More of the blind leading the blind. Either way Treasury only spends what’s authorized by Congress. And all the coin does is shift interest expense from the Treasury to the Fed.

Illogic is clearly a adaptive trait for holding office. As they say in Church, it’s another mysteriously rushed contradiction wrapped in an enema…

Greg Walden plans to introduce bill to stop U.S. Treasury from creating trillion dollar platinum coins to pay bills and expand debt

U.S. Rep. Greg Walden (R-Ore.) today announced plans to introduce a bill to stop a proposal to mint high-value platinum coins to pay the federal government’s bills.

“Some people are in denial about the need to reduce spending and balance the budget. This scheme to mint trillion dollar platinum coins is absurd and dangerous, and would be laughable if the proponents weren’t so serious about it as a solution. I’m introducing a bill to stop it in its tracks,” Rep. Walden said.

“My wife and I have owned and operated a small business since 1986. When it came time to pay the bills, we couldn’t just mint a coin to create more money out of thin air. We sat down and figured out how to balance the books. That’s what Washington needs to do as well. My bill will take the coin scheme off the table by disallowing the Treasury to mint platinum coins as a way to pay down the debt. We must reduce spending and get our fiscal house in order,” Rep. Walden said.

Within the last week, numerous media reports (example here) have suggested that the U.S. Mint could create trillion dollar platinum coins, which would then be deposited into the Federal Reserve to be used to pay the federal government’s bills or avoid hitting the debt ceiling. Rep. Jerrold Nadler, the ranking member of the Judiciary Committee’s Subcommittee on the Constitution, touted the proposal last week (story here). New York Times columnist and Princeton professor Paul Krugman suggested the idea in an article as well (click here). Other leaders in Washington, including House Minority Leader Nancy Pelosi, have urged the President to raise the debt limit unilaterally without permission from Congress.

Representative Walden, a member of the House Republican leadership, represents the Second District of Oregon, which includes 20 counties in the southern, central and eastern regions of the state.

91 Responses

  1. And all the coin does is shift interest expense from the Treasury to the Fed.

    How is that? Isn’t the coin supposed to make available a whole lot more funds than just what’s needed for interest expenses?

    Also, can I assume, under the current arrangements, the Fed is like the score-giver in the stadium example, so its balance sheet, profits/losses are immaterial? Maybe under that assumption, “a whole lot” is shifted from the Treasury to the Fed?

      1. @Roger, oh, okay thanks, that could be what Warren meant. (He is too fast to catch sometimes 🙂

        I read someone stating that the monthly interest expense to be 40 billion. Taking the outstanding debt of 16.4 trillion, that corresponds to an average 3% rate annually (approx). The interest paid on reserves is way smaller, isn’t it? So, there’s gotta be some interest savings in addition to shifting the expense to the Fed.

        But wait. Got no idea what the long term rates are nowadays, they could be close to reserve rates. In that case, compared to new borrowing, the coin does exactly what Warren says.

    1. the fed credits the tsy’s account in exchange for the coin

      the tsy spends via the fed debiting tsy’s account and crediting a member bank reserve account

      the fed pays interest on reserves at its ‘target rate’ for fed funds.

      only with a 0 rate policy does the fed not pay interest.

      nor would the tsy with all 3 mo bills

      1. Warren, another question occurred to this dummy when discussing elsewhere alternative uses of the funds from coinage gains.

        1) Treasury uses the funds to retire outstanding securities (making room for new borrowing and spending under the ceiling).
        2) Treasury uses the funds to spend directly (for authorized budget items).

        In either case, new reserves are added to the system, right? And there is no offsetting reserve drain, right? According to my rough understanding of the fed’s interest rate control mechanism, presence of excess reserves in the system puts the fed in a difficult place, and the interest rate it is trying to control (so-called ffr?) drops to 0%.

        Is that right? Or maybe, the rate drops like that, but that’s fine?

        Thanks in advance.

      2. the fed now pays interest on reserves so excess reserves aren’t a rate management issue any more.

        second, the tsy uses the new funds for normal spending and paying off tsy secs as they mature.
        they can only be paid as they mature.

      3. Thank you, Warren. That was very helpful.

        they can only be paid as they mature.

        That’s what I thought. But everybody is talking out there, saying all kinds of things.

      4. @WARREN MOSLER,

        Former Head of the US Mint on how it all works

        Diehl was also the Chief of Staff to Senator Lloyd Bentson of TX
        From The Razor’s Edge, John Carney and The Trillion Dollar Coin

        From Philip Diehl, Mint director who wrote the platinum coin law:
        The claim that minting a trillion dollar platinum coin is unconstitutional was no basis whatsoever. Congress has given Treasury broad discretion in minting coins since the founding of the republic, and its power to do so is rooted in the Constitution (Article 1, Section 8). Moreover, the accounting treatment of the coin would be identical to other coins produced by the Mint–no different from a quarter.
        Here’s a brief on the subject:
        I’m the former Mint director and Treasury chief of staff who, with Rep. Mike Castle, wrote the platinum coin law and produced the original coin authorized by the law. Therefore, I’m in a unique position to address some confusion I’ve seen in the media about the $1 trillion platinum coin proposal.
        * In minting the $1 trillion platinum coin, the Treasury Secretary would be exercising authority which Congress has granted routinely for more than 220 years. The Secretary’s authority is derived from an Act of Congress (in fact, a GOP Congress) under power expressly granted to Congress in the Constitution (Article 1, Section 8).
        * What is unusual about the law (Sec. 5112 of title 31, United States Code) is that it gives the Secretary complete discretion regarding all specifications of the coin, including denominations.
        * Moreover, the accounting treatment of the coin is identical to the treatment of all other coins. The Mint strikes the coin, ships it to the Fed, books $1 trillion, and transfers $1 trillion to the treasury’s general fund where it is available to finance government operations just like with proceeds of bond sales or additional tax revenues. The same applies for a quarter dollar.
        * Once the debt limit is raised, the Fed ships the coin back to the Mint, the accounting treatment is reversed, and the coin is melted. The coin would never be “issued” or circulated and bonds would not be needed to back the coin.
        * There are no negative macroeconomic effects. This works just like additional tax revenue or borrowing under a higher debt limit. In fact, when the debt limit is raised, Treasury would sell more bonds, the $1 trillion dollars would be taken off the books, and the coin would be melted.
        * This does not raise the debt limit so it can’t be characterized as circumventing congressional authority over the debt limit. Rather, it delays when the debt limit is reached.
        * This preserves congressional authority over the debt limit in a way that reliance on the 14th Amendment would not. It also avoids the protracted court battles the 14th Amendment option would entail and avoids another confrontation with the Roberts Court.
        * Any court challenge is likely to be quickly dismissed since (1) authority to mint the coin is firmly rooted in law that itself is grounded in the expressed constitutional powers of Congress, (2) Treasury has routinely exercised this authority since the birth of the republic, and (3) the accounting treatment of the coin is entirely routine.
        * Yes, this is an unintended consequence of the platinum coin bill, but how many other pieces of legislation have had unintended consequences? Most, I’d guess.
        Philip N. Diehl
        35th Director
        United States Mint

        A similar comment was posted at PragCap

      5. @Clonal Antibody,

        Hmmm. This strikes me as a partisan statement. Mike Castle is on record as saying that the purpose of the platinum coinage law was to allow the Treasury to meet the needs of coin collectors, specifically allowing the mint to create platinum coins of smaller denominations (even fractions of a dollar face value), so that they were more affordable.

        For Diehl to argue that the authority granted by the bill was nothing special and that Congress has routinely granted such authority for 220 years is simply dishonest.

        It is entirely possible, even likely, that minting a $1T coin would survive a court challenge based on the letter of the law, but it certainly was not Congress’ intent to give the Treasury the authority to circumvent the debt ceiling. And Congress’ intent (as established by the legislative record) is important in statutory construction, so it is by no means a slam dunk that a court would agree with Diehl.

      6. @ESM,

        The purpose of the law was to allow the Mint to generate Seigniorage profits for the US Mint by allowing it to create legal tender in any denomination, and to sell it either as a bullion coin or as a proof coin.

        Seigniorage profits are defined as the revenue to the mint (either from face value, or bullion value) minus the cost of producing those coins. These seigniorage profits are then counted as revenue to the US Government, being treated no differently than tax revenue.

        The US could choose to pay all its finacial obligations in dollar coins (current profits 525%) and use the seigniorage profits to fund the spending greater than tax revenues!

  2. Child: I want to play with the country the way I want to!
    Mom: No, you have to share. Play with it together.
    Child: If I don’t get to play with it all by myself I’m going to break it!

    1. @Brian,

      Actually, on the whole trillion dollar coin front, is there anything stopping the Treasury Secretary from simply issuing slips of paper that are redeemable in place of tax liabilities?

  3. There is something strange about people seeking public office so they don’t have to follow the same rules as everyone else and then claiming they have to behave like everyone else in the one area in which their is entirely different. They seek control where they don’t have it and relinquish control where they do. “Contrary” doesn’t begin to describe it. It is a recipe for failure — the modern Republican’s familiar.
    Walden’s bill is designed to fail. I wonder if he realizes that every bill issued by the Bureau of Engraving and Printing is nothing but a certified IOU, a certificate of debt.
    The Bureau of Engraving and Printing delivered 3 billion hundred dollar bills in 2012. Each note, regardless of the denomination costs 8.7 cents to produce.

    1. @Monica Smith,

      This government-is-like-a-household/small-business wisdom is liberally dispensed all the time, everywhere. The CEO of the local ABC affiliate did editorialize on TV to that effect two days in a row just this weekend. And this is in KC, where they should at least be expected to know about UMKC School of Economics.

      1. @Brian, Don’t know. But, this old lady has discovered a certain comfort in carrying around a couple or five. Saves time at the store, especially now that credit cards are accompanied by all kinds of rigamarole (signature, last four digets, confiscation by the checker, etc.) Presenting a local check takes even longer. It took me five minutes to buy an ipad and cover and twenty minutes to get the check approved.
        As we get older, time gets more valuable. LOL

  4. when the fed pays IOR, where do those funds to pay IOR come from? Does the treasury foot the bill by selling bonds to pay IOR or does the fed just use keystrokes to credit IOR out of thin air?

    1. the fed just credits the bank’s reserve account for the interest, and debits ‘fed capital’

      however the fed also happens to be holding US tsy secs, and debits the tsy’s account and credits fed capital for that interest.

      then the fed debits its capital and credits tsy’s account for the net profits if any

      1. @WARREN MOSLER,

        Warren, not following your accounts above, it would be great if you could document exactly where the interest comes from?


        1. It does seem the banks get “free” interest, $40 billion per month, from money they did not earn from productive work but rather that was out printed and “given to them for free” “debt created out of thin air” – Is this not true? where does the $40 billion come from?

        2. Is it not the American taxpayer that is ultimately on the hook for the$40 billion in interest each month?

        3. It does seem that there is no reason for this $40 billion in interest to be paid out each month as the Treasury / congress could create the money directly (rather than through debt)

      2. the banks don’t ‘get any money for free’

        Deficit spending by govt is payment to bank clients like you who keep their dollars in banks.

        the rate the fed pays banks on their excess funds they keep at the fed, via competitive forces,
        gets passed through to the depositors.

        in fact, you can earn more at most small banks in money market accounts than the banks earn on their excess funds at the fed.
        that’s how competitive it is at the moment.

        yes, the interest paid by govt, which it does to support its target rate, is an expense to the govt.

        note that with my proposed permanent 0 rate policy etc. govt. no longer would pay interest.

        the govt/fed wants its target rate to be higher than 0 because it believes the higher rates serve public purpose by keeping inflation low. I think they are completely wrong. But that’s just me…

      1. @Art, The native Americans used sea shells, presumably before they were broken up in the surf. They were derided, in our school books, for accepting glass beads as tokens of good faith. It was the Dutch who demonstrated bad faith. Also the Dutch who financed the slave trade.
        “Dutch treat.”

  5. Does the Fed have any say on the matter? Is it the Fed’s prerogative to accept or deny some platinum coin deposit request of the Treasury? Or, is it obligated?

  6. “Other leaders in Washington, including House Minority Leader Nancy Pelosi, have urged the President to raise the debt limit unilaterally without permission from Congress.”

    ROFLMAO !!

    Let’s just let the President make ALL the laws, Congress can be disbanded, and Nancy can go to assisted living before she seriously harms herself.

  7. Everyone should send a copy of 7-DIF to his offices in Washington DC and Oregon so he will be flooded with copies and can be cured of his deficit hysteria.

      1. @WARREN MOSLER, Warren,
        maybe if you sent him an autographed copy with a platinum spoon inserted? With a coupon for no interest on platinum enemas at the Japanese embassy this month? 🙂

  8. “all the coin does is shift interest expense from the Treasury to the Fed.”

    Oh is that all? So rather than American taxpayers paying billions in interest each year to a banking cartel for borrowing their own money, they simply print money directly?

    What is wrong with congress (the people) printing money directly? expect that it ends the central banking cartel.

    1. when the treasury spends more than it taxes, payment is made via crediting member bank reserve accounts on behalf of whoever the Treasury is paying.

      One way or another the govt has to pay interest on that ‘excess spending’ if it wants the ‘risk free’ rate to be higher than 0%

    2. @SandyZZZ,
      There is not only nothing wrong with government printing (creating) money directly, it has, and does, so all the time, beginning with the Coinage Act of 1792 (which is the only reason we don’t pay interest on coins too), the Constitution’s Art. 1, Sec. 8, clause 5 allowing Congress to “coin Money,” Lincoln’s doing exactly that with the first legal tender laws, affirmation of that right by SCOTUS in Julliard v. Greenman (1884), continuation of debt-free money in the form of U.S. Notes through 1996 when Treasury burned its stock, continued circulation of the Greenback (aka U.S. Notes) through the present ($239 million) through July 2011, according to the Treasury’s own debt report (Google United States Notes, go to the Wiki page, and then click on footnote 30 if you want to read the Treasury table, on page 11, that shows how U.S. Notes are NOT counted as part of the debt), 2 current bills to reintroduce U.S. Notes – HR1452 (1999) and HR2990 (present), and even a lawsuit to clarify Treasury money is NOT the same as Federal Reserve Money (, under v. Treasury – my petition to reissue U.S. Notes: is exhibit B).
      That’s a long way to say the gov’t, banksters, and anyone who says the gov’t cannot produce debt-free money is wrong, wrong, wrong.
      But still, see my article here:
      in which I quote Mosler,
      and here:
      in which I show where $100 Trillion is – including Greenbacking, as solution #1 out of 5.

  9. “n 2012, the U.S. will spend around $220 billion in net interest on its debt, according to the Congressional Budget Office — a figure that is expected to spiral ever higher in coming years.”

    Warren, Is this not the real issue? If you could explain the operations in detail and post it on your site, then that would be a great public service.

    Question: who pays the $220 billion in net interest and who receives $220 billion in net interest?

    What we need explained are the myths around this Interest on the debt, not the debt itself.

    I suspect the taxpayers are paying the $220 billion and the banks are receiving $220 billion each year, prove me crazy.

    1. @alicia, Y

      Yes, Krugman’s plan saves US taxpayers about $220 billion per year that could then become productive spending in the economy.

      Just like paying off your credit card, now you magically have more money to spend because you are not paying the bank your hard earned money as interest.

      The Federal Reserve is just a huge credit card the taxpayers were sucked into accepting from the Federal Reserve Banks and as with Credit Cards the money is made on the interest payments not the principle debt loaned out.

      From Wkipeadia – Government debt is one method of financing government operations, but it is not the only method. Governments can also create money to monetize their debts, thereby removing the need to pay interest. But this practice simply reduces government interest costs rather than truly canceling government debt.[3]

      1. you also need to read ‘soft currency economics’ on this website.

        krugman’s plan only shifts interest payment from the Tsy that would have issued longer term securities to the Fed which only offers overnight rates on reserve balances.

        However the implied present value of each, which reflects indifference levels of expected future fed rate settings, is pretty much identical

      2. @WARREN MOSLER,

        Krugman’s plan? Good grief. Beowulf first posted the idea and fleshed it out here in May 2010. Sort of makes me wonder what else Krugman has received credit for which was somebody else’s idea.

    2. @alicia, “the banks are receiving $220 billion each year, prove me crazy.”

      Virtually all of that is going to foreign governments, US state and local govts, and the US Fed itself….

      Banks have mostly property and automobile loans (and they dont even do those things very well now do they?)

      For data on UST ownership see Table L.209 in the Z.1 here:

      You are NOT “crazy”, but you are caught up in libertarian left-wing ‘conspiracy theories’ … suggest read Warren’s mandatory readings and stick with the facts… rsp,

  10. Retiring the debt (interest bearing money) with non-interest bearing money has two benefits.

    1. Immediate savings of interest payments.
    2. Ceasing to make payments taxes to the rentier class
    3. Rentier class will need to work for a living and yet they have zero marketable skills

    Republicans and many Democrats work directly for the rentier class and not joe the plumber, so they are pissed and trying to shut this “crazy talk” down.

    1. and it’s called a permanent 0 rate policy, with the bank’s cost of funds being 0 as well, which gets passed through to depositors and borrowers (risk adjusted).

      see my ‘proposals’ on this website

  11. Best comment I’ve seen so far on the $1T coin idea is that its just another way of passing the problem to our children who will have to pay higher taxes to pay it off.

    I pointed out that it was a coin but the irony didn’t seem to register.

    So the ‘your children will have to pay it off’ argument has now descended into farce with those ranting about it thinking that we have to pay off the money we carry in our wallets with taxes.

    1. It’s not that bad. I mean, the argument is not that terribly off-base. Just ask the guy if he doesn’t drink for fear of having to piss it off, either.

    2. @Neil Wilson,

      Is that really wrong? The value of the currency is driven by taxes, so presumably if there is more currency out there, the tax burden needs to be higher to maintain its value, all other things being equal.

      The fact that the poster understood that there is little difference between issuing a $1T platinum coin and issuing $1T of Treasuries is promising. His misunderstanding lies elsewhere.

    1. @Ed Rombach, all the metalists are ja-mokes. if they love gold so much, let them take their dollars and buy it. We aint using it for currency. also, being from GA, he probably subscribes to the southern congressional civil-war-period mentality that holds back progress.

      people need to get a grip, we have a fiat currency. Used wisely and set to public purpose, it could be the most powerful gift to society in history.

      if you want to see a real bill that would solve a problem:
      i dare you to read it.

    1. @Unforgiven, really?

      * The accounting treatment of the coin is identical to the treatment of all other coins. The Mint strikes the coin, ships it to the Fed, books $1 trillion, and transfers $1 trillion to the treasury’s general fund where it is available to finance government operations just like with proceeds of bond sales or additional tax revenues. The same applies for a quarter dollar.

      * Once the debt limit is raised, the Fed ships the coin back to the Mint, the accounting treatment is reversed, and the coin is melted. The coin would never be “issued” or circulated and bonds would not be needed to back the coin.

      * There are no negative macroeconomic effects. This works just like additional tax revenue or borrowing under a higher debt limit. In fact, when the debt limit is raised, Treasury would sell more bonds, the $1 trillion dollars would be taken off the books, and the coin would be melted.

      (Emphases mine)

      Is that right? Is the treasury’s general fund to be debited for $1T down the road? This sounds awfully like what many anti-Fed, anti-debt people complain about. Namely, we the people borrow from the Fed (which is a private bank to them), and then pay it back with interest (not unlike a consumer loan).

      But I don’t fully understand government/reserve accounting. What does all this mean for the Fed’s capital/profits/losses, etc? Which, I read here, become the Treasury’s at the end of the year. Does the initial $1T transfer to the treasury’s general fund take away from the Fed’s capital or profits, count as loss?

      Anyway, Joe Firestone has another piece at the NEP today, where he picks apart “Small Ball” pattern of coin-use scenarios. (Diehl appears to fit the pattern.)

      1. Well, okay, I’d still appreciate an insight from someone who knows. But I suppose, Diehl’s way is just one possibility, where debt ceiling is temporarily averted, and it doesn’t have to be that way. The Fed can keep the coin forever (or destroy it itself? instead of incurring costs to secure it?)

      2. @Nihat, no expert, but when the fed “orders” coins from trsy, i believe the above process fits…fed sells bond to pay for coins.

        I think the way the statute reads (to me at least) is the TDC exists in a sort of loophole that allows it to be minted in a way that it is the equivalent to a u.s. note or – a bill of credit direct from treasury. with no debt issuance required to be accepted as legal tender.

        There are still u.s. notes in circulation. if you had one and went to deposit at a bank, they would credit your account in the face amount of the note, right? the question is, what does the fed do with a u.s. note once it is credited to your bank account?…destroy it like it does with cash is my guess.

        So, if the trsy takes the TDC and deposits it at the fed, once fed credits the trsy account, does it destroy the coin also?

      3. Ed, thanks. But Diehl doesn’t mention “fed sells bonds to pay for coins.” Where did that come from?

      4. How does the accounting for quarters go as they are minted, entered into circulation, and retired from circulation?

      5. @Nihat, yeah my bad, i misread it above

        from fed:

        Putting Coins into Circulation
        The procedures for putting coins into circulation are similar to those for currency. The U.S. Mint produces coins in Philadelphia, Denver, and San Francisco, and ships them to the Federal Reserve Banks and to authorized armored carriers, which supply banks that need coins to meet the public’s demand.

        The distribution of coins differs from that of currency in some respects. First, when the Fed receives currency from the Treasury, it pays only for the cost of printing the notes. However, coins are a direct obligation of the Treasury, so the Reserve Banks pay the Treasury the face value of the coins.

        (does this mean full credit to treasury for a coin and no debt issued?)

        Both U.S. notes and Federal Reserve notes are part of our national currency and are legal tender. They circulate as money in the same way.

        I also read somewhere that said the fed would “sterilize” an an amount of debt equal to the TDC….don’t know if that holds true or not.

        your thoughts?

      6. @Ed,

        Seigniorage profits counts as revenue to the government – the same as taxes.

        From Diehl’s Wiki

        In January 1991, Diehl was named legislative director to U.S. Senator Lloyd Bentsen. In September 1992, the Senator promoted him to majority staff director of the Senate Finance Committee.[2] On the first day of the Clinton administration, he moved to the U.S. Treasury Department and was named Chief of Staff to Treasury Secretary Bentsen.[3] In December 1993, President Clinton announced his intent to nominate Diehl as Director of the United States Mint, and the U.S. Senate confirmed him unanimously in June 1994.[4]
        Director of the United States Mint and thereafter

        Diehl executed a dramatic turnaround of the Mint. By the time he left the agency in March 2000, the Mint had convinced Congress to exempt it from all procurement regulations and annual appropriations,[5][6] eliminated nine of ten political patronage positions,[6] and resolved its long-standing financial management weaknesses.[7][8] The Mint also reformed its troubled commemorative coin program[6] and built one of the most successful e-Business sites on the web.[6][9]

      7. Ed, my thoughts? I don’t know really. I just think Diehl’s conception of the coin is very limited and perhaps meaningless.

        Clonal, don’t you hear? Diehl is saying the treasury is gonna return that seigniorage profit back to the Fed down the road when it’s able to borrow again.

        I wonder if his conception would even be applicable to the similarly possible –from the letter of that clause (k)– platinum coins with much higher face values, e.g., $60T or $100T (several multiples of current debt or gdp, whatever your anchor of choice is).

      8. Ed, re: coin or currency circulation, I’ve always imagined that, when govt spent, coins and currency could simply be shipped to banks, and put in their vaults, instead of their reserve accounts getting credited for the corresponding amount. I’ve understood vault cash to be a form, an alternative form of reserves.

      9. @Nihat,

        I think what Diehl suggested was one possibility. One solution to a problem that is currently plaguing the US. If you read a the entireity of his memo, then the wider interpretation opens up. See also my reply to ESM above.

      10. @Nihat, coin or currency, i think the mint is like an outsource factory. The fed just orders the product and pays the cost.

        fed orders 1m benjamins from mint, mint ships to fed, fed pays mint cost of printing, 1m sits in feds vault, when it leaves fed vault the receivers bank account gets debited and then its in circulation. but apparently the fed owns the paper, but trsy owns the coins.

        joes piece at nep was really good. and yes they could at the moment print 100x1TDCj’s

        Clonal, diehls piece was good. i like the seigniorage.

        by the way, i still contend this TDC part of the statue was done with full intention of having the TDC option and is in the presidents book of secrets…..:-)

        if warren wants to go hollywood, he could produce the movie on the TDC plot. would be blockbuster with the right script.

      11. @Ed,

        You said

        fed orders 1m benjamins from mint, mint ships to fed, fed pays mint cost of printing,

        For coins, it is not like that the correct scenario is

        fed orders 1m dollar coins from mint, mint ships to fed, fed pays mint $1m, Mint books $840,000 as profits which are then added to the Treasuries account and $160,000 goes to pay minting costs

  12. The idea (or meme) of a coin was originally coined to expose the idiocy of thinking in terms of the “government borrowing capacity” and “the government as an enlarged household”. This is the cornerstone of the neoliberal attitude towards the state (“the government is just another economic agent, a slightly bigger corporation”). The obstructionists in the US Congress are the latest defendants of that neoliberal article of faith.

    For the non-government sector’s point of view, non-bearing interest Treasury liabilities are indistinguishable from non-bearing interest Central Bank liabilities – they are forms of financial assets called “currency”. Both Central Bank and Treasury are parts of the government sector.

    Please have a look at the stunning level of ignorance displayed in the majority of comments on this thread:

    There is virtually no difference in arguments presented by “bush economists” sweltering in a summer heatwave in the outback of Australia and some members of the US Congress. You would expect a bit more sophistication in Washington. Unfortunately these people in power in the US would be better qualified to manage a herd of sheep or shoot feral rabbits with a rifle rather than manage the largest global economy or be in the position to order a nuke or two to blow up a few cities.

    It is possible that the imaginary coin will do its job – will expose the sheer idiocy of monetarist thinking still infesting the brains of the masses and the “anointed”. Then there will be one less excuse not to start thinking about solving real problems. The governments always “have” a potentially infinite stock of money, there only might be no goods or services to be purchased for that money. The governments have the capacity to create as much money as needed.

    What if something is really wrong with our attitude towards the environment? What if we really need to worry about the climate (please remember that I live in a city which just recorded its hottest day on record)? In 19th century the cities were drowning in horse manure, a new technology was needed. Internal combustion engines solved the problem for a while. Yet even in the 19th century a great Russian chemist Mendeleev said that ‘burning petroleum as a fuel “would be akin to firing up a kitchen stove with bank notes.’ Burning coal is probably even worse in the long run.

    We can do better but why does the following article mention a big Asian country? Does it have anything to do with the self-consciousness of the monetary state sovereignty?

    1. @Adam (ak),
      Adam says
      “It is possible that the imaginary coin will do its job – will expose the sheer idiocy of monetarist thinking still infesting the brains of the masses and the “anointed”. @

      it looks that way to me ! a platinum lining ?

    2. @Adam (ak), I was a bit confused until I realized your “bush economists” was a small b and not a big B.

      After consulting to the federal government for a decade I assure you I personally have very low expectations about the sophistication of government when it comes to understanding our economic system.

      Just because it is exposed doesn’t mean anyone sees it. After all it should already be very apparent the emperor has no clothes.

      1. @Jon M,

        Under current arrangements, the treasury-fed duality seems to me to serve little purpose other than a big, fat (Greek?) obfuscator. Would you concur?

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