A call to action from Joe Firestone

Now you probably know him better as letsgetitdone from corrente and Firedog Lake and he’s started a series which, if you have any interest in economics and the economy at all, I think you should pay attention to.

It’s called Framing Platinum Coin Seigniorage and is available in source form from New Economic Perspectives (you might want to  bookmark that).

The precis-

Framing Platinum Coin Seigniorage: Part One, Basics

Joe Firestone

Posted on January 31, 2013

How come nobody asks why, since Congress has the unlimited authority to create coins and currency, it doesn’t just create money when it deficit spends? The short answer is that Congress in 1913, constrained the Executive Branch from creating currency or bank reserves, delegated its power to do that to the Federal Reserve System, and never looked back when we went off the gold standard in 1971, even though this removed the danger of money-creation outrunning gold reserves, and also created a new monetary system based on fiat currency.

But coins, it turns out are different from currency and bank reserves. They’re the province of the Executive. And Congress provided the authority, in legislation passed in 1996, for the US Mint to create one oz. platinum bullion or proof platinum coins with arbitrary fiat face value, having no relationship to the market value of the platinum used in the coins. These coins are legal tender. When the Mint deposits them in its Public Enterprise Fund (PEF) account, the Fed must credit it with the face value of these coins. The difference between the Mint’s costs in producing the coins, and the reserves provided by the Fed is the US Mint’s “coin seigniorage” or profit from the transaction.

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Platinum coins with huge face values such as $60 T, can produce seigniorage closing the revenue gap and technically end deficit spending, while still retaining the gap between tax revenues and spending that can add to aggregate demand and produce full employment. Platinum Coin Seigniorage (PCS) is also a way for the Executive to end debt ceiling crises, since the profits could be used to repay debt instruments when they fall due, without the need to issue any more debt.

The seigniorage from a $60 T platinum coin would serve as a potent symbol of the truth that the Federal Government can never involuntarily run out of money. This is one of the central ideas of MMT that the public needs to accept routinely, to understand that the Government’s budget isn’t like their household budget. The presence of the $60 T in the public purse would be a positive enabler of progressive legislation creating benefits that people want now, but austerians say we can’t pass because “we can’t afford it.”

If all debt instruments are re-paid by using PCS, then, eventually the US would have no debt subject to the limit, or presence in the bond market, and would pay no interest to bond holders. No one would worry about the public debt, or use its size to justify blocking legislation that fulfills public purpose and promotes the general welfare.

So, PCS-based elimination of debt can end the whole austerity mind set that provides our current budgetary process with its constraining conservative cast, focused on narrow monetary cost considerations, rather than on a broader progressive framework that weighs the real costs and benefits of proposed fiscal activities of the Federal Government.

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It must be done now! If it doesn’t, then people who are against the use of PCS will have time to organize against it and get it repealed by the Congress. Now that the PCS capability is widely known, the FIRE (Finance, Insurance, Real Estate) Sector will be gunning for it with all the financial, political and propaganda power it can bring to bear. It will do that because using PCS, especially the $30 T or greater coin, High Value Platinum Coin Seigniorage (HVPCS) I propose, strikes at the domination of the financial and political systems by Wall Street and the big banks

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HVPCS threatens the banks’ domination of the Fed, and also their role in money creation, and with it some of their income. The more time that passes without using HVPCS, the more likely it is that the Executive Branch will lose this capability to Wall Street’s persistent political efforts at repeal, and become the actual, rather than only the pretended (kabuki) prisoner of debt instruments and austerity once again.

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