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Here’s the best solution I’ve seen yet, and it doesn’t need Congressional approval.
“If you think about it, it does seem odd that the US Government is the monopoly supplier of US dollars and yet our politicians go through life thinking the government will run out of money unless it can borrow more. Of course that’s not true, the coins in your pocket are legal tender and yet were not issued against debt. They’re minted by the US Government, backed only by the gilt-edged credit of the American people, no one is paid interest on it and they don’t add a penny to the statutory debt. What’s more, the use of coins as legal tender is scalable, they could replace the use of Tsy debt sales. No, you wouldn’t have to carry more coins in your pocket. Nothing would change except Tsy would be credited by the Federal Reserve for the sale of interest-free Treasury coins (presumably of large denominations) instead of interest-bearing Treasury bonds.
The two great powers of a sovereign state are the monopoly of violence and seigniorage, the profits from the creation of money. If the federal deficit (that is, expenditures in excess of tax receipts) were funded by seigniorage revenue, not only would there be no debt service owed on the money, there’d actually be no deficit. Seigniorage (whether generated by the Federal Reserve or by the US Mint) is supposed to be booked by Treasury as “miscellaneous receipts”, since the funds canb be appropriated for other govt uses, it actually reduces the deficit dollar for dollar. Looking into it, I found that while Federal Reserve profits are counted as a revenue source (larger than estate taxes and customs duties combined), US Mint profits are not. I sent a couple of emails to the Tsy Inspector General’s office to point this out, but have’t heard anything back. I’ve copied below what I sent Tsy (changing the formatting a bit to merge the two emails). I go WAY into the weeds legally (“presumably in USSGL account, Acct Title: Seigniorage; Acct No 5795″), so I apologize for that in advance. Feel free to ask me to translate anything below into the English language. The bottom line is, the Secretary of Treasury already has the authority to create money without debt so there’s no fiscal reason to raise the debt limit. What’s more, since the Federal Reserve began paying interest on reserves in 2008, there’s no longer a monetary reason to raise the debt limit either.”
Snap Snap!!! Thanks for the response to an otherwise undefensible position in light of modern government’s role in an ever growing social democracy.
Some remain in cognitive dissonance of the world the way it is rather than the way they would like it to be. Caught in that contradiction leaves little room for objectivity.
Yes, that’s true. We are debt slaves given the current monetary arrangement. My fundamental point is that we have a monetary system that can be used to prime aggregate demand without incurring additional debt. By maintaing the canard that we need to tax to reduce deficits or pay for goods and services only exaccerbates our national situation.
The question is what monetary system works to ensure individual choice in the acquistion and disposal of legal tender? There are no effective systems where the STATE does not control national currency. I think the trick is to have a representative STATE where populist objectives and goals become the basis for the distribution of debt free currency. Nothing other than greed compels the current system to issue currency as debt bearing notes.
We’ve done debt-free currency before, successfully. The first time was with the Continental. Then the Crown despaired of its success since it did not include interest paymens to its bankst or the need to purchase speciesfrom the Crown. London began its counterfeiting of billions of Continentals devaluing them. Inflation was not the result of fiat paper issue. The CC limited issue to a bit less than 250 million. It was the quadrupling by counterfeit that caused the phrase “Not Worth A Continental.” Nonetheless, it is a certainty that without the Continental we would have lost that conflict with the Crown.
Then in 1862 Col. Taylor advises Lincoln to issue Greenbacks, which Lincoln initally opposed, but shortly endorsed rather than pay Eastern Bankers their outrageous “vig.” Greenbacks circulated as legal tender until 1971. These miracles of monetary and fiscal policy won the War and reignited the American Industrial Revolution and Westward Expansion.
There is no doubt in my mind that we need a Populist Revolt to Rebalance, Reform our monetary system.
Species is not the answer. Even Milton Friedman argued that while a gold standard might be ideal in theory, it doesn’t work in practice.) And that is generally the eventual conclusion of most attempts to tie a domestic currency to some sort of fixed exchange rate standard (whether gold or foreign currency): it works until it collapses
This video is very misleading because it uses the principles which are relics of the gold standard (abandoned in 1934 & 1971) to make its nonsensical point. Here’s what’s happening in the Modern World of Monetary Transactions which turns Bernanke, Geithner and Econ wags into snivelling cowards.
We’ve been brainwashed to believe that the Federal Government needs to manage its finances like a family or a business. This is unmitigated crappola. Just think about it. No family or business can issue our national currency. Only the Feds (Treasury in conjunction with the Federal Reserve)can do that. That means the Feds can pay for whatever they need because it is the sole issuer, its the currency monopolist and controls the quantity of money in this society. It also means that before it can tax it must spend. It’s not the other way around.
If a business or a family had that power there would be no need for customers or jobs or borrowing.
What today’s pundits, economists, experts, elected officials, and the general public, labor under are rules that were abandoned 40 years ago…the now dead gold standard. Balanced budgets, deficits, debt ceilings, trade deficit, too much borrowing, cut spending, etc. these no longer apply in a sovereign currency nation. moslereconomics.com…Tab to the link “The Seven Deadly Innocent Frauds of Economic Policy.”
In effect the Feds can spend as much as they need, while guarding against inflation. If inflation rears its ugly mug th Feds can cut their spending or cut our spending by levying a consumption tax. But as the sole currency issuer the Fed doesn’t levy taxes to raise revenue. There is no agreement of what inflation actually is. But what the problem is, when inflation is high enough where it becomes a political problem, those are our political limits. The limits to spending, nominal spending, are political. They’re not numerical.
As for deficits and debt…a deficit in the government sector means that there is exactly the same amount of savings in the non-government sector. Its an accounting identity and has nothing to do with Keynesian or Austrian theory.
So the little video you watched is grossly misleading. There is no way we can pass today’s debt to our grandchildren. Just like there was no way for our grandparents to pass their debt to us. As long as we don’t default by choice and we pay debt service on our obligationst we’re good. We can’t go broke because we are the currency monopolists in America.