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Saturday, January 12, 2013

Magic Money / Magic Coin

The UP with Chris Hayes Show on MSNBC discussed the TDC (trillion dollar coin) on Saturday (1/12/13) morning. Hayes does one of the most concise and accurate summaries of the TDC issue that has been done on network television.

Here is the "The Magic Coin" clip from the UP show. It does not show the subsequent discussion of the issue, which included MMT economist, Stephanie Kelton, Associate Professor and Economics Department Chair at the University of Missouri-Kansas City and contributor to the New Economic Perspectives website.

UP with Chris Hayes / MSNBC:
The Magic Coin [transcript]
Odds are by now you’ve heard at least something about the “Trillion Dollar Coin” idea that, thanks in part to Up regulars Joe Weisenthal and Josh Barro, has managed to catapult from the margins of the internet to the center of Beltway conversation. The idea, first proposed back in 2010 by a Georgia lawyer commenting on a blog under the screen name Beowulf, has now received endorsements from Nobel Laureate Paul Krugman, former director of the U.S. Mint Philip Diehl and a number of members of Congress. … 
Economist John Kenneth Galbraith once said: “The process by which banks create money is so simple that the mind is repelled.” And the same can be said of how our government creates money. The simple truth is it creates money simply out of thin air. Someone at the Federal Reserve punches in a number on a spreedsheet and–voila!–more money. At moments of profound crisis it was precisely this kind of monetary magic that helped the U.S. avoid catastrophe–Abraham Lincoln printed greenbacks to fund the union and his opponents mocked him mercilessly for doing so — which this cartoon from the time, depicting a machine spewing bills, shows. And FDR ditched the gold standard to get us out of the Great Depression. Both those ideas were, at the time, probably about as ridiculous as a trillion dollar coin. While there are rules that guide legal tender, at base, what makes money valuable is simply social convention, a norm. We all agree it’s valuable, so it’s valuable. The genius of the trillion dollar coin isn’t just that it provides some much needed leverage against a foe unencumbered by any sense of propriety, it also illustrates the uncomfortable, foundational reality of modern capitalism: money is nothing more than a shared illusion.

It’s a kind of magic. But is it good magic… or bad magic?

Abraham Lincoln running the greenback printing press to finance the Civil War...

Anti-Lincoln, anti-greenbacks cartoon from the Civil War
Running the "Machine" - Give us more greenbacks

Economic Policy Journal: Ben "Spanky" Bernanke as a child

Zero Hedge: Hyperinflation In Action: Beer For Bag Of Cash

Calculated Risk

MishTalk - Mike Shedlock

Paul Krugman - NY Times

The Big Picture - Barry Ritholtz

naked capitalism - Yves Smith

Pragmatic Capitalism

Washington's Blog

Safe Haven

Paper Economy

The Daily Reckoning - Australia