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In effect, the president of the US is, in fact, totally responsible for the sad state of the economy.  This is because he actually has legal and constitutional control over the US debt and the current debt limits.  But there are folks that go WAAAAAAAAAAAAAAAAAAAAAAAY to far with Treasury seigniorage.

The act of creating one or more extreme face value platinum coins and using those coins to retire debt held on the books of the FED is not inflationary.  Nor is it a devaluation of the currency UNLESS  the FED chooses to continue with massive amounts of quantitative easing.  But this is the hammer that the president holds and the congress must act to forbid it.  The current law allows it.  That means that the Democratically controlled Senate must sign off on legislation that would forbid the creation of the coins and the president would also have a choice of vetoing such legislation.

It would appear that the pres has the Republicans by the short and curlies.

All of the talk about retiring the debt held by the public and the total destruction of the "borrowing" system in which the FED acts as moderator is scaring the hell out of the natives (and me too).  But in the hands of a rational president the "coin trick" is a stone cold winner.  And it seems to me that the mere hint of employing it would return some needed control to the hands of the executive and the Senate .  The Republican House has gone way too far.   The House must still appropriate the spending, but the past spending doth not need appropriations.  The threat of currency devaluation staring the rich people in the face is a a major bargaining chip that should be employed by Obama.  It reminds me of Lincoln's "Green Backs".

Originally posted to TruthMerchant on Sun Sep 18, 2011 at 02:31 PM PDT.

Also republished by Money and Public Purpose.

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Comment Preferences

  •  Are you the same guy who has written (0+ / 0-)

    about this several times in the past , or was that someone else ?

    "Drop the name-calling." Meteor Blades 2/4/11

    by indycam on Sun Sep 18, 2011 at 03:57:07 PM PDT

  •  I still don't get it. (0+ / 0-)

    Which of these folks get stiffed by holding the coin and not printing more money to cover them?

  •  Why (2+ / 0-)
    Recommended by:
    psyched, maddogg

    do you think certain people "go WAAAAAAAAAAAAAAAAAAAAAAAY to far with Treasury seigniorage."

    And why must

    "the Democratically controlled Senate . . . sign off on legislation that would forbid the creation of the coins and the president would also have a choice of vetoing such legislation."

    Otherwise, I certainly agree with the diary and thank you for it.

    The two "certain people" you're referencing are probably Seneca Doane and myself:

    http://bit.ly/...

    http://bit.ly/...

    http://bit.ly/...

    http://bit.ly/...

    •  Second this sentiment n/t (0+ / 0-)

      Our Dime Understanding the U.S. Budget

      by maddogg on Sun Sep 18, 2011 at 08:19:28 PM PDT

      [ Parent ]

    •  Miscellaneous comments (0+ / 0-)

      The act of creating one or more extreme face value platinum coins and using those coins to retire debt held on the books of the FED is not inflationary.
      Right, because is is hardly an act at all. Government debt held by the Fed is economically meaningless. It's as meaningful as the act of writing a check to yourself with your right hand, taking the cash & depositing it back in the same account with your left hand.

      Nor is it a devaluation of the currency UNLESS  the FED chooses to continue with massive amounts of quantitative easing. If one continues to purchase government bonds with reserves/coins - that changes interest rates, changes things in the real economy, not just mystical internal government accounting.  But it can equally well be deflationary as inflationary, and is not likely to do much in any case.

      Joe:"the Democratically controlled Senate..." I think the poster is making a correct, legal comment, not urging a policy.  Just saying that the Repubs can't change the current coin seignorage  law without the Senate and President consenting.

      •  Thanx for the opportunity to expand and clarify (0+ / 0-)

        In the following blockquotes  I have emphasized MY words to distinguish them from your actual comments:

        The act of creating one or more extreme face value platinum coins and using those coins to retire debt held on the books of the FED is not inflationary.
        Right, because is is hardly an act at all. Government debt held by the Fed is economically meaningless. It's as meaningful as the act of writing a check to yourself with your right hand, taking the cash & depositing it back in the same account with your left hand.

        And that is exactly what I was saying!!!  When Ron Paul said that the "debt limit" would be avoided by the FED simply burning its "balance sheet" treasuries in a furnace he was absolutely correct.  Those debt instruments are part of the 14.x trillion encompassed by the "debt limit". and they were repurchased from the private sector using "fairy dust" money.  The debt to the money fairy is not a debt at all.   The magic coins can be  used to essentially  to repurchase the debt instruments and the money fairy takes the loss.  This ONLY effects the debt limit and NOT any real debts or expenditures  of the FED or the elected government or the private sector.  It OBVIATES the debt limit law while leaving the control of fiscal policy with the congress and the control of monetary policy with the FED. The "debt limit" law is nothing more than an instrument of circus politics.

        Nor is it a devaluation of the currency UNLESS  the FED chooses to continue with massive amounts of quantitative easing. If one continues to purchase government bonds with reserves/coins - that changes interest rates, changes things in the real economy, not just mystical internal government accounting.  But it can equally well be deflationary as inflationary, and is not likely to do much in any case.

        What I was trying to do was to draw a line in the sand on the use of the "magic coins".  I was attempting to broker a compromise in which the smallest change could be negotiated and that small change is actually the demise of the totally useless "debt limit" law.  Because if the executive can use the coin seigniorage to erase the entire debt,  then the value of treasury debt will be zero.  And that is much to large a change for the rational folks in this world to accept.  There is not much actually wrong with the current system once the debt limit law is obviated or repealed.  If we believe that the banksters and the FED and the rich people are taking too much out of the system then we should address the issue and resolve it.  The FED is not a profit making enterprise in its proper role.  And the rape in which the banks are currently engaged is correctable without totally destroying the current system.

        Joe:"the Democratically controlled Senate..." I think the poster is making a correct, legal comment, not urging a policy.  Just saying that the Repubs can't change the current coin seignorage  law without the Senate and President consenting.

        YUP.

        What the pres can do is to threaten to use the magic coin trick in order to bring the "Debt limit" crap to a halt right here and right now.  The congress would still control the purse and not the executive.  The FED would still control the monetary policy within the bounds of inflation on the one side and unemployment on the other.  The "Debt Limit" law simply needs to be abolished and the coin seigniorage thing can be used to do that.  Obama has the hammer.

    •  Read all my comments to clarify my position (0+ / 0-)

      When I see the comments to the stuff you are putting out I am of the opinion that they are mostly clueless and fearful.  The cluelessness can only be cured by repetition and by dialog, but the fear is palpable and can be prevented by taking a smaller bite off the apple.  By constantly extending the prerogatives of the executive in the use of the coin thing the proponents are scaring the hell out of the natives.  Just limit the use of the coins to the removal of the treasury debt on the books of the FED and the deal can be done.  And even that should not take place unless the FED NEEDS to do more quantitative easing.  The curtailment of quantitative easing is the primary objective of the Republican butt suckers of the rich.  Now that they (The Banker and the very rich) have all the money, they want to make damned sure that its value is not threatened.  If, in order to pay the debt, the kids have to work in the coal mines of the rentier then so be it.

      •  I'm not afraid to scare them (0+ / 0-)

        The most important thing is to get rid of the idea that the Government can run out of money and replace with the frame that what we spend is a political choice which Congress is responsible for.

        Little steps won't do that. I don't care if we scare the hell out of the natives. This political trap working people are caught in is intolerable. it needs to be disrupted radically, this is a way of doing it without violence using the legal authority of the Executive. I agree that the Presidency is too powerful in many areas; but it is weak in those areas that allow the President to easily act as the representative of the people rather than the interests. Reforming the Presidency is not a matter of unformly reducing its power. In some areas the President needs to be more powerful. In other areas much weaker.

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