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Gibson writes: "The idea was dismissed because it would be a huge blow to the banks that have contributed lots of money to helping Obama keep his job."

Gibson: 'Let's cast off the chains the bankers have on our economy and take it back.' (photo: TPM Muckraker)
Gibson: 'Let's cast off the chains the bankers have on our economy and take it back.' (photo: TPM Muckraker)



Most of Our Debt Is Fake - Let's Abolish It

By Carl Gibson, Reader Supported News

27 January 13

Reader Supported News | Perspective

id anyone else wonder why the Obama administration quickly dismissed the trillion-dollar coin idea that Nobel Prize-winning economist Paul Krugman so vehemently endorsed? If you're unsure, here's a hint - despite JPMorgan, HSBC and UBS all knowingly committing major crimes last year, the Obama administration hasn't tried to jail one banker.

President Obama dismissed the trillion-dollar coin idea not because it isn't sound economics - if that were the case, knowledgeable economists like Paul Krugman and Dean Baker wouldn't have thrown their weight behind it in the past. The idea was dismissed because it would be a huge blow to the banks that have contributed lots of money to helping Obama keep his job. The appointment of Jack Lew, who got a $940,000 bonus before the bailout of Citigroup, to the Treasury Secretary position, is a slightly less appalling pick than Timothy Geithner. But it's still a pick that shows Obama's deference to the banks when it comes to economic policy.

The fact is, we live in a fiat currency system, meaning we can print an endless supply of dollars and not run up inflation, since the US dollar is the world's reserve currency. Most of the paper money in circulation comes from fractional reserve banking, where banks lend out money they don't have, which technically doesn't exist, to anyone who applies for a loan. When banks loan this money, they do so with a promise of real wealth to be taken if the bank's debt isn't repaid by a specified deadline. While it costs the borrower all the real wealth they staked as collateral if they don't pay back the debt owed to the bank, it costs the bank nothing to loan out the money they just created out of thin air. However, the bank turns a profit by collecting interest on these loans, regardless of the fact that they loaned out fictitious money. All commercial banks do this, hence why such a Ponzi scheme is legal. And US dollars are no longer backed by gold, so each dollar is essentially a note signifying debt owed to the private banks that control the Federal Reserve, which has been the sole issuer of US dollars since 1913.

Today, the Fed has lowered interest rates on our debt to 0% to keep the debt level artificially as low as possible to preserve the Ponzi scheme that the banks created with the signing of the Federal Reserve Act of 1913. The act states that the government must borrow money before the Fed can issue paper money, so if the interest rate was at 3% or 4%, the debt would soon rise to such an exponential level that the concept of paying it off would become laughable. But, since most of the national debt is owed to these same banks who engineered our debt, why not mint several trillion-dollar coins and pay off all the fake debt owed to the banks for good?

Coins are legal tender, and four quarters issued by the US Mint are interchangeable with one dollar issued by the Fed. So, if the US Mint made enough trillion-dollar coins to pay off the artificial debt created by fractional reserve banking, we could strike all of that debt and spend our tax dollars on jobs and infrastructure. And we would have plenty to pay debts that are owed to countries that actually lent us money, instead of debt created artificially by banks. In fact, as Chris Currie of Rhode Island suggested to me in an email, we could overhaul our paper currency system and issue US dollars electronically, doing away with the needless debt that the Fed creates when it issues paper money.

The short-term debt limit extension recently agreed upon by the House GOP won't do anything except kick this can down the road, where it becomes an even greater problem. Let's cast off the chains the bankers have on our economy and take it back.


Carl Gibson, 25, is co-founder of US Uncut, a nationwide creative direct-action movement that mobilized tens of thousands of activists against corporate tax avoidance and budget cuts in the months leading up to the Occupy Wall Street movement. Carl and other US Uncut activists are featured in the documentary "We're Not Broke," which premiered at the 2012 Sundance Film Festival. He currently lives in Old Lyme, Connecticut. You can contact Carl at This e-mail address is being protected from spambots. You need JavaScript enabled to view it .

Reader Supported News is the Publication of Origin for this work. Permission to republish is freely granted with credit and a link back to Reader Supported News.

 

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-46 # Malcolm 2013-01-27 08:25
This is an early April Fools joke, right?

My daughter, bless her heart and being only six years old at the time, had the same suggestion as Carl Gibson. "Why not just print lots of money, Daddy?", she asked. "Then we could all be rich!"

I explained why this wouldn't work out so well. I hope someone doesn't have to explain it to Carl Gibson. I believe he's 25, not 6.

APRIL FOOLS!
 
 
+52 # Skeptical1247 2013-01-27 09:43
Malcolm, would you please post a copy of your Nobel Prize in Economics, so that I don't automatically dismiss your opinion as being less valuable than that of a 6 year old.
 
 
-15 # Malcolm 2013-01-27 14:38
Quoting Skeptical1247:
Malcolm, would you please post a copy of your Nobel Prize in Economics, so that I don't automatically dismiss your opinion as being less valuable than that of a 6 year old.


Sorry to have gotten your panties into such a twist, young lady; I'm afraid I don't have my Nobel Prize in economics yet. Only the Nobel prize in basic intelligence.

Look; let's just print enough fiat money to give each and every one of us a million bucks. NO-better yet, let's give every one of us $100 BILLION bucks. Why mess around?

Ok, now each of us is now richer than Bill Gates. Richer than Warren Buffet. Richer than GOD! And of course, we can "afford" to buy that 500 foot schooner, complete with captain, galley mates, bosn's and hot babes doing the hoochie coochie in the ballroom, to music the five live aboard live bands. We're as rich as sin!

Guess what? The cost of that schooner will no longer be a mere $5-10 million. It will inflate in value to m/l match the now deflated value of the fiat dollar.

Wanna buy lobster? How much lobster will your new fortune buy you? maybe a pound or two?

I was pretty sure that this was all a joke. Now I have to think maybe it's just a BAD joke, and somebody actually believes it.

BTW, by your logic, the opinion of anyone-nay, EVERYONE- who does NOT have a Nobel Prize in Economics is less valuable than my six year old's.

Speak for yourself, madam.
 
 
+27 # BradFromSalem 2013-01-27 17:08
Malcolm,

It don't work that way, so stop making shit up. Your example is an example of instead of giving a baby a bottle of milk every 3 or 4 hours (or whatever it is), you give the baby 2 gallons of milk every hour. Guess what, you are going to kill the baby.

So until you are able to talk about fiat money rationally and ask intelligent questions, all I can say is google MMT, Modern Money Theory. Read up on it, then we can talk like grownups.
 
 
+5 # Doubter 2013-01-27 20:46
I might have understood MMT before I had my brain stroke; but now all I can understand is that if we borrow money to pay back capital plus interest, our debt enslavement has no escape clause. The debt just grows and grows.
I remember in Mexico, when inflation had added a lot of zeros to the money, a genius president (I thought us was comedy material at the time) kept the peso but simply emitted new bills with three less zeros: a 10,000.00 peso bill became a 10.00 peso bill. The whole thing didn't make any sense to me; but it worked! Inflation slowed down to a moderate rate. I guess money HAS to be taken on faith if we use it for exchange and payment. I also remember the ten million Mark notes in Germany that were printed only on one side to save ink.

From MMT Wiki ...a Modern Monetary Theory Wiki
"It would be useful if the basic principles of modern monetary theory, if the work of Wynne Godley and his followers insisting on models that maintain stock flow accounting consistency and if Minsky's instability principles were at the core of understanding of these matters. But it is obvious that they are not." — James K. Galbraith
 
 
+2 # BradFromSalem 2013-01-28 05:40
Doubter,

I am a novice in the field of MMT (as well as not being an economist) and I may have some details mixed up. That being said, I have no idea what Galbraith's quote means, let alone its context. However, your point regarding interest is, as I understanf MMT correct. And the Mexican example describes very well how MMT works, not so much by faith, but by using money as a tool. Inflation starts to runaway when the "base" value dimenishes. A potential cause would be to spend beyond capacity. This is a critical difference between those that claim "printing" money causes inflation and MMT that adhere to limits of how much money (food) you can supply n economy. To little, like in austerity cases, and you slowly starve the country. Too much and it gets bloated and has to go on a diet (as Mexico in your example).
 
 
+2 # dkonstruction 2013-01-28 12:53
Doubter,

The MMT folks never say that deficits or inflation are not real but rather that in and of themselves are not a problem The question for them as i understand them is how big a deficit is necessary to create and maintain full employment which relates to how much money does the gov't need to create to make this happen. Their other point though is that the "printing of money" in and of itself is not inherantly inflationary (e.g., look at how much the US has printed in the last few years...and those that argue that food and energy prices have indeed gone way up are attributing this to more money being printed instead of market manipulation and or geo-political conditions). As for deficits, they point to Japan as one example of a country that has for a decade run up far larger deficits than the use (in relation to GDP) without causing either the kind of inflation and or currency devaluation that traditional economists say sure will happen in this situtation.

As for Galbraith, my understanding is that he is much more sympathetic to the MMT'ers than your quote would lead one to believe so i think people should look further into the MMT theory and Galbraith's comments on and relation to.
 
 
+1 # dkonstruction 2013-01-28 12:54
For more on MMT and Galbraith's comments on and relation to see:

http://neweconomicperspectives.org/p/modern-monetary-theory-primer.html

http://socialdemocracy21stcentury.blogspot.com/2010/07/galbraith-versus-krugman-on-deficit.html

http://articles.washingtonpost.com/2012-02-18/business/35442562_1_john-kenneth-galbraith-budget-surplus-economists
 
 
-2 # Malcolm 2013-01-29 10:56
[quote name="Doubter"]
I remember in Mexico, when inflation had added a lot of zeros to the money, a genius president (I thought us was comedy material at the time) kept the peso but simply emitted new bills with three less zeros: a 10,000.00 peso bill became a 10.00 peso bill. The whole thing didn't make any sense to me; but it worked! Inflation slowed down to a moderate rate.

Sorry about your stroke, Doubter. I remember the Mexico Peso zero falderol, too. The first few visits there, the peso:dollar ratio was around 30:1. A few years later, I asked a taxista what a ride to the ferrocarril would cost. He said "seis mil". I had him repeat it, and thought my spanish was even worse than usual. I told my honey "i think he said "six thousand" pesos!

We WALKED to the RR station, instead of taking the cab. Soon afterwards, it became clear what had happened: the government had simply ADDED three zeros to the peso.

I suspect, but don't know, that there was a lot more involved in Mexco's inflation issues than changing the number of zeros on the pesos.

Beun dia.
 
 
-6 # Malcolm 2013-01-28 08:22
Quoting BradFromSalem:
Malcolm,

It don't work that way, so stop making shit up. Your example is an example of instead of giving a baby a bottle of milk every 3 or 4 hours (or whatever it is), you give the baby 2 gallons of milk every hour. Guess what, you are going to kill the baby.

So until you are able to talk about fiat money rationally and ask intelligent questions, all I can say is google MMT, Modern Money Theory. Read up on it, then we can talk like grownups.


And I'm to believe that your childish tantrum is your best attempt to "talk like grownups?"
 
 
-2 # Malcolm 2013-01-28 08:41
Quoting BradFromSalem:
Malcolm,

It don't work that way, so stop making shit up. Your example is an example of instead of giving a baby a bottle of milk every 3 or 4 hours (or whatever it is), you give the baby 2 gallons of milk every hour. Guess what, you are going to kill the baby.

So until you are able to talk about fiat money rationally and ask intelligent questions, all I can say is google MMT, Modern Money Theory. Read up on it, then we can talk like grownups.


Brad, Gibson said, "The fact is, we live in a fiat currency system, meaning we can print an endless supply of dollars and not run up inflation". (Look at the article-I couldn't make this shit up!)

To use your own analogy, printing endless supply of dollars WOULD "kill the baby".
 
 
+1 # BradFromSalem 2013-01-28 10:03
Malcolm,

I will concede that Gibson does state that and I forgot that I read your note. However, to be fair to Mr. Gibson; there are those in the MMT movement that do hold that position. In that vein I am more conservative and believe in the baby bottle example, that there are limits to most everything.
 
 
-2 # Malcolm 2013-01-28 12:40
Quoting BradFromSalem:
Malcolm,

I will concede that Gibson does state that and I forgot that I read your note. However, to be fair to Mr. Gibson; there are those in the MMT movement that do hold that position. In that vein I am more conservative and believe in the baby bottle example, that there are limits to most everything.


Glad to hear it, Brad; now, perhaps you could work on learning some respect, and some manners :)
 
 
+1 # BradFromSalem 2013-01-28 13:32
malcolm,

I think that asking someone to stop denigrating a well respected economist that has had the track record of Paul Krugman is not disrespectful, nor is it ill mannered to ask for an intellifent response rude. I hope you read dkonstruction's clarification below.
 
 
0 # Malcolm 2013-01-28 16:05
Quoting BradFromSalem:
malcolm,

I think that asking someone to stop denigrating a well respected economist that has had the track record of Paul Krugman is not disrespectful, nor is it ill mannered to ask for an intellifent response rude. I hope you read dkonstruction's clarification below.


What? You were asking me not to denigrate Paul K? I am certainly NOT doing that. I'm denigrating Gibson's off the wall idea about printing unlimited amounts of money. Why do you think i'm denigrating Krugman?

And my comment about your rude attitude had nothing to do with any such request. Just for your own self improvement, consider how this sounded:

"It don't work that way, so stop making shit up."

And " So until you are able to talk about fiat money rationally and ask intelligent questions, all I can say is google MMT, Modern Money Theory. Read up on it, then we can talk like grownups."

That's also why I wonder how old you are: you aren't acting very grown up. Are you over 25?
 
 
+5 # dkonstruction 2013-01-28 12:56
Quoting Malcolm:
Quoting BradFromSalem:
Malcolm,

It don't work that way, so stop making shit up. Your example is an example of instead of giving a baby a bottle of milk every 3 or 4 hours (or whatever it is), you give the baby 2 gallons of milk every hour. Guess what, you are going to kill the baby.

So until you are able to talk about fiat money rationally and ask intelligent questions, all I can say is google MMT, Modern Money Theory. Read up on it, then we can talk like grownups.


Brad, Gibson said, "The fact is, we live in a fiat currency system, meaning we can print an endless supply of dollars and not run up inflation". (Look at the article-I couldn't make this shit up!)

To use your own analogy, printing endless supply of dollars WOULD "kill the baby".


I think that Gibson makes a rather serious error in believing that the MMTers say that the US gov't can pring "endless paper" without causing inflation but they do not believe that "printing" money in and of itself is inflationary and that in a sovereign nation that controls its own currency and which is still used as the international reserve currency that we have a hell of alot of leeway evidence of which is the amount that the US has "printed" of late without any effect on either inflation or the value of the dollar.
 
 
+2 # BradFromSalem 2013-01-28 13:33
Thanks for putting that better than I did.
 
 
+5 # Third_stone 2013-01-29 06:26
Richard Nixon provided us with a proof of the system of printing money. Instead of the Reagan program of borrow and spend, he printed and spent. The inflation he caused was the ruin of Jimmy Carter, and the cause of the Reagan recession, as they tried to beat back rampant inflation. The real problem is the distribution of the money. In healthy times banks did not own much money, they loaned customer deposits to other customers. Wealth was not concentrated among a few people, nobody had enough money to control the federal government, and the hiding of money overseas to avoid taxation was minor. One need only observe Mitt Romney running for president to realize that today men without ethics are the norm in the financial sector, and their power is immeasurable.
 
 
+53 # Firefox11 2013-01-27 10:02
The Federal Reserve notes, commonly used as currency in the U.S., are not money. Constitutionall y, money in the U.S. is gold and silver coin. Since Federal Reserve notes are no longer backed by gold or silver, they constitute a fiat currency, that is, they only have psychological value because people believe they have value. The problem is that when we use Federal Reserve notes as currency, the Federal Reserve has been charging us interest. Given that Federal Reserve notes no longer have any real value, we would be better off creating our own American dollars as a fiat currency, backed by the integrity of the American people and incurring no debt to the Federal Reserve with no interest payable. Carl Gibson's ideas are not as far fetched as they seem. Only the owners of the Federal Reserve Bank would suffer as a consequence of the strategy he suggests. Surely everyone in the U.S. does know that the Federal Reserve Bank is privately owned, don't they?
 
 
+8 # tabonsell 2013-01-27 12:40
There is nothing that says gold and silver are the real money of the United States. Such a reference in the US Constitution applies only to states, and that is now moot since states do not issue their own currencies.

Debt is money and money is debt. The dollar bill in your wallet is only an IOU and has value as do bonds, stocks both common and preferred, loans or any other financial agreement.

The government does not print money willy-nilly. It prints enough to cover the existing economic activities represented by debt; such as the IOU debt a home-buyer creates with a mortgage.

As far as the national debt being a problem. Not so when it is debt held by American entities. The only problem is debt held by foreign entities, which account for about 30% of US debt, and takes money from our economy and puts it into other economies. The rest is held by Social Security, the Fed, mutual funds, banks, insurance companies, pension funds and US citizens. Such holdings protect your life savings if you have them in CDs, money market funds and other such assets backed by the US government.

In the US, Federal Reserve banks are owned by the private-sector banks that are served by the Federal Reserve bank in that area. That is, West Coast banks (those chartered by the national government) own the San Francisco Federal Reserve Bank which serves West Coast banks. The Federal Reserve Board is an agency of the United States government.
 
 
+19 # BradFromSalem 2013-01-27 13:10
Actually money is not even debt. The reason is that a debt is an accounting entry, while money is only a tool that we use to exchange goods and services. I am sure there are a few others here that give a better explanation, but for great discussions and debate on the entire subject I recommend http://neweconomicperspectives.org/2013/01/can-the-federal-reserve-really-refuse-to-accept-and-to-credit-a-platinum-coin-deposited-by-the-us-mint.html as both an article and a site for further reading.

The bottom line in my mind is that the debt is a fiction and that there is a major excess of resources which are not being utilized, but could be by applying the tool of money.
 
 
+5 # SOF 2013-01-27 23:27
What a scam! I think we should be able to see the gold that used to back our currency and is held by the Fed. Since they won't show Germany their share, we should be suspicious. And if they can't show it, we should arrest those corporate artificial persons, give them a trial, and make them pay restitution. Thin air is in the interest they charge on money borrowed + the amount added by claiming thin air interest on top of that, and so on. This is theft by the most powerful men in the world. I pay my bills, why should I pay them for money they stole, which I never saw, borrowed, or owe?
 
 
+10 # Doubter 2013-01-27 20:50
And that they lend 'us' money to pay the interest on what we "owe" them - creating Debt Slavery.
 
 
+5 # tbcrawford 2013-01-27 11:05
When discussing current events my grandson (15) told me "They should ask young people. We have the best ideas."
 
 
+23 # George D 2013-01-27 12:56
You didn't provide any backup for your comment Malcolm. The fact is, I've been asking why we have so much "debt" and to whom it is owed for years now. How can one of the wealthiest nations, in terms of natural resources and human creativity, be "bankrupt" economically?

What if we say we will not pay back any debt owed to anyone? Then what? Does that cause a war? Over what? Dollars?

For decades I used to hear about how much we give to other nations and never get paid back. It has never made sense and in truth it never can make sense. Even if a nation's wealth is based on a commodity like gold or silver, it STILL doesn't make sense. Trade occurs when a need by one is fulfilled by another. Does anyone "need" gold or silver? We need water, to grow crops, to feed people. We need oil and other energy (and have it) to run our factories etc. I could go on.
The point is, there has always been a disconnect in the "true value" of things versus their "cost" and the whole economy of the world reflects imbalance at every turn. So what happens? Our "rulers" use artificial terms like "debt" to justify depriving the have-nots of ever more of our collective wealth, and we stupidly buy into "check book" and "credit card" analogies during their "explanations" of the world economy.
 
 
-2 # Malcolm 2013-01-27 14:43
[quote name="George D"]You didn't provide any backup for your comment Malcolm. The fact is, I've been asking why we have so much "debt" and to whom it is owed for years now. How can one of the wealthiest nations, in terms of natural resources and human creativity, be "bankrupt" economically?

Hi there, George. I gave rather facile "support" to my position in a reply to Skeptical1247. I did not address debt, and-although I have my opinion (we all have one, I'm told :) it's no better than anyone else's. My comment only involved the puerile idea that we can enrich ourselves by printing money. We'd do as well to just allow people to write checks without checking accounts.

I will say that I share most of your incredulity.
 
 
+2 # humanist7 2013-01-29 00:02
Carl, I'm 66, a retired UU minister, and i have to say, you understand more about the world than many people twice your age. I love your columns. This one in particular is very wise. You've read Ellen Brown's wonderful book, Web of Debt, right? Why not do a column or two about it, for those who haven't discovered it yet www.j.mp/mon-01. Carry on!
 
 
+59 # KrazyFromPolitics 2013-01-27 09:26
The Obama-Holder Justice Department aren't incompetent, they are complicit. The complexity of our financial system makes it nearly impossible for the average person, not trained in economics, and banking to sort through. I'm talking beyond Econ 101.


Yet, many people I know, regardless of their political stripe, know that something is dreadfully amiss, but feel helpless to do anything. The level of secrecy in our government-corp orate-military- industrial complex is out of control and pathological.

Nor, is this pathology new. We tend to only go back to Regan and "trickle-down economics to identify the source of our current problems. Refer to highly decorated Marine General Smedley Butler's 1937 book, "War is a Racket" in which he refers to himself as a "corporate hit-man" for his military exploits around the world. I'm sure our corruption predates Butler's book by many decades. The only thing standing in the way of an American enema to purge corruption appears to be American citizen's ambivalence. Or are we all just as corrupt?
 
 
+52 # Firefox11 2013-01-27 10:08
I think that the American citizens' ambivalence is really denial. American people live in a constant state of fear which is fostered by the media and the government and the public school system. Most Americans citizens do not understand how the current financial situation came into being, and they accept the Federal Reserve System as if it had always existed. The American people have the power to replace the Federal Reserve System with a method of banking and providing currency without incurring ever rising national debt through payments of interest to foreign bankers, the owners of the Federal Reserve Bank.
 
 
+25 # Depressionborn 2013-01-27 10:48
Firefox11

Sir, you honor us with clear headed thinking, Thank you,

“The study of history, while it does not endow with prophecy, may indicate lines of probability.”

-- John Steinbeck
 
 
+21 # indian weaver 2013-01-27 10:32
We are not ALL corrupt, but we are spoiled and greedy which form the foundations for our pathetic ignorance and cowardice, as a People. Only when push comes to shove (like in: over a cliff, into a corner, starving and homeless, etc.) will this nation begin to remove the government or adjust its structure in major ways. This won't happen, so we'll implode from lack of financial support and maintenance of our infracture. Then, we'll become a huge Syria / Egypt / Libya / Afghanistan / Iraq and see the collapse of the empire. And: the Empire will not come back, not here anyhow. We'll be gutted and wiped out, in chaos due to lack of any government that takes care of its citizenry.
 
 
+21 # jwb110 2013-01-27 09:28
It's like the virtual money in a computer game except this is not s game.
 
 
-20 # Depressionborn 2013-01-27 09:51
It has been tried before, lots-never worked though. Mises wrote about it as a "Crack up boom".

No one wants to live though one but he said it can become inevitable if not stopped in time.

Carl Gibson does not know much. Probably never read Mises
 
 
-15 # Malcolm 2013-01-27 14:44
He did read Goldilocks...
 
 
-4 # Martintfre 2013-01-27 09:55
//The fact is, we live in a fiat currency system, meaning we can print an endless supply of dollars and not run up inflation, //

Incorrect.

Inflation IS pumping more currency into the money supply.
 
 
+20 # pbbrodie 2013-01-27 11:56
If this were true, then the rate of inflation over the last 4 years would have been in the neighborhood of 50%, maybe even more, since the Fed has been printing money hand over fist during that period of time. It is well known that they pumped well over a trillion dollars into the banking system. You are simply wrong.
 
 
-5 # Malcolm 2013-01-27 17:07
Quoting pbbrodie:
If this were true, then the rate of inflation over the last 4 years would have been in the neighborhood of 50%, maybe even more, since the Fed has been printing money hand over fist during that period of time. It is well known that they pumped well over a trillion dollars into the banking system. You are simply wrong.


Sometimes inflation has been delayed by several years. Consider, for instance, WWII.
 
 
+3 # SOF 2013-01-27 23:35
Rent here has gone up 25 -75%. Food has gone up 50-300% in the last 4 years.
 
 
+1 # BradFromSalem 2013-01-27 17:26
Martin,

The Fed may have made an accounting entry for all the To Big To Fail semi monopolies to supply them with funds, which they were supposed to turn around and use to shore up their available liquid funds for lending. Thereby stimulating the economy. They, of course did not do that; so in reality, no money was actually ever printed or created.
Money is only the stuff that is circulating, so if the debt gets paid off, then we can do one of two things. One, we could have the Treasury authorize a deposit into the Federal Reserve equivalent to what the Congress decides to spend AND (You will love this!) reduce taxes to nearly zero. Or two, we can keep taxes exactly the same and only have the Treasury deposit the difference.
I prefer the first, since that leaves taxes available to be used as a brake if inflation starts to increase tool fast.

The problem is that we have excess capacity and the means to utilize it, and we are not exercising those means.
 
 
+30 # Firefox11 2013-01-27 09:56
If we are going to use a fiat currency, we the American people should own the fiat currency, and keep it interest free.
 
 
+26 # jon 2013-01-27 10:07
"The only thing standing in the way of an American enema to purge corruption appears to be American citizen's ambivalence. Or are we all just as corrupt?"

Not so much corrupt as divided and conquered....
 
 
+22 # indian weaver 2013-01-27 10:35
And living in deep greed and arrogance, until the shit hits the fan. Then, we're dead and rotting meat on the freeways and homeless, no gas, no money, no food, no shelter. Only then will The People attack and begin the long path to removing this corrupt government. No one much is going to risk their comfy lives until their comfy lives disappear around them and out from under them. That is what leads to revolution, not whining about ugliness, until it comes to roost at home.
 
 
+11 # pbbrodie 2013-01-27 11:57
Unfortunately, I have to agree with you.
 
 
+6 # SOF 2013-01-27 23:42
I think it's kinda funny that the middle class repeats the insults of 'irresponsible freeloaders' against the poor and victimized. When they are rid of the poor, they will sink to replace the 'freeloaders' and will eat those words.
 
 
+8 # futhark 2013-01-27 10:10
Mr. Gibson, you declare the few remaining U.S. Savings Bonds I still own to be worthless and see how many I will buy in the future! Now try writing an article about a sensible approach to reducing the political power of investment banks.
 
 
+34 # flippancy 2013-01-27 10:14
We need the usury laws reinstated. No bank should be allowed to charge interest rates more than, say, 7% more than the fed rate, and any bank controlling more than 1% of the GDP should be broken up into tiny pieces.
 
 
+2 # Depressionborn 2013-01-27 15:15
Why not making it a crime for anyone to borrow at more than 2%
 
 
+4 # indian weaver 2013-01-27 10:26
Most of our government is fake (and useless, dishonest, greedy and dangerous, and operating with No Rule of Law, and has forgotten The People - works only for the employees whom you and I pay). Let's abolish it.
 
 
+1 # Depressionborn 2013-01-27 10:44
Quoting indian weaver:
Most of our government is fake (and useless, dishonest, greedy and dangerous, and operating with No Rule of Law, and has forgotten The People - works only for the employees whom you and I pay). Let's abolish it.


Exactly what God told the Hebrews. They went ahead anyway and demanded a king to fight their battles. They got one. They ended up in slavery.
 
 
+19 # whisperindave 2013-01-27 10:34
Before we do this minting money of our own, we have to get out of the catch twenty two of not being able to print more money without borrowing it from the banks. Thus we need to destroy the banking system as we know it. This would cause an economic crisis from which we would never recover. Every mortgage on every piece of property would become worthless or property of the state. Every robotic manufacturing device, every piece of an injection molding machine or punch press would be then owned by whom? If you don;t get rid of the banks and don;t put the bankers in jail (as they did in Iceland) the banks will fight the Trillion dollar coins in the Supreme court...and win...because they have all the money to fight and the people in our Justice Dept. are lame, ineffectual, without spines. A better idea is to jail the heads of all these major banks that have recently committed crimes and make it part of the sentence that they reduce the debts they forced on us, in lieu of being shot by a firing squad! Profiteering on one's own country through Black Market manipulations is a treasonous offense.
 
 
+16 # Charles3000 2013-01-27 10:56
Coins are minted and sold into the economic system now by the Federal Government. The problem is the most used coins, pennies and nickles, cost more to mint than their face value. However the BEP prints a 100 dollar bill for just 9.7 cents and sells the bill to the privately owned Federal bank for that price. The BEP could print "US Treasure Notes" in the same denominations as Fed Reserve Notes and spend them directly into the economy and offer to buy all Federal Reserve Notes at face value using the new US Treasure Notes. This would force banks to convert their non cash "credit" into cash by selling the US debt they hold. This would payoff all national debt held by banks and replace Federal Reserve Notes with US Treasure Notes that would go into the economy with no interest tagged to them and no requirement they be "paid back". This would end the privately owned Federal Reserve bank's hold on the US economy.
 
 
+5 # Firefox11 2013-01-29 15:21
As a Harvard graduate with a degree in Economics, President John Kennedy was well on the way to establishing US Treasury notes when he was assassinated.
 
 
+32 # Big Jake 2013-01-27 11:18
Gibson is the closest to understanding the insanity of our current system. It is working---for those who control it and they will never give up their privilege willingly.

In spite of the fact the Fed is a bad and probably unconstitutiona l organization, we need some kind of central banking system. As a conservative, it is imperative that the central bank be owned and operated by government. Absent that is akin to a football game with no rules or referees.
The Constitution provides us with the rules to run our economy. Art. 1, sec.5 Sub.8. If you read it you should wonder why weights and measures were included in it along with foreign coin. Not really that complicated.
More recently, we employed a different system that worked more than just fine. It won WW11 and gave us real prosperity without the incurrence of excessive debt(public or private) until the laws expired in 1952. It monetized real wealth which was caluculated to provide balance between all economic sectors thereby minimizing inflation. Guess who did not like it?
The statutory scheme is still in place and could be resurected quickly but again, the people would be the winners and the banking/financi al system would suffer. Maybe it is time to consider just who in the hell this country belongs to and who should reap the benefits of the efforts of the many.
 
 
+4 # Firefox11 2013-01-29 15:24
Unfortunately, those rights were bought and sold long ago, and continue to be in present day Congress. See Amgen scenario (Moyers Journal).
 
 
+12 # Big Jake 2013-01-27 11:26
As an interesting exercise, look up QE3.
It is astoundingly clear. To prop up Wall St and in particular the housing sector, the Fed pumps $40 billion a month of computer generated money into the related securities. Absent that unsustainable action, the value of our citizens homes would continue to decline until the values are brought in line with our earnings. Banking and politics have a great fear of that although it will evenutally happen in spite of whatever efforts are undertaken. It is our income level that is the problem. Mises ill thought out theory while having attraction because we use the government as a punching bag, will result in a faster transfer of wealth to the elite than the corruptied Keynsian ideas of Reich and Krugman, et. al. Surely it is not to difficult to observe that vast amounts of our spending and the resultant bureacracy are caused by the disparity in income and earning ability of far too many of us. While we seem to think this is a mystery, the record from 1942-1952 give irrufutable facts to explain the mystery.
 
 
+6 # DaveM 2013-01-27 11:29
Money is only money so long as it is accepted as value by both buyer and seller. So long as that agreement persists, anything can serve as money. Once it ceases to exist, the commodity involved is no longer money.

The United States has sufficient debt that it could wage economic warfare on its major creditors merely by defaulting on their debt. The Chinese and Saudi Arabian economies, for example, could be destroyed by such a move. The consequences to the United States, however, could be equally horrible.

Nonetheless, the amount of American debt held by several potentially hostile nations is powerful insurances that they remain "friendly" toward us.
 
 
0 # EPGAH3 2013-02-01 20:47
Argentina defaulted on us and stole several American business's holdings, but nothing "horrible" happened to them!
 
 
+8 # charsjcca 2013-01-27 11:43
If our debt is fake so then is our economy. We understand that social structure is a imagined realm so that no conversation is worthy of our effort. What, then, do we have left except a discussion about illusions.
 
 
+7 # David Starr 2013-01-27 11:48
Debt worldwide should be abolished, especially in the "Third World," where it is more a manufactured crisis.
 
 
+20 # Marxian 2013-01-27 11:58
"If we are going to use a fiat currency, we the American people should own the fiat currency, and keep it interest f(r)ee."
Read the veto of the bank bill by Andrew Jackson on July 10, 1832. It was what he intended. Now we have the Federal Reserve system which handed the nation's money system to a group of banksters, which resulted after the greedy, bought and paid-for Congress reversed the intent and warnings of Jackson. He was correct when he called the banksters a den of vipers. Each President that tried to accomplish the end of a private banking system was assassinated, or in Jackson's case attempts were made.
"Maybe it is time to consider just who in the hell this country belongs to and who should reap the benefits of the efforts of the many." YES, INDEED !!
 
 
+5 # Rationalist 2013-01-27 12:14
I agree with much of what Gibson says, i.e., the system is rigged, our politicians are complicit with it, and Krugman's trillion-dollar coin is a good idea. I am wary, however, of abolishing the banking system as we know it--a very dangerous experiment, I think. My suggestion is to leave the economic solution to experts like Krugman and other mainstream economists. The political problem is another matter, however; and it behoves us to be a better educated and more activist electorate to clean out the corruption that has swamped our democratic system. Replace the banks, no; replace the Congress and White House, yes.
 
 
+5 # Rahn 2013-01-27 12:56
Because all "government",ag encies et al.,and all banking, are private corporations obeying rules of commercial contract enumerated in UCC (Uniform Commercial Code) - this is where the "game" is played on us. As such, the amazing documents filed by The One People's Public Trust have, in commercial Law, foreclosed on all corporations deceptively posing as government. Enforcement by the People will transfer their stolen wealth and begin the reconstruct that this current form will never do. I challenge everyone to research. FIAT is finished.
 
 
-10 # ConstitutionalSam 2013-01-27 13:10
Ever here of the concept of default? If you do not understand this concept, try not paying your mortgage or car loan and see what happens. Especially when you try to borrow again. And if you don't have a mortgage or car loan, you either live in a big city or do not belong on this site.
 
 
+7 # Malcolm 2013-01-27 17:13
Quoting ConstitutionalSam:
Ever here of the concept of default? If you do not understand this concept, try not paying your mortgage or car loan and see what happens. Especially when you try to borrow again. And if you don't have a mortgage or car loan, you either live in a big city or do not belong on this site.


Whoa! I've paid off my mortgage, never borrowed for a car loan. I live way out in the sticks. So I'm not supposed to be here? Whyever not?
 
 
+1 # ConstitutionalSam 2013-01-28 14:19
I stand corrected and please accept my sincere apology. See my comment below to Brad from Salem.
 
 
0 # Malcolm 2013-01-29 11:01
Quoting ConstitutionalSam:
I stand corrected and please accept my sincere apology. See my comment below to Brad from Salem.


Thank-you, CSam; very kind of you, although not necessary :)
 
 
+5 # BradFromSalem 2013-01-27 17:32
We cannot default if all we have to do is mint a coin for whatever the bill amount is.

P.S. The Constitution allows for this and as this is macroeconomic, the example you gave is microeconomics; the shoe don't fit.
 
 
-2 # Malcolm 2013-01-28 08:24
Quoting BradFromSalem:
We cannot default if all we have to do is mint a coin for whatever the bill amount is.

P.S. The Constitution allows for this and as this is macroeconomic, the example you gave is microeconomics; the shoe don't fit.


You leave me almost speechless. One word: WOW!
 
 
0 # BradFromSalem 2013-01-28 10:06
I know, WOW. looking at things from another direction can actually evoke that response. Now that you had your wow moment, go look up whatever it is that made you say WOW.
 
 
0 # Malcolm 2013-01-28 12:28
Quoting BradFromSalem:
I know, WOW. looking at things from another direction can actually evoke that response. Now that you had your wow moment, go look up whatever it is that made you say WOW.


I said "wow" because you appear to be practicing voodoo economics, Brad. I don't need to "look it up". I think Paul Krugman doesn't call MMT voodoo economics; he calls it Monetary Mysticism Theory. Whatever. Here's one comment he made in a debate on MMT:

“I’m all for listening to heretics when they offer insights I can use, but I’m not finding that at all in this conversation, just word games and continual insistence that the members of the sect have insights denied to us lesser mortals. Time to move on.”

I agree. Time to move on...
 
 
0 # Malcolm 2013-01-28 12:33
Quoting BradFromSalem:
I know, WOW. looking at things from another direction can actually evoke that response. Now that you had your wow moment, go look up whatever it is that made you say WOW.


I do have one more question for you, Brad. A simple one: how old are you?

I'm not implying that you're six years old-definitely not. But I'll bet you're no older than about 25. Right?
 
 
+1 # ConstitutionalSam 2013-01-28 14:37
OK-try this. Try default on a macroeconomic basis. Then you get a lower demand for your debt which leads to a hihger interest, or the lack of an ability to place your debt at any rate. Or alternatively, just do the coin or print money. And see what happens. It would be interesting to get Jimmy Carter's opinion of the political cost of an inflationary economic policy.

I will echo the comment below of WOW! and let the reader attach whatever meaning to it makes the most sense from the readers own perspective.

Lastly, I am an economist and find it easy to hold the opinion that you can find economists at polar opposite positions of almost any issue. This is a lot like lawyers, politicians, professors, diplomats and other professions.

On balance, I stand on my original comment minus who belongs on this site [I was wrong on that an have apologized to Malcolm.]
 
 
+1 # BradFromSalem 2013-01-29 06:21
Sam,

There can be no argument that the government is the creator of money. (For simplicity, lets ignore the legal details of Treasury vs. Fed, etc.and also the precise definition of money) The current system inserts that money into the economy via our privately run banking industry. The banks in turn lend that money out to businesses and also individuals. The intention that the money will then be used to invest in the economy which in turn generates income that can then be taxed. Those taxes are then used to fund the government, any shortfalls are funded by loans from the banking industry. MMT starts the process by creating the money to fund the government, eliminating the possibility of default. The money that is used to fund government does not wait for an investor to come along, it is an immediate investment by itself at the bottom of the money cycle, instead of at the top as we currently do.

It is of course very true that any so called science is as much an art and does house many opinions. However, it must be noted that the inflation commonly blamed on Carter began during the Nixon/Ford administrations . We can argue if Volcker's solution was the best one, but it did work and it was Carter that hired him to do lower the inflation rate.

To be honest, I am still trying to understand that inflationary cycle, so any opinions I have on its causes right now are pure speculation.
 
 
+17 # RMDC 2013-01-27 14:09
There's nothing complex about the US money system. The Federal Reserve act of 1913 gave control of the US money supply to private banks. The act was written by the bankers, principally Morgan and Warburg. They got what bankers have always wanted -- control of a nation's money supply, interest rates, and financial policies. The run the economy for the benefit of banks. The banks ran the economy into the ground by 1929 and caused a worldwide depression. There was some regulation until Bill Clinton abolished it all and tnen 19 years later they ran the economy into another depression -- depression that is for the millions or the 99% but huge profits for the banks. That's how it works. That's the way they wrote it. Gold standard or fiat money do not mean a thing.
 
 
+6 # planckbrandt 2013-01-27 17:21
The private creation of money comes from the Constitution where the founders who were also bank shareholders in Bank of North America limited States rights to issue money. Private banks in states issued money throughout the 19th century. Only the Greenback was Federal Money, and the NY bankers quickly passed laws to devalue them. The National Banking Act quickly followed, which setup the hegemony of NY Banks. The Fed is only the latest in their games to control money supply. We need to democratize money supply plain and simple. Educating ourselves is 1st step.
 
 
+3 # planckbrandt 2013-01-27 17:29
Here is a scenario of how money could work if issued electronically by the state. Taxes would be used to take away excess money that could cause inflation once we get back to full employment. The banks would only make money from making real loans of real savings, but they would have to get it right. It would fundamentally change what banks do and it would discipline them, instead of them "disciplining" us which is the economics "profession's" justification for the present privately controlled money supply system. http://neweconomicperspectives.org/2012/11/2020.html
 
 
+4 # planckbrandt 2013-01-27 17:19
Great to read the story. There is no reason money has to be created by Private Banks.

It turns out though, the favoritism for banker control of money supply
goes back to the Constitution itself, not just the Fed Act of 1913.
The roots of this problem we are living with were already in place by
1789. The private control of the money supply by the creditor class
was weaseled into that constitution by plenty of Founders who were
also bank shareholders. Farley Grubb may be a good source about this sad insidious history.

We should be careful our conventional wisdom assumptions about the USD
as reserve currency, however. This situation is changing around the
world. There is a lot of pressure to push up the value of the RMB. Use
of RMB for trade was up 41% in 2012. That is replacing USD flows
because people don't want to hold the USD anymore.

Even the British are selling US Treasuries over the past year. This info is easily found online. They
are fixing to throw their capital into currency wars against the USD
and the Euro. There are plenty of news stories in British and Indian press about this. A cheaper USD will wipe out these debts, and a stronger
RMB will multiply the purchasing power of Chinese households to take
over the consumer job from the Americans and Europeans.

We should be preparing ourselves for what could become a real attack
against the USD once the RMB is fully tradeable.
 
 
+10 # Big Jake 2013-01-27 17:28
When Clinton and R.Rubin securitized mortages, and probably they did not and certainly did not care, a depression was postponed. Monetization of bank inflated real estate and home values poured into the economy. It blew up in 2007 and has not yet been fixed with no signs any functional fix in sight. We are reaping the harvest of a corrupt money system brought to us via the Fed, the greed that has ensued from a financial system that has shed itself of what little regulation that existed, the Sup.Court opening the flood gates to corrupt money overwhelming our electoral process. Depressing isn't it?
The good news is that we can fix all of this. Citizens with integrity and intellect must step forward. Out with the crooks. A reestablisment of our uniquely American system. We have been on a slippery slope for a long time. The examples keep coming. Obama's SEC appointment has erased all hope that this President is not in the clutches of the same bunch of crooks that his recent predecessors have been. As a start, I would advocate for a Constitutional Amendment that restricts any campaign contributions to only those eligible to vote in that particular election. A game changer. Or just say the hell with it and let the bad guys have the fruits of all of our accumulated labor since the beginning. It is not every generation that is confronted with this choice. However, it is ours today. Time for some serious thought and then action.
 
 
+2 # Malcolm 2013-01-28 12:38
Quoting Big Jake:

....As a start, I would advocate for a Constitutional Amendment that restricts any campaign contributions to only those eligible to vote in that particular election. A game changer. Or just say the hell with it and let the bad guys have the fruits of all of our accumulated labor since the beginning. It is not every generation that is confronted with this choice. However, it is ours today. Time for some serious thought and then action.


Well said; I would, however, suggest making ALL campaign contributions illegal, and have all campaign adds/debates paid for by our tax dollars. And paid only to "viable candidates". Viability could be demostated by a candidate PERSONALLY collecting X number of signatures, accompanied by a five or ten dollar check. The actual number would be higher for those seeking higher office than for those seeking to represent smaller numbers of constituents.

And the only "fruits" these so-called people deserve are our rotten tomatoes.
 
 
+1 # ladypyrates 2013-01-28 10:13
...paragraph 28 of the original Federal Reserve Act spells out the essence of the Ponzi-like scam. Also, when the injection of fiat money into the economy exceeds the value goods and services in circulation at any given moment, that is inflationary.
 
 
+1 # ericlipps 2013-01-28 16:06
articles like ths one invite the riposte that it's our currency that's fake, not our debt. If the government can simply cancel its debt with a few stamps of a coin press, what does the "full faith and credit" clause of the Fourteenth Amendment reaally mean?
 
 
+4 # Big Jake 2013-01-29 09:08
While subjecting myself to permanent smart ass status, it is clear from the responses herein that as a society, we are lacking in a fundamental understanding of money, wealth, and the economy.
We reflect our lack of education and the education we have received is increasingly just not so.
If we accept the Lincoln(via Carey,et.al.) premise and absolute that labor precedes capital and in fact capital can only come into existence as a result of labor. Once we have realized the validity of the premise, we can begin to sort through the nonsense that we are fed and develop a sound, reasoned and provable theory of how economics works. Until then, those who are in the business of plundering us will continue to succeed no matter who we select as our leaders.
 
 
+3 # BradFromSalem 2013-01-29 13:33
Well put. A lot of us (including me) get trapped in the weeds of a philosophy. It would serve us all a whole lot better, if there was an open forum at RSN where a moderator can open a topic up. Let it get hashed out for a week or whatever. After that, the moderator selects one or two of the participants to put together a summary. I think a well moderated board such as that would generate a lot of powerful ideas.
 
 
+1 # JSRaleigh 2013-01-29 12:42
While the Federal Reserve does issue the majority of U.S. currency, the U.S. government has occasionally issued its own money since 1913.

I am currently looking at a "United States Note" issued as Series 1963 during the tenure of C. Douglas Dillon as Secretary of the Treasury.

At the top of the bill it says "United States Note" instead of "Federal Reserve Note", and the serial number & seal are imprinted with red ink.

If you run into one, hang on to it, because even in poor condition it's worth about 25% over face value.
 
 
+1 # Firefox11 2013-01-29 16:52
I would like to express my appreciation for the interesting and informative comments given here on this very important topic which informs so much of what is possible in other areas of our common good.
 
 
+3 # Big Jake 2013-01-29 20:47
JSRaleigh, the currency you are refering to was ordered by JFK when the Fed refused to expand the money supply. I think about $4Billion of this was spent into circulation by the Federal Gov. It was a huge battle between the Fed and JFK. Subsequent to JFK's death, no more was issued and it was all recalled by the Johnson treasury. It is an extremely interesting story with a lot of unanswered questions. Contrary to all of the currency in existence today plus the other computer generated Fed money, this was not debt money. It was not really fiat money. It is one of the necessary actions that must be taken to restore our monetary and its subsequent effect on the economy. That is the exact reason that this appears in the Constitution along with weights and measures. It prevents a corrupted private banking sector from robbing us blind. If we follow this rule, we have the ultimate control via elections to maintain our democracy albeit much of this important aspect has been lost and Citizens United may be the last straw.
 

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