In several articles of late we have seen an exposition of LEGAL and CONSTITUTIONAL usage of Treasury Seigniorage to facilitate direct job creation by the federal government. I have been arguing that such an action on the part of the president would be political disaster whether it is legal and constitutional or not. I have argued that the use of Treasury Seigniorage (The Magic Coin) can however be used to empower/urge/convince the FED that it should attend to the unemployment side of its dual mandate and to also force the congress into dealing with the current situation in a reality based manner.
It is the THREAT of the seigniorage that provides the political muscle to call out both the FED and the congress. Treasury seigniorage absolutely ends any threat from the "debt limit" law. And that is precisely how the seigniorage should be used. The threat will also force the pundits, the economists, and the politicians to deal with the facts of fiat money as opposed to continuing the lies they have been spinning. In my opinion, that is all that is necessary.
It is very important to understand the latest FED action being called "Operation Twist". The FED claims that it is an attempt to reduce long term interest rates and that is probably the truth.
How far must long term rates fall in order to provide 30 year mortgages at 2%??? If 30 year mortgages at 2% are in the offing then the housing slump will end and there will be more jobs. And if the FED stops kissing banker's butts and paying them to store their money in interest paying reserve accounts at the FED then the banks will have to MAKE LOANS or slowly go broke from paying all those bandits they hire. This assumes that the FED is also taking away the T-Bond piggy bank at the same time.
The unemployment part of the FED's dual role regarding the value of the currency is not being addressed with enough vigor. At this point, due to the debt limit law and other misunderstandings of money, the FED must sell short term treasuries from its balance sheet so as to get the money necessary to buy the longer term treasuries. That is so because if the FED gets money from the money fairy as it did in QE2 then the amount of treasury debt remains the same. The debt merely moves from the private sector onto the intergovernmental sector. Only by actually retiring that debt via The Magic Coin can we address the real problem of a too strong dollar while educating pundits, politicians, and the people at large.