Rohan Grey — Administering Money: Coinage, Debt Crises, and the Future of Fiscal Policy

Abstract

The power to coin money is a fundamental constitutional power and central element of fiscal policymaking, along with spending, taxing, and borrowing. However, it remains neglected in constitutional and administrative law, despite the fact that money creation has been central to the United States’ fiscal capacities and constraints since at least1973, when it abandoned convertibility of the dollar into gold. This neglect is particularly prevalent in the context of debt ceiling crises, which emerge when Congress fails to grant the executive sufficient borrowing authority to finance spending in excess of taxes. In such instances, prominent legal and economic scholars have argued that the President should choose the “least unconstitutional option” of breaching the debt ceiling, rather than impeding on Congress’s even more fundamental powers to tax and spend. However, this view fails to consider a fourth, arguably more constitutional option: minting a high value coin under an obscure provision of the Coinage Act, and using the proceeds to circumvent the debt ceiling entirely. Reintroducing coinage into our fiscal discourse raises novel and interesting questions about the broader nature of, and relationship between “money” and “debt.” It also underscores how legal debates over fiscal policy implicate broader social myths about money. As we enter the era of digital currency, creative legal solutions like high value coinage have the potential to serve as imaginative catalysts that enable us to collectively develop new monetary myths that better fit our modern context and needs.

The platinum coin redux.

Rohan Grey
Administering Money: Coinage, Debt Crises, and the Future of Fiscal Policy

Michael Roberts Blog: blogging from a marxist economist — Minsky and socialism

Minsky’s journey from socialism to stability for capitalist profitability comes about because he and the post-Keynesians deny and/or ignore Marx’s law of value, just as the ‘market socialists’, Lange and Lerner, did. The post-Keynesians and MMTers deny/ignore that profit comes from surplus value extracted by exploitation in the capitalist production process and it is this that is the driving force for investment and employment. They ignore the origin and role of profit, except as a residual of investment and consumer spending.Instead they all have a money fetish. With the money fetish, money replaces value, rather than representing it. They all see money (finance) as both causing crises and, also as solving them by creating value!

In my view, far from Minsky providing the “necessary ingredients to a to a rethinking of Marxian theory of capitalist dynamics and crises”, as Bellofiore argues, Minsky’s theory of crises, like all those emanating from the post-Keynesian think tank of the Levy Institute, falls well short of delivering a comprehensive causal explanation of regular and recurring booms and slumps in capitalist production. By limiting the searchlight of analysis to money, finance and debt, Minsky and the P-Ks ignore the exploitation of labour by capital (terms not even used). They fail to recognise that financial fragility and collapse are triggered by the recurring insufficiency of value creation in capitalist accumulation and production.

Moreover, by claiming that capitalism’s problem lies in the finance sector, the policy solutions offered are the regulation and control of that sector, rather than the replacement of the capitalist mode of production. Indeed, that is the very path that Minsky took: from his socialism and ‘’socialisation of investment’’ in the 1970s to ‘stabilising finance’ in the 1990s.

Michael Roberts Blog — blogging from a marxist economist
Minsky and socialism
Michael Roberts

Brian Romanchuk — Book Excerpt: Financial Assets Matter, Not Money

If we abolish money from economic theory, what replaces it? The answer is: financial assets. Although this might be viewed as a superficial change, there are important implications. In particular, the central bank can manipulate the amount outstanding of some types of financial assets, but it cannot control all of them. We end up with a more realistic view of central bank power. They no longer control “money” and hence all commerce, rather they are reduced to worrying about setting interest rates.…

This is short, simple to understand and very important for getting MMT, which deals with "financial assets" rather than "money." Financial assets appear on accounting statements, not "money." Understanding this removes a lot of confusion.

Bond Economics
Book Excerpt: Financial Assets Matter, Not Money

Brian Romanchuk

Steve Roth — Four Definitions of Money. All Correct.

Understanding what we mean by the most important word in economics.

The meaning of ordinary language terms is relative to use in context. Conversely, technical terms are defined operationally. The same sign can be used for different technical terms, although such use is discouraged as confusing, but not in the same context, where only one operational definition applies.

Unfortunately, economics often employs ordinary language terminology with specifying the meaning operationally. Confusion ensues.

Evonomics
Four Definitions of Money. All Correct.

Steve Roth | Publisher of Evonomics

Michael Hudson — Origins of Money and Interest: Palatial Credit, not Barter

Neolithic and Bronze Age economies operated mainly on credit. Because of the time gap between planting and harvesting, few payments were made at the time of purchase. When Babylonians went to the local alehouse, they did not pay by carrying grain around in their pockets. They ran up a tab to be settled at harvest time on the threshing floor. The ale women who ran these “pubs” would then pay most of this grain to the palace for consignments advanced to them during the crop year. These payments were financial in character, not on-the-spot barter-type exchange.

As a means of payment, the early use of monetized grain and silver was mainly to settle such debts. This monetization was not physical; it was administrative and fiscal. The paradigmatic payments involved the palace or temples, which regulated the weights, measures and purity standards necessary for money to be accepted. Their accountants that developed money as an administrative tool for forward planning and resource allocation, and for transactions with the rest of the economy to collect land rent and assign values to trade consignments, which were paid in silver at the end of each seafaring or caravan cycle....

Naked Capitalism
Michael Hudson: Origins of Money and Interest: Palatial Credit, not Barter

See also

Michael Hudson — On Finance, Real Estate And The Powers Of Neoliberalism
High Cost Economy

There’s an idea – deregulate the banks!

Michael Hudson | President of The Institute for the Study of Long-Term Economic Trends (ISLET), a Wall Street Financial Analyst, Distinguished Research Professor of Economics at the University of Missouri, Kansas City, and Guest Professor at Peking University

David Orell — Economics is quantum

Money and brains are both quantum phenomena – so it's not surprising that economics is overdue for a quantum revolution...

Aeon
Economics is quantum

David Orell

Lord Keynes — Larry White on the Origins of Coined Money: A Critique

The latest iteration in the controversy over theory of money, money creation, and historical origins of money use.

Social Democracy For The 21St Century: A Post Keynesian Perspective
Larry White on the Origins of Coined Money: A Critique
Lord Keynes

Brian Romanchuk — Primer: Monetary Aggregates

Mysticism about money is damaging to economic theory. This shows up in even the most fundamental questions, such as defining what “money” really is. It is clear that the developed countries are “monetary societies,” and behaviour is very different from those societies where money is either not used or highly ceremonial in nature. Unfortunately, our usage of the word money is often muddled, as we say things like “she made a lot of money selling used cars,” even though what we really mean is that “she earned a high income selling used cars.” For those with an interest in describing macroeconomic behaviour, such vagueness is not enough; we have to pin down what we mean by money.

If money were to be abolished from economic theory, the only references to money might be in reference to the monetary aggregates. This primer explains the definitions of these aggregates (without diving into the institutional differences between different regions)....

Bond Economics
Primer: Monetary Aggregates
Brian Romanchuk

David Korten — How to Break the Power of Money

To build a truly coherent movement with the necessary strength to replace the failed system with one designed and managed to self-organize toward a world that works for all, we must challenge its bogus claims as logical and practical fallacies. And simultaneously affirm the self-evident truth that:

We are living beings born of and nurtured by a living Earth. Life exists—can exist—only in living communities that self-organize to create the conditions essential to life’s existence. Money is just a number, an accounting chit we accept in exchange for things of real value because we have been conditioned to do so almost from birth.

We who work for peace, justice, and sustainability have the ultimate advantage. Truth is on our side. And the deepest truths, those on which our common future depends, live in the human heart. Let us each speak the truth in our own heart so that others may recognize and speak the truth in theirs. Together we will change the human story.

Marx and Keynes pointed out that the nature of capitalism is money accumulation.

The classical and neoclassical view is that consumption of products returns money to producers who invest in more production of commodities (products for sale), resulting in real growth. Money is just a veil over barter.

The Marxist and Keynesian view is that investment of money generates production of goods the sale of which result in money accumulation by owners of the means of production. In Das Kapital, ch 4, Marx expressed this as the difference between C - M - C' (C prime) and M - C - M' (M prime), where M = money and C = commodities. What Marx called a capitalist economy, Keynes called a monetary production economy. This doesn't imply that Marx and Keynes were "saying the same thing," but that there is a lot of similarity, some of which Keynes borrowed from Marx. See L. Randall Wray, Theories of Value and the Monetary Theory of Production.

Yes! Magazine
How to Break the Power of Money
David Korten

Robert Hackett — Bitcoin Is Not Money, Miami Judge Rules

Money is what the law says it is. This judge ruled that Bitcoin is property.

Michell Esponiza, the defendant, had sold $1,500 worth of the virtual currency to undercover police officers who said they intended to buy stolen credit card numbers with it, as the Miami Herald reports. The cops then brought a case against him, alleging that Espinoza had illegally engaged in money laundering.

The court’s decision? Where there’s no money, there’s no money laundering.

“This Court is not an expert in economics, however, it is very clear, even to someone with limited knowledge in the area, that Bitcoin has a long way to go before it is the equivalent of money,” the Miami-Dade Circuit judge Teresa Mary Pooler said in her ruling, which the Miami Herald published.

“This court is unwilling to punish a man for selling his property to another, when his actions fall under a statute that is so vaguely written that even legal professionals have difficulty finding a singular meaning,” she added.…

Fortune
Bitcoin Is Not Money, Miami Judge Rules
Robert Hackett

Diane Coyle — Civilising money

I am going to have to read this book. Fortunately, it is modestly priced. You can "Look inside" at Amazon.

Publisher's blurb:

In the aftermath of recent financial crises, it's easy to see finance as a wrecking ball: something that destroys fortunes and jobs, and undermines governments and banks. In Money Changes Everything, leading financial historian William Goetzmann argues the exact opposite--that the development of finance has made the growth of civilizations possible. Goetzmann explains that finance is a time machine, a technology that allows us to move value forward and backward through time; and that this innovation has changed the very way we think about and plan for the future. He shows how finance was present at key moments in history: driving the invention of writing in ancient Mesopotamia, spurring the classical civilizations of Greece and Rome to become great empires, determining the rise and fall of dynasties in imperial China, and underwriting the trade expeditions that led Europeans to the New World. He also demonstrates how the apparatus we associate with a modern economy--stock markets, lines of credit, complex financial products, and international trade--were repeatedly developed, forgotten, and reinvented over the course of human history.

Exploring the critical role of finance over the millennia, and around the world, Goetzmann details how wondrous financial technologies and institutions--money, bonds, banks, corporations, and more--have helped urban centers to expand and cultures to flourish. And it's not done reshaping our lives, as Goetzmann considers the challenges we face in the future, such as how to use the power of finance to care for an aging and expanding population.

Money Changes Everything presents a fascinating look into the way that finance has steered the course of history.

Finance and economics are two side of the same coin, one coin among the many, albeit a very important coin, that figured in the development of civilization and life as we know it today. But even today, finance and economics remain separate disciplines, and very few understand their intimate connection through price ("money") as the basis of markets, and accounting as the common language of finance, business and economics. 

The Enlightened Economist
Civilising money
Diane Coyle | freelance economist and a former advisor to the UK Treasury. She is a member of the UK Competition Commission and is acting Chairman of the BBC Trust, the governing body of the British Broadcasting Corporation

Matias Vernengo — DisORIENT: Money, Technological Development and the Rise of the West

Link to paper by Matias and David Fields at Academia. It's a free download but may require (free) registration at Academia if you haven't done so.

Naked Keynesianism

DisORIENT: Money, Technological Development and the Rise of the West

Matias Vernengo | Associate Professor of Economics, Bucknell University

Steve Keen — Our Dysfunctional Monetary System

Steve Keen sums it all up on one sentence:

The great tragedy of the global eco­nomic malaise is that it is caused by a short­age of some­thing that is essen­tially cost­less to pro­duce: money.

It's beyond inane, especially post Keynes and post Lerner. Not that this was unknown or overlooked before. But Keynes and Lerner elaborated economic policy based on a theory that disproves the conventional approach.

Steve Keen's Debtwatch
Our Dysfunctional Monetary System
Steve Keen | Professor and Head Of School Of Economics, History & Politics, Kingston University, London

Brad DeLong — John Maynard Keynes Getting One Very Right: There Is No Medium-Run Full-Employment Sheet-Anchor for the Economy

Keynes quote from General Theory.

This, expressed in a very general way, is my theory of the rate of interest.

WCEG — The Equitablog
John Maynard Keynes Getting One Very Right: There Is No Medium-Run Full-Employment Sheet-Anchor for the Economy
Brad DeLong

Branko Milanovic — 99 percent Utopia and money

My good friend and co-author Leif Wenar, in his first tweet, asked this question: “Friends, a utopia query. Keep human nature fixed. Imagine the best possible world. Does money exist?” I could not sleep last night so I decided to give it a thought.…

Presently scarce resources are allocated by markets based on money. It's a distribution issue. Is a superior distributional system possible? Marx, of course, thought so.

Global Inequality
99 percent Utopia and money
Branko Milanovic | Visiting Presidential Professor at City University of New York Graduate Center and senior scholar at the Luxembourg Income Study (LIS), and formerly lead economist in the World Bank's research department and senior associate at Carnegie Endowment for International Peace

Satyajit Das — The Power of Money – Book Review

Satyajit Das reviews Vivek Kaul's three volume Easy Money.

• Vivek Kaul (2013) Easy Money: Evolution of Money from Robinson Crusoe to the First World War, Sage Publications
• Vivek Kaul (2014) Easy Money: Evolution of the Global Financial System to the Great Bubble Burst, Sage Publications
• Vivek Kaul (2014) Easy Money: The Greatest Ponzi Scheme Ever and How it is Set to Destroy the Global Financial System, Sage Publications

Naked Capitalism
The Power of Money
Satyajit Das

Dirk Ehnts — Money – a legal, not an economic thing

I have recently read a paper by Christine Desan that is titled Money as a legal institution. The author argues that money is a legal thing, that it is defined by laws and that the law is changed in times of crisis. I very much agree with that. Economists have been so bad at understanding money because it is not their field of comparative advantage. Anthropologists have long doubted that money arose from “coincidence of wants”, and David Graebers 5,000 year history of debt has been read by so many economists that nobody can deny anymore that the story that modern textbooks tell us is wrong. Money is a legal entity. Bill Mitchell writes about money:…

Short and to the point. Read it all. What economics is missing.

econoblog 101
Money – a legal, not an economic thing
Dirk Ehnts | Berlin School for Economics and Law

200 Years Ago, We Didn't Have To Explain "Where Money Comes From" To All Citizens. More Knew Then Than Do Now!

   (Commentary posted by Roger Erickson)

Battle Over Banking: A Public Bank for the Republic of Vermont (1803)

The first part is is a fascinating historical story, for multiple reasons. 

First, for the mere fact that a savvy set of state legislators had it right from the beginning, like multiple American Colonies had done, previously. 

(Just like John Law had pointed out. Maybe he could read some Greek?)

Second, for the chilling story of how widespread bank monopolies conspired to do away with the Public Bank of Vermont.

Nothing much changes? The bank lobby is still winning, so far. Keeping us from further coordinating our own returns.

Theme Song For MMT? "We Make Money (Money Don't Make Us)"

   (Commentary posted by Roger Erickson)

I Make Money (Money Don't Make Me)

Jerry Jeff Walker

Last I'd heard, he'd retired from San Antonio to Costa Rica. (Or was it Belize?)

Anyone know how to contact Jerry Jeff about licensing that jingle?

Or making a dedicated version:

We Make Fiat (Fiat Don't Control Us)

Or commission a new album: Mr. Banksterangles?

Replacing the Money-Multiplier with the Thinking-Multiplier?

   (Commentary posted by Roger Erickson)

It's not clear that replacing one simplistic fad with another is the right approach.

This journalist blithely replaces the "Money-Multiplier" with a "Fiscal-Multiplier." If only things were that simplistic. Then we wouldn't have to think at all.

Austerity has been an even bigger disaster than we thought

Yes it has, at least for the royal "we," yet only because the bulk of us weren't "thinking" critically enough in the first place.

Look, countless people grasp how countless complex processes work. 

Can't we just agree to treat Public Purpose and Public Policy as a complex process too, instead of just something to throw simplistic slogans at?

If we're gonna rely on one, mythical multiplier, how about we select a Thinking Multiplier?

After all, the root of all disasters is the lack of thinking, not the following steps in the causality flow.