Thinking Big: Give the US Government a $60 Trillion Blank Check
Joe Firestone writing at New Economic Perspectives wants the MMT's (Modern Monetary Theorists) and their brethren to think bigger. He is thinking outside of the penny jar that is currently U.S. monetary policy.
He asks, why go for a measly $5 or $6 trillion using Platinum Coin Seigniorage (PCS). Why not create a massive $60 trillion purse for the US Government that will totally rewrite the rules of monetary policy in this country. This plan will neuter the Federal Reserve.
Anything that will take Ben Bernanke off his high and mighty throne will get one's attention. However, turning the power to create money over to Congress and the President sounds very scary. But, let's explore the idea.
First, some background, TJN reviewed the history of the Platinum Coin Seigniorage option, in a post last July entitled, "Debt Watch / Coin Trick: the Trillion Dollar Coin."
Ellen Brown first suggested the idea in her book back in 2007.
WebofDebt.com: The Market Has Spoken: Austerity Is Bad for Business [Aug 7, 2011] --
Another alternative was suggested in my book Web of Debt in 2007: the government could simply mint some trillion dollar coins. Congress has the Constitutional power to “coin money,” and no limit is put on the value of the coins it creates, as was pointed out by a chairman of the House Coinage Subcommittee in the 1980s..Joe Firestone writing yesterday updates the status of the Platinum Coin Seigniorage (PCS) discussion and then goes into his expansive view of implementing it.
Joe Firestone / New Economic Perspectives:
New MSM Trillion Dollar Coin Wave: Here’s The Big Story --
The one thing that jumps out at you when reading the mainstream posts of the past week-and-a-half bringing Platinum Coin Seigniorage (PCS) into the forefront of attention again, for the first time since last year’s debt ceiling crisis, is that every mainstream blogger or commentator is telling a story about minting a Trillion Dollar Coin (TDC), or a few trillion dollar coins as an option the President can either use or not to get around the debt ceiling. But no one is telling us the much bigger story of the enormously increased authority to cause the creation of fiat money, delegated to the Executive Branch by the Congress in the 1996 legislation enabling PCS. And no one is telling us what the possible implications of this change are for our political and economic systems.Joe says the plan will not be inflationary. That is the nub of the whole issue.
I’ve reviewed these posts, as well as a cable segment, in the four earlier installments of this series. The installments, beginning with this one, are here. The posts and the cable segment are by: Pethokoukis, Wiesenthal, Carney, Drum, Yglesias, Yglesias, Harry Bradford, Brad Plumer and Chris Hayes...
CS Creates a Great Crack in Gold Standard Constraints and Austerity Justifications
The big story about Platinum Coin Seigniorage is not the Trillion Dollar Coin and its possible implications for solving the debt ceiling crisis, as the mainstream has been telling us. Instead it is the great crack it creates in the wall of gold standard-based constraints still hanging over our politics and economics, and the increased fiscal and policy space this gives us to use to solve our various national problems. It is the authority the Executive Branch of Government now has to break through these constraints, and begin to unify the financial functions of government behind the public purpose...
The mainstream bloggers and commentators told the PCS story solely in terms of the theoretical availability of coins with face values in the low trillions and their potential impact on the debt ceiling conflict. But they never considered or examined a more aggressive use of PCS to change the US financial system substantially, by freeing the Treasury from its gold standard chains and the political system from fiscal policy alternatives focused first and last on their fiscal impact on deficits, debts, and misplaced solvency fears, rather than on full employment, price stability, and other public purposes. They never considered a range of PCS options and their possible wide range of impacts on economics, politics, and the federal financial system, as well as on the debt ceiling conflict...
As I’ve said in another place, a $60 T solution would allow Treasury to harness the authority of the Fed to fill the TGA (the public purse), so that Treasury need never issue debt again for the next 15 – 20 years, ample time to reconsider the unwise and damaging decision made by Congress in gold standard days to make the Fed independent of the Executive Branch and unaccountable to the public. That solution would also make the debt ceiling issue a dead letter, to the point where that legislation could easily be repealed over the next few years, since no one would expect to use it again...
I’ll consider the inflation objection at length in my next post.A President would have to have Rooseveltian cojones to implement this platinum coin option. Does Obama? Let the discussion continue..
However it’s also already been considered and evaluated in past writings by myself, and also by Scott Fullwiler. The bottom line, however, is that debt repayment won’t be inflationary; and that deficit spending using seigniorage, also won’t be inflationary in itself.
Here is Joe Firestone's explanation on why using Platinum Coin Seigniorage to mint trillions of dollars to break the back of the Federal Reserve will not be inflationary:
New Economic Perspectives:
Platinum Coin Seigniorage, Issuing Debt, Keystroking Deficit Spending, and Inflation