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?
The best way to fight (and conquer) inflation is to implement a 50% Discount/Rebate policy at retail sale. I love MMTers, and other reformists like Steve Keen, Michael Hudson and Ellen Brown because they've all surrounded the problematic area of the economy (finance), now all they need to do is cognite on the single new paradigm concept that strategically implemented and applied will change the entire nature of the economy and money system...instead of just separately and much less effectively tinkering with the various anomalous aspects of the problem.
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.
The 14th amendment might be the resolution of this current political absurdity, but we must be careful not to constitutionally validate the current monetary paradigm of Debt Only. There isn't anything inherently wrong with debt itself only the weilding of a MONOPOLISTIC monetary paradigm and thus an inevitable and de-stabilizing build up in private debt. Public debt is just a political side show that private finance is happy to foment as a distraction from the solution which is the new paradigm of Gifting.
It is important to separate out the national public debt of fiat currency countries from all other forms of public debt whether national, state or local. Fiat currency countries cannot default; all others are dependent and therefore vulnerable.
That is true, but the way to finally explode the idea that public debt is inflationary (or even debt at all) is not to offer some abstract argument for such that is not understood by the general populace which has been acculturated since day one to associate paying "debts" as a moral imperative. Rather it is creating a mass movement to implement a policy (a 50% Discount/Rebate at retail sale) that wildly benefits all economic agents individual and commercial and ends any possibility of inflation forever. People will understand and cooperate when they get a continuous gift of price in their wallets every time they buy a package of chewing gum or a new house.
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.
Excellent observation, and paradigm perception and communication is exactly the same phenomenon because new paradigms are always in complete cpnceptual opposition to the current paradigm and also suggest, and if accurate, create complete temporal universe inversion of reality. This is why I titled my book Wisdomics-Gracenomics because wisdom insights and new paradigms are alike deep simplicities and aspects of the natural philosophical concept of grace (in this case Gifting) have historically been the major effects of paradigm changes.
For instance the change from NOMADIC Hunting and Gathering FOR FOOD became AGRICULTURE, HOMESTEADING and URBANIZATION leading to more assured abundance (aspect of philosophical concept of grace). Likewise the Copernican cosmological paradigm change was helio-centrism instead of geo-centrism and the inversion of the positions of the earth and the sun was the new cognition and temporal universe reality understood, and it increased knowledge and temporal universe workability (both aspects of Wisdom and the concept of grace).
Thus, the new paradigm for the creation and distribution of new money goes from Debt Only to Monetary Gifting and
1) the most strategic place and means of implementing the new paradigm is a 50% Discount/Rebate policy at retail sale because it is the single universally participated in and thus agent effected point in the entire economic process by
2) utilizing the same method the private banks use to create upward of 97% of our new money Only As Debt every year (accounting, equal debits and credits that sum to zero) but instead by integrating Monetary Gifting into the Debt Only system
3) it mathematically and macro-economically ends inflation forever, immediately doubles everyone's purchasing power that has eroded for the last 50+ years and historically been the core problem of profit making economic systems
There are other policies that synergize and stabilize the beneficial effects of this key policy of course.
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?
The best way to fight (and conquer) inflation is to implement a 50% Discount/Rebate policy at retail sale. I love MMTers, and other reformists like Steve Keen, Michael Hudson and Ellen Brown because they've all surrounded the problematic area of the economy (finance), now all they need to do is cognite on the single new paradigm concept that strategically implemented and applied will change the entire nature of the economy and money system...instead of just separately and much less effectively tinkering with the various anomalous aspects of the problem.
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.
The 14th amendment might be the resolution of this current political absurdity, but we must be careful not to constitutionally validate the current monetary paradigm of Debt Only. There isn't anything inherently wrong with debt itself only the weilding of a MONOPOLISTIC monetary paradigm and thus an inevitable and de-stabilizing build up in private debt. Public debt is just a political side show that private finance is happy to foment as a distraction from the solution which is the new paradigm of Gifting.
It is important to separate out the national public debt of fiat currency countries from all other forms of public debt whether national, state or local. Fiat currency countries cannot default; all others are dependent and therefore vulnerable.
That is true, but the way to finally explode the idea that public debt is inflationary (or even debt at all) is not to offer some abstract argument for such that is not understood by the general populace which has been acculturated since day one to associate paying "debts" as a moral imperative. Rather it is creating a mass movement to implement a policy (a 50% Discount/Rebate at retail sale) that wildly benefits all economic agents individual and commercial and ends any possibility of inflation forever. People will understand and cooperate when they get a continuous gift of price in their wallets every time they buy a package of chewing gum or a new house.
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.
Excellent observation, and paradigm perception and communication is exactly the same phenomenon because new paradigms are always in complete cpnceptual opposition to the current paradigm and also suggest, and if accurate, create complete temporal universe inversion of reality. This is why I titled my book Wisdomics-Gracenomics because wisdom insights and new paradigms are alike deep simplicities and aspects of the natural philosophical concept of grace (in this case Gifting) have historically been the major effects of paradigm changes.
For instance the change from NOMADIC Hunting and Gathering FOR FOOD became AGRICULTURE, HOMESTEADING and URBANIZATION leading to more assured abundance (aspect of philosophical concept of grace). Likewise the Copernican cosmological paradigm change was helio-centrism instead of geo-centrism and the inversion of the positions of the earth and the sun was the new cognition and temporal universe reality understood, and it increased knowledge and temporal universe workability (both aspects of Wisdom and the concept of grace).
Thus, the new paradigm for the creation and distribution of new money goes from Debt Only to Monetary Gifting and
1) the most strategic place and means of implementing the new paradigm is a 50% Discount/Rebate policy at retail sale because it is the single universally participated in and thus agent effected point in the entire economic process by
2) utilizing the same method the private banks use to create upward of 97% of our new money Only As Debt every year (accounting, equal debits and credits that sum to zero) but instead by integrating Monetary Gifting into the Debt Only system
3) it mathematically and macro-economically ends inflation forever, immediately doubles everyone's purchasing power that has eroded for the last 50+ years and historically been the core problem of profit making economic systems
There are other policies that synergize and stabilize the beneficial effects of this key policy of course.
Tomorrow?
...or another time?