already MMT based. Government spending is sterilized by taxes and issuance of bonds. Too bad it comes bundled with the the debt ceiling feature which is used to brow beat the masses.

            So if we had a non-debt-based currency, we’d at least eliminate the debt-ceiling “conversation”. More importantly it would make it more clear that Fed Gov fiscal operation is simply a game of picking winners and losers:
            – winners and losers on who receives money
            – winners and losers on who is taxed.

            Hopefully that would empower more to fight for what’s “right”. For instance, as Micheal Hudson would argue, weight taxes towards sources of inflation.

            In any case, I don’t think MMT “liberation” changes the dynamic for corruption in government. Look at China. They’re essentially MMT-based (they certainly don’t have a recurring debate on a debt ceiling).

          4. Aquifer

            dj –

            “Hopefully that would empower more to fight for what’s ‘right'”

            A two edged sword – also enable more of what is wrong …

            As for fighting for what is right – those coins only empower the folks who hold them – and if, as you say, the folks in power hold them now, then what is their excuse for not using them for what is right? Can’t have it both ways, it seems to me – either they don’t have the power, or they do – in the first case, my objection holds, do you want to give these schmucks more power? In the second case, my objection still holds – look at what they are doing with this power now …

            “Look at China. They’re essentially MMT-based”

            Hmm somehow that doesn’t make me feel warm and fuzzy about MMT …

        3. ebear

          “This is physics, not economics.”

          The physical underpinnings of reality are of no consequence to mystics.

          This is not Copenhagen. THIS IS SPARTA!

      2. JTFaraday

        “Well that certainly is the fiction touted by Austrian economists.”

        Outside a few right wingers and Phil Pilker almost no one reads this stuff. Consequently, what some “Austrian” says is irrelevant in almost all public conversations and pulling the “Austrian economist” card like it has some kind of trumping power is as delusional as you people think “Austrians” are in the first place.

        If I said something you thought was dumb and you attempted to counter me by belittling some douchebag I’ve never even read– thereby effectively changing the subject while attempting to dismiss me by aligning my opinion with someone you think is discredited instead of addressing what I said directly– I would just find you pedantic at best and more likely preposterous.

        But then I am not interested in endless new rounds of pointless ideological bickering where everyone is compelled to pick a team.

        1. Lambert Strether

          Well, if the phrase “sound money” and ranting about precious metals is a sign of Austrian economics, vulgarized, then Austrians are everywhere.

          Wasn’t the recent spate of posts arguing — and not as a parody — that there wasn’t a trillion dollars worth of platinum in the world, so a trillion dollar platinum coin couldn’t be minted, Austrian in origin, even if vulgarized?

          1. JTFaraday

            Oh, okay fine. I admit it.

            I’ve read my Karl Polanyi, and I can say with 100% certitude that sound money/ gold backed money is NOT “Austrian in origin.”

          2. Hypothetical_Taxpayer

            Might try reading at least a summary of Austrian-Econ. They rant about fractional reserve banking the most. Nary a peep about the “gold standard” – if there ever really was one under fractional reserve banking.

            They are quite good at pointing out problems – almost prophetic about bubble blowing our way into our current balance sheet recession.


            But like all brands of econ – fun solutions seem to be wanting – excepting, of course, our “Fake Platinum Coins For National Socialist Imperialism and Predator Drones”.

            P.S. The so called “law” about minting platinum coins is a TYPO and will end up in court or revisited by congress – a “fix” bill already was introduced. Not the least complaint will be that minting $1800 of platinum and saying it is worth a trillion is more than a tad silly.

            And all this ranting about platinum too.

        2. ebear

          “But then I am not interested in endless new rounds of pointless ideological bickering where everyone is compelled to pick a team.”

          There’s probably a site somewhere on the internet where that holds true and I’m sure all three participants would welcome your input. Meanwhile, the reality is that you can’t debate people whose minds are made up – all you can do is mock them and hope that someone somewhere gets it.

          That someone will not be posting to the board. It’s the far more numerous people who read, but don’t post, that you want to reach. People who haven’t made up their minds are far more receptive to new (or old) ideas than those who’ve already staked a claim. That’s your audience.

          OTOH, if engaging in polemics with dilettantes is your cup of tea, then you’ve come to the right place.

          1. ebear

            Insert obligatory “neoliberal” insult here:_______________

            Or you could really step out and label me a neoAustrian.

          2. Aquifer

            I agree – the audience that reads is the bigger one – and that is why we need to engage, even as “dilettantes”, in logic as best we can – insults don’t win arguments – but ya gotta admit, a little snark once in a while breaks the monotony of too much “seriousness” …

    3. TK421

      “The creation of currency is a joint issue of the Treasury and Congress (‘the People’)”

      That’s not what the law says. You remember the law? It’s what we used to follow.

      But yes, the People’s work is sure being done by the government these days, isn’t it? It would be such a gosh-darn shame if that work were interrupted by a platinum coin.

    4. Joe Firestone (LetsGetitDone)

      “Thank goodness the platinum coin ‘idea’ is dead because using them is no way to run a country.

      The creation of currency is a joint issue of the Treasury and Congress (‘the People’) not the prerogative of whoever happens to be sitting nearest the door at any given time.”

      Why not? Later on, you rant against the debt. But a $60 T platinum coin would let us pay back the back and handle deficit spending for 15 – 25 years.

      The creation of USD is Congress’s prerogative alone. But, in its wisdom, it has delegated currency creation to the Fed and banks in general and coin creation to the Treasury. That’s the way it is. The Platinum coin is perfectly legal, the language of 31USC 5112(k) is very clear about the Secretary’s authority in this matter. Why it seems more strange to you have the Treasury creating Trillions of Dollars, than the banks, including the regional Feds creating the trillions is an inconsistency that I don’t understand in your thinking. Certainly, you must recognize that the legislative act establishing the Fed is unconstitutional, because it clearly establishes a 4th branch of government.One of these days the Fed will piss off a President with some guts and he will proceed to fire Fed officials causing a law suit, whereupon the Supreme Court will finally have to quit hiding behind standing questions, and face the issue of the Fed’s constitutionality squarely.

      1. Aquifer

        Joe – methinks you have finally touched on the REAL issue here … “One of these days …”

        That is the problem with this whole scenario, ISTM, the problem is not coins and all and which office has the power to make them so much as who is occupying the office that does …

        You can have as many coins as you want, but if the folks who wield them are schmucks, the public purpose will be no better served than if there were no coins at all, and in fact could be undermined even more …

        FDR did a hell of a lot without a plat coin – and we could do a hell of a lot without one, too – if we would just pay more attention to who we put in charge of the whole shebang …

        The irony is TPTB know this very well indeed – that is why they spend so much time and effort making sure that we choose no one but their minions to run the show – they do not want us to understand the power we have – methinks there is considerably more power in the ballot box than in the mint – the mint is a tool – the ballot box is where we decide on the tool user …

        1. Joe Firestone (LetsGetitDone)

          I agree we have to elect the right people. But it’s also true that the political context is very important. During the 1930s big business and the banks were despised; which made the Roosevelt Administration’s new ideas about fiat money much easier to accept. These days business and the free market is not quite so far down in status and prestige as it was then. And the TPTB are trying obscure the nature of fiat as much as they can. If we can make people understand the nature of fiat, which we can do by minting the coin, then it will really help them come to understand and support a move to mint that coin.

      2. jonboinAR

        The platinum coin idea probably rubs quite a few people the wrong way because it seems like a gimmicky workaround to a serious (at least seemingly serious), somewhat intractable national finance dilemma. That is, what to do about the ballooning debt. It also seems easy to implement in a whimsical or cavalier manner not really commensurate with what might be somewhat far-reaching consequences of suddenly retiring a large portion of our huge debt, basically by presidential fiat.

        1. jonboinAR

          Myself, I’m ready to try it though, as the Tea-pottier’s little repeated gimmick of holding the entire national financial structure hostage to THEIR whims is decidedly ad-hoc and terribly destructive, I should think, to our national financial structure.

    5. diptherio

      “The reason for the Federal deficit in the first place is because the government alone can lose money perpetually and remain in business.”

      The Federal government can “lose money perpetually” because it can also create money perpetually, an ability granted to Congress by the Constitution. If the government was not continually running a deficit, any savings by the private sector or a trade deficit would necessarily result in a drag on the economy, as financial resources would be continually being removed from circulation in the real economy.

      While it is no-doubt true that TPTB are corrupt and sociopathic, that is no reason to not try to talk sense about macroeconomics to the rest of the populace. The sooner the American people learn about how the financial system really operates (which used to be common knowledge back in the ’30s), the less damage the elites will be able to cause, imo.

    6. Rodger Malcolm Mitchell

      Unless you are part of the upper .1% income group, you are speaking in favor of your own economic suicide.

      Sadly, you have no comprehension of Monetary Sovereignty, so will continue to rush into the trap created by the .1%.

      Ignorance does have its penalties.

    7. mac

      I have found in my time that folks with volumes and volumes of words to support something usually have no idea of what they speak!

    8. BruceMcF

      The high value platinum coin seignorage WOULD BE a collaboration between Congress and an administration. Congress has already passed the law authorizing the issue. The next step is then the administration using the power already granted to it by Congress.

      Had the Congress wished to include more Congressional approval of each minting, it could have included that in the law. If it wishes, and both Chambers in a divided government can agree (it would seem that over-riding a Presidential veto might not even be required), it could amend the law to include approval by Congress of each issue.

  2. Titus Pullo

    Joe Firestone wrote:
    ‘I believe that if the MSM bloggers hadn’t set up one of their usual “only talk to fellow villagers” echo chambers, but instead had embarked on an honest discussion of PCS options, they would have ended with a groundswell of support for HVPCS to fight austerity …..’

    I’m afraid you hope in vain my friend. The American MSM is precisely that – mainstream. Its modus operandi is to represent, by-and-large, ideas that have as their common denominators a.) vested interests of the great-and-the-good and b.) least requirement for critical thinking. The idea that a “groundswell” of popular’ support would erupt, via the MSM, for something as “esoteric” as TDC or economic theory in general is wishful thinking at best.

    Consider, (paraphrasing LORNE – ‘probably two of the most important voices challenging the status quo today former New York Times journalist Chris Hedges, and linguist, philosopher, cognitive scientist, logician, historian, political critic, and activist Noam Chomsky , are rarely if ever granted access to mainstream media anymore. Noam Chomsky – a towering intellect, who has for decades been warning us of the fabricated reality being imposed upon us by corporate power’ is invisible to the MSM’s great unwashed audience. An audience that might hear Chomsky say something like:

    “If the media were honest, they would say, look, here are the interests we represent and this is the framework within which we look at things. This is our set of beliefs and commitments. That’s what they would say, very much as their critics say. For example, I don’t try to hide my commitments, and the Washington Post and New York Times shouldn’t do it either. However, they must do it, because this mask of balance and objectivity is a crucial part of the propaganda function. In fact, they actually go beyond that. They try to present themselves as adversarial to power, as subversive, digging away at powerful institutions and undermining them. The academic profession plays along with this game.” From Lecture titled ” Media, Knowledge, and Objectivity,” June 16, 1993

    before channel surfing onto Hollywood Squares for relief.

    1. diptherio

      I love Chomsky, but I have to say, he’s boring as dirt to listen to. I’m interested and in agreement and I still have a hard time staying awake. Something about that monotone…

      Just the fact that PCS made it from the blog-sphere to the MSM, even in watered down form, is evidence that we can have some effect on the debate. A little encouraging, I’d like to think.

  3. from Mexico

    Joe Firestone said:

    …want to deny responsibility for the actions they will take…

    Isn’t that what the entire debt-ceiling ruse is all about, congresscritters who want to avoid accountability for their own actions?

    “The debt ceiling made me do it!”

    When congress does this sort of thing, I’m always reminded of the Flip Wilson skit “The Devil made me do it!”:


    Is there nothing but gimmicks, deception and theater left in either government or Finance?

    This coin is a gimmick.

    Obama’s decision-making is decidedly crafty, in this one case: “They are just a rationalization, so the President, who most probably decided to pretend that this isn’t his decision ; or at least can be partially blamed on the Fed.”

    Don’t get me started on the financial schemes and their schemers, and the government complicity; which Yves has documented beyond any doubt.

    This state of affairs sickens me.

    1. Lambert Strether

      Can we stop with the “gimmick”? It’s the flip side of “innovative,” which is just as much of a trigger word. All this clutching of pearls on the way to the fainting couch gets tiresome.

      There are plenty of examples of currency maneuvers that were derided at the time, had beneficial outcomes, and are now either forgotten or regarded as normal. FDR confiscating gold and printing a single $100,000 bill is one; here’s another; and Lincoln printed greenbacks. No doubt fractional reserve banking, double entry book keeping, and arabic numerals were regarded as “gimmicks” in their day.

      Focusing on the formal characteristics of a proposal to the exclusion of considering its policy outcomes is a sign of analytical weakness, and one, I might add, shared by most opponents of The Coin, and by this comment too. One might almost regard the ridicule — and I like my snark as well as the next man — as coming under the heading of agnotology.

      1. DANNYBOY


        OK, I’ll stop clutching pearls on the way to the fainting couch. Also, I admit that my comment displays my analytical weakness.

        But am I guilty of agnotology too?

        Please advise so I can change.

    2. TK421

      A coin with a value of one trillion dollars is a gimmick, but a piece of paper with a value of one hundred dollars is just sound economics, because…well…um…

      1. Lambert Strether

        Every time I hear “sound money” I think “noisy distraction” (by someone with a fetish for metal).

        What’s “sound” is what (legally) fulfills public purpose, especially in the real economy, as FDR”s $100,000 bill clearly did.

      2. DANNYBOY

        Because people have agreed to accept the $100 bill, it is accepted as Currency.

        Not so with the coin with a value of one trillion dollars.

        1. Joe Firestone (LetsGetitDone)

          I think you miss the point. The coin is a mandatory instruction to the Fed to issue its electronic credits to the Mint’s PEF account at the Federal Reserve. The Treasury then “sweeps” that account for the difference between the mint’s expenses in making the platinum coin and its face value. That difference in electronic USD credits then goes into the Treasury General Account (TGA), from where sooner or later it is spent on paying down debt or covering deficit spending in denominations that are readily accepted by people who are used to accepting USD created out of thin air by the Fed. In short, the acceptability of the $60 T coin is not an issue once credited by the Fed!

    3. Aquifer

      Never underestimate the power of a “gimmick” – today’s “gimmick” is tomorrow’s cannot do without – which is why i always say, be careful what you ask for ….

    4. Joe Firestone (LetsGetitDone)

      The coin isn’t a gimmick! It represents the legal authority of the Executive Branch to exercise the full thrust of the coinage authority delegated to it by the Congress. It’s no more a gimmick than the procedures the Fed uses to create currency out of thin air. In fact, the platinum coin is way of mandating the Fed to use its currency creation power to fill the public purse. And what’s wrong with filling the public purse to show people that it’s a lie to claim that we’re running out of money? Congress still has control of the purse strings which it exercises through its appropriations.

      1. diptherio

        I was disappointed to hear Krugman using the word yesterday, as well.

        PCS is a gimmick but QE isn’t? Uh…why?

        And “gimmick,” is itself a rather troublesome and paradoxical word, with both positive and negative meanings.

        Gimmick, noun: 1)A device employed to cheat, deceive, or trick, especially a mechanism for the secret and dishonest control of gambling apparatus. 2) An innovative stratagem or scheme employed especially to promote a project

        Obviously RMBS, CDS, CDOs, etc., along with HAMP, the Foreclosure Task Force, the Mortgage Fraud Settlement, etc. all fall easily under definition 1. PCS is a gimmick only in the sense of definition 2 (the program being promoted is maintenance social welfare spending).

        So let’s not call it a gimmick, Danny. Let’s call it a policy option, i.e. something that we can possibly do. I think that’s a little more exact.

      2. DANNYBOY

        It IS “more a gimmick than the procedures the Fed uses to create currency”.

        This analogy is almost analogous (get it?) to Lambert’s comparison to “fractional reserve banking, double entry book keeping, and arabic numerals”, above.

          1. DANNYBOY


            I do appreciate the time you’ve taken to explain the technicalities of the operation. I have found myself in the position of explaining my comment to a number of people, sometimes in defense.

            I wrote that I was upset with all the shenanigans that have taken place in Finance, and the Government’s complicity. And my original comment expressed my disillusion with the with indirect methods of the coin.

            What I wanted to communicate was that I am sick and tired of these crafty players.

            OK, now I end up defending myself against annoying personal attack from Lambert, and from technical corrections from you, and others.

            It’s just that I wish the President would deal with this debt limit honestly and directly. Maybe all that’s left is games.

  5. JTFaraday

    “It wouldn’t change the fundamental drive for austerity in both parties, fueled as it is by the view that “national debt” is both frighteningly large, and also unsustainable.”

    Well, let me see here.

    IF the idea behind the magic bean is really that its promoters want to promote US Treasury dollars backed by nothing but the power of the global hegemon in lieu of still more Federal Reserve dollars backed by the debt

    THEN, doesn’t the idea that the debt is “frighteningly large and unsustainable” work to their advantage?

    Especially given that it is the belief of the magic bean promoters that everyone in the country is so dumb that they think the finances of the global hegemon exactly replicate that of “their own households,” in which debt is indeed frightening, unsustainable and leads to bankruptcy, shame, unemployability… (I don’t think people are that dumb, but I’ll play along).

    Let’s be honest here. Most of the times, politics works on half truths at best. Do the magic bean promoters want to be technically correct or do they want to “mint The Coin”?

    The popular belief that debt is bad is good for belief in The Coin.

    Whether The Coin would be good for them is another question. After all, they still have no control over the government that would be minting it.

    1. JTFaraday

      ie., still a government that reserves to itself the right to kill whoever it wants, whenever it wants, wherever it wants, for whatever reason it wants, in defiance of all constitutional and international law.

      1. jrs

        Hey now, a 1 trillion dollar coin could buy a lot of drones. Which oddly every city is soon going to have despite every level of government crying “bankruptcy!”

        1. JTFaraday

          So, what you’re saying is that the global hegemon is going to do what it wants, whether it does it with magic beans that carry interest or magic beans that don’t carry interest.

          Although, if the parties in charge of the government feel forced to pretend to make money off drones instead of pretending to make money off the interest on their magic beans, we’ll just get more drones!

          This just underscores the point of the much maligned first commenter that the underlying problem of the corrupt government that is killing you is not going to be solved by Jack’s beanstalk.

        2. TK421

          “Hey now, a 1 trillion dollar coin could buy a lot of drones.”

          True but irrelevant, since drones are a constituency that have never had trouble having their costs met by Congress and the president.

      1. JTFaraday

        I’m not the one who thinks the global hegemon needs a coin trick, so it’s (once again) pointless for you to talk at me about it!

    2. Joe Firestone (LetsGetitDone)

      They’ll be in a better position to influence the Government if they cease to believe that the US is running out of money. Then they won’t let the elites get the safety nets or all the other programs they’re after. That’s the result of using the $60 T coin!

        1. DANNYBOY


          This is the third instance of you hurling your Agnotology Accusation, ON THIS ONE WEBPAGE!

          As I haven’t received a response my my sincere inquiry questioning why you’d accuse ME, should I just assume that you are test-marketing your new theory of Agnotology Explains Everything?

          Again, I sincerely await your reply.

          1. Aquifer

            Sorry – getting old, don’t remember, what’s “agnotology” again? – wasn’t in my dictionary

          2. different clue

            To Aquifer actually,

            I think Agnatology is intellectualese from “spreading the dummgas” or “fostering stupidism”. Or one could say that “spreading the dummgas” or “fostering stupidism” is English for agnatology.

      1. Aquifer

        Joe – if folks don’t want elites going after safety nets, maybe they shouldn’t vote for them …

        1. Joe Firestone (LetsGetitDone)

          Well, notice that they don’t intentionally vote for them. They vote for people who make all kinds of promises and then when they get in suddenly decide that “teh debt” is the biggest issue in the universe that can only be solved by cutting spending a smidgin of increased taxes. They’d have a lot harder time selling that BS if $60 T were in the bank and the debt was getting paid down fast.

          1. Pepe

            But the chief promoter of this view (we have unsustainable debt and a government’s budget is like a family’s) (Obama) is the person you want to mint the coin?

            I don’t disagree with the theory of the platinum coin; I just am circumspect of the actual people involved.

        2. different clue

          Why don’t more people vote third party? I speculate that people remember what happened during and after NaderBush versus Gore and decided that Bush really was far worse than Gore ever could have been. Also, some people still remember RepubMcGaw versus Wellstone, and still hold a grudge.

          I suspect Green Party behavior in the two elections referrenced above has poisoned the well against third parties for many years to come. I speak as one who voted for Rocky Anderson this time around.

      2. Aquifer

        Joe – they’ll be in a MUCH better position to influence the gov’t once they demonstrate they are going to kick Tweedledee and Tweedledum out on their tweedles …

        Until they do that – they have NO leverage – knowledge is necessary, but it ain’t sufficient …

  6. JTFaraday

    “since it is more strategic than tactical, would have been much harder for the President, Geithner, and Bernanke to dismiss, after a campaign that had identified it as the way out of austerity for the United States.”

    No, once you include Bernanke, you’ve already lost. Bernanke is irrelevant in the Land of Magic Beans.

      1. JTFaraday

        I’m not the one who pretended to cut Bernanke only to invite him back in!

        What’s the matter? Too scared of sounding like a Tea Nutter who wants to “End the Fed”?

        1. diptherio

          Personally I could care less about being grouped in with the “Tea nutters.” How others label me is their concern, not mine.

          “End the Fed as We Know It” is definitely a slogan I could get behind (which, btw, is kinda what a $60T coin would do).

  7. Synopticist

    Obama has been an idiot, again.

    Even if he had decided not to mint the coin, he shouldn’t have announced it before negotiations properly begin. Just the fear that he could produce a trillion dollar coin out of his pocket would have given his opponents nightmares. The republicans are now emboldened and confident they’ll break him.

    1. Aquifer

      Pssst – that was the point, he wants to be “broken”, a martyr to the cause of gov’t solvency, the savior of the nation and …. (sorry, my barfing keeps obscuring the page …) the salvager of SS/Med that otherwise would be “in dire staits” but for his heroic efforts …. (oh rats, now i have problems from the other end …)

      Have you not understood this by now – what keeps you from seeing this?

    2. different clue

      He’s not an idiot. He’s a Catfood Conspirator. He just plays the idiot on TV in order to throw eternally hopeful progressives and liberals off the scent.

      It’s a shuck-and-jive stringalong thing.

  8. jack hepler

    Hey Joe, thanks for your efforts on this issue. As a moderately well-informed reader— still rather innocent on economic matters— I still lack some fundamental clarifications.
    In general, I have not seen the single article that lays out the following aspects of this in terms that I and the rest of the unwashed can readily understand. Letsgetitdone came very close here, very enlightening to me.

    The larger question: are we better off with our current system (which has left our country 16.7 trillion dollars in debt) of privately controlled debt-based money or might we try a (Constitutionally mandated?) system in which the Govt directly controls the creation of money, without having to go deeply into debt? I cannot believe that the USGovt could do worse than what we have now. I’ve seen such money called “debt-free money”. Terminology is very important. I think that calling it “fiat money” is misleading, since Federal Reserve notes are also issued by fiat, backed by nothing but other Fedral Reserve notes.
    This question would merit an historical note of the creation of the Fed Resreve System, a legal contract in which Congress presumably offloaded its constitutional mandate onto a private banking cartel. (And I’m not certain that my previous sentence is completely accurate.)

    Sub question— how does the “obscure law” regarding platinum comemorative coins relate to the Constitutional mandate that “Congress shall have the right to coin money”? Would it not be better to carry this issue forward under the Constitution rather than the “obscure law”?

    Sub question— is it true that 4% of US money today— coins and bills— are actually already “debt-free money”, created directly by the US Treasury? Who, finally, controls the amount and production of these? That would be an existing precedent— we are not pushing something stupid-radical if this is true. High Value Platinum Coin Seigneurage could move this percentage incrementally, without directly challenging the Private banks right to create debt-based money.

    SubQ— Isnt the Fed— in Quantitative Easing (QE)– creating dollars out of electrons? How does that compare to the USTreasury creating dollars out of HVPCs?

    Again: clarity, common terminology, a Summit of HVPCS bloggers; a Manifesto that deals with these questions (and more) in simple language.

    1. TK421

      “Isnt the Fed— in Quantitative Easing (QE)– creating dollars out of electrons?”


      “how does the “obscure law” regarding platinum comemorative coins relate to the Constitutional mandate that “Congress shall have the right to coin money”?”

      Congress passed a law allowing the Treasury to mint a platinum coin, so there shouldn’t be any conflict, I don’t think. No one is saying it’s time for Congress to lose its right to coin money, just that the Treasury should be able to do so as well. Also, the money created by minting a platinum coin could only be used to pay expenses already authorized by Congress, while money created by Congress can be used for new expenditures, so Congress still has more authority on this.

      1. Aquifer

        Hmmm – sounds like this coin thing, though, in essence, is passing the power of the purse given to Congress to the Pres. as in Congress can appropriate but if the Pres doesn’t direct Treas. to “mint the coin” …. Rather like a big veto – rather like Congress creating a program, then refusing to fund it …

        1. Joe Firestone (LetsGetitDone)

          “SubQ— Isnt the Fed— in Quantitative Easing (QE)– creating dollars out of electrons? How does that compare to the USTreasury creating dollars out of HVPCs?”

          The Executive can’t refuse to spend Congressional Appropriations. It’s mandated to spend them. But, unjustly, it’s now up to the Treasury to generate the credits supporting the spending through taxing, borrowing, and seigniorage. That makes no sense. When Congress mandates the spending it should also authorize the Treasury to create money out of thin air in the act of spending if credits are lacking in the TGA to cover the spending.

          However, the customary way of things happening now is that the Fed creates money out of thin air for its operations while the Treasury uses taxes, borrowing, and very little seigniorage. The $60 T platinum coin changes that. It lets the Treasury commandeer the Fed’s capability to create money out of thin air, for its operations. So, it’s not HVPCS that actually creates the dollars. It creates the “instruction” mandating the Fed to use its power to create dollar credits out of the electrons. It’s as if the Fed had been folded into Treasury for purposes of facilitating deficit spending and repayment of debt.

    2. davidgmills

      I think the Constitution is a much better authority. Tehre was some question when Lincoln issued his greenbacks whether paper money qualified as “coining money” under Article I, Section 8. But the Supreme Court in the Greenback cases answered that question. It held that at the time the Constitution was written, “coining money” and “printing paper money” were considered to be the same.

      But interstingly, the court also held that “printing paper money” was part of the war powers of Congress. You might recall that Lincoln, when he attempted to borrow money for the war was told by the bankers that they wanted 24-36% interest. At the time, which was during the early part of the war, a Northern victory was far from certain. The risk of a Northern loss was quite real to the bankers hence their demand for usurious interest. In short, greenbaks were a war necessity and thus part of Congress’ war power.

      1. davidgmills

        Additionally, under Article I, Section 10, States are prohibited from “coining money” and “emiting bills of credit.” Bills of credit are the equivalent of “printing paper money” and there are a number of cases where the courts have had to decide whether States were “emiting bills of credit” or whether states were borrowing. Where the states were found to be “emiting bils of credit” this was considered to be the equivalent of printing money and thus was unconsitutional.

        Note also the constituion does not prohibit the federal government from emitting bills of credit but it doesn’t expressly say it can.

        1. davidgmills

          One more point. Under Article I Section 8 Congress is given the right to coin money and to delegate its value. In this platinum coinage statute, it gave the treasury the right to mint these platinium coins and granted permission to the treasury to delegate the value. So the constutional question would be whether Congress could give the delegation powers to the executive. I could see the Court going either way on that one. Probably have to look at the Congressional record to see what Congress was really debating here.

          I think it would be a bit of a stretch to think that Congress envisioned the treasury making trillion dollar coins. I think they probably intended this statute to permit some coinage of limited value but not vast sums like a trillion dollars.

          But Congress’ problem in creating this statute is that it failed to place a limit on valuation and presumably Congress knew it.

        1. davidgmills

          There are a number of cases collectively known as the greenback cases. As I recall these were decided five to ten years after the war ended.

    3. Joe Firestone (LetsGetitDone)

      There’s no debt free money. Money is a debt of the Government in the sense that it represents a tax credit which the Government must accept. Now I’m not saying that “money” in the form of reserves isn’t different from money in the form of Treasury Securities. It is because 1) Treasury Securities aren’t a tax credit in that form, but 2) eventually will be redeemed for reserves plus an interest payment in reserves, again tax credits. So, everything comes down to tax credits; but securities are different in that the government pays out more in tax credits eventually if you owns securities than if you own reserves. However, these days it’s even true that if you own reserves the Government will pay you interest. That is, the Fed will pay Interest On Reserves (IOR)

      1. davidgmills

        Bills of credit, or cash, can come in two forms from the government. Bills of credit can be used to pay tax. But they can also act as a loan to the citizenry and earn the government interest.

  9. Steve Roth

    COINS not coin.

    Say, a $1 million or $1 billion each.

    As needed to meet obligations, not one big coin.


    “We are constitutionally and statutorily required to meet the spending obligations imposed on us by Congress. Congress has failed to provide the bond-issuing authority necessary to fulfill those obligations. To do so, we will issue platinum coins at approximately the same rate that we have heretofore issued bonds, as needed to ensure our ability to meet congressionally-imposed obligations.”


    “Not to worry, we’ll adjust OMO and QE operations as needed to maintain monetary stability.”

  10. davidgmills

    The coin is being portrayed as a gimmick, but in actuality represents a return to a monetary system that Franklin, Jefferson and Madison wanted: a fiat money system where money created out of thin air was created by the government rather than a private central bank ( as envissioned by Alexander Hamilton, international bank wh*re).

    When the private banks control the creation of fiat money, as they have since the Federal Reserve was created in 1913, the banks get to create money out of thin air and the government is forced to borrow from the banks. With compound interest this creats a government debt that can never be repaid. 2013, the 100th anniversary of the Fed, should be the year of the jubilee. The trillion dollar coin would have been a good start. Fifteen or sixteen more would have returned us to government fiat money.

      1. NotTimothyGeithner

        If you accept the idea the Revolutionary War and the Constitution were ultimately about preserving a 1763 status quo minus the trouble with the French, this quote from Franklin when he was in England in 1760’s I think is the end game of Madison, Hamilton, and even Jefferson* despite their political differences.

        “That is simple. In the Colonies, we issue our own paper money. It is called ‘Colonial Scrip.’ We issue it in proper proportion to make the goods and pass easily from the producers to the consumers. In this manner, creating ourselves our own paper money, we control its purchasing power and we have no interest to pay to no one.” -Franlin, explaining why there were no poor people in the non-slave colonies.

        Look at their shared, overall policies, a strong navy, paying down the war debt quickly when we were a new country with a new government not dependent on nobility or church backing, and aggressive expansion to the Missippi which would prevent other countries from trading inside the U.S. without dealing with U.S. customs. The underlying theme of the Federalist Papers is how do we continue without the British and preserving what had been hopefully achieved. The Federalist Papers don’t discuss the character of the country but are about preservation and succession of the current generation. What do they do when Hamilton and Madison are gone because they represent different parts of the country and were Washington’s Continental Army lackeys? Slavery was dying at the time. Cotton wasn’t king.

      2. davidgmills

        Here are three common quotes I commonly find on the internet attributed to these three men.

        I find this first quote a lot from Jefferson, purportedly in a letter to Secretary of the Treasury Albert Gallatin, in 1802:

        “I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around [the banks] will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs.”

        This second quote is widely attributed to Madison on the internet but it is not referenced to time or place that I see; on the other hand, it doesn’t appear to be challenged:

        “History records that the money changers have used every form of abuse, intrigue, deceit, and violent means possible to maintain their control over governments by controlling money and it’s issuance.”

        Franklin purportedly said this third series of quotes in his autobiography and I see nothing on the internet to dispute its authenticity:

        “We have no poor houses in the Colonies, and if we had, we would have no one to put in them, as in the Colonies there is not a single unemployed man, no poor and no vagabonds… It is because, in the Colonies, we issue our own paper money. We call it Colonial Script, and we issue only enough to move all goods freely from the producers to the Consumers; and as we create our money, we control the purchasing power of money, and have no interest to pay.” (This statement was made before the war to the British Bankers when he was in England and after the war he said this about the revolution) “The refusal of King George to operate an HONEST colonial MONEY SYSTEM which freed the ordinary man from the clutches of the manipulators was probably the prime cause of the Revolution…The Colonies would gladly have borne the little tax on tea and other matters, had it not been that England took away from the Colonies their money, which created unemployment and dis-satisfaction.”

        There are of course limits to links onthe internet. To be ceratin, we would really need to look at the original texts themselves.

          1. davidgmills

            How do you know these don’t appear somewhere in his papers? His publications were extensive and I would not trust search engines one bit. Now I do notice he has in has papers from 1729 an article on the necessity of paper money.

          2. davidgmills

            Here’s an excellent paper by Franklin called “The Legal Tender of Paper Money in America” taken from the Franklin cite.


            And here’s some more remarks made to the London Chronicle stating how well paper money in the colonies worked when the colonies lacked gold and silver:


            In it he says: “Thus, if carrying out all the Gold and Silver ruins a Country, every Colony was ruined before it made Paper Money. But, far from being ruined by it, the Colonies, that have made Use of Paper Money, have been and are all in a thriving Condition.”

            Whether the quotes I cited in the earlier post and attibuted to him are technically his words or someone’s interpretation of them, they seem to be at least a fair summary of his views. It may be a stretch to say that Franklin thought that taking away the colonies’ ability to print money was the primary cause of the revolution, but it does seem clear Franklin thought it was a major cause of the revolution. See for example:


            The major qoute:

            “To a concurrence of causes; the restraints lately laid on their trade, by which the bringing of foreign gold and silver into the Colonies was prevented; the prohibition of making paper money among themselves; and then demanding a new and heavy tax by stamps; taking away, at the same time, trials by juries, and refusing to receive and hear their humble petitions.”

    1. TK421

      Well, president Lincoln used fiat money to win the Civil War, correct? But he never sang at the Apollo Theater, so who cares about him!

  11. hcm

    The statement from the Treasury spokesman is curious in a number of ways, both for what it says and for what it doesn’t say.

    The statement that the Treasury and the Fed agree that the platinum coin can not and should not be used to avoid the debt limit is making both a policy statement — the coin “should not” be issued for the specified purpose, and a statement about the fact that the issuance of the coin can not affect the debt limit.

    Let us dismiss the policy statement. It may well be that that it is poor fiscal management to just issue money for a particular purpose instead of borrowing it but whether it is good or bad policy is a matter for the administration to decide, presumably considering the alternatives available to it.

    Whether the Treasury can issue the coin is a different question. If the Treasury has the authority to issue platinum coins is the amount of, say, $1 million, why can it not issue them in the amount of $1 billion or $1 trillion. I believe the discretion to determine whether to issue any platinum coins and, if so, the amounts to be issued is statutorily conferred on the Secretary of the Treasury. So what are the constraints?

    The statement suggests it is the purpose of the issuance that is offensive, not the fact of the issuance. So coins can not be issued to avoid the debt ceiling. Can they be issued for other reasons such as paying expenses or debt obligations as they come due for example? The Treasury spokesman does not say. Could the Treasury issue a trillion dollar coin if the debt ceiling had just been raised to degree sufficient to eliminate it as concern for the immediate future? Why not and why would that be different as a matter of statutory interpretaion? I do not believe that there is any requirement in the statute that any currency be issued for a particular purpose.

    I recognize that Congress probably contemplated that any platinum coins issued would be issued as collectibles but that limitation is not in the statute and it is not uncommon for statutes to be applied in ways that were not originally contemplated. The framers likely contemplated that the first amendment would apply to boring writers like Publius and did not question whether it would apply to writers like Joyce or Henry Miller. But it, like the platinum coin statute says what it says and as a general matter the literal wording of a sttute is a pretty good guide to its meaning.

    In short, I would love to see any written legal opinions by Treasury counsel addressing the point. (By the way, doesn’t the Solicitor General have the ultimate responsibility for issuing legal advice to the Government?)

    The larger point is that the apparent decision of the administration to foreclose the platinum coin option appears to me to be far from mandatory. There is plenty of reason to believe that the approach works. So why take it off the table? My guess is that the Administration wants a show down of sorts but I also believe that they have left themselves plenty of options to reverse course.

    By the way, I think it would be foolish to issue a trillion dollar coin. Much better to mint 1000, maybe 2000, billion dollar coins. And why try to talk the Fed into accepting it. Much better to issue one or two to a large bank which can take to the fed and deposit it and let the Fed tell it that no, it will not accept for deposit the currency issued by the Treasury. My guess is one could actually try just one or two and see how that plays out.

    1. Joe Firestone (LetsGetitDone)

      Please read the diary. The NY Fed cannot refuse to mint the coin if ordered to by the Secretary of the Treasury.

      On the number of coins involved, I’d like to avoid the situation where the platinum market is impacted in any way by this. The platinum coin is purely a way to commandeer the Fed’s currency power to fill the public purse. One $60 T or $100 T coin will do that; so that’s all we ought to mint, or actually we should mint two of whatever we choose, because the Fed could ask its coin to be redeemed for equivalent money. So, if they did that, Treasury would need another one in reserve!

      1. jack hepler

        Hey joe/ letsgetitdone
        Here is one more piece of the puzzle I question, and I am pretty totally on board this HVPCS ship: The 60 trillion dollar coin is a bit much for me and others to swallow. Many mini questions, such a giant step has far less chance in reality– yes someday this may be a real possibility.
        If we started with easily comprehended small steps such as the buying back of US T-bills from the Fed-bank freeloaders and normalized the intra governmental debts (per yr post in Corrente, op cit), people could actually swallow this and see, in a few years the results with minimal influence of fear and ignorance.
        Personally, I have a hard time understanding in theory how the 60T infusion could avoid severe dislocations. That first 6.7T step is already a huge bite for most folks.

        1. Joe Firestone (LetsGetitDone)

          Read my piece on inflation here: Then address the points made in it. PCS at whatever level isn’t inflationary in itself. In addition, incremental steps won’t work. The reason is that they don’t SHOW people that the debt is no longer an issue. Taking it off the table is the necessary condition for enabling the success of progressive fiscal policy. Sometime incrementalism just won’t work. You have to do what’s necessary to solve a problem. First you must recognize what it is. Then you must solve it. No half-measures will do.

          Look at the ACA, it’s going to be a miserable failure. Look at the ARRA, the stimulus bill, it failed in overcoming our unemployment problem. Look at FINREG, nothing done there that will stop another crash of the global economy. Look at the efforts to help homeowners, a total fraud. No moderation in these matters doesn’t work. You have to solve the problem and be ruthless in your assessment if you fail to solve it.

      2. hcm

        I have not checked on the details of how coins are produced. I was assuming that the Treasury did it themselves through the Bureau of Engraving and Printing. Not sure it matters–the details change but not much else. The ultimate question is whether the coin, once made, is accepted as money and I can not imagine a situation where the Fed tells the Treasury that the money it issues is not good enough. So I do not think that you are saying anything that is inconsistent with what I am saying (or vice versa)

        The point about smaller (e.g. $1 billion) denominations was to create a situation where there was a non-governmental entity (e.g. a bank) that had held one and deposited it with the Fed. If we both read the statute right it is a superfluous step. But the implication of the statement from Treasury is that the Fed might not recognize the coin as lawful currency. That position gets harder to maintain when the question is not an issue between the Treasury and the Fed but between the Fed and a privete entity. And, perhaps more importantly, once a platinum coin has been “circulated” even in a limited way, there is one less level of abstraction to the question of whether it is valid money. If it has been used in a commercial transaction (e.g payment for government bonds)the argument (if there ever was one) that it is not truly money because it was never intended to be used as money is eliminated. The coin (or one of the same series) would have actually been used as money. It would not be (merely) some accounting trick.

        So there are reasons for using smaller denominations. It may be that they are not really necessary. I think they are not necessary but I would take the trouble anyway to strengthen my position if I thought the validity of the coin might be challenged.

        I do not worry too much about affecteing the platinum markets. I would assume that they are robust enough to handle the tangible delivery of a few pounds per month of the stuff. I also have to assume that the recalcitrant members of Congress would fold their tents if they thought that their refusal to raise the debt ceiling would be unavailing. So if the Treaury provided for the initial minting of ten or twenty physically small billion dollar platinum coins of a planned series of one or more thousand, I would think that even the House majority would recognize the game was up.

    2. Aquifer

      Precisely – i have a problem with the idea of “money is no object” in terms of spending for a number of reasons, but the admin case for refusing this idea is quite bogus –

      ISTM that the only way the admin can save face in all this is to absolutely refuse to “bargain down” the safety net programs, period – otherwise, if he does “bargain” though it is clear to the public (key) that he had “a way out” from doing so and didn’t use it, i think the Dems’ ass is grass (or I guess i should say, I would hope it is …)

    3. Lambert Strether

      Thanks for making an important point. The statement reads:

      “Neither the Treasury Department nor the Federal Reserve believes that the law can or should be used to facilitate the production of platinum coins for the purpose of avoiding an increase in the debt limit,” said Treasury spokesman Anthony Coley in a statement.

      I’ve parsed a lot of Beltway-ese in my time, and this looks to me like they’ve reserved the right to produce the coin for some other purpose. Now, one could argue that the purpose should be collecting seignorage from coin collectors, but the statement does not say that, no more than the law does.

      1. Hypothetical_Taxpayer

        Let’s not play dumb. The purpose was to make something like American Eagles – with a SMALL minting charge – except in platinum.

        The American Peagle.

        They neglected to say in the 1995 bill that a trillion dollar minting charge is NOT small. But that will be corrected one way or the other.

        1. Aquifer

          There are canons for construction when interpreting laws – one runs “whatever is not expressly forbidden is allowed” another “whatever is not expressly allowed is forbidden” – let the courts decide –

          I Obama gave a damn about the 99%, he would argue the first …

          1. Hypothetical_Taxpayer

            Did I mention the American Peagle is also a cross between a poodle and a beagle?

            Be good to remember that when platinum hits a trillion dollars an ounce and Treasury has to breed dogs for money. Then Fed turns into kennel of trillion dollar pooches and finally gives up on QE.

            Hope they pee on the then Fed Chairman’s leg anyway.

        2. lambert strether

          Cite to the legislative history, please. It’s always easy to say what the law means, and unfortunately in this case the plain meaning of the words is clear, no matter what you wish the words meant.

          1. Hypothetical_Taxpayer

            moi? I read the “legislation” posted in the comments here a year ago. It was about one paragraph long, from 1995 I believe, and so loosely worded you either had to believe that “minting” meant making coins like a gold Eagle with a small minting charge, or be precient enough to think someone may try and make trillion dollar platinum coins, or most likely, no one in congress read it.

            I didn’t save a copy of the “law”, thinking you guys are the experts on that subject. So I’ll wait for you to post you copy, which I’m sure you have handy.

            Also, I didn’t say I would be the one officially interpreting the law. I’m not in Congress or the Supreme Court (ya know, the corporate personhood people)

          2. Jeff W

            A fairly clear account of the legislative history of the provision is given in the Washington Post here. (Obviously, the account itself is not the official legislative history but it gives enough detail that the official legislative history can be traced.)

            In 1995 Rep. Michael Castle [R-Del] took over as head of the House Financial Services subcommittee on domestic and international monetary policy and issues of coinage were part of that subcommittee’s jurisdiction. The original provision that he drafted (along with former US Mint Director Philip Diehl), which later was incorporated in subsequent legislation that became 31 USC §5112(k), was the Commemorative Coin Authorization and Reform Act of 1995.

            From the article:

            The logic…was to enable the Treasury to put out collectable platinum coins of a variety of sizes. At the time, collectors had complained that the smallest platinum coins available were too expensive, a problem the bill was supposed to enable the Treasury to correct. “The investment community wanted flexibility to make fractional coins,” Castle explains. “People couldn’t afford the $600 investment, so they wanted the flexibility to put in smaller coinage so that people could collect them.”

      2. Calgacus

        A point which deserves some consideration is that neither the Treasury or the Fed are really the ones whose opinions are important. Of course, to mint a coin, the Treasury must do so. But the basic thing to remember is that the Big Platinum Coin, the TDC, whatever is just that. A coin. No different from a penny or a Susan B. Anthony.

        One of the only objections that make any sense at all is Eugene Volokh’s that for it to be money, and to come under Congress’s constitutional powers, it must circulate. So mint some circulating coins, say with billion or ten billion denomination. The thing is not whether the Fed thinks it must accept it, but whether our legal system enforces its acceptance. It does.

        For it to be money, that it be “twintopt” – something that you can pay your taxes with – is more than enough. Can you pay taxes with a platinum coin? Well, you can pay them with any other sort of coin. Suppose you tendered a platinum coin. Suppose the Treasury rejected it, being mired in Obama-ism. Now, you might think you are in something like a 1935 Perry v US situation. Where you would be suing the government to accept the coin. And the government has the (deplorable, but real) doctrine of sovereign immunity, that it can only be sued with its consent. This consent was withdrawn after 1935 (Source, Depression Decade, Broadus Mitchell).

        I don’t know if the government is still immune from such suits. But it does not matter. What matters is if the government can sue you for another means of tax payment, having rejected your good faith offer of the coin. Frankly, this is a joke. Any non-corrupt court would laugh it out. You have a coin, just like millions of others that have been used to pay the government. The government, because it is insane, innumerate and illiterate, rejects it. An honest, sane court could not.

        SO the point is, once a platinum or any other coin is minted and circulated, then it is up to the courts. There are literally millions of real-world precedents. Accepting the platinum coin is business as usual. Rejecting it is not. A court would have to be truly insane to ignore them. Sometimes, they are, but then we are beyond the point where direct logical argument can be of any use, but in “When in the course of human events” territory.

  12. ebear

    “Well first, we need to recognize that the TDC, with its intense and frenzied web-based campaign was based on the wrong coin and the wrong cause.”

    Exactly! The coins should be ten dollar denomination and made of chocolate. You watch the velocity of money go up with that kind of coin, especially on a hot day.

    1. Lambert Strether

      Funny how all the jokes about The Coins take off on the physical medium. Since is so so so so so wrong an idea, and demonstrably so*, it’s clear that the jokes serve at least a cultural purpose, and perhaps an interest in political economy as well.

      NOTE * Like the people who think a pound has to weigh a pound.

      1. Aquifer

        Shucks, of course they do – when things like life and death can be joked about, surely platinum coins are not “off the table” – oh, wait ….

  13. Paul Tioxon

    Austerity has been decoded and debunked as the deliberate rationing of money circulating through the populace by conscious policy choices or the rejection of viable options to overcome rationing. At the largest level of analysis, the sovereign nation state, the self designated point of origin of money is the government. It is lawful for the US Treasury to mint coins and print dollar bills and issue US Bonds and Treasury Notes. This is beyond dispute. It is also includes the power to mint a platinum coin, in any amount and deposit it in the government’s own account at the Fed which can be drawn against.

    Since this financial innovation comes form the sovereign power of the government, legislated into existence in a clearly written law, the only question is when will my economy be allowed to benefit from this financial innovation that was made possible by generations of labor, paid and unpaid, to build up the physical plant of the USA.

    Austerity is the rationing of this boundless resource of money, too cheap to meter. The fevered concern is that if money is just passed out to every Tom, Dick and Jane, then we will all retire to our homes and apartments and drink and screw and watch television, and maybe in some quarters, play violent video games and go postal after a bad day at the shooting range. But, that simple minded fear of the great unwashed, becoming financially independent and not even knowing what to do with themselves is BS.

    For starters, a reasonable proposal, put forth by many serious people, more serious than me by any measure, is to set up a NATIONAL INFRASTRUCTURE BANK. We all know there are calls to harden the assets of NYC and all of the coastal Northeastern USA from severe storm damage. Burying all of the electric and cable lines, will prevent the undue deaths, injury and damage to so much property when communications and power goes out. Replacing underground gas lines with a solar electric and fuel cell grid in densely populated areas will prevent explosions and fires.
    And on and on.

    This will stop the austerity and circulate money back into the my economy, which will trickle up when I decide to buy from a Fortune 500 company. WE can rationally distribute the unlimited supply of money we can generate from the Treasury, but we can do it in way that takes up our time in meaningful enterprises that are good investments to preserve our society and our nation into the future.

    1. citizendave

      As a nation — as People of Earth — we have an existential dilemma. What should we do?

      Should we continue to allow ourselves to be constrained by whatever revenue and borrowing we can wring out of our crazy dysfunctional economy? Or should we talk about what we would — and should — do if cost were not a constraint?

      Ellen Brown, in Web of Debt and elsewhere, argues for a Public Infrastructure Bank that would use Treasury-issued debt-free money for the public good.

      We lack a common vision for a debt-free future, and there is some reason to believe that the global corporate-banking behemoth likes it that way (see Lambert’s “agnotology”). If we could achieve a popular vision for the kind of world in which we would like to live, it would go a long way toward putting to rest the fears of those who suggest that only our spending constraints are keeping our worst excesses in check. With a common vision of the world we wish we could inhabit, with abundant prosperity, yet minimal impact on the future of the planet, we could weigh every public policy decision against whether or not it would serve our vision and goal of a better world.

      Vox populi should be loud and clear.

      1. Aquifer

        “If we could achieve a popular vision for the kind of world in which we would like to live, it would go a long way toward putting to rest the fears of those who suggest that only our spending constraints are keeping our worst excesses in check.”

        Yup, it would, but until we get there, and we ain’t even close, ISTM we might be wise to maintain those “spending constraints” …..

  14. Hugh

    We live in a kleptocracy. Obama occupies an important post in it. He was not going to accept the platinum coin solution either short term for the current debt ceiling crisis or longer term to pay down the national debt and end its interest subsidy to the banks. The whole point of these serial fabricated fiscal crises is to justify cuts to programs important to the 99%. That the Fed would not let him is a red herring. As Joe Firestone cites in the law, the Fed has no power to say no. Obama did not choose this or the 14th Amendment option because he has no intention of solving this problem but rather exploiting it.

    The only reason he would embrace the platinum coin is if the rich who own him and our elites in general thought they could use it to further their looting. But it is difficult to see how this would happen. They are already raking in hundreds of billions of dollars each year in interest payments on the national debt and they can use fiscal cliffs and the debt ceiling to loot the federal budget and its programs for the 99%. What could the platinum coin add to this when their current depredations are working out so well?

    1. Hypothetical_Taxpayer

      Wish all would cut it out with the dumb meme that banks own the national debt and are the sole benificiaries of the paltry interest being paid nowadays (less than 1% on a 5 year bond).

      Here’s the breakdown on public held debt:

      Debt Held by the Public – Foreign governments and investors hold 48% of the nation’s public debt. The next largest part (21%) is held by other governmental entities, like the Federal Reserve and state and local governments. Fifteen percent is held by mutual funds, private pension funds, savings bonds or individual Treasury notes. The rest (16%) is held by businesses, like banks, and insurance companies and a mish-mash of trusts, businesses and investors. Here’s the breakout:•Foreign – $5.311 trillion
      •Federal Reserve – $1.66 trillion
      •State and Local Government, including their pension funds – $709.1 billion
      •Mutual Funds – $864.9 billion
      •Private Pension Funds – $605.2 billion
      •Banks – $305.2 billion
      •Insurance Companies – $259.1 billion
      •U.S. Savings Bonds – $184.7 billion
      •Other (individuals, government-sponsored enterprises, brokers and dealers, bank personal trusts and estates, corporate and non-corporate businesses, and other investors) – $1.14 trillion. (Federal Reserve as of Januray 2, 2013; All others as of June 2012. Source: Treasury Bulletin, Ownership of Federal Securities, Table OFS-2)

      Note that banks own $300B out of $11 trillion+.

      Out of the $16 trillion total debt – here’s a key ratio:

      “As you can see, if you add up debt held by Social Security, and all the retirement and pension funds, a large part of the U.S. Treasury debt (30%) is held in trust for people’s retirements. If theoretically the U.S. were to default, foreign investors would be angry, but the greatest harm would befall the average U.S. citizen.”

      entire breakdown here:

      1. davidgmills

        Most of the foreign debt is probaly owed to international banks. Most foreign governments owe their banks so even if we owe governments ultimately the money is owed to banks.

        I am not buying it. And for the rest of us, if the government wanted to pay off its debt to us with cash, we would take it.

        1. Hypothetical_Taxpayer

          You’re not buying it? This is official treasury data. Well, that settles that. Got any more BS for me?

          And no, most foreign debt is not held by foreign banks – they are all broke if you haven’t heard. Some is held as reserve currency denominated treasury debt by the central banks.

          China and Japan each hold about $1.25 trillion – much of it is either private, pension fund, or sovereign wealth fund. In the case of china, the PBOC holds most of theirs.

      2. Hugh

        I assume that you are citing data whose original source is here:

        with the most recent complete data from June 2012.

        Your breakdown is more or less correct except for the Fed’s holdings which were more like $1.75 trillion. However when I say banks that is shorthand for the financial world of banks, individual investors, private pension funds, mutual funds, insurance companies, etc. These account for $3.175 trillion. Foreign accounts are dicier because the US does not have direct information about who the actual owners are.

        If you look here:

        you get the estimated breakdown by country, but you can see the problem I refer to in that banking centers like the Caribbean, Luxembourg, Switzerland, and Hong Kong are all in the top ten holders of Treasuries. At the bottom of the table, official holdings ($3.853 trillion) are split out leaving $1.45 trillion likely in the hands of various nongovernmental entities, much like the list I gave above. Add this to the previous figure and this comes out to some $4.625 trillion held by financial institutions and investors. Together this accounts for 29% of the total national debt and 49.3% of the privately held debt. So yes, this is a sizable part. But more than this why should we be sending a hundred billion dollars to these groups and another hundred billion to various foreign governments each year, when we don’t have to? If we retired this debt, it might result in messing up the balance of payments cycle which feeds into our chronic trade deficits, but these need to be messed with. It would not, however, harm the dollar as the world’s reserve currency because it is dollars not Treasuries which underlie that system.

        A separate but specifically bank problem is that banks can borrow at ZIRP from the Fed and then put it into their reserve accounts at the Fed and get paid interest on it. This is another multi-billion dollar subsidy.

        1. Hypothetical_Taxpayer

          “However when I say banks that is shorthand for the financial world of banks, individual investors, private pension funds, mutual funds, insurance companies, etc.”

          That’s where I think the problem is. It’s investments owned by someone or entity (insurance companies need assets to back their policies to individuals and business)and held in some kind of bank, brokerage, pension fund, or 401k.

          So when you advocate screwing the holders of treasuries, it is mainly NOT merely banks. It’s a whole lot of individual savers.

          Granted the distribution is not so good among individuals. I look at the country distribution every few years or so and was always amazed that the Caymen Islands ranked # 3 or #4 behind China, Japan and Britain. But then I call that a problem with taxation, loopholes and tax cheats. Then the other thing that always annoyed me is I have to pay taxes on my treasury bonds, but a foreign central bank does not.

          As far as how world trade works, dollar as reserve currency, global central banking and them recycling our trade deficit back into treasuries was not my plan so I don’t take responsibility for that. My plan would be tariffs – then foreign claims on the US just go away. Then US citizens can invest their savings in the US and get hopefully a small real inflation adjusted return on savings to achieve our lofty goal of not having to work until we drop.

          Yes, under our current implimentation of MMT, the Fed has moved into the #1 position as holder of US debt. Under this scenario the only ones that do make out are the bank’s primary dealers that just flip bonds to someone else, and banks get a quarter percent on reserve funds for doing nothing with someone elses money. So the system is now completely disfunctional for the average saver/investor/pension fund/bond fund/401k.

          1. ebear

            “I look at the country distribution every few years or so and was always amazed that the Caymen Islands ranked # 3 or #4 behind China, Japan and Britain.”

            Drug money. That was Escobar’s mistake. He spent money on the poor instead of investing in US treasuries.

    2. Joe Firestone (LetsGetitDone)

      I agree, Hugh. But we can’t underestimate the influence of emotion and free. The Republican House is nuts. They may break under the pressure and push the system to the brink. Then the street will shout at Geithner, bernanke, and Obama to do SOMETHING. Seigniorage in that situation is a very effective thing to do. But after they do it; like the mainstream bloggers they will want to go back to normal, and talk austerity. It’s then that we have our best chance to destroy their legitimacy and authority.

  15. Eric L. Prentis

    Old Mother Hubbard Poem

    By Sarah Catherine Martin
    (With variation)

    Old Mother Hubbard
    Went to the cupboard
    To get her poor doggie a bone,
    When she got there
    The cupboard was bare
    Except for the trillion dollar coin
    There is now no need to purloin,
    For poor little doggie has a loan.

      1. Eric L. Prentis

        For the trillion dollar platinum coin to be considered cash, an arm’s length sale’s agreement is required. No one in their right mind would give a trillion dollars for this platinum coin. Period. It’s a loan!

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