Rob Parenteau: Why Understanding Money Matters in Greece

By Rob Parenteau, CFA, sole proprietor of MacroStrategy Edge and a research associate of The Levy Economics Institute

As Greece staggers under the weight of a depression exceeding that of the 1930s in the US, it appears difficult to see a way forward from what is becoming increasingly a Ponzi financed, extend and pretend, “bailout” scheme. In fact, there are much more creative and effective ways to solve some of the macrofinancial dilemmas that Greece is facing, and without Greece having to exit the euro. But these solutions challenge many existing economic paradigms, including the concept of “money” itself.

At the Levy Economics Institute conference held in Athens in November 2013, I proposed tax anticipation notes, or “TANs”, as a way for Greece to exit austerity without having to exit the euro (see “Get a TAN, Yanis!” published here last month, for an updated version of that policy proposal). This proposal is based on a deeper understanding of what money actually is, and the many roles that it plays in the economies we inhabit. In this regard, Abba Lerner captured the essence of modern fiat currencies, which are created out of thin air by modern states with sovereign currency arrangements. Lerner’s essential insight is contained in the following passage from over half a century ago (and, you will note, Lerner’s view informs much of the neo-chartalist view espoused by advocates of what is called Modern Monetary Theory):

The modern state can make anything it chooses generally acceptable as money…It is true that a simple declaration that such and such is money will not do, even if backed by the most convincing constitutional evidence of the state’s absolute sovereignty. But if the state is willing to accept the proposed money in payment of taxes and other obligations to itself the trick is done.

The modern state, then, imposes and enforces a tax liability on its citizens, and chooses that which is necessary to pay taxes. That means a state with a sovereign currency is never revenue constrained. In fact, the government has to first create the money before the private sector can find a way to get the money it requires to pay taxes and by government bonds. Taxes and bonds are therefore not really the source of government funding or finance. Wait, what?

The government itself ultimately is the source of money required to pay for government expenditures. Taxes simply give value to money, as households and nonbank firms cannot create money – that is counterfeiting. Instead, they have to sell an asset or a product or a service to the government to get money, or they need to be beneficiaries of government corporate subsidy or household transfer programs to get money.

It is in this context that one has to look at the TAN proposal. It is important to note that the tax anticipation note is by design a debt issued by the government, just like any other bond. It is a debt instrument that could be returned by the TAN bondholder to the Treasury to settle tax payments due on a 1 TAN = 1 euro basis. By imparting a value to these TANs (i.e. letting them be used to extinguish national tax) this will ensure a natural source of demand for TANs. In addition, it is very likely that consenting adults in the Greek economy would be willing to use TANs in settling private transactions as well, and this is an important element if the TAN approach is going to provide a way out of fiscal austerity without requiring an exit from the euro.

Skeptical? Well, there are other historic examples of local currencies operating in parallel with national ones. As economist L. Randall Wray has noted, in Argentina as the financial crisis deepened after 2000, local governments began to issue “Patacones” (bonds with interest) as local currencies, paying workers and suppliers, and accepting them in tax payment. Utility companies began to accept them—knowing they could pay part of their taxes with them–and acceptance spread even to international corporations such as McDonald’s.

There are other historic examples closer to home, some of which might underline the irony of adopting this kind of approach in a “what is good for the goose, may be good for the gander” fashion. None other than the self proclaimed “Old Wizard” Hjalmar Horace Greely Schacht – who was the Currency Commissioner of the Weimar Republic after the 1922-3 hyperinflation bust, a President of the Reichsbank from 1924-30, and then again from 1933-39, a highly placed executive at both Dresdner and Danatbank , and Minister of Economics under Hitler in the 1930s, all of which is not bad for a guy named after an American newspaper editor – himself introduced the MEFO bills, which TANs bear some resemblance to, though TANs are constructed much more along neo-chartalist lines, with their value deriving from their use as a tax credit, which was definitely not the case with Schacht’s MEFO bills.

The Nuremburg trial transcripts described Schacht’s scheme as follows:

Transactions in mefo bills worked as follows: mefo bills were drawn by armament contractors and accepted by a limited liability company called the Metallurgische Forschungsgesellschaft, m.b.H. (MEFO). This company was merely a dummy organization; it had a nominal capital of only one million Reichsmarks. Mefo bills ran for six months, but provision was made for extensions running consecutively for three months each. The drawer could present his mefo bills to any German bank for discount at any time, and these banks, in turn, could rediscount the bills at the Reichsbank at any time within the last three months of their earliest maturity.

German policymakers themselves, operating under financial constraints in the 1930’s, devised alternative government financing instruments, although Schacht’s MEFO scheme was clearly a shell game relying on the complicity of the central bank, and that is not how TANs work at all.

For less extreme examples in the decade before Schacht, it is worth noting that the US had at least 5 forms of paper currency going at the same time in the 1920s – despite the concerns about hyperinflation generated by the horrifying Weimar experience in 1922-3. These were used interchangeably and included:

1. Gold Certificates (redeemable in gold coin until FDR’s prohibition on private citizens holding gold)
2. Silver Certificates (redeemable for coin or bullion)
3. National Bank Notes (issued by US government chartered banks with equivalent face value of bonds deposited by bank at Treasury)
4. United States Notes (issued directly by Treasury and also called Legal Tender Notes, but with no “backing”)
5. Federal Reserve Notes (redeemable in gold on demand at Treasury or in gold or “lawful money” at any Federal Reserve Bank, until FDR’s prohibition, when it was just declared legal tender redeemable in lawful money at the Fed or Treasury).

Indeed, experiments with alternative financing instruments that can help bring economies back on line during monetary and financial crises are frequently cited by Austrian School economists, especially the Hayekian splinter group/wing that favors privatizing money. For example, clearinghouse certificates were created and spread during the Panic of 1907 and the Great Depression (see So this adaptability of financing and monetary systems is much wider than we are led to believe, and it is not always government driven, which presents something for neo-chartalists to ponder.

Those who are not of a neo-chartalist persuasion might be skeptical of the claims that a 1 TAN for 1 euro exchange rate could be sustained. Their argument centers on the fact that even if one imparted value to the tax anticipation notes by allowing them to be used to extinguish tax liabilities, TANs would still plummet in value relative to the euro and so wouldn’t do much in terms of boosting aggregate demand via their use in financing fiscal expenditures.

Let’s consider that scenario in more detail for a moment. Say TANs plummet and start “trading” in private exchanges in Greece at 4 TANs to 1 euro or some such horrible disaster. Say you are a Greek citizen. You have tax arrears (as many do) and you hear Syriza has made tax compliance a high priority, and is required to do so by the Troika/Institutions if it is going to get any further loans from external official sources. Your tax arrears are equal to say one years’ worth of your salary. You will then use euros to buy discounted TANs and deliver them to the Treasury, who are obliged by law to accept tax payments in TANs at the prescribed 1 TAN= 1 euro. This gets you a huge effective tax deduction in the process – but one you had to earn by selling euros and buying TANs – thereby bidding up the price of TANs relative to euros. If this is done over and over again by many citizens with tax arrears and tax payments forthcoming, whatever “depreciation” of TANs to euros has occurred will be essentially arbitraged out of the market.

As any Wall Street investor would realize, the only reason why one would do not do that trade, all day, and every day, for oneself and all one’s relatives, would be if one believed that the “market maker”, the Treasury, would ever run out of its capacity or willingness to accept TANs as a means of settling tax payments, at 1 TAN= 1 euro. And recall that the market maker, in this case the Greek Treasury, has virtually unlimited authority to impose new taxes and raise existing tax rates, which directly influences the demand for TANs. Of course, there is a political constraint (recall tennis superstar Bjorn Borg threatening to emigrate from high tax Sweden in the 70s), and Greece has got to get its tax compliance dealt with properly before TANs can be implemented. But if that adjustment mechanism doesn’t do the trick, the Treasury can vary the proportion of government spending financed through TAN issuance, directly influencing the flow supply of TANs.

In other words, by design, there is a self-correcting mechanism through arbitrage that should keep the 1 TAN to 1 euro “exchange rate” in a pretty tight band, as long as it is clear that tax liabilities can and will be settled with the Treasury at a 1 TAN = 1 euro exchange rate. Anybody who works on Wall Street or the City would understand this self-correcting process. After all, “arbs” on Wall Street scalp minuscule basis point discrepancies in various financing instruments at the speed of light these days in automated arbitrage programs and in high frequency trading. TANs have a built in self-correcting mechanism that work precisely in that same fashion.

As for the unusual hybrid structure of the TANs (as zero coupon, perpetual, bearer bonds) it is worth noting the following irony: isn’t it peculiar how we marvel at, and handsomely reward, financial engineers on Wall Street when they create all kinds of debt instruments that get counted as equity (as an example, consider that perpetual bonds are ruled Tier 1 capital for banks under the Basel Accord rules), and all kinds of equity that look like debt? Or even better still, how we applaud the ingenuity of financial engineers when they stitch together such Frankenstein monsters as total return swaps, exchanging one set of returns on one asset for another set of returns, while never nominally changing the ownership of an asset (and remember, according to research by Jan Kregel, these types of instruments played a critical role in the 1997-8 Asian Crisis, as well as the more recent 2008 Financial Crisis).

Yet for some odd, unspeakable reason, we simultaneously refuse to entertain even the possibility of a similar level of creativity and hybridization to the realm of government finance. Or we hand wave it away, declaring it dead on arrival, simply impossible, fraught with all sorts of inconceivably difficult complications, and bound to eventually lead to fiscal irresponsibility, outright misallocation of resources, and ultimately, the dreaded source of much hyperventilation at the Bundesbank in particular, the eruption of hyperinflation…even despite the fact more and more eurozone nations are sinking into outright price deflation (and others, like Greece, have suffered outright income deflation).

This appears to be the case even with things we should know nations have done successfully before (like no less than five different currency types running side by side in the US in the ‘20s), but no one seems to remember, or at least no one bothers to mention this “verboten” subject. Money matters in Greece. Understanding the nature of money, and designing financing instruments informed by that understanding, matters if we are going to find a practical and effective solution to Greece’s conundrum of trying to exit austerity without having to exit the euro.

Ignorance, both of these essential financial principles, and of economic history, is no excuse for sadistically demanding the deepening of a humanitarian crisis, and thereby potentially creating a failed nation state, all in the name of pursuing what is called sound finance or fiscal responsibility, but upon saner reflection, is far from either of these things. It is high time to drop the charade, and it is well past high time to solve the problem.

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  1. JTMcPhee

    The magic word for today is “sadistically.” Can you say “sadistically,” class? Very good!

    Let’s remember some other German fiscal policies. Like making inmates in concentration camps yank the gold teeth and bridges out of the mouths of recently gas-exterminated eliminees before their carcasses were incinerated, to be melted into nice gold bricks, some of which accompanied some of the Run Away, Run Away! National Socialist elite as they moseyed or submarined their way to Argentina and various tolerant and comfortable and autocrat-cum-plutocrat-ruled ‘guays. Along with a lot of the cultural wealth of defeated nations. Some of which is slowly finding its way back to rightful owners or their heirs.

    Of course, that was then, and this is now, right?! and a different branch of the German economy is in charge of the looting. With the same provisions for fleeing to safe havens if the crap hits the fan.

  2. mpr

    Unfortunately, this is unlikely to work as easily as the post suggests.

    If they issue too many TAN’s then obviously they will trade at a discount as supply will exceed demand (i.e taxes to be paid). Moreover, since that situation will be generally anticipated, even an issuance below this level will trade at a discount, since TANs are not instantaneously convertible into Euro’s – you have to match them with tax payments people want to make.

    Moreover, any substantial issuance of such instruments will be generally seen as a precursor to leaving the Euro – a self fulfilling prophecy which will cause the run on Greek banks to resume.

    But if that adjustment mechanism doesn’t do the trick, the Treasury can vary the proportion of government spending financed through TAN issuance, directly influencing the flow supply of TANs.

    Yeah, but what if the level of issuance consistent with a 1-1 exchange rate is tiny ? In particular, what if its negligible compared to the amount needed to end austerity ?

    A more interesting proposal would be for the government to issue a tiny amount of TAN’s. It would have to begin as an amount seen by the market as trivial so as to avoid a bank run. Then one might ramp this up very slowly over time, and perhaps it might help to get an extra few points of GDP in spending.

    1. Santi

      Current Greek GDP is appox. $230b. If we assume the Public Sector is around 40% it means the yearly budget is ~80b€. Greece could issue up to, say, 10b€ TANs, spend them and save euros instead to cover their debt payments for this year without risks. This would cover their current liquidity problems, next year debt profile is much better. I guess the key is to ensure that taxes keep returning TANs back. This is while keeping the required primary balance, i.e. without breaking the “current programme”, active until June.

    2. jonf

      I agree with you. But I think this is likely to be seen as a precursor to exiting the euro. And that, in turn, could trigger a loss of confidence and a fall in the value of debt and the stock market and capital flight for Greece. Also, the “trick” to getting money accepted is enforcement. If this is voluntary what advantage is there to using TANs, aka, the new drachma, as opposed to the old fashioned way with euros. They would have to be at a discount or pay outright interest. Finally, for Greece, this could mean higher interest on the next issue of debt to replace the old.

      And then there are the masters who control the euro. How will it be if all the countries start printing their own currency for taxes? Pretty soon there is no need for the euro. And in one or more places the new currency may drive the euro out.. (which may not be such a bad idea, all things considered.) So my guess is the masters will not be keen on this idea. Perhaps a small issue will make it easier, but I doubt it.

    3. washunate

      I’m curious why you are concerned about TANs not trading at parity to euros? That might be a theoretical concern if we’re talking a closed system, but Greece isn’t in trouble due to domestic projects. It’s in trouble due to external debt. It owes a lot of euros to a lot of people outside Greece.

      Who would accept 1 TAN for 1 euro’s worth of wages, but then pay 4 TANs for 1 euro’s worth of taxes?

      1. mpr

        No one would pay 4 TAN’s for a Euro worth of taxes, since they could pay 1 TAN, but that doesn’t mean that they would trade 1-1.

        Even setting aside issues about the specific confidence issues in this case, setting up a liquid market in a particular type of security is a non-trivial undertaking. You need people to be confident there is a market. There are no obvious market makers in this scheme.

        1. washunate

          Okay, thanks, I see where you’re going with that now.

          My preference is to grant the assumption of the can opener and deal with the idea as if it’s implemented effectively, because I think the flaw is more conceptual than operational.

          But I do wonder how such a market would work (if it were sufficiently large to be meaningful). The only two realistic reasons people would buy them are national pride and that they’re sold at a discount. So if we’re not calling them drachmas, and if the government is giving them to suppliers and workers at par, then the government has simply transferred the cost of short-term financing to the suppliers and workers.

          Which is a de facto spending cut, the exact opposite of what the author wants to do.

          1. Rob Parenteau

            wahunate: You may see where you think mpr is going, but if he is right, please note you cannot even get there, to the 4 TANs = 1 euro, because long before you do, someone with a tax liability, either past due or at due ANY point in the future (ok, so discount present values and such, get out your HP12C, plug and chug) will sell euros and buy TANs to give themselves an effective tax cut. Look at the set up of mpr: “no one would ever pay 4 TANs for 1 euro of taxes”. Precisely my point. And they never have to, nor are they likely to get the opportunity to, if there is a penultimate market maker, the Treasury, with an ability to set tax rates and tax distribution, up to some politically acceptable ceiling of course as a practical matter, who will always only require you to pay 1 TAN for 1 euro worth of taxes, and 1 TAN for 1TAN worth of taxes as well, while we are being all symmetrical about this. Hey, is that the a straw man I smell burning? Damn, I think it might even be the Scarecrow from the Wizard of Oz. Pity, that, cuz I knew he always had a brain, de doot de doodly doot. (admittedly obscure movie reference linked here:

            1. Rob Parenteau

              I should add I am always impressed by how markets can spontaneously self-organize, in amazingly short order as well, to price and exchange even the most intangible, ephemeral, goods and services and assets. It never ceases to astound me. Markets abhor a vacuum. And I am pretty sure that iron law of the capitalist motion is unlikely to be violated with a government financing instrument like TANs, with a guaranteed ultimate buyers, at a guaranteed price. But I could be wrong about that. Having worked in the financial industry for over three decades now, I have seen people trade all kinds of crazy things, in all kinds of crazy ways, at all kinds of crazy hours of the day. If you can trade an intangible asset so inherently prone to speculation (hence lacking much of a chance of maintaining a relatively stable exchange value, which is usually a desirable quality of a currency) like Bitcoins that are largely used to settle thoroughly illegal goods and services, then TANs might not be so hard to handle.

              1. washunate

                You are not addressing mpr’s point that the activity of clearing financial assets is not costless. This is why currency is granted legal tender status – the ability to extinguish private sector debt directly – and why R/TANs (and tax credits generally), which lack that, are sold at a discount (ie, with interest). Satisfying tax liability is not sufficient to make a new financining tool broadly acceptable at scale in a short period of time. It has to satisfy private debts, or else it won’t trade at par within the private sector economy.

                The reason for this is because tax liability itself is lumpy. That’s why governments use TANs in the first place. If there was always taxes due immediately, governments wouldn’t need bridge financing :)

                1. MRW

                  If there was always taxes due immediately, governments wouldn’t need bridge financing.

                  Oh, lord. Here we go again.

                  Governments, like ours, with a sovereign currency, don’t need bridge financing. We create our own currency. Why is that so difficult to understand? The US federal government certainly doesn’t need bridge financing, it “creates’ it to restore the money supply to balance after the spending is appropriated (created) by Congress. Congress authorizes $100 of spending. The US Treasury issues $100 of treasury securities to sop up an equivalent amount of US dollars to stabilize the monetary system. Hey! Even issues interest to make it attractive to buy them! In our case–because of the way it was designed–if it allowed the $100 Congress creates to mount, time after time, there would be too much moolah swirling around in the private sector economy affecting the price of things, and inflation.

                  All of this happens before the private sector is even involved.

                  This is why currency is granted legal tender status– the ability to extinguish private sector debt directly

                  As the Supreme Court Legal Tender Cases of the 1870s determined, legal tender is anything with the Great Seal of the US on it that is required for payment of taxes. It said absolutely nothing about its purpose being “the ability to extinguish private sector debt directly.” That goes without saying; it’s a secondary effect. Unless you want to barter with something illegal, like a bag of grass.

                  1. Calgacus

                    Yes, MRW, and this was very well understood back then during the Legal Tender cases. Indeed, Chief Justice Salmon Chase opined that making / calling something “Legal Tender” made it worth less – not more, as Washunate and others think. The only thing that makes money work is its real world use – taxation paramount – not pious wishes like “legal tender”. Mitchell Innes in 1914 of course agreed, but commented that Chase was maybe going a bit too far in his anti-Washunatism.

                    I can’t resist another little-known story. Chase is usually thought to have behaved a bit oddly by ruling against the constitutionality of the Greenbacks, since he after all had issued them as Lincoln’s Secretary of the Treasury. But Sandburg’s biography of Lincoln explains how at that time Chase came to Lincoln and gave a long legal and financial argument about how paper money would be unconstitutional, although of course it would work because it was backed by taxation. Lincoln said that he didn’t really understand the details – but asked only – “Is there anything else we can do?” Chase said – Nothing at all – there is no alternative. So you won’t hear any complaints about it from me ever again!

                  2. washunate

                    Lol, I think you need to read up a bit more before leaving that comment. I support Greece using a sovereign currency.

                    It’s the author who opposes reintroducing the drachma.

            2. a Texas libertarian

              “…if there is a penultimate market maker, the Treasury” – The TAN system would only work at the point of a gun, and even then not for very long. It’s only another form of central economic planning doomed to fail.

              Why would the EU accept this situation? Let the Greek government hand out these TANs, worth nothing accept how much people don’t want to be shot or jailed or have assets repossessed, so that the Greek citizens can then use these to pay taxes, the same taxes that the EU is demanding in repayment of its loans? Why doesn’t the Greek government just print “f-you” on a bunch of pieces of paper and send them to the EU as repayment?

              “…with an ability to set tax rates and tax distribution, up to some politically acceptable ceiling of course as a practical matter”

              These money schemes like TANs, always require centrally distributed force and always misunderstand the true purpose of money. Money has to represent something of value, like savings, or work, or goods. You can’t just print a bunch of pieces of paper, call it money with a different name, and expect it to be worth something, unless of course you point guns at people and threaten to lock them in a cage, if they disobey your desires. That only works so long though.

              Does anyone care to educate me on how this system of money would work without force? I’d really be interested in an answer.

    1. Pookah Harvey

      After thought, if Austria allows creditors to take a haircut for one of its provinces why shouldn’t Europe allow Greek creditors to do the same.?

      1. JTMcPhee

        why? Because, you know, they are, after all, GREEK, not Austrian… “useless eaters,” and all that.

        The Rich Folks are all set up to depart to Elysium with their wealth and their private security armies, in advance of what looks for all the world, to us uneducated and unsophisticated mopes, a little like an inevitable “lomcevak into an irrecoverable flat spin.” They are apparently unaffected by conscience or fellow-feeling at all. If all He77 is going to break loose in not too long anyway, and all that is going on is doubling down on the last bit of looting, looking like the Goths wrapping themselves in torn precious-metal brocades over their raunchy homespun and armor, as they run ululating out of town, and dang little is being or can be done to “recover” from the maneuver, maybe it’s time to do what a lot of manufacturers of high-performance or clumsy, marginally stable aircraft advise the pilots to do if they fly themselves into such a coffin-corner “flight regime:” “Eject, eject, eject!” An example, where possible, to be followed by the crews as well…

        1. A long time reader

          There were two Greece debt restructuring measures with various haircuts for private bondholders, resulting in a ~40% point debt-to-GDP decline.

          Your “ueseless eaters” comment and the other ridiculous comparisons are the kind of over-the-top rhetoric that has become all too common in the Naked Capitalism comments section and it’s one of the reason why the comments section has become progessively more unpalatable in recent years, which is a shame, because it used to be great here. Once upon a time.

  3. generic

    I note that both deputy labour minister Rania Antonopoulos and Yanis Varoufakis himself have at some point made proposals along similar lines so we can assume that the Greek government is aware of this. But in order to be able to issue money equivalents you need to be able to tax reliably. So focusing on reforming tax collection makes sense as a first step.

  4. Rob Parenteau

    Generic: I have stated repeatedly in these TAN writings and presentations, and agree with you wholeheartedly, that unless Syriza (or whoever is in power, wherever) can get tax collection and compliance straightened out first, with all that may involve in terms of creating a conviction across most of your citizenry that the tax code is legitimate and reasonably fair, there is absolutely not point in pursuing a TAN approach. Rania was at the Athens November 2013 Levy Economics Institute conference where I first proposed a TAN approach. I wrote that proposal up in December and was told by several people who had no reason to blow smoke up my arse that it was delivered to Yanis and he took it into consideration – serious consideration, I presume, because around February 2014, he was moving away from his Modest Proposal on GDP contingent bonds that he had crafted with Jamie Galbraith, and was exploring e-money, parallel currency solutions which bear a family resemblance to the TAN proposal, but to be clear, TANs are structured as a hybrid perpetual/zero coupon/bearer bond, and as such are an alternative government financing instrument, and not a parallel currency, though consenting adults may end up voluntarily using them in private market exchange as such. So yes, there is a connection, and this is not just another theoretical exercise.

    1. generic

      My comment wasn’t meant as criticism. In fact I find that the current Greek government seems to prioritize going after tax evasion in a way that is much broader than would be effective with a view on purely extracted money. Just like they would if they were worried about their currency issuing power.

      1. MRW

        How can they control tax evasion when the EU allows their richer citizens to bank in Germany or France?

  5. washunate

    Why not just call them DANs – Drachma Anticipation Notes?


    Uh, we do these kinds of tax shenanigans all the time in the US. Indeed, tax incentives are a huge part of what is wrong with our society. Every dollar deducted from charitable contributions and housing tax credits and tax increment financing and qualified dividends and carried interest and on and on is simply a dollar that doesn’t go back to the government. This only causes malinvestment issues, not financing issues, at the federal level since USFG debt is denominated in the USFG currency unit. But Greece – like local and state governments in the US – has no such luck there. Yes, a local government in the US of A can do whatever TANs it wants to fund McMansion sprawl and sports stadiums and strip malls and law enforcement agencies in the short term. But at the end of the line, somebody wants to get paid in dollars. Judges and Police Chiefs and Prosecutors and Engineers and Doctors and Professors and Computer Scientists and Politicians and Landlords are funny that way.

    In Greece, you either have to raise Euro taxes, cut Euro spending, or repudiate Euro debt. Everything else is smoke and mirrors. We are not having a monetary or financial crisis. Money isn’t the problem. This is a crime spree. You don’t solve theft by printing more money. You solve theft by stopping the thieves.

    1. hunkerdown

      Robert Steele did point out that a bourgeoisie that prefers foreign goods to their own nation’s is a contributor to political instability. Which isn’t possibly the ulterior motive of free “trade” agreements and work visa programs, surely.

      1. MyLessThanPrimeBeef

        But that is patriotic when we have an inflation problem, for

        1. imports are cheaper when we substitute them, even if they are less durable or even toxic.


        2. those dollars kept in global circulation (i.e. not invested in Treasuries) mean, in effect, dollars ‘destroyed’ (i.e. less demand dollars for domestic manufacturing shops – they can stay idle; and those dollars ‘disappear’ from the domestic scene), thus anti-inflationary.

        Thus, for an empire, taxation is not the only means to destroy money. Money can be gone from the domestic front by corporations investing and hiring overseas – that has proven to be quite effective in curbing wage inflation for the last few decades.

  6. Rob Parenteau

    mpr, and perhaps Jonf as well- Please bother to read the essays you decide to comment upon, if you wish your comments to be relevant to the discussion. I treat the issue raise in the main body of this text…as well as the last essay posted here on Naked Capitalism called Get a TAN, Yanis, as well as the comment section to that essay in February. I describe how the design of the TAN induces an inherent arbitrage that should prove self-stabilizing of the 1 TAN = 1 euro exchange rate. If you see a flaw in that mechanism, please do make it clear. If the flaw that you see is that the TAN approach will signal that Syriza is preparing to take Greece out of the eurozone, and that will cause deposit and capital flight from Greece…well, that horse, I am afraid, has already left the barn, judging by deposit outflow data we have through January at least, as well as TARGET2 data. Better to have the architecture up and running and stress tested if you do in fact have to exit for one reason or another, because unless you are planning on emigrating, which I suppose the whole nation of Greece could try to do, you are going to want to have TANs if TANs are going to become the basis of the next currency upon exit…right? Or am I missing something here? Thanks, Rob

    1. jonf

      Thank you for your response. I have read your post and this is how I understand it.

      I would say again this could easily be seen as a precursor to a Greek exit. Yes, there have already been capital flows out of Greece, but this could likely accelerate that trend – at least in the immediate future. I am not as concerned about the value of the tan but, since it will be for future use, it will likely be discounted. You said a narrow band. That is ok by me.

      Also, why bother buying one unless there is some advantage to do so? In any event I continue to think the value of Greek debt and the stock market will fall in view of the exit risk.

      I am not clear on whether you expect these to be used for domestic use, e.g. for wages. But, if so then you do have a dual currency situation. I don’t see this analogous to a state or the US since all those instruments are dollar denominated. The tan could likely have an exchange rate component for the discount. I think you said these were voluntary instruments and so there needs to be some advantage to using them. Perhaps the discount is sufficient. But then they would have to carry more earnings beyond than what a bond would.

      There is also this notion. Since these notes are purchased for future taxes, it follows that euro tax collections in the future will be less since they were effectively paid in advance. So it is clear the euros or the Tans must generate sufficient and sustainable multiplier effect to make an impact on GDP ( that the euro does not “run out” before the bills are paid.) I think there is something of a Ponzi scheme to it, since it may rely on next years taxes to keep it going.

      I would repeat again the idea that the euro masters are likely not to be keen on this. They would need to reconcile their single currency to many more and likely require further agreement – something not going to happen soon. And the next sale of Greek euro bonds would be more expensive due to increased risk.

      On balance if this is in preparation for an anticipated exit, it sound right. Otherwise, it is not clear to me. But the unknowns would give me pause.

      1. Don W

        I will preface that I am no expert. This is just me trying to apply a little MMT to the Greece problem.

        I think TANs are still a delaying action because as far as I can tell there is no way to create net Euro denominated financial assets. I assume that a functioning Greek economy with decent tax enforcement and good employment levels is a net importer, and exporters to Greece whether in the Eurozone or outside will essentially be draining Euros from Greece. So, at the limits all the Euros are drained from Greece. This limit will never be reached because there will be a crisis well before that point. All TANs really do is create a delaying action to give Europe a chance to fix the problems with the Euro or Greece will have to exit the Euro. A big part comes down to Germany realizing that is cannot be a net exporter to the rest of Europe without also financing those purchases.

        One exception would be if every Eurozone country became a net exporter to the US, then they could export something to the US and some one would get say $100 which, if the ECB creates Euros for foreign exchange, gets exchanged with the ECB for new Euros and the ECB buys US treasuries with the dollars. Essentially, letting Europe become just like China and become a beneficiary of US creation of net financial assets via deficit spending while touting their moral superiority even though their entire economy is based off US government deficits.

        1. Ben Johannson

          Greece does export to the greater European Union, it just doesn’t export so much as it imports. TANs can, in theory, offset taxation to offset the financial leakeage and even act as an alternative financing instrument allowing sustainable domestic credit growth in euro-denominated bank IOUs. If, that is, Syriza gets off its fat ass and enforces taxation.

          1. Don W

            I said net importer meaning it has a trade deficit. TANs cannot offset the Euro leakage indefinitely. Show me one place where there are Euros coming into Greece to offset those leaking out. Greece currently has a trade surplus due to having their economy crushed, so no one can afford to import anything, but if TANs are used to create a functioning Greek economy, Greece will almost certainly be a net importer. I don’t differentiate between Euro imports and imports in other currencies because I presume that Greece would convert other currencies to Euros or Euros to other currencies.

            Without a central bank somewhere with a steady supply of Euros like the ECB or some country with a Euro trade surplus buying Greek sovereign debt with Euros and rolling it over indefinitely to pump Euros back into Greece, the only possibility is that Greece runs out Euros eventually and does all internal business using TANs. You then end up with a discounted TAN Euro exchange regime, and now Greece starts issuing interest bearing TANs than can only be redeemed for non-interest bearing TANs which you might as well call drachmas and change the name of the interest bearing TANs to drachma denominated bonds. And, we have completed the Grexit and arguably the end of the Eurozone unless the Eurozone fixes things. So, TANs are a way for Greece to get back on its feet and delay a Grexit sufficiently to see if the Euro Experiment can be fixed before leaving entirely. Unfortunately, I wouldn’t be surprised if the idiots running the Eurozone just kick Greece out if this happens because it will take several Euro exits before they realize that the Euro is fundamentally flawed.

            Just one note: This doesn’t let Greece off the hook to get their tax reform and enforcement house in order.

            1. Rob Parenteau

              Who said the Greek government had to stop issuing euro denominated liabilities? Please show me that passage in the TAN proposal, because I forgot about that one. Who said TANs cannot be used to improve the infrastructure and encourage the training and R&D required to get Greece’s current account surplus to increase further over the medium run, and thereby earn a net inflow of euros? Who said Greek banks might not need to be nationalized and recapitalized using TANs, which are after all a perpetual note hence likely to count at Tier 1 capital in a bank, and that these same banks could not turn around and make euro denominated loans to businesses and entrepreneurs in the tradable goods and services industries to increase the productivity and product quality and product breath of the Greek economy in tradable goods? If the Troika is too stupid, stubborn and faith based to figure out that it somehow has to create a net flow of euros into the nations in the eurozone if those nations are not going to face debt deflation spirals from time to time, or at least long periods of stagnation, then there are at least a few countervailing steps to be taken if you have TANs as one of your government financing instruments. If not, well, bon chance, as the French might advise.

              1. generic

                I’ve been with you so far, but this is a category mistake:

                which are after all a perpetual note hence likely to count as Tier 1 capital in a bank,

                If the ECB was willing to accept that TANs are Tier 1 capital than the question wouldn’t even present itself. The real threat hanging over Greece is the ECB’s power to murder the Greek banking system. Formal rules don’t enter into it.

              2. Don W

                I think we vehemently agree.

                If the Troika is too stupid, stubborn and faith based to figure out that it somehow has to create a net flow of euros into the nations in the eurozone if those nations are not going to face debt deflation spirals from time to time, or at least long periods of stagnation, then there are at least a few countervailing steps to be taken if you have TANs as one of your government financing instruments. If not, well, bon chance, as the French might advise.

                This was my point. TANs give some time to the Eurozone to potentially fix the system to actually create net Euro denominated assets. But, if the Troika is too stupid to fix it nothing will stop the dissolution of the Eurozone.

                Who said TANs cannot be used to improve the infrastructure and encourage the training and R&D required to get Greece’s current account surplus to increase further over the medium run, and thereby earn a net inflow of euros?

                Yay. Greece is fixed. Now those net inflows to Greece mean there is a net outflow somewhere else. So, we have the exact same problem just with a different name to the country. That just shuffles the deck chairs on the Titanic.

                which are after all a perpetual note hence likely to count at Tier 1 capital in a bank

                This is interesting. If the ECB allows banks to essentially create Euros from TANs by making loans, that takes care of the Euro creation problem, since issuing TANs essentially creates Euros. I expect the ECB will have a problem with that.

            2. Ben Johannson

              I said net importer meaning it has a trade deficit.

              Yes. And?

              TANs cannot offset the Euro leakage indefinitely.


              Show me one place where there are Euros coming into Greece to offset those leaking out.

              You’re missing the domestic component.

              Greece currently has a trade surplus due to having their economy crushed, so no one can afford to import anything, but if TANs are used to create a functioning Greek economy, Greece will almost certainly be a net importer.

              Not for several years.

              I don’t differentiate between Euro imports and imports in other currencies because I presume that Greece would convert other currencies to Euros or Euros to other currencies.

              Greece doesn’t convert anything.

              1. Don W

                What domestic source of Euros?

                Banks can create Euro currency, but they create an equal liability, so no net Euros created there. Private citizens cannot create Euros, so no Euros there. The Greek government cannot create Euros otherwise they would not be in this mess.

                Greece doesn’t convert anything.
                A Greek importer buys something from the US they have to exchange their Euros to Dollars to buy that thing. A Greek exporter sells to the US they have to exchange their Dollars for Euros to buy things locally. So, a trade surplus in a non-Euro currency adds Euros to the Greek economy like a trade surplus in Euros.

    2. mpr

      RP, yes you are missing something, and I addressed your “self-stabilizing” mechanism in the previous comment.

      Namely you acknowledge that the market might need help ‘clearing’, and say that the treasury could control the flow of TAN’s issued. But you don’t quantify this. What I am suggesting is that the flow of TANs you could issue while sustaining a 1-1 exchange rate is tiny – essentially 0.

      You are dramatically underestimating the difficulty of setting up a liquid market which clears. Now that I look at your post again, I see this blunder explicitly. You refer to the Treasury as a ‘market maker’. No ! The treasury is not a market maker here. I can’t buy up an unlimited number of TANs and redeem them for Euros. I can only do it to extinguish tax liabilities I have.

      Your 4-1 example is a numerical straw man. It wouldn’t be 4-1, but it would be a substantial discount.

      1. Rob Parenteau

        mpr: This one, from another reader, may have gotten lost in the sauce above.

        “I got mugged in Recoleta, Buenos Aires in December 2001. The poor guy was unhappy that I didn’t have many pesos on me but he ended up taking the patacones and seemed quite happy with the ‘transaction’. On learning that I was British, he even wished me ‘goodnight’. It’s amusing to think that his ethics have more to admire in them HSBC, RBS, JPM etc.”

        I have request an affidavit from said reader, just in case you think I made this up. So the reader is trying to tell me when he got robbed, the thief wanted the parallel currency called patacones that was circulating widely in Argentina at the time, and apparently being used in enough private transactions in Argentina that the robber was happy that reader he was robbing had patacones rather than pesos in his pocket? If you still don’t get it, read the essay above again, the part about the US in the 1920s, when no less than 5 different types of currencies – one gold “backed”, one silver “backed”, one backed by fiat, etc. – trading a face value…well into the 60s and 70s for some of these.

        Yeah, you are right, I guess it is pretty impossible to create a demand for TANs, or in a worst case situation, limit the flow supply of TANs. See, as the reader reflected based on his experience in Argentina, the robbers will steal all the TANs, and leave the euros behind, especially once more people admit the euro is based on patently obvious design flaws. Inherent design flaws, I should mention, pointed out by heterodox economists like Wynne Godley and Jan Kregel and Charles Goodhart well before the launch of the euro. Which means this currency called a euro might not even exist in five years. Hell, if Syriza runs with TANs, and it works the way theory and history suggest to me it can, the euro might then not have more than 5 months or so…and end up trading at a discount to TANs! But we should not talk this way, Herr Schauble and Herr Weidmann might have a heart attack.

        1. mpr

          Yeah, you are right, I guess it is pretty impossible to create a demand for TANs, or in a worst case situation, limit the flow supply of TANs.

          Your sarcasm is unwarranted. I didn’t say it would be impossible to create a demand. Even trading 4-1, or more realistically at say a 20% discount means there is some demand. That is not the same as saying they will trade 1-1.

          Note that I don’t say its DOA, but your argument that a discount would be arbitraged away suggests you haven’t thought the idea through properly. This unfortunately detracts from some of the merits of the proposal. (A typical situation with MMT advocates I’m afraid).

        2. washunate

          Maybe it would help to have a specific example of a cost of setting up a market. Here’s a link to a law firm that deals in R/TANs. Do you think they work for free? Or more to the point, do you envision Greek lawyers and accountants working for free? Because that is a way to solve the short-term fiscal position: have workers work for free. Temporarily, of course.

          Or maybe you’re using the language of TANs but don’t really mean a Tax Anticipation Note? Maybe you are simply advocating the re-issuance of the drachma while rhetorically denying it?

          Because who is going to be carrying around TANs in their wallet? That’s what you would do if you’ve already printed up drachmas and released them (which I of course have been advocating – I’ve been pointing out that the cash logistics barriers to transitioning to the drachma are a lot less than what people like Varoufakis have been claiming).

          1. Rob Parenteau

            No washunate, they don’t work for free. They may have to work for TANs, though.

            1. JTMcPhee

              Hey, I was an Imperial Soldier, a volunteer no less, 1966-69, and got paid in peanuts and in Vietnam, in “monopoly money.” Not quite working for free, but still…

              TANs, DANs, platinum coins – what are all the pieces of this machine, again? I can’t begin to keep any of it straight, while particular-solution partisans and AustroQuislings seem to have absolute certainty or at least huge momentum behind them.

              Seems the reason ordinary people get so thoroughly screwed is that their “monetary” transactions are pretty simple, and happen at a scale they can understand, in small bits and related to real needs and real acts of what seems like REAL wealth creation, to my simple brain. While 4th and 5th order derivatives get to create their own denominations and forms and gain such substance as they have (none? Or a “notional value” of maybe $2 or $4 QUADRILLION and still growing?) from magical leverage, or waves of the wizard’s wand, over the real economy of tools and skills and the lower tiers of Maslow’s’ hierarchy of needs. I have the same problem in even trying to think about the stuff written about here that I had trying to figure out calculus, until I took a summer school course taught by a civil engineer. Practical examples and connections, and suddenly I could follow! No such Rosetta Stone for me with this financialization-securitization crap, even Taibbi is hard slogging for me.

              This is all coming to mind after painfully recalling, in an unwanted dream, an experience I had with another kind of fiat currency that’s not much talked about in Imperial-space these days – US military scrip. When I arrived in Vietnam, in August 1967, the little bit of US “greenback” folding money and coins I had in my pocket was simply taken from me by the Army. In exchange, I got a little sheaf of “military payment certificates,” or MPCs. These were printed and denominated in “dollars and cents,” but were nothing of the sort. These were all we were allowed to carry and “spend” on US Military Territory. When we GIs went down “on the economy”, as the expression had it, to buy the stuff that GIs bought, we had to “convert” our MPCs to Vietnamese piasters, to get the booze, beer, recreational chemicals, broads, laundry service, souvenirs of various sorts, and wonderful healthy food as an escape from even “Class A rations,” when we got them, which were somewhat better than “C-rations.”

              When I arrived in-country, the official exchange rate between the Vietnamese piaster and the MPC was about 116 to the “dollar.” If you had a $20 US greenback at that time, you could go “down to the ville” and get well over 300 piasters for each of the dollars that $20 represented, or goods and services inflated to the same degree. If you did such a transaction and were caught, it was a felony, supposedly because that was “funding the ‘gook’s war on America’ ” (say what, again?) and giving aid and comfort to the enemy.

              Many GIs got little stacks of $20 federal reserve notes, and even more valuable $100s, in the mail from home, and took them downtown for a nice profit with small risk. You could also get local stuff for MPCs, if you were a little less daring – still illegal, but “everybody did it” and the penalties were less.
              Corruption and incompetence made sure that the flow was steady.

              By the time I left Vietnam in August 1968, corruption and incompetence had screwed the South Vietnamese to the cross of Imperial suffering and inflation. The official exchange from piaster to MPC was nearly 400 to the “dollar” as I recall, and more for greenbacks where the street exchange was closer to 1,000. After you picked up your piasters, you could not convert them back to MPCs, but you could by various means go to the Bank of America branch and deposit piasters into your account, with a nice mordida for the Bank, and wire the “dollars” back to the Mother Ship for another pass through the machine. A guy I knew growing up spent his time in ‘Nam as an MP “guarding” the main Saigon “PX,”, a notorious black market nexus, just part of the REAL nature of “war operations” so terribly and accurately painted by Joseph Heller in his “Catch-22.” When I ran across him in about 1970 he was driving a brand-new white Jaguar XKE convertible with a red leather interior and a lovely blonde companion, and he averred with a smirk that between “invisible hand(s) of the marketplace” and the MPC, he had come home a multi-millionaire, all on a Sergeant E-5’s wages.

              The inflation and dislocation that all this caused in the South Vietnamese ordinary-people economy was huge. And MPCs were first issued at the end of WW II to try to avoid the damage that having relatively rich GIs circulating dollars into trashed and dependent economies caused. All this stuff, as you can read in Wiki, was totally well documented, understood and known by the powers that be, way back in the late 1940s. But the Brass and the Dulles boys and other powers gave the loaded carnival midway game wheel yet another spin.
              You much smarter and deeper people might find something of interest, some tidbit of illumination in the issuance of truly “fiat” MPC s, which if you read the wiki article or ever handled them were even cheaply made, but in such small denominations until late in the Vietnam horror as to make counterfeiting less attractive. And besides, the “real money” was always there for the CIA and US AID and scum like that to put into play to fund whatever it is that they get away with doing… Like the billions in shrink-wrapped blocks of used, non-sequential $100 Federal Reserve Notes, all strapped neatly to US-aircraft-delivered pallets for easy re-gifting, that have disappeared into “Messuppotamia” and might be headed to the shores of the Hellespont.

              We’re kind of past the limits of a tolerable amount of “slack” in the gearboxes of “the economy.” And what, I asks the experts, happened to the “store of value” that all those MPCs, billions and billions of “dollars’ worth,” in circulation and in warehouses, after the last “ugly Americans” fled from the top of the US Embassy roof in Saigon? Hmmm? What is “money,” again?

              1. BadBentham

                Money, ever since it was invented, is a fully virtual entity, only based on beliefs, coercions, and self-referring signs, that however happens to drive the economy, and determines thus whole societies. This goes back to gold, and its magic “time-less” and end-less self-referrence, as sign-of-a-sign-of-a-sign, which once was considered to reflect, in its shining, – and “represent” , “the Real” (what is still believed by those romantic and neurotic “fundamentalist” gold bugs all around the net) , that is however as it comes basically the full and actually undialectic opposite of virtuality. The most famous story to this topic is of course that of the Golden Calf, where there is on one hand the un-representable God of the Jews, who somewhat “shines through absence” , and founds for the Jewish belief (the rather catastrophic, that is) reality, while on the other hand there is the “full representation” of the calf, that claims, as sheer virtuality, and “impossible Thing”, all reality (and thus unlimited attention) for itself. Wagner, who was certainly no philosemite, but self-proclaimed neo-pagan, still shared the view that money and especially the archetypical gold are through their “shiny-ness” catastrophic entities, that have in a final catastrophy to be sunken in the river where they came from; – for the sake of universal Hippie love.

                – So, from my point of view, I can really understand the arguments you brought up.

        3. washunate

          One other thought on this, a different way of approaching it.

          the US in the 1920s, when no less than 5 different types of currencies – one gold “backed”, one silver “backed”, one backed by fiat, etc. – trading a face value…well into the 60s and 70s for some of these.

          What exactly happened in the 1960s and 1970s? The fixed exchange rate policy of the international monetary system collapsed. [monetary buffer stocks don’t work, whether we’re talking gold, silver, wool, NAIRU, or full employment….]

          Are you saying that the reason a 1960 quarter is worth more FRNs than a 1970 quarter today in the private market is because a 1970 quarter extinguishes more tax liability? Of course not. Even the government recognizes the discount between face value and market value. If an employer, for example, pays an employee in a silver eagle coin – a coin minted by the US government(!) – the taxes owed are based upon the private market value of the silver, not the face value of the fiat denomination ($1).

          It wasn’t changes in tax liability that pushed aside silver from quarters and dimes, copper from pennies, silver certificates, and other USFG financial issuance. Rather, the private market wasn’t trading the various items at par amongts each other, so the government stopped making the more valuable items in order to force usage of the less valuable ones. It’s why T-Bills carry interest, because you can’t use them very easily to buy groceries or pay rent. It’s why pennies aren’t made of copper anymore, because the government isn’t willing to create enough copper pennies to satisfy the private sector demand to surrender FRNs in exchange for copper pennies. It’s why the dollar price of an ounce of gold has increased dramatically since the post-war period. Housing too. And healthcare. And higher education…

          By the way, I’m not against this conceptually. I support fiat/sovereign/whatever money. I support freely floating exchange rates. I think a gold standard is a stupid idea. I think it’s a great thing to separate transaction money from savings money. My beef is how we spend that money.

          I’m just pointing out that the purchasing power of the TANs (the T-Biills) drops relative to other options as a sufficiently large number are issued – unless taxes also go up. So all you have increased is the quantity of currency-like units, or the quantity of taxation, not the productive output of the nation.

          But Greece can’t pay its debts in currency-like units. It has to have actual, honest to goodness euros. Just like the private sector in the US values pennies with copper more than it values pennies with zinc and quarters with silver more than it values quarters with copper, so too non-Greek Europeans value euro euros more than TAN euros.

          So as long as Greeks and non-Greeks are sharing the same currency – or as long as the ECB and IMF refuse to accept TAN euros – Greeks also will value euro euros more than TAN euros.

      2. hunkerdown

        I’m not really of a mind to game out the whole thing right now (give me my hour back), but you seem to expect that a formal market is required to establish an exchange rate, which is precisely backwards. As I understand it, one does not purchase them for speculative purposes. One receives them for rendering goods and services to the state, which has agreed to accept them at par for all or part of tax liabilities only. It may ultimately be a monopsony, but it’s a market nonetheless, and in most everyone’s pocket is a liquid enough market for human-scale actors.

        1. washunate

          There’s a time mismatch here, though. As a supplier/worker paid in TANs, you are lending the government money (euros) today in exchange for extinguishing of your tax liability tomorrow.

          An informal market would of course arise – at a discount to par (the face value of the bond/note/currency/IOU/whatever).

          The Greek treasury can only be a market maker if it offers to immediately buy these back. Which kinda defeats the whole short-term cash flow enhancement thingamajig.

          1. Calgacus

            There’s a time mismatch here, though. As a supplier/worker paid in TANs, you are lending the government money (euros) today in exchange for extinguishing of your tax liability tomorrow. There is always a time mismatch for any sort of money, or credit, or any division of labor. If you are paid in the tax credits called dollars by the US government, the government is declaring a debt to you, which it can repay when you pay your taxes, or buy something at the Smithsonian Museum Gift Shop. J. R. Commons called money & credit “futurity” for that reason.

            Parenteau isn’t saying that there would be no discount – but that it would be small – 0.1%, 0.01% – whatever.
            ‘In other words, by design, there is a self-correcting mechanism through arbitrage that should keep the 1 TAN to 1 euro “exchange rate” in a pretty tight band, as long as it is clear that tax liabilities can and will be settled with the Treasury at a 1 TAN = 1 euro exchange rate.”

            With all the banking fees involved nowadays, people use bank money effectively at a small discount to folding money – – without much complaint.

            1. washunate

              Are you denying that short-term financing has non-zero costs? Or are you suggesting that the costs are trivial?

              If the latter, then the whole scheme is moot. If it is trivial to secure short-term financing, then the government doesn’t need to issue TANs in the first place.

              1. Rob Parenteau

                Well, let’s see here washunate, all the way out to the 5 year bund, German government yields to maturity are…oh, wait a minute…negative? No that could not be right, could it? Well Germany is a special case, right, cuz we know they are super duper fiscally responsible. Oh, wait, yield curves are dropping below zero elsewhere too. Hmm, time to rethink that time value of money. Or, if you live in the eurozone, you can just wait until your bank deposit rate goes negative, if it isn’t there already…then you’ll get the picture. Weird stuff happens when you openly court deflation, by design, as the eurozone has, did, and does.

                1. washunate

                  TANs are a cash flow management tool.

                  If you are now arguing that governments already have effectively zero short term financing costs, then TANs are superfluous.

                  If what you are really arguing is that, in aggregate, Greek tax collections need to rise, well then just advocate that directly. Drop this notion that bridge financing increases the total amount of tax revenue to spend in the economy.

  7. fosforos

    Thanks Rob, for this excellent advocacy of the measures that I have been advocating, in NC comments as well as elsewhere since the start of the Greek debt crisis (I have been calling them “Tax Anticipation Certificates” or, from the picture I want to see in their center, “Solons”).

  8. Rob Parenteau

    fosforos: It is said that success has many fathers, and failure is a bastard (or, in this case, perhaps a bitch). Tax anticipation notes have been around for decades, arguably centuries. So too have parallel currencies. So too have multiple types of legal tender. So too have zero coupon bonds, perpetual bonds, bearer bonds, etc. I have no interest in claiming the copyright on any of this, though I suppose I should call my lawyer if I want to monetize my ideas. The design I propose is pretty unique if you walk through the whole thing, but hey, maybe somebody else got their before me, or maybe somebody else has an even more bombproof design than mine. I could truly care less about any of that, except to insist that these proposals need to be seriously examined, and if they pass muster, as TANs appear to be doing since I first cobbled my take on it together in late 2013, then let’s quit playing footsie with the Troika and other Austerian Institutions around the world, because we can now all see how far that gets you, and get on with it. Set something like TANs loose and see what happens. Yup, it could make things a lot worse in Greece, but guess what…things are pretty freaking desperate already, and sometimes, as the old ’60s lyric from the Doors goes, you “just been down so long it looks like up”…anything looks like up from 25% unemployment, 50% youth unemployment, increasing suicide rates, increasing drug addiction and prostitution, increasing malaria cases, and other metrics of a society on the verge of implosion…or on the way to vote for Golden Dawn, take your pick.

  9. TheCatSaid

    Isn’t the US already doing this, just not calling it a name and burying it in a footnote?
    E.g., the Feb. 19, 2015 H.4.1
    Footnote 17, “liability for interest on Federal Reserve notes due to the U.S. Treasury” at this is stated as being $65.4 billion.

    An economist who commented on this said, “Four years ago, through a technical accounting gimmick, the Federal Reserve created a mechanism whereby it could never show a capital loss.” He goes on to explain that while previously if assets such as securities ever had to sold at a loss, with the new accounting gimmick, “such losses will be offset against future remittances to the Treasury thereby making the Fed incapable of having a negative capital position.”

    To top it off–is there a NC award for this kind of lingo?–in commenting on the above accounting trickery fancy footwork, Bank of America’s Ralph Axel stated that: “We will not make too much of a fuss over this accounting change, but the overall theme of reduced government credibility is strengthened by it.”

    Is Parenteau’s recommendation for Greece similar to the accounting approach the US is using? (With one important difference being that Parenteau is suggesting this be considered and debated in the light of day.)

    1. TheCatSaid

      Only the word “future” was meant to be in italics.
      The words quoted are inside the quotation marks.

    2. Rob Parenteau

      Dear CatintheHat: About what you Said. The Fed, by law, has to pay the interest it earns on the assets it holds, mostly Treasury debt, to the Treasury, each year. Now if you think this is something like Thing One taking money out of its pocket for Thing Two, and Thing Two putting it back in Thing One’s pocket, you are too sane for you own good and should stop voting right now, in case you haven’t already. How that payment of interest by the Fed to the Treasury has anything to do with the question of central bank solvency (though it does say something about de facto ownership and control of the Fed, eh?), and why the solvency of a central bank with a sovereign currency (i.e. not convertible on demand into a fixed number of units of another currency or a commodity) would ever matter anyway, is a little bit beyond me, but I admit, I can be a little slow on the uptake, especially on Mondays. Send me a link to the quoted passages you cite, I will see if I can follow the accounting math, but this is all a little tin foil hat like if you ask me…which should not dissuade you from sending the documentation, because I like thinking outside the box, and I can tell you do too. Best, Rob

      1. TheCatSaid

        Like you, the person I quoted has a love for history. He has deep experience working with governments, non-governments, and arcane aspects of finance (including knowing where the bodies are buried), while preserving his commitment to integrity and transparency to a degree rarely encountered. His thoughts are grounded in personal experience and meticulous knowledge of little-known facts and information flow. That’s why I pay close attention to his throw-away comments. (As I do to the wisdom in your posts.)

        Like you, his thinking is out of the box. That doesn’t sit well with people who have lost the ability to pay attention, notice/question/avoid the surrounding brainwashing, or think for themselves. If you are interested in discussion or making contact, my experience is that it is worth the effort and you never know where it might lead.

        Full blog post, including the parts I quoted, is here:

        1. MRW


          If the Federal Reserve is earning interest income, its books will say that it returned it to Treasury (Annual Report). If the Federal Reserve is losing interest income, it will mark it on its books as a loss, and yes, “such losses will be offset against future remittances to the Treasury,” just like you do with your taxes. Big effing whoop. It’s an accounting act, after the fact, accounting for something it did in the past.

          In the main, the Federal Reserve returning interest income to the US Treasury causes that money to be extinguished. It disappears. It’s like “Return to Sender.”

          However, for all I know, US Treasury might use that “Interest income” amount against the amount of treasury securities Treasury is required to issue subsequent to any congressional appropriation (the amounts equal). I don’t know. Scott Fullwiler would know these things.

          Respectfully, David Martin, the guy at your link, doesn’t have a clue. He writes in his tag paragraph, “Greece, the U.S., and the E.U. all have the same problem. No they don’t. Not even close. The US has a sovereign non-convertible currency issued by the US Government and controlled by Congress. Greece does not; it uses a foreign currency, the Euro. The EU uses a currency issued by its Central Bank, the ECB, with no fiscal institution like Congress legally controlling it through fiscal policy and making adjustments as conditions change. The ECB restrictions are controlled by treaty.

          Then Martin gets Quantitative Easing all wrong.

          In short, the Federal Reserve has two bank accounts: checking and savings, and four classes of clients; US federal government, US banks, Foreign governments, Foreign banks. Each class of clients has a checking and savings account at the Fed.

          When anyone buys a treasury security–corporation, pension fund, university trust, etc–that money goes from their bank’s checking account at the Fed to their bank’s saving account at the Fed…in the buyer’s name of course. Treasury securities are kept in the buyer’s bank’s savings account at the Fed just like a CD is kept in a savings account at your local bank.

          When the buyer, independently of any government organization or manipulation, wants to sell his treasury security, he does it through a discrete number of primary dealers who specialize in their sale. The seller has no clue who is going to buy it.

          Quantitative Easing is the Fed buying treasury securities on the open market from one of these primary dealers. The Fed has no clue who the seller is. It just buys it, and pays the seller. In addition, because it’s the Fed in charge of those things, it moves the seller’s money from its bank’s savings account at the Fed to its bank’s checking account at Fed. That’s it. And the Fed drops the treasury security it bought into its own savings account. It’s an asset swap, basically.

          Now the Federal Reserve is collecting interest on the treasury security, not the seller. And because the Federal Reserve is collecting the interest income and not someone in the private sector, that money is removed from the active economy. Quantitative Easing reduces the amount of money in the economy, it does not increase it. The story we were fed was that by moving the money into the bank’s checking account [called a reserve account] at the Fed it would be increasing the amounts of “reserves” the bank would have and encourage lending.

          Further, Quantitative Easing actually increased the value of the dollar because there was less of it—around $100 billion/year–available to the non-federal government sector.

  10. Rob Parenteau

    washunate – I appreciate your sense of humor, and will consider your rebranding proposal, though I suspect the ECJ suit might be a little quicker in the filing if I run with DANs rather than TANs. Plus TANs tweaks the Northerners better, because that is what they think the Southerners work on all day long anyway. To be clear, TANs are not a tax incentive program, so please try reading my proposal rather than setting up a straw man to torch, because yes, we all recognize strawmen can burn, and we have known this ever since we saw it on TV with The Wizard of Oz, either n color, or in black and white. Look, I am sympathetic to your theft theme, but it is a euro based theft as you describe (so yes, even by your own admission, money DOES seem to matter to the problem at hand), and one way to end euro based thievery is to take back control of your own fiscal and monetary policy. That is, you stop the thievery by finding a way to accomplish your goals that cut the thieves out the picture from the get go. Now admittedly, that sure as hell ain’t easy in the eurozone, and it sure as hell ain’t easy in Greece where corruption and tax evasion are about as abundant as ouzo and feta cheese, but if you think about it long enough, there is a way to do it, and whoever ends up running the show in Greece is going to have to deal with it. That way, I believe, is the TAN approach. I am open to other approaches that may do the job of getting more eurozone economies on a pro-LIFE (that is low inflation full employment) growth path, but I frankly am not finding any better solutions. Propose one if you have it – maybe it is anarchy you want to advocate, or a corporatist/fascist solution, or a libertarian free marketeer informed proposal, I dunno – trace it out, and put it up on Naked Capitalism. But random potshots – sorry, I am done responding to that.

    1. washunate

      Yeah, I was hoping you would like DANs. For some odd reason the diplomats don’t like direct language. Not my forte, although I do try to be more diplomatic IRL…but in general, I think our civilization could do with a lot more authenticity and saying what we really mean in this age of deceit and manipulation and half truths. Secrecy is not conducive to good government. Hope the following response gives you some things to chew on.


      FYI, unless you’re doing something technical with the commenting, you can actually reply directly and it will nest a few layers of discussion. On the substance, of course it’s not exactly like TIF. Which isn’t exactly like the charitable contribution deduction. Which isn’t exactly like LIHTC. Which isn’t exactly like carried interest. Which isn’t exactly like NAP. There are important operational and tactical differences. The details do matter – one of my ongoing critiques of the ways MMT is applying chartalism to western political economy is the absence of committing to concrete details, like specific budget proposals or specific working conditions.

      But at some level we have to talk about the bigger picture, the strategic options, the 30,000 foot view. Just like the justification that tax breaks will spur future activity whose benefits outweigh the current costs, so too the TAN concept is that shifting taxes over time (in this case, from future to present) somehow alters the absolute levels of tax collections.

      I would counter that is nonsense, the kind of fantasy that has thoroughly discredited economists in the eyes of normal people. You are either raising taxes in aggregate, or you are cutting expenses in aggregate. This is what I was addressing with the phrase smoke and mirrors.

      It’s a doublebind. You either embrace “austerity” (whatever exactly that means), or you reject the rules of the game. There is no strategy within the confines of the game that solves anything meaningfully. The issue is not liquidity. It is solvency. Greek taxpayers cannot bailout private losses without paying more in taxes.

      cut the thieves out the picture from the get go

      Indeed, that is what I advocate. You are trying to figure out how to pay the bankster debt. I’m observing that Greece could instead simply refuse to pay it, if it wanted to.

      I am open to other approaches that may do the job of getting more eurozone economies on a pro-LIFE (that is low inflation full employment) growth path, but I frankly am not finding any better solutions. Propose one if you have it

      This is where things git a bit tricky, because if we’re talking specifically about Greece, I believe above all in self-determination and sovereignty. I would vote for repudiate the bankster debt, but I make no claim as to what choice Greeks themselves ought to make. The Greeks have a fundamental choice of whether they want to be a sovereign nation or a regional government within Europe. There are pros and cons to both. One of the cons to regional governance is that they tend to issue debt in a currency which they do not control. That is the issue in Greece, which is fundamentally different from the USFG. This is a particularly sad policy stance for me, because I am a big supporter of the concept of Europe, of having the bulk of the citizens of the continent view themselves first as European and only secondly as their national (or regional) identity. But I think Europe grew too fast, and remained too entrapped in the Anglo-American world, and now the only option is for those more peripheral nations to the core Franco-German culture to leave (at least, at this time, perhaps to return in a couple generations if there is a US of E to join).

      Now if we abstract a bit from the Greek situation and go to the US, where I’m a citizen, then my summary response would be this. First a very short soundbite, then a longer response.

      –> VSS: abandon growth and full employment as policy goals

      Longer response:

      1) Reclaim rule of law/End the two-tiered justice system.
      2) End subsidies that are driving malinvestment/Invest only in areas of true public benefit.
      3) Provide universal social insurance (particularly health and unemployment insurance).
      4) Restore progressive income taxation.
      5) Massively shrink the power of the national security state.

      What I would emphasize is that none of this has anything to do with growth. We don’t need more cars. We don’t need more roads. We don’t need more hours worked in the formal economy. We don’t need more McMansions. We don’t need more GWOT/OCO/NSA/CIA/ETC. We don’t need more airport screeners putting their hands down people’s pants. We don’t need more drug warriors throwing young black men in jail. We don’t need more judges and professors and prosecutors and specialist doctors. We do not lack in aggregate. We lack in distribution.

      The other thing I would emphasize is that none of this has to do with the quantity of money. The USFG budget of about $4 trillion is plenty of money. Federal outlays are about twice as big relative to GDP today than they were during the New Deal era(!). Rather, the issue is power, something of which money is certainly a part, but not the whole story. How to organize average citizens to take back control of the political process.

      As one of my favorite quips goes, we have a management problem, not a monetary problem.

      1. hunkerdown

        one of my ongoing critiques of the ways MMT is applying chartalism to western political economy is the absence of committing to concrete details, like specific budget proposals or specific working conditions.

        That’s part of its beauty. By not committing to such things, MMT helps discredit the notion that the laws by which money operates are “natural laws”, not merely conventions designed to enable the concentration of surplus in the most useless hands of society’s idols. Tell people that MMT is not incompatible with a culture of pederasty, peerage and peonage, but now they can’t use the monetary system to rationalize it as necessary or adaptive.

        1. washunate

          Your premise that ignorance is the problem is not accurate. The general public understands quite well they’re getting screwed.

          1. hunkerdown

            They understand it that far, I grant you. But, as is my usual bent, I claim not ignorance, but ethos, as the operative principle: that, if only we all *also* had the same capacity to plunder as the executive class, the resulting detente would be forever stable and peachy keen. It’s those axioms of the culture — the compulsion to conformity, the perception of identity as a union of group memberships, the overweighting of commerce and contests in the distribution of social status, the celebration of exclusion as a model social relation, and last but not least Protestantism — that normalize continuous, low-level combat and tend to inhibit meaningful solidarity from crystallizing.

            1. washunate

              And MMT enlightenment offers no mechanism for what you are describing. It depends upon the “executive class” as you term it.

  11. Rob Parenteau

    Most criticisms of the TAN approach to achieving pro-LIFE (low inflation full employment) economy, as opposed to the Austerian/Creditor Looter/Rent Extractor suicide pact we are living under today, eventually boil down to, yes, but they will never hold at 1 TAN = 1 euro, and they will never get taken up as a means of settlement in private transactions (despite an unbelievable pile of historical evidence about what has been taken up for that purpose to the contrary – I barely scratched the surface of it above), so this TAN thing is just DOA. Since I have treated the first objection over and over again, let me begin to repeat myself endlessly on the second objection, as we all know, from Goebbels and Faux News, if we repeat something enough times, everyone will eventually believe it. Let me share the following hilarious but oh so relevant anecdote from a comment of a reader over at New Economic Perspectives: “I got mugged in Recoleta, Buenos Aires in December 2001. The poor guy was unhappy that I didn’t have many pesos on me but he ended up taking the patacones and seemed quite happy with the ‘transaction’. On learning that I was British, he even wished me ‘goodnight’. It’s amusing to think that his ethics have more to admire in them HSBC, RBS, JPM etc.” I have request an affidavit from said reader, just in case you think I made this up – because I could not, not even in my wildest dreams. We apparently inhabit a Pynchon novel. Gravity’s Rainbow is still be written, and we are the pencils writing it.

  12. Chauncey Gardiner

    Rob Parenteau’s proposal strikes me as a creative alternative/supplementary monetary policy idea to mitigate the very real humanitarian effects of the Troika’s austerity policies on the people of Greece. Although I am not a bond guy and may be overlooking a key feature, his proposal seems similar in concept to the State of California’s TAN’s to me:

    1. washunate

      I don’t think you want to hold up California bonds as an example of what he wants to do :)

      My bold:

      RANs are short-term notes that fund the State’s cash management needs during a fiscal year. Each note is a promise by the State to repay investors the amount of money borrowed (the principal), plus interest, from the States available monies at the end of that fiscal year.

      In other words, these bonds are sold at a discount. They’re cash flow management tools sold to investors, not payments made to workers and suppliers.

      1. Chauncey Gardiner

        Hmmm… Recalled there was specific discussion of California’s use of TANs when I looked at that link earlier.

        Just an observation that issuance of these types of notes is not unique. Not addressing expansion of purpose to encompass the potential use of TANs as a form of money, although as I recall there was some discussion by California state officials of using them for this purpose to address the state’s financial woes when Ahnold first assumed the position of governor; i.e., to pay vendors. I didn’t follow what subsequently transpired and I am not a Cali resident. So please correct me if my recollection of those evening newscasts years ago is erroneous.

        1. washunate

          Yeah, non-sovereign governmental entities use tax policy all the time. But it’s for short term financing at interest. That’s liteally what the R/T stands for. There’s a specific source of revenue or taxation that will be coming in, it’s just not here now when the outlay needs to be made.

          The author is trying to claim something else, that this can be done without paying interest and that it can increase total spending rather than pulling it from the future into the present.

          1. washunate

            P.S., to clarify like in the thread below, I’m talking about a meaningful increase in spending. There of course would be some float as the time lag between when a TAN is issued in the Greek proposal and when it’s redeemed means some total increase in spending.

  13. larry

    Rob, while not central to your argument, you left out of your list of US notes the “lovely” Silver Certificate on the dollar bill, which was redeemable at any bank for one silver dollar (Whether that dollar comparised a dollar’s worth of silver is another matter.) The rest of the notes displayed “Federal Reserve Note”, which was not redeemable in silver by demand. Which I would guess was the intention. The change was made sometime in the Fifties, I think.

  14. larry

    Apologies, Rob, I missed your mention of Silver Certificates. Though you don’t mention the denominations to which this attribution applied. As I recall, it applied only to dollar bills.

  15. Jordan from Croatia

    I still think of TAN as somwhat reducing state income in longer term. Not in the first year but later on, and Greece needs a long stretch of extra spending. Yes, it would aleviate suffering but reduction in state income while economy is buzzing will enrage Eurogroup.
    While anticipated income from tax is in euro but some is paid in TAN, ammount of euros received will be constant while received in TAN will be increasing as economy grows. How will state accounting be set up? As only receiving euros even tough they receive TAN too? That would be only way to prevent reduction in euro receipts, tricking ECB. Would Eurogroup take notice and stop that?
    Also another issue is ammount of possible issuance of TAN due to tax liabilities. The possible amount will surely increase over years as economy grows.
    Another issue is black market where trading is with TANs. TAN incites black market when black market is exactly one of the big problem of Greece is.

    Those are minor issues i raise, except accounting set up of receiving TAN but counting euros.

    TAN should be used no matter issues, but i think i have an idea with greatest usage of knowledge of money.
    Slovenia was presenting a similar idea which i upgraded. About 97% of money used is bank created, when credits are paid off they destroy it and only part that is interest is kept.
    Why not give them something else to destroy instead of precious euros? Let’s call it PILL – Pay in Lieu of Loans.
    Greece could print €100 denominated PILL accepted only by banks in lieu of debt repayment. It could print the total of monthly payments toward credit principal that citizens pay every month.
    It could print even more if people open new loans and pay it off in PILL. Even unemployed could open a credit line at banks if they receive PILL and pay late taxes or utility bills. And those PILLs should have a 90 day expiration date so they are used right away.
    This would cut numbers of defaults that are reducing reserves at banks which most of continous bank bailout is for. Credit defaults are the main reason greek banks need continous ELA funds. This way greek banks could start fund the government again instead of opposite.
    These new PILLs will surely reduce further defaults and maybe even correct some old ones while Syriza is instituting USA style bankruptcy institutions.

    1. Rob Parenteau

      Jordan – I am intrigued by your PILLs proposal, especially the recognition that lies beneath it (namely, that bank loans create money qua deposits too, so lets fiddle with that knob while we are going for a pro LIFE economy). However, remember who ultimately regulates the banks and monitors/dictates their capital requirements and repos their assets when they need reserves to meet reserve requirements etc. That’s right, that would be the ECB. And the ECB doesn’t take PILLs. The ECB only administers PILLs. And only bitter ones at that. Unless of course you happen to be a bondholder. Then the ECB has unlimited candy coated pills to give you, if you will just be so kind as to give them your bonds, and these candy coated pills, called reserves, or newly created money in plain Eurospeak, can be used to buy more bonds for you to sell at marked up prices to, why yes, that would be the ECB…again…as in wash, rinse, repeat. And the funny thing is, even though some eurozone governments seem not to have enough money to help make sure their economies do not sink into 5 year long (or longer) Great Depressions (depressions we know were their own fault anyway, stupid and lazy countries that they are, as indicated more diplomatically by some German policy maker in the last week), the ECB NEVER RUNS OUT OF MONEY when it comes to subsidizing bondholders. Never. Nein. No can do. Unless they want to. But bondholders would prefer otherwise. And you do not, under any conditions, want to pizz ov zee bondholders, got it? So I like the thrust of your PILL proposal, but I suspect the ECB would rip the ELA life support tube right out of the esophagus (or is it esophagi?) of the Greek banks on day one…which the ECB may also elect to do on day one of the implementation of TANs, but hey, at least we can deal with that eventuality. Because you see, under BIS capital adequacy rules, perpetual notes are legitimate forms of what is called Tier 1 (as in super duper special kryptonite proof) capital, so when the ECB plays that card on TANs, which you may recall, are a perpetual note, we can nationalize the banks and stuff them with TANs to recapitalize them on the spot and get on with it. That would be, check, and mate, I believe. Would you hand me my coat please, Mario?

      1. Jordan from Croatia

        Rob Parenteau
        Now i see how far you are going with TAN.
        I think you gave a to long a life to PILL thing, much longer then i did. PILL would go from government to people (comercial bank credit holders) to banks. Stop – destroyed.
        Why not give banks to destroy something else (PILL) instead of euro? that was my question.

        Now i am not 100% sure about EU banking accounting, you could advise me there.
        When a bank receives a record of payment in lieu of credit, it erases the equivalent ammount of principal and transfer interest part to income of a bank which goes into capital fund.
        Now, only principal part would be covered with PILL while interest part in euros. Yes, at the beggining of a loan service principal part is miniscule but it grows as time pass while credit is repaid.

        So what happens when bank receives digital euros as payment of loan principal. Does it increase ammount of reserves? As far as i know it does not (if payer have an account at the bank A and credit at bank A). If payer uses different bank B to pay to credit bank A then it will raise reserves of credit bank A. But payer will use two payments: one part in PILL and another part in euro from his account.

        Only pay to interest part goes into capital fund while part of principal payment is destroyed. PILL will be destroyed just as euro that cover principal is destroyed.
        There would be need and cooperation of banks to accept monthly payments in two types, part in elecctronic euro and part in PILL.

        Let’s say that a client is paying monthly payment in paper euros, but that is extremely rare. Bank puts paper bills in the vault (bank reserves) while principal ammount is electronically destroyed (erased). That is the case where credit payment increases reserves but as far as i know it is extremely rare that people pay in cash to banks.

        So if loan clients will have a checking account in the same bank that gave the loan, there will be no issues with bank reserves. Paying in PILL for loan principal part will not change ammount of reserves. It will lower requierd reserves freeing funds for government borrowing.

        I developed the idea from the USA style of bankruptcy chapter 13 where judge allows a bank to erase defaulted client’s debt without receiving the payment and leaving property in clients hand.
        What banks do with defaulted credit if there is no bankruptcy and can not sell property but for miserable ammount of 20% of the total debt which happens often?
        Banks have to use their own capital ( from capital loss reserve if they have any left) to repay loan on their books. Right?
        Without bankrupcy, banks loose capital in their client’s credit default. Which is why they need ELA after they became insolvent.

        PILL is incremental bankruptcy of private debtors. It does not affect reserves and prevents destruction of bank’s capital in defaults.
        I know that there is a lot of Loan & Savings loans in EU and they should not use my PILL, it would not work with it. But greeks could refinace S&L loans with a loan from regular bank where PILL could work.

  16. susan the other

    Great essay Mr. Parteneau. Money is one thing – and one thing only – cooperation. So yes, consider all the directions that cooperation (usu. politix) can go with confidence and money will follow and be legit. Even if everyone is a con artist, if everyone cooperates, then the money is good. Which is basically what we humans are because we skim our profit from the environment, leaving it trashed and dying. But nevermind all that. You can put money in your pipe and smoke it. I’d just say this because I get confused always: Taxing authority doesn’t give value to money (value is ever and always a relative thing), it gives assurance and confidence, and creates cooperation. And cooperation is a very fragile thing that can and does turn on a dime – when anyone smells a rat, its all over. Then it’s all out distrust. The great irony with money is that if you kill confidence because you are a jerk who is too greedy and clever by half, then you kill money because money is nothing more, nor less, than the fragile thing no one can describe – confidence – which creates cooperation. So money is cooperation as a system but underlying it all is human confidence which is always at best ethereal. There is probably no better gate keeper. And nobody will give banksers the benefit of the doubt – with all their clever “instruments” – when all this sewage is finally washed away. Money is nothing more than cooperation. And cooperation runs so deep we cannot even define it.

    1. Rob Parenteau

      Susan: I largely agree with the point you are making, and if you read the history of how Hjalmar Schacht ended the Weimar Republic 1922-3 hyperinflation episode single handedly by producing a new currency called the Rentenmark (supposedly “backed” by land mortgages I believe) and browbeating merchants and bankers etc. into accepting it and maintaining its value from what was once a closet but then became his office, a closet with a telephone in a government building, then you will know you are on to something. But to be fair to the neo-chartalist point of view, if you have to deliver a certain piece of paper to the Treasury every quarter or every year at in every transaction (think VAT) to avoid being thrown in jail, or to avoid having even more of the possessions you had to sell to get that piece of paper into your hand in the first place taken from you, then it makes it a little easier it to justify using that piece of paper to settle purely voluntary private market transaction as well. And if these state deems that piece of paper as the only legally recognized way of settling debts, public or private, you got one more reason other than trust to carry that green papyrus in your pocket, right?

    2. Jordan from Croatia

      Very well said, susan.
      Pursuit of money is motivator for cooperation.
      I have a really nice metaphor of what money is, and what should be treated as. I hope you will like it.

      In times of birthdays, baby showers, weddings, visits etc we bring presents to celebrities that are mostly our familly and good friends. We try to keep a memory of the value of those presents we are given and when it is our turn we try to keep presents on the level they gave us the last time, As much as we can. But we can not keep such huge ammount of data in memory (depending of the number of familly and friends we have). What if we were given a record of value of such presents every time we give and receive so we do not have to keep it in memory.
      Lets say i give you a present and you give me a paper with value writen on it. That is what money should be tought of: as record of debt from present. With money as we have it, we all can exchange gifts and have a record of it, and then give valuable present to anyone but you will eventually receive equal value from someone else.

      My work is a gift to my employer. Then i receive a record of my gift. Even tough they are in debt to me i can receive gifts from others in exchange for such record. And then others will eventually give those records back to my employer in exchange for what my employer have and gifts them when they need it..

      A single currency is what motivates people to exchange gifts within a whole country just like familly and friends exchange gifts and remember the values. With money there is no need to remember and you can exchange gifts with millions of people that cooperate. Familly values are extended onto the whole country which uses one type of record of gifts (one money)
      I know it is utopian and advanced concept but when it becomes accepted widely then we will understand our position in a society and what to do with it. We will understand that is much better cooperation if there is more records of gifts for people to use then less. Why some are so inclined to hoard records of gift (which they could never use them all up) while others lack them even tough they give gifts.

    3. MRW

      susan the other,

      Taxing authority doesn’t give value to money (value is ever and always a relative thing), it gives assurance and confidence, and creates cooperation.

      It’s much more than that in the USA, susan. This was litigated in the 1870s. see

      This link only discusses what precipitated the judicial challenges–short and sweet–but if you plow through the findings as I did a few years ago, you find their legal determination that legal tender is anything the US federal government slaps its Great Seal on and requires in payment of taxes, and all debts.

      Wikipedia has a longer explanation. Cooperation does not enter into it. It’s law.
      I am reluctant to give this link because there is so much that is factually wrong about the Federal Reserve. Take that as a warning.

  17. Rob Parenteau

    Though I live in California, and the TAN approach I am suggesting for the eurozone bears some resemblance to that short lived incident in recent history, that really was not the inspiration for it. You see, there is this American economist named Irving Fisher. He is the Godfather of the New Keynesians ( Krugman, Bernanke, Yellen, Blinder, Woodford, etc.) who rule the policy roost in the US, as well as the head the mafia known as academic economics. He made a fortune inventing and marketing Rolodex cards (I kid you not – somebody had to invent this stuff, right?). He thought the real interest rate was the key to the economic universe, and a critical element in establishing and maintaining economic equilibrium at a noninflationary full employment path, just as the misnomered and arguably just as misinformed New Keynesians who follow his early Gospel do today (see my rant against Krugman last week on Naked Capitalism if you do not know about this little truth in advertising problem). Irving, with all of his elegant theory, failed to see the Great Depression coming, got fleeced because he never cut his losses, at least until they cut him too deeply to avoid bankruptcy, and he also lost his house, which I am told Yale bought in gentlemanly fashion upon foreclosure and graciously rented back to Prof. Fisher. Irving’s theories, needless to say, changed dramatically, after this little living experiment in the equilibrating power of real interest rates. So much so that he trashed them all, or at least most of them, and spent the remainder of his life writing about debt deflation dynamics, which yes, are quite disequilibrating (as in, flush your toilet, you will get the visual equivalent of those long and impressive sounding words), and about alternative finance and monetary systems, because the old one apparently did not work out so go…despite the fact the Federal Reserve was in place to manipulate interest rates…and insure such horrible potential outcomes never became actual outcomes. I invite you to Google Fisher’s book “Stamp Scrip”, where he catalogs some of the monetary innovations that have gone on in modern history. Of course, rarely do the New Keynesians du jour mention that Fisher trashed all the real interest rate theories of his that they so devoutly and ardently worship to this day, and only occasionally, if the circumstances are extreme enough, will you catch these New Keynesians mentioning that Fisher did a little bit of a rethink on all that real interest rates equilibrate everything stuff after he lost his shirt and his house in no small part because of those theories. So the TAN approach grew out of an understanding of how government finance actually works and what money actually does based on my read of history, in part guided by Irving Fisher, J.M. Keynes, Hy Minsky, Abba Lerner, Ed Domar, Jan Kregel, Paul Davidson and other economists who have either been consigned to the dustbin of history, or exiled to the academic equivalent of Siberia. I believe the record shows all this stuff, by the way, was once widely understood, especially by the ’40s. It is just that we have all been punked by the plutocrats and their economist and policy making puppets in to thinking TINA – there is no alternative. Read a little history, read a little macro from 40-80 years ago, and do a little original thinking for yourself, as Orwell warned you to do, and you too can come up with a pro-LIFE TAN Plan to save the world from the dark forces of ignorance and deception.

      1. susan the other

        And also thinking about debt as the original money. A little ill-defined for my soul. But I can see an ancestry tree that goes back in time like this: Love to Justice to Trust to Cooperation to Debt and bond to Money to a First born, aka collateral. Can’t really rehypothecate your kids tho’. Full circle. There is alternatively a fine line between debt and money or a deep trench between them. And it all depends on things like good will. Funny that. If Greece can pay, Greece will pay. Otherwise it will become a carnival. Debt is idea based on flesh and blood. Can’t we get beyond that?

  18. Peter Pan

    NC needs more Rob Parenteau.

    His articles are excellent and his participation in the comments section are commendable.

    Please !!

  19. steelhead23

    If Greece wants to improve its tax collection and earn euros to pay Mr. Junker back, it shouldn’t merely issue TANs, it should offer them at a discount – say 1.1 TAN to the euro while continuing to count 1 TAN = 1 euro in tax payment. That is, offer players a 10% discount on their taxes – if they pay up (moral hazard notwithstanding). Combine this with a short, but severe spanking of the worst tax cheats and tax scofflaws would run over each other to save that dime – and pay their taxes with TANs, feeling like the smartest guys in the room. Whatdya think Rob?

    1. Rob Parenteau

      Steelhead: I can see the merit of your idea, but look at how much the 1 TAN = 1 euro feature of the TAN proposal tends to draw unfriendly fire. There is enough doubt out there that TAN parity can be preserved by raising taxes, or by reducing the share of fiscal expenditures financed by TANs, even AFTER letting the built in arbitrage mechanism (giving yourself a tax cut is usually not that controversial a proposition) do its thing that I think there is no point in trying to be too cute by playing with a TAN discount. Maybe a trial of your idea makes sense (after all, it is a variation on the tax cheat holiday theme, as in say IRS will forget about the concept of compound interest at usurious levels if you just pay the initial tax liability you owed on April 15th over the past three years, but somehow managed to forget to pay, despite those alarming letters in the mail, and despite the “garnishing” of your wages, which probably marks last time you’ll ever order a garnish for any meal, right?) but given how many people still get their backs up on this parity feature, even after being told that the US ran 5 very different currencies at the same time in the 20s (and at least 3 of those circulated into the 60s and 70s at par I believe) and even after hearing one semi-entertaining anecdote, since that constitutes decisive evidence in a Faux News world, that an average robber in 2003 Argentina preferred to take the parallel currency off of you rather than the official legal tender of pesos…well, we might just have to wait to twiddle with the parity feature, if there is to be any twiddling at all (and my preference would be no twiddling, at least until TANs were trading at a large and sustained premium to euros, which is within the realm of possibility under more than a few scenarios, and only then would I suggest twiddling with parity if the potential benefits dramatically outweighed the potential costs. Same thing holds, by the way, for the 2% inflation ceiling and the maintenance thereof under the TAN approach to a pro LIFE, that is low inflation, full employment, economy…which was spelled out in “Get a TAN, Yanis!”… but for some reason the parity worriers never seem to take much notice of that feature, through a weird form of cognitive bias I guess. Yup, monkeying around with financial and monetary systems can introduce some painful deflationary or inflationary biases. The eurozone architecture, as Jan Kregel identified over a decade and a half ago, is decidedly disinflationary, and eventually, as we can all see now, outright deflationary. But knowing that, we can make sure what we do design in these areas minimizes risks in either direction. And right now, the risk appears more on the deflation downside…especially since it is hard to sustain an accelerating inflationary wave, or even a high inflation rate, when a quarter of your labor force has no work, and hence, no visible income to pay more money for goods with higher prices, never mind ever increasing prices. The purchasing power just ain’t there, so the high prices do not get “validated” by actual spending, and the retailer ends up with unexpected inventory accumulating, which tends to lead to price discounting, undoing the inflationary spiral. In other words, and here is the piece that escaped the notice of the designers of Abenomics specifically, and New Keynesian/Old Fisherian advocates of managed inflation (like Paul Krugman) in general: if household income fails to increase pari passu with the prices of consumer goods as they rise, and credit is not so available to consumers for whatever reason, then prices of consumer goods cannot keep rising very easily, because eventually your rising payments for essential items in your household budget crowd out your ability to pay for less essential items, which means the producers and vendors of those items are left with less pricing power. That would be a fail for any runaway inflation process. Or to put it another way, you cannot manage higher inflation rates, or accelerating inflation rates, unless real wage growth is equal to or greater than zero, or employment growth is compensating for real wage erosion (neither of which condition we witness under Abenomics), or banks are spewing household credit to plug the gap between household income growth and household expenditures. The inflationary process becomes largely self-extinguishing unless you assume things that may not necessarily happen, which is generally not a very wise thing to rely upon. Best, Rob

  20. Jim

    There was a time when ordinary people thought they knew what money was. Now nobody knows what it is.

    1. Bobbo

      Jim, what could be simpler than this: “if you have to deliver a certain piece of paper to the Treasury every quarter or every year at in every transaction (think VAT) to avoid being thrown in jail”.

      That’s really the essence of the top down approach. The people no longer define what money is at the local level. Instead, it we be defined by those who control the levers of centralized power. What could possibly go wrong?

      1. Calgacus

        The people no longer define what money is at the local level. They never did. They never could. For this is a logical impossibility, that has never happened anywhere. Money can only be defined at the global, macro level of a group of people making a “top-down” decision, hopefully collectively, democratically. The base money in the uSA & the world today is the US dollar, whose worth is defined by the taxation power of the US governments & behind that, the productive power of the US society. It is all of us, at the national level that defines the value of the US dollar.

        Yes, things can go wrong. They have for millennia. But if people re-understand what they are doing, have been doing for millennia, understand MMT again, understand accounting again – the same things won’t go wrong. They didn’t go wrong in the postwar era, basically because all the countries in the world decided to have no or low unemployment. This is a very easy thing to do, so everybody did it, and everybody benefited. Things go wrong because people work very hard to make things go wrong, to systematically sabotage the economies of the whole world. Their main tool is spreading ignorance and non-sensical economic beliefs.

  21. dbk

    Great stuff, really thought-provoking.
    Some dumb questions from a non-finance person:
    (1) How would the initial issue of TANs be determined (i.e. amount)?
    (2) How do you envision private transactions actually working in practice (i.e. physically), given that TANs will be IOUs electronically credited to taxpayers’ bank accounts? They won’t exist physically, right?
    (3) How exactly would Rania Antonopoulos’s ELR plan be financed by TANs, given that they are for use only for discharging tax obligations?
    (4) We normally think of “tax obligations” as applying to “income tax.” Would TANs also be available for discharging VAT obligations?
    (5) If people had the option of paying taxes in either euros or TANs, why would anyone choose euros? It seems to me that many people would prefer TANs, which suggests that there might actually arise a situation in which TANS were traded at more than parity, due to the continued preference for euros (for travel, savings, educating one’s children abroad, etc.).
    (6) You noted here (and in the earlier essay, which I just reread) that Greece needs to get control of tax compliance – i.e. tax evasion – before TANs would be a viable option. This, however, is at the very least a medium-term goal. Just out of curiosity, what are your thoughts about how this could be effectively achieved at minimum cost/ within a fairly constrained time-frame? Given that a very large percentage of the Greek work force is self-employed (32% vs. an EU average of ~15%), how can the government find a way to ensure that these individuals pay taxes on their actual income, as opposed to their reported one (e.g. for physicians, it’s estimated that a self-employed physician who is not in a “critical” specialization on average declares between a third and forty per cent of their yearly income)?

    Thanks for your patience!

    1. Rob Parenteau


      (1) idk. My advice to Syriza would be start small then go big. The clock is ticking down.
      (2) You have a debit card? Seen one ever? How about an iPhone? I hear they do this kind of thing in Africa, with people who can barely read and write…and may not even have electricity most of the day. So maybe that excludes Greece from a TAN approach. Not. If necessary, TANs will be used to finance solar in all the rural villages. Oh, hold on, we’d have to import that stuff, and that takes euros, so wait 5 years and we will have the graduates from the local engineering program all over it…what do you mean you had to close the school because you couldn’t pay the teachers anymore? Oh, right, you ran out of money…the kind the ECB never runs out of, at least when it comes to subsidizing the capital gains of bondholders.
      (3)Nah, dbk. Read the Get a Tan, Yanis piece. What does it say TANs will be issued for? That’s right, to finance all sorts of fiscal expenditures, just like most bonds do, with the exception of a few legally delicate categories.
      (4) Maybe on VAT, but first we learn to walk before we run. Allowing the settling of VAT obligations with TANs, however, would probably speed up the adoption of TANs in private sector transactions though.
      (5)Right, you would prefer to settle tax liabilities by delivering TANs rather than euros to the Treasury…which does what to the demand for TANs…and does what for the “exchange rate” of TANs relative to euros. And if TANs do get voluntarily exchanged between consenting adults for private market transactions, think about the potential appreciation of TANs over euros that might show up then too. Yup, some people will still prefer to hold euros for external transactions, etc. and I see no reason to want to stop that. But you’ve got a “market maker”, the Treasury, with virtually unlimited buying power…see the whole rap in the essay above, I do not have time to repeat it, sorry.
      (6) Good question, and Syriza appears to have a very high incentive to answer that question, and fast, right? Otherwise, let’s just call a red and black spade the anarchist spade that it really is, build a big fence around the country (call Junker at the EIB, he could fund that one, cuz its infrastructure, you know) declare a no-fly zone, and stop pretending Greece is governable, by anyone, ever. So does that mean I can start working on the Spanish and Italian translations of the TAN proposal now?

      1. Jordan from Croatia

        Regarding 6)
        Croatia implemented a program called Fiscalization and within 2 months recorded sales transactions increased by 31%. Now even sales at country markets have to be with receipts that are imediately relayed to Tax collection agency. All digital and wireless. 31% increase in reported sales.
        After few months of closing shops and writing fines for not issuing a receipt, even 1 cent of discrepancy in cash register and reported transactions which took all of country’s fiscal inspectors 24/7 work, it all calmed down. Now Austria, Poland, Slovenia, Latvia and Check Republic are asking advice on program, It was so succesfull. So the problem of grey economy is solved. Now only highly connected people can avoid paying taxes through debt forgivness and tax imunity (lax tax laws).
        It is not a problem if government is determined to do it. It will take less then 4 months to repeat Croatian program of fiscalization. But such program requiers funds to implement, doesn’t it?

        1. TheCatSaid

          This is impressive.
          What about the folks at the top–is the Croatian government taking steps to close down the lax tax laws that provide loopholes for the favored few? Otherwise it’s just more taking from the folks who have the least to give, isn’t it?

        2. Rob Parenteau

          That’s what I am talking about Jordan. Nice one. Where there is a will, there generally seems to be a way. Let’s just suppose, hypothetically speaking, Syriza really needs to find a way. Like right now. The good people of Croatia need to jam YV’s phone and iPad with texts and e-mails with this link you provide. Just ask the Italians how to do that, though best not to try this when YV is at the negotiating table, and urgently trying to place a call to Tsipras. Of course, under Maggot Thatcher and Ronnie Raygun’s TINA mindwash, gummint can’t ever get nuttin done. Best practices in government is just an ex ante contradiction in terms. Let’s agree to turn our heads away from all the cock ups that corporate bureaucracies are just as capable of executing on any given day of the week. Move along, there is nothing, nothing to see at all over there by those 94 flaming railroad cars carrying tar sands oil through Gogama, Alberta. Move along, and just remember what a hell hole the DMV is by comparison.

        3. TheCatSaid

          Jordan, how are non-financial transactions handled? E.g., barter of goods & services? Or helping a neighbor because it’s the right thing to do, rather than with the expectation of a future exchange?

  22. Rob Parenteau

    Thanks Peter Pan, and say hello to Tinker Bell for me. For those who share your esteemed judgment, please scroll up and go looking for the picture above of the two cute looking snow leopards (or whatever the hell those hilarious fuzz balls are) and feed them tips. Lots o tips. Big ones, as in many zeros before the period. With a love note maybe even, because somebody’s got to make a living providing this forum of civic engagement, and I am pretty sure it will never, ever be me. I only write when the absurdity of the situation gets to 11 (you’ve seen the film Spinal Tap, no? Here, let me let clue you in on that little inside joke that only the mullet heads amongst you might have caught, see – and I should mention a hot tip for you all you bond traders out there, I recently heard Mario Draghi also has an 11 setting on his QE machine, by the way). Fortunately, that is not every day, or else I would get fired for moonlighting on my day job, and then never be able to make my alimony payment. Which would suck. Because divorce laws make just so much sense to me. And I guess women never fought for liberation in my lifetime, that was just a hallucination I was having in the ’70s (and I have heard, with rights, come responsibilities, or so my high school history teacher Mr. Brooks used to assert), But I digress…

  23. mpr

    Let me flesh out why the 1 TAN = 1 Euro parity is a non-starter since, as I wrote, I think this fallacy detracts from some of the possible merits of the proposal. Lets take the best possible implementation of RP’s proposal: The govt. sets up an electronic exchange where people can trade their TAN’s, solving the market making problem. Moreover, they carefully manage TAN issuance.

    What would carefully managed TAN issuance look like. Suppose they issue only enough TAN’s in a given day to cover tax payments they expect the next day. The TAN’s would still trade at a small discount, as otherwise no one would bother going through the exchange process, but this discount would be small, since the TAN’s are really worth a Euro the next day in somebody’s hands.

    But this has achieved just (at most) one day of financing via the TAN float. Presumably the idea is financing for a period of at least several months. So TAN issuance would have to be much larger than that. This means the number of sellers of TAN’s on the exchange would greatly exceed the number of buyers with immediate tax payment needs. Either the price would crash immediately (quite possible), or someone would have to be willing to hold the TANs for eventual redemption in lieu of taxes.

    There is no reason at all to think that someone would hold TAN’s for several months at an (implied) rate of return below those of T-bills. In fact since this is a new kind of security there is every reason to think the rate would have to be substantially above T-bills.

    The response that the TAN’s extinguish tax liabilities by law, whereas the govt can default on T-bills is not convincing, because in the latter case they are likely out of the Euro, and your TAN’s extinguish drachma liabilities.

    So the absolute best case scenario, if one wants to argue for such a proposal is that TAN’s are a covert form of T-bills. Of course they won’t be accepted as collateral by the ECB, but it might have some merit. Its not obvious one can reasonably overcome the illiquidity, novelty and bank run issues however.

    1. Ben Johannson

      But this has achieved just (at most) one day of financing via the TAN float. Presumably the idea is financing for a period of at least several months. So TAN issuance would have to be much larger than that. This means the number of sellers of TAN’s on the exchange would greatly exceed the number of buyers with immediate tax payment needs. Either the price would crash immediately (quite possible), or someone would have to be willing to hold the TANs for eventual redemption in lieu of taxes.

      Government doesn’t need to manage precisely or produce in large anticipatory quantities as euros will still be accepted. Only regular injections of TANs will be needed to smooth the market over time. Short term volatility will deviate from official exchange rate while average over longer periods will remain in a narrow band close to parity if government maintains that policy.

      1. mpr

        I’m not sure what you mean. Yes, I gave only two scenarios, but their funding need is for several months, so one way or another you’d need a sizable float of TAN (several billion E at least) to make this work.

        If you think those will trade at parity, I’ve got some Greek T-bills I can sell you at parity.

        1. Ben Johannson

          You continue to assume Greek government will need to immediately ssue all TANs necessary to settle tax liabilities. It only needs to issue them gradually and regulary as TANs aren’t the only financial asset available for settlement.

          1. mpr

            @Ben Johannson

            I don’t continue to assume anything. It can issue them as regularly and gradually as it likes.
            Either the rate of issuance is such that they all get quickly redeemed (in which case they don’t do much to help financing), or there is a float, in which case they will trade at a discount.

            1. Calgacus

              Either the rate of issuance is such that they all get quickly redeemed (in which case they don’t do much to help financing), or there is a float, in which case they will trade at a discount.

              I don’t think critics understand the purpose of issuing TANs.
              “Financing” or “cash-flow management” is not the purpose of issuing TANs. Exiting austerity is the purpose. Quick redemption probably indicates success in spurring economic activity. Greece should not care about the size of its “TAN deficit” – just issue enough to employ a lot of Greeks in Greece working for Greece.
              All the same (inadequate) arguments could be made against bank money instead of state money – but people use bank money more than state money, and it trades at basically par, at most a small discount for bank money.

  24. Rob Parenteau

    mpr, is it possible you are discrediting yourself by not taking into account my prior responses to your reservation about the parity issue? I do not have time to repeat myself yet again, so let me try a different tack with you, and then I have to jump. Please note your implicit assumption: the demand for TANs is mainly a function of the number of people who have tax payments due tomorrow, or at least that is what it is sounding like to me from your words above. When in fact we should reasonably expect that anyone with taxes in arrears – which are quite a few households and firms in Greece I hear – and anyone with a tax liability at any time in the future – would love to take advantage of giving themselves their very own self-induced tax cut by buying TANs at a discount to euros and delivering those TANs at Treasury, or selling them on to someone that needed to do the same, to extinguish 1 euro of tax liability for each 1 TAN they deliver to the Treasury to settle tax liabilities. Again, apologies if I am missing something in that trade, but most people I know would, beyond perhaps some frictionally transactional inconvenience cost, do that trade over and over and over again. As in some wise guy or two will do it for you and scalp a percentage if you can’t find the website on your iPhone, or can’t code the algo or the bot to do it for you while you leisurely eat your Greek salad at lunchtime overlooking the ocean. And let’s assume TANs will never, ever, ever be used as a means of settlement by consenting adults in private market transactions, because, hell that kind of thing has never happened with any thing like this, has it? Turns out it has. Many times. For centuries. To the point robbers want the parallel currency, not the official government legal tender, in Argentina, circa 2003, at least according to one reader. Except yup, if you do not design it right, and the adjustment and enforcement mechanisms are flawed, you can end up with some undesirable results, no question. And you have failed to persuade me, despite repeated efforts on both our parts, that these first two conditions, adjustment and enforcement mechanisms, are fundamentally flawed in the TAN approach, though I am prepared to be proven wrong, because I am self aware enough to realize I am far from omniscient, or else I would take all this time and effort to engage most of you on these various issues, and I am especially more than willing to be shown how to improve these mechanisms and make the TAN proposal even more bombproof, if that is indeed possible, because if we drop the verbal sparring for just a NY minute, too many real people are really suffering for no good real reason except sheer and utter ignorance about how government financing actually works in a fiat money economy…which is an ad hominem attack on the Troika/Institutions and their ultimate puppet masters, and not on you, because I can see you have indeed made an effort to get your head around the TANs as an alternative financing instrument for a pro LIFE (low inflation full employment) policy stance. And no, I am not so starry eyed to think that all of Greece’s problems can be solved overnight with a single government financing instrument. But I am foolish enough to think that it just might reveal where the real underlying problems, as opposed to the arbitrarily self-imposed ones, can be found.

    1. mpr

      RP, the reason all those tax debts are outstanding is because people are not paying them, and in large part have no intention of doing so. According to you, just because you’re offering them a discount with the TANs they will suddenly all want to pay. If that were true, I grant your proposal would work.

      But it almost certainly isn’t. Except at the margin, taxes which are uncollectible in Euros will remain uncollectible even at a small discount.

      BTW, I’m not assuming TAN’s won’t be used in private settlement. They probably would be, just at a discount.

      The thing you’re missing is the time value of money. If your system is perfectly efficient, and the TANs immediately come back in lieu of Euros then the exchange rate is 1-1, but there is no benefit because they’re immediately converted into Euros. To the extent that there is a ‘float’ of TANs they will trade a discount to face value.

      I think I gave a pretty airtight argument for why the implied return on TANs could never be lower than T-bills. Do you disagree with it ?

      1. Sibiriak

        mpr: “RP, the reason all those tax debts are outstanding is because people are not paying them, and in large part have no intention of doing so. According to you, just because you’re offering them a discount with the TANs they will suddenly all want to pay.” (emphasis added)

        As far as I can tell, RP assumes that the Greek government will be able to increase pressure to pay taxes independently of any TANs program. Discounting of TANs would then add an additional incentive to pay them. I base that on this statement:

        “Say you are a Greek citizen. You have tax arrears (as many do) and you hear Syriza has made tax compliance a high priority, and is required to do so by the Troika/Institutions if it is going to get any further loans from external official sources. Your tax arrears are equal to say one years’ worth of your salary. You will then use euros to buy discounted TANs and deliver them to the Treasury, who are obliged by law to accept tax payments….” (emphasis added)

        1. mpr

          It may well be true that Syriza is going to enforce taxes and force more payment. But even a backlog of taxes is perfectly consistent with what I wrote. It just means they will be able to issue somewhat more TANs without the price collapsing, but they will still trade at a discount. (How significant depends on the amount of issuance).

          RP’s point only makes sense if you assume that people will pay more taxes because of the TANs over and above what would have come from any new enforcement measures.

          1. Sibiriak

            Mpr, you make good points about 1) TANs being traded at discount and 2) the likelihood of their being seen “as a precursor to leaving the Euro – a self fulfilling prophecy which will cause the run on Greek banks to resume.”

            But how do you evaluate those two aspects of TAN issuance in relation to their primary purpose of facilitating increased government spending?

            According to RP in his “Get a TAN” post:
            As the government fulfills expenditure plans, TANs could be distributed electronically to the bank accounts of firms and households due to receive these payments […]

            Essentially, the government would be securitizing the future tax liabilities of its citizens, and creating what amounts to a tax credit. This tax credit will not be counted as a liability on the government’s balance sheet (British consols were are a historical example of this), and will not require a stream of future interest payments […]

            Governments issuing TANs could thereby pursue the expansionary fiscal plans that are required to return their economies to a full employment growth path. ” (emphasis added)

            1. washunate

              Ah, but they don’t facilitate increased government spending. They pull future government spending into the present.

              The only way to increase government spending is to increase taxes.

              1. mpr


                Actually I think this is slightly too pessimistic especially if one takes your suggested ‘lets posit the existence of a can opener point of view’.

                In an idealized situation TANs would function almost like T-bills. You could have a float of TANs which would never be ‘paid back’. Individual TANs would be redeemed, but new ones could be issued in equal or greater quantity, just as with T-bills.

                That’s why I said the idea has some merit, and its a shame that RP has missed all the subtleties. (Not to rub it in, but I’m afraid this is a typical situation with MMT types).

                So in principal it might help spending, in the same way that issuing more T-bills might. They want to do that but the ECB won’t let them.

                But in practice the discount the TANs would likely trade at – being a new security – would make them a very expensive financing mechanism. Moreover the issue of signaling Grexit (aka DANs) is probably insurmountable.

                So @Sibriak, sound in theory, and not so unlike issuing T-bills, but probably unworkable in practice.

                1. washunate

                  Agreed, in trying to be concise, I left unstated an important assumption. I meant at scale, a meaningful amount of spending.

                  And one of the ways to get scale, as mentioned above, is to appeal to national pride, call these drachmas for the float. But the author pointedly opposes such marketing.

              2. Calgacus

                Ah, but they don’t facilitate increased government spending. They pull future government spending into the present.

                The only way to increase government spending is to increase taxes.

                MMTers aren’t saying anything metaphorical, suggestive or figurative when they say that such sentences make stark raving mad assumptions. They are saying that in the plainest terms possible. Nothing can pull anything from the future to the present. Future government spending only “exists” in the future. We can’t know it, let alone pull it anywhere. Many people – [including the MMT academics I believe :-)] don’t realize how fundamental, how philosophical the level MMT is arguing at. To learn it one must slow down. Which is why there are so many who have half-learnt it.

                The only way to increase government spending is to increase government spending. This is a good thing in Greece because it will allow the Greeks to work for themselves, to support themselves. Of course it is a management problem – but the prime tool of management in modern societies is called money, so you are making false dichotomies between them. TANs are one way to increase spending. Spending comes first, taxation comes after. That is the way it has to work, the way it has always worked everywhere without exception. Again, the way many think things work – actually violates the usual direction of the arrow of time.

                i replied to you about the JG in that old thread in January a few hours after you queried my reply btw.

                1. washunate

                  You are either not reading the author’s proposal, or purposefully distorting my criticism of it.

                  Parenteau, ironically, isn’t the one advocating for Greece to use sovereign money.

                  I am :)

                  Greece cannot print electronic euros. It can print paper euro notes, and it can print euro substitutes, but you can’t pay off the bankster debt in paper notes or euro substitutes. That requires electronic transactions denominated in euros.

                  So do I take it from your post here that you, like other MMTers, want Greece to pay its bankster debt?

                  1. Calgacus

                    Look at my response to mpr above. I don’t think you understand the purpose of TANs- which is not to acquire more Euros, although that would be the eventual effect – which Grexit would also cause. Paying debts and exiting austerity are separate issues. I want Greece to do what it wants to do. I am not Greek. The real problem is not the debt, but the usage of the debt to impose a deranged economic system. Greece’s creditors systematically act to prevent Greece from paying its debt.

                    The important thing is for them to understand money and accounting and basic economics, which the Euro suicide pact violates, so they do not work hard at cutting their own throats. Varoufakis has a halfway decent understanding, but some of what he says is seriously confused nonsense, like doomsaying about Grexit. I don’t think I am distorting your criticism, as far as I understand it. Talking about time travel from the future to the past is a pretty sure indicator of confusion.

                    1. washunate

                      What does purpose have to do with this discussion?

                      I’m talking about results. About what they would actually do, in Greece, in the real world. In the real world, Greece needs euros. Paying some TANs and some euros will increase its short term stockpile of euros, but as taxes are paid back in the future in TANs instead of euros, it simply washes out. Unless what you are actually advocating is an increase in tax collection, which is a completely different thing.

                      This notion that Greece can simply spend euros without consequence is what I would call stark raving mad. Yes, Greece can spend drachmas in infinite quantities. But not euros. When you are not a sovereign issuer of currency, the only thing that increases government spending is increasing taxes (well, or non tax revenue, like user fees and public asset sales, but I’m assuming we’re talking conceptually here not in operational details).

                      What the program that Parenteau has laid out would do is shift the cost of short-term financing from the government to the workers and suppliers paid in TANs. That would allow the government to slightly increase spending, since it has offloaded that financing cost and thus would net a float period, but that doesn’t scale very far. You are ignoring the distributional matter in western political economy, the massive differences in savings (wealth) from one household to the next. The author’s proposal forces workers and suppliers to be the middleman between the government and savers. That is not a costless activity.

                      If you want to disagree with that claim, then offer a specific argument against it.

  25. EmilianoZ

    Yeah, but all this is predicated on the assumption that the Greeks are willing to pay their taxes. If they were, they wouldn’t find themselves in the predicament they’re in to start with. Come on, let’s get serious. Let’s try to find a solution that doesn’t involve the Greeks paying taxes.

  26. BadBentham

    My first impression with TANs, like with the historical Mefo coupons, is : It smells rather Ponzi. (And clearly, many other clever “instruments” like derivates do it as well) It is (as I understand it) another way (compared to debt) to bet on a brighter future, with the help of the (artistically and artificially created) “asset” of future “debt” of tax payers to the state, to eat up tomorrow`s income today, which still might make the future harder to handle. (Where it might be necessary to invent a derivative “A-TAN” , as equivalent to thin air of thin air of thin air in the asphyxiation spiral)

    In the Schacht framework of optimistic war Keynesianism, what it was all about, it certainly had its clear place and purpose; – however, after the lost war Germany consistently had to outright abandon the Reichsmark and thus the savings of its population to get rid off its over-indebtedness.

    Another problem is of course that the issuance of “warped” (as in Star Trek) TANs is concurring with the Euro itself: It is a bit like in “Back to the Future”, where Marty McCoy, the “Will-Be-Euro”, meets himself , the current currency Euro, during time travelling, trying to take over its place, to give a rather poetic description; – with all kind of possible loopholes (a favorite topic of economics, as well, I guess) , ambiguity errors, and strange space-time anomalies to follow. – We all do know well the warnings of those Sci-Fi authors about these scenarios ;)
    – Only one thing so far, to come back to my joke above, seems certain: The future of Greece will be determined by a lot of Thin Air. The usual question remains, how it will be called, and of which level the thin air will be. As is generally to be expected for the simulacrum / “hyper-reality” that is famously called money.

  27. Jordan from Croatia

    Rob Parenteau
    Croatian Finance Minister just gave an talk saying that Varoufakis spoke to him about Croatian Fiscalization Programme and that next week his delegation will come to Croatia to discuss it and possibly addopt it.
    I think it is a good news.

  28. Rob Parenteau

    Earlier this morning the director of this website suggested that I continue debating some of you, mpr and washunate in particular, on the operation of TANs, particularly the parity/discount issue that has been raised. And raised. And raised again. I have chosen to respectfully declined the invitation. Here is why:

    Dear Susan:

    Please let them debate away. As I wrote to mpr, I am done debating this point any further. They have not, at any point Susan, demonstrated why the built in arbitrage mechanism I described will not work. Why won’t you buy yourself a tax cut, if it is large enough, in advance of having to pay the tax? If we are talking discounts of TANs to euros of 5% or greater, that is a return you can earn by using euros to buy TANs. And if you don’t know how to do the trade, you can pay someone to do it for you. They have not addressed the ability of Treasury to increase and broaden tax coverage in order to increase the demand for TANs. Nor have they addressed the ability of the Treasury to reduce TAN issuance in “financing” its expenditures, thereby reducing the flow supply of TANs. Nor have they addressed the countless historical examples of parallel currencies with vary different types of “backing” trading at par…for years…if not decades…even in the US…in the last century…which I saw with my own two eyes.

    I invite constructive criticism of the TAN approach. I have no illusions that TANs are the perfect solution, or the only solution. It is merely the best I have been able to come up with, to date. It may be flawed, as most human creations are, and perhaps fatally so. I welcome all improvements to TANs, or even better, I welcome even more effective solutions than TANs to the horrifying situation in many eurozone nations. I have heard none from washunate and mpr. All I have heard is the same assertions over and over again that parity will not and cannot hold, under any plausible conditions whatsoever.

    So this is not a debate, is it? This is stonewalling and grandstanding. I apologize, and mean no personal offense, but I have no time for that, sorry. Post this is if you want, but I have to get on with other priorities today after spending most of yesterday engaging with NC readers in great detail on the TAN proposal. If readers want to engage with the points I have made and show me where my thinking or my interpretation of history is flawed, I am prepared to change my views when they raise persuasive points. Even though I am of French heritage, I am old enough to realize I gain nothing by persisting in errors and mistakes. And I actually love learning, and have all my life. That, to me, is the whole point of engaging in these forums as actively as I do.

    If they want to play Faux News with me and make believe repeating the same assertions over and over again will make it true, well, I am sorry, but I have little interest in playing that game. It is a waste of precious time, when there are a lot of people running out of time in Greece, Spain, Italy, and Portugal, in no small because of a profound and very costly misunderstanding (or worse yet, and perhaps more likely in the case of eurozone policy makers and their wealthy puppeteers, feigned willful ignorance) of money and government finance.



    1. Kurt Sperry

      Well put. Interesting piece and great of you to have a round or two in the comments, something that adds huge value and is quite natural to the format here.

      What I see is a dynamic where irrational conservatism is used to defend a clearly untenable status quo. In such a situation alternatives can be horrible and still be beneficial. or even optimal if no better realistic options are offered. Like Rahm, bless his corrupt heart, said, “You never let a serious crisis go to waste. And what I mean by that it’s an opportunity to do things you think you could not do before.” It’s true though. The field of play gets huge in a large crisis, if you don’t exploit that someone else surely will. If you look at it as Greece is trying to avert a crisis (Grexit/default/failed state) its options are obviously limited. If the status quo however is believed to be untenable, all options, however counterintuitive, heterodox and imperfect, must be considered.

    2. Santi

      What no one in the present “debate” is arguing is what happens if the state really need euros and nobody pays taxes with them.

      As an example, let’s say that Greece needs to pay 5b€ on a given month, and that it does not have them, because 100% of it taxes are paid in TANs and there are not really big sources of Euro other than this. Rational agents would prefer redeeming TANs to spending Euros, as Euros are usable outside Greece or in international transactions. If this Euro shortage happens, the state would need to pay Euro at the rate deemed acceptable by people holding Euros in Greece, and knowing that there are not enough taxes (TANs sinks) to redeem them, this rate would be the market rate. In other words, the state as market maker needs to ensure that taxation and expenses run parallel to avoid oversupply of TANs. In other words, the government cannot run a big deficit for a long time.

      So, TANs are helpful to have a buffer of liquidity, but never a panacea. Still, TANs would be extremely useful for Greece right now. They would help run temporary stimulus or survive the current liquidity crash.

    3. mpr

      RP, all these points have been addressed but you’re not trying to understand in good faith.

      No one is saying there would be no demand for TANs or that people wouldn’t use them, or that they would be worthless. These are all strawmen. I think I gave a pretty airtight argument for why they would not be better than T-bills.

      In practice suppose you issue TANs, and I’m a Greek who owes taxes which I expect to pay say six months or a year from now (i.e not immediately). Whether these taxes are already due now or will only be due in the future, if I expect to pay them six months from now (say), why would I buy TANs now ? I might if the discount was large enough, but there is a risk of a Grexit in the interim. In that event I could keep my Euros and pay my taxes in drachma. That’s a strong disincentive to buy TANs and hold them. Added to this would be the intrinsic uncertainty surrounding a new security. I can always wait and buy the TANs just before I need them.

      So thats the answer to your question:

      Why won’t you buy yourself a tax cut, if it is large enough, in advance of having to pay the tax?

      This might be a compelling argument for people who need to pay their taxes immediately. But you haven’t done the math. There won’t be enough of those people. Everyone else will demand a steep discount for holding the float of TANs.

      Actually for taxes which are already due, we know the govt has been offering a discount for payment, and it hasn’t helped that much. Thats what TANs bought at a discount do – they give a discount on taxes, and we know it would have to be quite large.

      The mistake you’re making is that you think that because an argument holds at the margin it holds. Yes, if you issued 1000 E of TANs they’d be snapped up at almost no discount (and be immediately redeemed). But that doesn’t work in the volume of issuance you actually need.

      1. Sibiriak

        mpr: “In practice suppose you issue TANs, and I’m a Greek who owes taxes which I expect to pay say six months or a year from now […] why would I buy TANs now?”

        But for the Greeks that would receive TANs as payments there is no issue of them wanting to buy them or not.

        RP: “As the government fulfills expenditure plans, TANs could be distributed electronically to the bank accounts of firms and households due to receive these payments…”(emphasis added)

        1. mpr

          Well sure, they would have no choice. But you could just as well say ‘we’re going to pay you 80% of whats due from now on’.

          Its contractionary, as washunate pointed out, and doesn’t really solve the problem.

    4. washunate

      Thanks for explicitly acknowledging you’re not interested in exploring this topic in an interactive way. That’s cool; we all have time constraints. Like taxes and user fee revenue for non sovereign governmental units, our free time is often lumpy :)

      But I would definitely push back against this notion you are putting forward that you have offered answers. You seem to think that the only criticism of ideas comes from faux news. As if CNN and the NYT aren’t part of the problem?

      Do you understand how hilarious that is? mpr is openly receptive to the general idea you propose, and you won’t even answer those points. When I take up your specific challenge to offer a thoughtful response as someone less receptive to the concept than mpr, it goes completely unremarked upon.

      You don’t even say whether you agree or disagree with the basic strategic position I outlined of Greece being trapped in a doublebind type situation.

  29. susan the other

    I just read this for the 3rd time. Thank you for leaving it up. It gets better every time. TANs R Us. Or US.

    1. Rob Parenteau

      Right Susan the Other. You get it. You get it big time. Fiat currency IS a TAN. We are already using TANs in the US. And around the world. In every single nation with a sovereign (i.e. not convertible upon demand into fixed units of another currency or a commodity) currency. And this is the ultimate joke on many of the critics of TANs who say they will never, ever fly. We already have zero coupon, perpetual, bearer bonds in the form of tax anticipation notes. Open your purse. Open your wallet. See that green rectangular piece of paper with some funny looking guy with a wig on it? That is a TAN. You are already using TANs. This is not some theoretical wank I cooked up. TANs already exist, and have been stress tested. Most of just have no clue as to what money is anymore, so we do not realize that fiat currency IS a TAN. Especially economists don’t get this. Especially policymakers don’t get this (or in the case of Greenspam and the Bernank, make believe they don’t get it, but you can find the quotes on videotape, under oath, where they let the cat out of the bag). And even high financiers (which is redundant, I realize, since Wall Streeters tend to be high most of the time, from what I can tell, or maybe that was just a nosebleed). But you, dear Naked Capitalism readers, or at least those of you with an open mind still in working order, need not be punked on the issue of money, how it is created, and the role it plays in government finance. You need not be duped any longer. Unless duped works better for you. Then stay with the duped thing, and see how that works out for you. But you get it Susan the Other, as do many of the rest of you who were kind enough to take the time to get your head around this TAN proposal thing, and maybe even read through the comments as well, or better yet, ask a question or two. Keep waking up. It is high time to end these charades. It is time for a pro LIFE (low inflation full employment) economy. And the only thing stopping us from that…is ourselves, or rather, poor design and bad choices based on ignorance or deception. Maggot Thatcher was dead wrong about TINA (there is no alternative). Another World is Possible (AWIP), and some of us came here to build it.

      1. Rob Parenteau

        And in case you thought this was all just a theoretical exercise, let’s all join hands, get real, and close with an extract from a recent article that was cited in the opening reader comment. Cuz this is what is really going on while the Troika bides its time for a solution/full capitulation from Syriza:

        “Earlier this year pharmacies and hospitals in Greece were unable to provide life saving medicines due to a shortages caused by a freeze in the flow of credit from manufacturers to distributors to patients. A collapse in the country’s economy has forced many Greeks to turn to black market barter economies and has left millions financially devastated, with no hope of finding an income stream for the foreseeable future.

        The credit system of the entire country is in shambles. So much so that reports are emerging about food shortages and hunger within the Greek prison system, suggesting that serious problems in the food delivery chain have begun to materialize.

        As Nigel Farage warned recently, we are beginning to see the rise of extreme political parties as a consequence of the total and utter desperation of the populace.

        Today the news gets even worse. Greece’s Regulatory Authority for Energy (RAE) announced an emergency meeting to deal with what can only be construed as a tell-tale sign that this crisis is very rapidly reaching critical mass and may spiral out of control in the very near future:

        Greece’s power regulator RAE told Reuters on Friday it was calling an emergency meeting next week to avert a collapse of the debt-stricken country’s electricity and natural gas system.

        “RAE is taking crisis initiatives throughout next week to avert the collapse of the natural gas and electricity system,” the regulator’s chief Nikos Vasilakos told Reuters.

        RAE took the decision after receiving a letter from Greece’s natural gas company DEPA, which threatened to cut supplies to electricity producers if they failed to settle their arrears with the company.”

        Sounds like it just might be time for Yanis to get a TAN.

        1. mpr

          Yes, I agree the situation is extremely serious, which is why its a shame that so many of the MMT crowd, whose general world view has so much to offer, tend so often to make poorly thought out arguments or policy suggestions. Its like having a climate scientist speak to a bunch of climate change deniers, and then have the scientist’s calculations exposed as completely wrong. It arguably does more harm than good, by making the side which is actually right look like a bunch of quacks.

          Of course there are more sensible Post Keynesians like Jamie Galbraith, but the whole school hasn’t got much traction in the past few years (Krugman is about as close as its gotten), it seems to me, and I wonder if MMT has contributed by tending to turn off some people who’ve looked in that direction. Just a thought.

  30. Clifford Johnson

    “for some odd, unspeakable reason, we simultaneously refuse to entertain even the possibility of a similar level of creativity and hybridization to the realm of government finance”

    I partly disagree. We in the US certainly do refuse to entertain even such a possibility, (A) re paper money, by statutes such as 31 U.S.C. § 5115(b):
    “The amount of United States currency notes outstanding and in circulation—
    (1) may not be more than $300,000,000; and
    (2) may not be held or used for a reserve.”
    (B) re coins, by GAO and CBO reports affirming that absolutely no seigniorage benefit accrues to the government when a $1 United States coin is circulated, rather than a $1 Federal Reserve note.

    However, the reason for this is not unspoken. The reason generally given is that Governments absolutely cannot be trusted to print their very own money, else they rapidly and inevitably end up like Zimbabwe.

    But I agree that this reason is odd, in that such creativity in government finance is of course far more monitored than in an independently monitored, purely self-interested private sector.

    1. MRW

      Where did you quote that from, Clifford? When I look at Title 31 U.S.C. § 5115(b) I see:

      §5115. United States currency notes
      (a) The Secretary of the Treasury may issue United States currency notes. The notes—
      (1) are payable to bearer; and
      (2) shall be in a form and in denominations of at least one dollar that the Secretary prescribes.

      (b) The amount of United States currency notes outstanding and in circulation—
      (1) may not be more than $300,000,000; and
      (2) may not be held or used for a reserve.
      (Pub. L. 97–258, Sept. 13, 1982, 96 Stat. 983.)

    2. MRW

      I’m confused by what you’re saying about seignorage. I thought there was seignorage with coins, not bills. The Federal Reserve pays the Mint (US Treasury) $0.07 to $0.09 to print a Federal Reserve Note.

      (3) NUMISMATIC ITEM.—The term “numismatic item” means any medal, proof coin, uncirculated coin, bullion coin, or other coin specifically designated by statute as a numismatic item, including products and accessories related to any such medal, coin, or item.
      (3) TRANSFER OF SEIGNIORAGE.—The Secretary shall transfer monthly from the Fund to the general fund of the Treasury an amount equal to the total amount on the seigniorage of numismatic items sold since the date of any preceding transfer.

  31. MRW

    @Clifford Johnson,

    The reason generally given is that Governments absolutely cannot be trusted to print their very own money, else they rapidly and inevitably end up like Zimbabwe.

    But we’ve been doing it since 1789.

  32. mpr

    In the spirit of trying to find practical solutions to a difficult and serious problem, let me propose the following, which I’ve been wondering about.

    There have been quite significant market moves in response to the negotiations with the Troika. Why not have Lazard, which is acting as the govt.’s adviser quietly buy up a slew of derivatives of various kinds ahead of one of the key meetings. Then around the time of the meeting some Greek minister makes a dramatic announcement – we’ve decided to leave the Euro for example (or maybe something slightly less extreme). During the next hour they clean up on the derivatives, and then Tsipras and V. can deny that this was to be taken seriously.

    It doesn’t seem so hard to believe this could raise at least a few billion E. Of course it would all be denied publicly.

    Rinse and repeat if necessary. I think this kind of market manipulation would be quite hard to defend against, even if people suspected it was happening.

    Ok, on a political level this would be pretty toxic I guess, which is why they haven’t done it, but I think it should be one of the plan B’s if its a last resort.

    1. Rob Parenteau

      Now that, my dear mpr, is sheer, Machiavellian brilliance. Though do not underestimate for even a NY minute the capacity and desire of Lazard, Goldman, and JP Morgan (to name a few) to create the algo to front run you after the first time you play this card. Cuz they will see you coming from a mile away if the position is big enough, and seemingly arbitrary enough. It’s how they play the game, and they play it remarkably well. So yeah, you probably get enough loot out of it to pay the IMF in March, but after that, I suspect you may find diminishing returns, or worse yet, the Vampire Squid will figure out how to turn it into a pain trade for you somehow before the planted announcement, and all the derivative positions will get taken out one by one.

  33. Rob Parenteau

    On the question of the legality of parallel currencies in the eurozone, which may be of interest in determining the general thrust and effectiveness of possible legal challenges to TANs, I tend to defer to the following assessments from eurozone economic and legal experts, including the former head of economic research at Deutschebank. Thomas Mayer:

    Eurocat Project.

    Thomas Mayer.International economists in favor of a parallel currency.
    1 October, 2013.
    BVMW. Logo.Declaration regarding «Parallel currencies» discussed during the BVMW workshop «Parallel currencies – options, chances, risks», Berlin, July 24, 2012.

    The signatories share the concern that an uncoordinated break-down of the European monetary union could economically harm every member state and substantially damage the idea of European integration.
    Therefore, the signatories strongly request European leaders to evaluate alternatives to the recent rescue approach.
    It is our conviction that the implementation of a parallel currency is an economically convincing and politically executable alternative, also in accordance with Article 128 TFEU2.
    A parallel currency means that another currency is introduced in addition to the Euro.
    Thereby, the struggling nations can become more competitive and fundamental elements of the European monetary union are preserved.
    We are aware of the fact that the implementation of a parallel currency is not a substitute for structural reforms, but can only supplement them.

    Mario Ohoven (Präsident des BVMW e.V. und CEA-PME).
    Trond Andresen (Norwegian University of Science and Technology).
    Eckhard Behrens (Seminar für freiheitliche Ordnung e.V., Bad Böll).
    Prof. Dr. Ulrich Brasche (Fachhochschule Brandenburg).
    LL.M. André ten Dam (unabhängiger Euroforscher).
    Christian Gelleri (Chiemgauer e.V.).
    Reinhard Hübner (Hübner GmbH).
    Dr. Hans Kremendahl (SPD, Staatssekretär a.D.).
    Prof. Dr. Bernd Lucke (Universität Hamburg).
    Dr. Jochen Leonhardt (Wirtschaftsprüfer).
    Dr. Thomas Mayer (Center for Financial Studies der Goethe Universität Frankfurt und Deutsche Bank).
    Werner Onken (Zeitschrift für Sozialökonomie).
    Dr. Hans-Michael Pott (Sernetz Schäfer Rechtsanwälte).
    Ludwig Schuster (MonNetA e.V.).
    Prof. Dr. Roland Vaubel (Universität Mannheim).
    BVMW: Dr. Michael Vogelsang (Chefvolkswirt), Sindy Vollmert, Josef Girshovich, Nicole Wägner und Peter Menke-Glückert (Deutsches Forum nachhaltiger Mittelstand).

    Link to original article:

  34. Rob Parenteau

    Or for the unabridged version of legal and economic opinions on parallel currencies in the eurozone (and again, remember, TANs are designed as a transferable, zero coupon, perpetual bond, issued in electronic form by the Treasury of the national government, so it is not a parallel currency per se, though consenting adults operating in free markets may indeed chose to utilize this alternative government financing instrument in such a fashion), see the link below with essays from the full conference on the topic of parallelwahrung (you will need Google Translate unless your German is well polished).

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