Cross posted at Voices on the Square and the Stars Hollow Gazette
It’s now undeniably pathetic or immoral assuming this is what they want and it probably is. The Trillion Dollar Coin
and a 14th amendment
challenge have now been rejected. What do we have instead? Insulting fake pseudo macho posturing
from the President about what he will or will not negotiate on as if there has ever been anything this POTUS won’t negotiate on. It’s already happening as we speak.
Besides, he just got done with negotiating away his “iron clad” promise to raise income taxes on the rich above $250,000. But this time we are supposed to believe the same fairy tale? Or maybe when I say negotiate when I really mean “negotiate.” Yeah, this is actually what he and John Boehner wanted as in to show us “extremists” who care about people instead of idiotic deficit terrorism on the backs of the poor a thing or two.
Conspiracy of Two
“I’m the President of the United States,” Obama told Boehner [in 2011]. “You’re the Speaker of the House. We’re the two most responsible leaders right now.” And so they began to talk about the truly epic possibility of using the threat, the genuine danger of default, to freeze out their respective extremists and make the kind of historic deal that no one really thought possible anymore — bigger than when Reagan and Tip O’Neill overhauled the tax code in 1986 or when Bill Clinton and Newt Gingrich passed welfare reform a decade later. It would include deeper cuts in spending, the elimination of all kinds of tax loopholes and lower income tax rates for all. “Come on, you and I,” Boehner admitted telling Obama. “Let’s lock arms, and we’ll jump out of the boat together.”
It’s too late to spin tales of the intrepid politician that stands up to Congress. You know, as Stephen Colbert says regarding journalists, fiction
. Debt ceilings were never negotiated until this POTUS put his full faith in crediting John Boehner for NOT using the debt ceiling as a hostage as part of the Obama/Bush tax cut deal in 2010. Oops. I predicted this. Others deluded themselves thinking this mess happening right now extended from back then was somehow an abstract form of 11th dimensional chess again and again. When will they learn?
I put the blame at the top because debt negotiations are always there between the House and the Treasury in the executive branch so there no putting it all on just Congress or Republicans in Congress. The many backroom deals are always negotiated with Congress from the top; the kind with the massive political and human damage that result from the people having little voice or a choice. This was an embarrassing and unprecedented result ensuing from 2010 to 2011 to now which humiliated everyone in the Democratic Party.
And yet now we are supposed to believe the White House’s tough talk BS as if SS cuts they put on the table with Chained CPI won’t be part of the stupid sequestration grand bargain coming up as they plead to raise the debt ceiling with Republicans who are fine with the consequences. As if there is a credible reason that the same type of harsh austerity offered up last time won’t be considered again given the real non arbitrary consequences. We know this thanks to Bob Woodward and the memo he released from the new Wall St Treasury Jack Lew back when he was head of Obama’s OMB.
I know reality bothers some people when their fragile oh so fragile illusions are shattered, but by now one either understands this or one needs to at least show some intellectual curiosity and do some reading and pontificating. Our President and future Democratic Presidents along with this do nothing Congress cannot be trusted to truly end wars, fight for any steps towards Medicare for All, enact real financial reform, or handle what was once routine when it comes to the debt ceiling or the fiscal and monetary systems they need remedial help understanding. Or perhaps they do understand and are just ethically challenged instead as they look to exploit the 99% by lying about these operations and what is possible within the framework of our money system.
The President’s ignorant villager “wonks” are truly challenged when it comes to law and the monetary operations between the Treasury and the Fed. Case in point, what’s written into law already renders Ezra Klein’s pathetic ignorant excuses rather dead as Letsgetitdone said.
Disconnect: High Value Platinum Coin Vs. Austerity!
Yesterday, Ezra Klein reported in the Washington Post that:
The Treasury Department will not mint a trillion-dollar platinum coin to get around the debt ceiling. If they did, the Federal Reserve would not accept it.
That’s the bottom line of the statement that Anthony Coley, a spokesman for the Treasury Department, gave me today.
“Neither the Treasury Department nor the Federal Reserve believes that the law can or should be used to facilitate the production of platinum coins for the purpose of avoiding an increase in the debt limit,”
The inclusion of the Federal Reserve is significant. For the platinum coin idea to work, the Federal Reserve would have to treat it as a legal way for the Treasury Department to create currency. If they don’t believe it’s legal and would not credit the Treasury Department’s deposit, the platinum coin would be worthless.
First, here are a some quotes from the US Code and comments.
"…banks, when required by the Secretary of the Treasury, shall act as fiscal agents of the United States; and the revenues of the Government or any part thereof may be deposited in such banks, and disbursements may be made by checks drawn against such deposits."12 USC 391
The coins are legal tender, and disbursements can't be made unless a deposit is credited. So, both imply that all banks that receive such deposits must credit them, and that the Bank officers at the New York Fed cannot refuse to credit the face values of a deposit of coins by the US Mint in its Public Enterprise Fund (PEF) Account. As for the Board of Governors, including the Fed Chair, forbidding the New York Fed from crediting the deposit, there is this part of the USC:
". . . wherever any power vested by this chapter in the Board of Governors of the Federal Reserve System or the Federal reserve agent appears to conflict with the powers of the Secretary of the Treasury, such powers shall be exercised subject to the supervision and control of the Secretary." 12 USC 246
The US code says that the Secretary has supervision and control, not the Fed Chair, or the bank officers at any of the banks, however exalted, within the Fed system. So, if anyone in the Fed system wants to go to Court about this; it's hard to see that they could get standing even to file an injunction.
Poor Ezra. I guess he better go ask Michael Lewis what to think again as he did about the financial crisis he also got wrong, because he just doesn't get it. That Goldman Sachs Treasury Spokesman is wrong.
Bottom line: the Trillion Dollar Coin is definitively legal and more than just a way out of this mess; it was a game changer changing the national conversation to a different way to fund debt payments without prioritizing the 1% bond holders at private banks over the 99%. The use of high value platinum coins as legal tender is scalable, wouldn’t cause inflation, and perfectly legal. They could replace the use of Treasury debt sales which are only interest rate setting tools which are irrelevant in the age of impotent monetary policy at the zero bound. Nothing would change except the Treasury would be credited by the Federal Reserve for the sale of interest-free high value Platinum coins instead of interest-bearing Treasury bonds.
The gold standard died with the end of Bretton Woods in August 1971 and good riddance. We have the ability to create interest free bonds and money from the Fed as the Treasury’s fiscal agent. Private commercial banks have access to the free money from the Fed’s discount window. We learned from the 80s that Monetarism is a fiction. Milton Friedman’s whole philosophy (Quantity of Money) was discredited in the attempts to control the money supply because private banks have the same power to create money as the Fed does and it can destroy it the same way taxation destroys the money supply to regulate demand pull inflation by destroying loans.
Private commercial banks create loans and deposits; a debit and a credit legally tenderized bound for reserves (that don’t’ chase goods unless allowed) credited from the Fed easily marked up on a computer as well. They earn interest on these cash reserves meaning they don’t need interest bearing Treasury securities. However, they buy them once we issue them because it is a good deal.
Government debt that pays interest is bought with the free non interest money these banks and other member bank bond holders have direct access to. Therefore there is no need to issue new debt or pair it with money typed into a spread sheet at the Fed. High value Platinum Coin Seigniorage can change this system that is being politically exploited across the board to exploit people. PCS can change the conversation. PCS can end the lies behind austerity we are being told right now in the fake insulting posturing we are hearing from the WH and Congress.
It’s sad that during their vacation time (we don’t get that time) they cannot even take the time to learn even the most basic rudimentary concepts that govern our whole modern money system. We can appropriate and allocate where wealth is concentrated and at what time minting coins to make debt payments and printing money in order to create the deficits we need for the private sector as far as Wynne Godley's sectoral balances are concerned.
Everyone is taking bigger steps on this path than Congress or the White House. I was proud to see Markos feature a FP story on the absolute relevance of the TDC referencing Philip Diehl whom was the coauthor of the law. I was proud that the TDC got attention across the blogosphere and the White House had to answer questions on it, even if their final answer is one big fail. Regardless of what they or their villagers say, the idea will stay because of having to go through these ridiculous debt ceiling negotiations every few years thanks to what happened in 2010. Sooner or later enough people will wake up to monetary reality instead of the austerity pushed by fear that induces tears for families everywhere and not just this year.
This isn’t just a wonky conversation on a blog. This is about getting resources to those that need them by creating the means for their efficient distribution. We create money, and are ultimately not revenue, debt, or deficit constrained; we are only politically constrained because politicians just don’t seem to care enough about people. We can be appropriate human beings and Congress can either get educated and/or gain a moral compass by appropriating the spending on what human beings need with the means to get them.
As activists we can demand the truth about all of this from our Representatives in all branches of government, because these lies being spun by all of them waste lives and we only get one.
What a waste.
I'm now in the angry and cynical camp, but regardless, please sign this petition:
End austerity: Mint the 60 trillion dollar coin