The debt limit is destructive, duplicative, and dumb. That was the title of a post I wrote a few days after the US hit this self-imposed anachronism back in January. Since then, I’ve done countless interviews about the state of play in the fight to raise the “debt” ceiling in time to avoid an unprecedented and catastrophic default.
This morning, when they played a snippet of Powel's testimony before Congress in which he said that the Fed's job was to fight inflation and maximize employment, it should be noted that the Fed also runs the nation's payments system and is the Treasury's paying agent. I don't think that he would permit the Fed to fail in that function. "As a member of the Fed’s Board of Governors a decade ago, Powell called certain possible debt default responses by the Fed “loathsome.” Yet following the March 10 failure of Silicon Valley Bank the Fed took steps that resembled what it might also do with defaulted U.S. debt - agreeing to accept impaired securities, at face value, as collateral on loans to banks."(source https://www.reuters.com/article/usa-fed-powell-default-idTRNIKBN2WV0OE)
Isn't an important question here whether this is an opportunity to blow up the deficit myth and show that the Fed can, indeed create Dollars without limit? Maybe this is the other side of Trump's advice to House Republicans that they should default. If they do, and the Fed creates money to prevent the default, won't that be the lesson that the world needs to learn?
I'm still struggling to understand why the Fed's raising of interest rates affects the rate the Fed offers on treasury bonds. 30 years ago Warren Mosler pointed out that the Fed doesn't sell bonds to "borrow" money--this is a silly concept when referring to a currency issuing sovereign gov't. No, the Fed sells bonds to soak up excess currency in the banking system in order to maintain the Fed's "target interest rate." If the Fed allowed excess currency to remain in the banking system, all banks would be flush with cash and no bank would ever have to borrow from any other bank to settle their overnight accounts. This would cause the "Fed Funds Rate" to plunge to zero (flush lenders never having the leverage to negotiate with flush borrowers=0% interest rate).
Holders of US dollars have zero leverage with the Federal Reserve--they'll have to take whatever the Fed offers or they can go pound sand. So these dollar holders can decide NOT to buy bonds because they don't like the interest rate. But by keeping their US dollars in the US banking system, we have just seen that this will drive the overnight rate to zero. So this would mean the Fed is creating the very result they want to avoid. This appears to create a situation wherein the Fed--in its zeal to curb inflation--agrees to pay a higher interest rate on bonds--not because it "has to" (it doesn't)--but because it HAS TO if it wants its policy to succeed!
Don't TEMPORARY price controls start to look like a more reasonable way of fighting inflation?
I believe the Republicans during the climate change era are now a front for Big Oil . The cuts they want in the budget are the investments in clean energy . This is why and where they draw the line,IMO.
Thanks for your excellent participation on the NPR panel today. I sent the following email to NPR for the panel.
15 May 2023
To: NPR panel
From: Dick Swartley, Jacksonville FL
What am I missing here?
In reality, there is no debt limit crisis. There will be no X date, when the U.S. government runs out of money to pay its obligations. The U.S. government can never run out of money. The U.S. government has the unique and exclusive power to issue U.S. dollars under the Constitution to pay its bills. "Uncle Sam can always pay!" “There’s nothing to prevent the federal government from creating as much money as it wants and paying it to someone.” Alan Greenspan. The Deficit Myth, Stephanie Kelton. Uncle Sam does not have to borrow (issue Treasury notes and bills) to cover a deficit. No law or anything else requires it. So, pay all debts and expenditures as law and the Constitution require, funded by issuing currency (credits to Fed reserve accounts) for payments as usual. The checks will clear, as usual. Choose not to borrow to cover a deficit, and avoid exceeding a stupid debt limit. Keep calm & carry on.
"Where there is no vision, the people perish". Economics has no vision to replace Finance's monopolistic paradigm for the creation and distribution of new money, only reformist semi-consciousness of the single applied concept that would change the entire pattern of economics and the money system. This failure/unwillingness to look/analyze on the paradigmatic level is almost as bad as the current monopoly paradigm itself because visualization is the first step in both temporal universe change and self actualization. Maybe if the leaders of MMT, Steve Keen, Michael Hudson and Ellen Brown would constructively engage me we could expand and improve on the policy vision of the new paradigm I've outlined in my book. I'd welcome that, but if not, then let it someday be remembered as a clear case of the student surpassing the professors.
The only thing more stupid and problematic than dominating systemic economic power is dominating paradigmatic power, and private banking has been granted the first and has sereptitiously been allowed to unconsciously acculturate the latter into the minds of the naive and even the erudite for the entire history of human civilization.
Lawrence O'Donnell's conversations with Professor Tribe last week were explosive. The professor had been the instructor of several of our justices in law school and is well versed and respected on matters involving the Constitution. His conclusion that the President is following the law by spending what Congress has already passed is his Constitutional duty. He added that no one could have 'standing' to sue him for performing his Constitutional duties. The debt limit is a violation of the 14th Amendment and is therefore Unconstitutional. The President can slay this monster once and for all by taking the offensive and suing the Congress for attempting to violate the Constitution and force the Supreme Court to state that the Constitution means exactly what it says. Oh wait, does this court actually think the 14th Amendment is valid? It wasn't Original.
As a student of comparative religion, I see MMT as a sort of esoteric teaching, i.e. that which is reserved for a few qualified aspirants vs the exoteric teachings which are for the entire religious community. An example would be Hesychasm in Orthodox Christianity vs the teachings for the entire community of Orthodoxy. When MMT is spoken of publicly, it strikes the "masses" as heresy. I suspect many Congressmen and other public officials understand MMT, and have for a long time, but chose not to talk about it publicly, for fear of appearing foolish. E.g., Rep. Wright Patman of Texas and Ben Bernanke (drop money from helicopters) hesitated to speak publicly of it, because it sounds so strange. Some Sufi sages talked publicly about the esoteric teachings and were crucified for it (Al-Hallaj). It is difficult to understand the economics of a sovereign government that issues fiat currency, since it's so different from that of individuals and organizations without that ability. Even those public officials who do understand find it easier and politically safer to pretend they don't. I appreciate you are trying to educate the general public, and think it can be done. But it's not easy as long as those who already understand choose to remain silent about it.
Why dontt hey listen (and learn( from Stephanie???
Break a leg!
Do good!
This morning, when they played a snippet of Powel's testimony before Congress in which he said that the Fed's job was to fight inflation and maximize employment, it should be noted that the Fed also runs the nation's payments system and is the Treasury's paying agent. I don't think that he would permit the Fed to fail in that function. "As a member of the Fed’s Board of Governors a decade ago, Powell called certain possible debt default responses by the Fed “loathsome.” Yet following the March 10 failure of Silicon Valley Bank the Fed took steps that resembled what it might also do with defaulted U.S. debt - agreeing to accept impaired securities, at face value, as collateral on loans to banks."(source https://www.reuters.com/article/usa-fed-powell-default-idTRNIKBN2WV0OE)
Isn't an important question here whether this is an opportunity to blow up the deficit myth and show that the Fed can, indeed create Dollars without limit? Maybe this is the other side of Trump's advice to House Republicans that they should default. If they do, and the Fed creates money to prevent the default, won't that be the lesson that the world needs to learn?
I'm still struggling to understand why the Fed's raising of interest rates affects the rate the Fed offers on treasury bonds. 30 years ago Warren Mosler pointed out that the Fed doesn't sell bonds to "borrow" money--this is a silly concept when referring to a currency issuing sovereign gov't. No, the Fed sells bonds to soak up excess currency in the banking system in order to maintain the Fed's "target interest rate." If the Fed allowed excess currency to remain in the banking system, all banks would be flush with cash and no bank would ever have to borrow from any other bank to settle their overnight accounts. This would cause the "Fed Funds Rate" to plunge to zero (flush lenders never having the leverage to negotiate with flush borrowers=0% interest rate).
Holders of US dollars have zero leverage with the Federal Reserve--they'll have to take whatever the Fed offers or they can go pound sand. So these dollar holders can decide NOT to buy bonds because they don't like the interest rate. But by keeping their US dollars in the US banking system, we have just seen that this will drive the overnight rate to zero. So this would mean the Fed is creating the very result they want to avoid. This appears to create a situation wherein the Fed--in its zeal to curb inflation--agrees to pay a higher interest rate on bonds--not because it "has to" (it doesn't)--but because it HAS TO if it wants its policy to succeed!
Don't TEMPORARY price controls start to look like a more reasonable way of fighting inflation?
I believe the Republicans during the climate change era are now a front for Big Oil . The cuts they want in the budget are the investments in clean energy . This is why and where they draw the line,IMO.
Thanks for your excellent participation on the NPR panel today. I sent the following email to NPR for the panel.
15 May 2023
To: NPR panel
From: Dick Swartley, Jacksonville FL
What am I missing here?
In reality, there is no debt limit crisis. There will be no X date, when the U.S. government runs out of money to pay its obligations. The U.S. government can never run out of money. The U.S. government has the unique and exclusive power to issue U.S. dollars under the Constitution to pay its bills. "Uncle Sam can always pay!" “There’s nothing to prevent the federal government from creating as much money as it wants and paying it to someone.” Alan Greenspan. The Deficit Myth, Stephanie Kelton. Uncle Sam does not have to borrow (issue Treasury notes and bills) to cover a deficit. No law or anything else requires it. So, pay all debts and expenditures as law and the Constitution require, funded by issuing currency (credits to Fed reserve accounts) for payments as usual. The checks will clear, as usual. Choose not to borrow to cover a deficit, and avoid exceeding a stupid debt limit. Keep calm & carry on.
"Where there is no vision, the people perish". Economics has no vision to replace Finance's monopolistic paradigm for the creation and distribution of new money, only reformist semi-consciousness of the single applied concept that would change the entire pattern of economics and the money system. This failure/unwillingness to look/analyze on the paradigmatic level is almost as bad as the current monopoly paradigm itself because visualization is the first step in both temporal universe change and self actualization. Maybe if the leaders of MMT, Steve Keen, Michael Hudson and Ellen Brown would constructively engage me we could expand and improve on the policy vision of the new paradigm I've outlined in my book. I'd welcome that, but if not, then let it someday be remembered as a clear case of the student surpassing the professors.
The only thing more stupid and problematic than dominating systemic economic power is dominating paradigmatic power, and private banking has been granted the first and has sereptitiously been allowed to unconsciously acculturate the latter into the minds of the naive and even the erudite for the entire history of human civilization.
Lawrence O'Donnell's conversations with Professor Tribe last week were explosive. The professor had been the instructor of several of our justices in law school and is well versed and respected on matters involving the Constitution. His conclusion that the President is following the law by spending what Congress has already passed is his Constitutional duty. He added that no one could have 'standing' to sue him for performing his Constitutional duties. The debt limit is a violation of the 14th Amendment and is therefore Unconstitutional. The President can slay this monster once and for all by taking the offensive and suing the Congress for attempting to violate the Constitution and force the Supreme Court to state that the Constitution means exactly what it says. Oh wait, does this court actually think the 14th Amendment is valid? It wasn't Original.
As a student of comparative religion, I see MMT as a sort of esoteric teaching, i.e. that which is reserved for a few qualified aspirants vs the exoteric teachings which are for the entire religious community. An example would be Hesychasm in Orthodox Christianity vs the teachings for the entire community of Orthodoxy. When MMT is spoken of publicly, it strikes the "masses" as heresy. I suspect many Congressmen and other public officials understand MMT, and have for a long time, but chose not to talk about it publicly, for fear of appearing foolish. E.g., Rep. Wright Patman of Texas and Ben Bernanke (drop money from helicopters) hesitated to speak publicly of it, because it sounds so strange. Some Sufi sages talked publicly about the esoteric teachings and were crucified for it (Al-Hallaj). It is difficult to understand the economics of a sovereign government that issues fiat currency, since it's so different from that of individuals and organizations without that ability. Even those public officials who do understand find it easier and politically safer to pretend they don't. I appreciate you are trying to educate the general public, and think it can be done. But it's not easy as long as those who already understand choose to remain silent about it.
Tomorrow?
...or another time?