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Reposted from Daily Kos 6 August 2014

This is the second bite-sized installment in my series on why monetary policy matters to progressives, why it’s worth your time to learn and why it isn’t as hard or as boring as you think.*

Having said that I’m going to start this diary by talking about fiscal policy. When I say “fiscal policy” one of three things will come to mind: a) the spending and taxation policy of Congress, b) that thing you vaguely remember from your macroeconomics class fifteen years ago which may or may not have to do with something-or-other or c) a really excellent abs workout. Actually, as I see it, this is a trick question because in practice none of these things are the case.

Fiscal policy is supposed to be the macroeconomic (I’ll explain this term below) effect on the economy of the taxing and spending policies of Congress and technically this is the case. Practically, however, no fuzzy dice. This would be because the word “policy” implies that Congress is making spending and taxation decisions based upon something other than how it effects their individual re-election campaigns and the associated campaign coffers. I’m not talking about the infamous Bridge to Nowhere or, my personal favorite, the Teapot Museum. I’m talking about reducing the funding for Head Start and unemployment benefits in favor of funding a missile system which the Pentagon has specifically said it does not need or want.

In Congress, in accordance with the Constitution, spending bills must originate in the House. This is called “the power of the purse” and by that the current House means the power of the purse to beat you down until they can wipe you off the bottom of their shoe on the nearest patch of grass. This is also called the “Paul Ryan Budget” and the clear objective is to destroy the middle class and the poor while pouring money down the throats of the top 1% until they choke our economy to death.

Congress is supposed to be using the power of the purse to spend money into the economy when it is needed and pull it out, via taxation, when the economy starts to overheat. THAT would be “fiscal policy” and there are two essential things you need to know about it.

1. Congress does not need to tax ANYONE on order to have money to spend. Congress owns this thing called a printing press and can direct the Treasury to put that press to work any time it likes. (I will cover this in much greater detail in a later installment.)

2. Inflation is not a threat when unemployment and underemployment are high and while Republicans and many elected Dems cannot understand this the concept will make perfect sense to you if you take a kale break and think about it. Inflation happens when demand exceeds supply and more can be charged for things that are suddenly in short supply. (Think Cabbage Patch dolls in 1983 or the gold iPhone 5s.) For that to be the case an economy would have to be working at full capacity both in industrial capacity and, more importantly, in labor capacity. Does anyone, anywhere on this planet think there is any way this economy is in danger of inflation? Ok, I’ll grant you, Alan Greenspan and Michelle Bachman, but I’m talking about people who might actually be in touch with reality. Anyone…anyone? Yeah, I thought not.

Congress is supposed to be thinking about the whole vegetable garden when they are making their spending and taxation decisions but they are not so the result is that annual spending, while continuing to have macroeconomic effect, is much more correctly seen as having microeconomic effect in that it is directed at specific individuals (the 1%), specific businesses (big business not Main Street) and specific (conservative) social agendas. If you want to understand the single biggest reason why the economy is still soft, this is it. The House has abrogated their fiscal responsibility completely. Period. Ffft!

It is worth saying that while “austerity” and “fix the debt” sound like macroeconomic policy they are tissue-paper thin lies used to disguise moving the wealth of the economy from the pockets of the many into the greedy hands of a few. Again, later in this series I will describe this process and how we can put an end to it so stick with me, baby. It’s going to be fun and besides, we rabbit Americans really know how to party.

Macroeconomics and microeconomics may be courses you took in college or they may be courses you avoided like the plague. Certainly, college is not necessary in order to understand the most important basics. For now, all you need to know is that macroeconomics is the big stuff: unemployment, inflation and the currency exchange rate. Functionally, monetary policy is the purview of the Federal Reserve Bank of the United States of America (the Fed.) Everyone except elected officials will immediately note that unemployment can be much more easily and directly improved by Congressional spending (fiscal policy) but, as we all know, John Bohener is much too busy regulating his level of orange to pay attention to the decimation of the middle class.

Microeconomics is, as you will have guessed, the little stuff: individuals, specific businesses or industry sectors, specific social classes. Microeconomics is how all the big stuff, macroeconomics, thumps down hard on your kitchen table and mine.  Microeconomics is personal and it’s the part that hurts but never, ever, EVER let yourself be mislead. Microeconomics flows from macroeconomics. The big stuff drives the little stuff. If Congress is only spending into the economic sectors that are the exclusive territory of the 1% and if the Fed is only spending in a manner which serves to sequester money out of the economy AND is refusing to regulate banks and investment institutions then things can only get worse. Which explains a lot.

But this doesn’t have to be the case. Progressives have formed coalitions and created memes that have moved mountains before. We must and can do it again. The first step is understanding the vocabulary and the mission. Then we do what we are best at, we raise some H-E-double-carrots. We won’t get everything we want but it is entirely within our power to get a lot more than we have now. Tune in to Netroots Radio The After Show every Thursday at 11AM EDT/8AMPDT for more. If you can’t join us for the live stream then catch the podcast available on Stitcher Radio and iTunes.

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Over the past couple of weeks the debate around platinum coin seigniorage (PCS) has been raging and that is good. In fact, it is great. Like carrot subsidies, PCS is something we should have been talking about years ago. As a rabbit American, I support both but like LetsGetItDone (LGID) who has been writing incredibly knowledgable and quite brillent posts on PCS at both The Daily Kos and the New Economic Perspectives sites, I am hoping it will be possible to leverage the current discussion into a much larger one about crating policy space.

The Power of Paper

It’s like that tired adage, give a rabbit a carrot and he eats for a day, teach a rabbit to order carrots on-line and he eats for a lifetime – or something like that. Sure, we could solve the current debt ceiling problem by minting a $1T coin but we could also chose to do more.  We could resolve the entire US debt and return our economy to full employment by minting a $60T coin.

Oh, put a sock in it each and every one of you who is sputtering something about insanity. First of all, there are some outstanding detailed explanations as to why this really will work but it all comes down to one simple thing – a fiat currency really IS a figment of our collective imagination. It IS just little pieces of paper or metal upon which we have collectively agreed to confer value and in which value is retained, in the case of the United States, by the policies of the Department of the Treasury, the Internal Revenue Service and the Federal Reserve. Beyond that, money is just paper. (Though, I have to say that in comparison to other paper, when one just happens to nibble on money, humans have a way of turning an extra special shade of white.)

Given that we know that fiat currency works, one of the things that is the most interesting about this entire debate is that no one in Congress

…or the White House

…or the Treasury

…or the Fed

has figured this whole thing out before. Part of this is because, as I have said, almost all of the people currently staffing those positions learned monetary policy at a time when the thinking was all still founded on the gold standard despite the fact that the monetary system no longer has these limits. Nixon took the country out of Bretton Woods in order to allow for growth but only a very few people managed to realize that national policy makers also needed to alter the way they thought about actual money. They needed to smash their old thinking so that the truth of the reality could become clear.

Yeah, like that happens.

I was just reading today about some complete idiot (and by “idiot” I mean conservative Republican) who is claiming that teachers teaching the distributive principle in algebra are pushing a liberal agenda. Back up the truck full of stupid. I get that once humans have their minds set on something it is hard for them to see anything else or in any other way but that won’t work for the US economy unless, of course, your objective is aligned with the GOP and your intention is to destroy the economy on “principle.” Let’s assume that since you are reading this, you are not satisfied with crashing and burning the economy and that you are willing to learn something new. Ok, now take what you think you know about debt and inflation outside and smash it against the rocks of “that’s SO ’70’s.” I can wait. (Don’t forget your jacket. It’s a bit nippy outside.)

If you still think the old “rules” of debt and inflation apply, it’s about to get a little nippy in here. Bunny teeth are sharp. I’m just sayin’.

Policy Space

For those of you who are beginning to understand the incredible power of a strong fiat currency we can now move on to what I really wanted to talk about, policy space. In speaking about policy space I am talking not about the legality of PCS and I am not talking about PCS in relationship to the debt ceiling. I am talking about why we, as progressives, should be supporting PCS for all we are worth. Progressives should be loudly supporting PCS with one voice because it would allow us, as a nation, to get past all the truly meaningless battles being fought in Washington, over shadows that live only in the backs of paranoid minds, and on to policy that could genuinely and positively effect the real world.

Let’s imagine, for instance, that we are talking about minting $60T worth of PCS coins. It could be any number but $60T is one being actively talked about so I’ll go with that for the sake of this example. (And remember, I’m not going to get into why there is no realistic way this would cause inflation or any of the other topics that have been covered by myself and LGIT as noted above.) Now, the funds made available by PCS are not pushed out immediately into the economy, as so many imagine (that really would cause inflation), rather, they are sitting in a Treasury account at the Fed. In other words, for all you MMT folk, they are a $60T entry on a spreadsheet. The first thing that happens, of course, is that all debt that falls due is paid as it is due, in full, instead of being rolled over. No more interest is paid and no new debt is created. Take that, austerians, as Paul Krugman calls those dedicated to austerity. Our debt is being retired. Done. Fin. At the same time, Congress is still in session and is suddenly in a position to authorize spending without having to deal with the canard of not having enough money. (Which, as MMTers know is NEVER the case for the US government but that is not for this blog post.) The issue would be that if we were able to mint the big coin the optics and political will around everything else changes.

As Paul Krugman cites in his 2012 book, End This Depression Now!,

And early this year, with the debate having shifted perceptibly toward a renewed focus on jobs, Republicans were on the defensive. As a result, the Obama administration was able to get a significant fraction of what it wanted…without making any major concessions.

So the first thing Congress now has is a free hand, policy space, to deal with unemployment. In point of fact, the take-over of the national zeitgeist by drummed-up concerns over debt and deficit (see a brief discussion on why FAUX News and company are so dedicated to this mantra near the end of this post) has been allowed to relegate unemployment to the backseat. Putting unemployment in the backseat in order to talk about imaginary problems denies the absolute fact that unemployment is still driving the car. So, if you are wondering why the US economy is still swerving all over the damn road, that’s the reason right there. Platinum coin seigniorage would put unemployment right back in the front seat and, in a matter of a very short time, could put everyone who wants a full-time job back to work. (The resting rate for unemployment is said to be around 3.5% so don’t ever think we are looking for Gadot/zero.)

That should be reason enough for progressives to be the biggest cheerleaders of PCS – but wait, there’s more.

Strict and seriously enforced environmental regulation could be enacted and, instead of using indirect reward like tax breaks which tie up liquidity for tiny and giant corporations alike, the government could provide upgrade grants. Jobs are created and, I love this part, everyone benefits except the bankers. Also, this would move corporations from opposing such regulation to supporting it. Imagine, all you environmentalists out there, being on the same side of an argument as American Electric Power. We still would have problems with them (“Clean Coal” anyone?), I know that, but we could move with them further down a road which would benefit all of us collectively. For small corporations, it would make it possible for them to come in to compliance with regulations which they are commonly exempt from because, if included, they would not have been able to comply.

It would allow this nation to address long-standing infrastructure crisis’ including the electrical grid, water treatment and transportation. Even major improvements to existing systems, like rail, would benefit the economy and each one of us enormously.

We could not only invest in disaster preparedness, we would have the ability to set aside funds to deal with the coming, rapidly increasing, rate of disasters including things like the fires in the West, draught in the Midwest and that’s before I even get to superstorms and hurricanes. Of course, I am already assuming that should funds be perceived as being available, the needs of the states and victims hit by Sandy would be addressed.

And on and on and on – in a manner metered by Congress and the Fed up to the point where industrial utilization is near peak levels and unemployment is down near 3.5%.

Perceived Funds

The reality is that the coin is not a necessity. All that it does is give physicality to an accounting transaction. Large PCS would make it plain to all that the US government will not and cannot run out of money. There are constraints on our economy (inflation and the exchange rate) but “having enough money” is not one of them. The ability to spend whatever we need to bring the economy into balance has been available to the government since 1971, since the day the US dollar became a fiat currency, we just haven’t realized it and haven’t used it.

What progressives need to know is that the things we want, the things we have been calling out for from the wilderness, become possible with Large PCS. Also, if by some minute chance we were able to get this President to order large PCS then we could all wipe trickle-down economics off the bottoms of our kicks on the nearest patch of grass. If for that and no other reason, we should all be getting behind this right now.

So, Why Do We Think Debt is a Big Deal?

Debt, given the current state of our economy, means nothing, so why do we, the progressives, the reality-based group, the group that actually thinks math is a real thing, believe it when we hear it? Well, folks, you have been duped and, no surprise here, you have been duped by FAUX News and company. I know, you don’t listen to FOX but you do listen to people who listen to them and all those people drank the Kool-aid. Rabbits are big on water. We oppose Kool-aid on principle. (This would probably not be the case if the orange flavor was carrot instead of orange.) Rabbits, like all prey animals, are adamantly focused on the real world so we were not taken in.

Still, one has to ask, why this meme is so important to conservatives?

Simple. Greed. Surprised? Of course not. In the dictionary under “conservative” the definition says “greedy bastards.” We all know that. So, how does their greed tie in here, you ask? Well, to start with, Pete Peterson knows. If we cut social security for reasons of austerity, where do those people go? They go right to Wall Street. If we cut Medicare, where do those people turn? They turn to the insurance industry. If anyone other than the government is funding projects where is that money coming from? Why, it is coming from the banking industry, of course. So, here is the equation:

Wall Street + Insurance Companies + Banks = Non-stop Debt Crisis Meme

That’s it. That simple. This other equation,

Platinum Coin Seigniorage = Policy Space

has been here through this entire crisis and has had nary a whisper until #MintTheCoin took off just a couple of short weeks ago and we, as progressives, absolutely must get on board. If you ever, in your entire life, wanted to be a part of making a real change that could change everything for the better, this is it. Platinum coin seigniorage isn’t the golden ticket but it’s pretty damn close. Thump!

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By now most of you have heard the joke about Romnesia and the punch line about it being a pre-existing condition which is, thankfully, covered by ObamaCare. (If you haven’t, go here to listen to the President of the United States tell it better than this rabbit ever could.) I also like the notion of Ryan-itus as an FTD (Fox Transmitted Disease.) As jokes go, these things make me giggle which I don’t do often and surely haven’t done much during the extremities of this election cycle. Last week, however, I broke my long silence and now I’m on a roll. It’s all because of that second debate. [If I have to be honest, I slept through the first debate and, apparently, I wasn’t the only one…Mr. President.]

I thought the second debate was much more interesting, especially since both candidates showed up, but what has been even more compelling to me are the videos of Governor Romney debating himself as seen here and here. All of which serves to bring me to my point, Romney is speaking in tongues. All the Romney reversals, “misunderstandings” and outright lies are so frequent that they can’t really be accidental, can they? I think they have to be strategic. They are locking the doors of the room, dumping snakes on the floor and then speaking in tongues…and somewhere between 44.8 and 48 percent of the electorate is buying it.

Bring on the lies!

Bring on the snakes!

Surely, I am a believer and I will be spared.

Except, of course, that snakes don’t work that way and eventually poison spreads.

Speaking In Tongues

 Romney’s Economic Plan – The economic plan which Governor Romney still refuses to detail can not possibly work. It can’t. That is a fact proven by every single outside, independent organization which has reviewed it. (The only organization to review it and find it workable is owned, in part, by high ranking GOP operatives.)

Romney’s Jobs Plan – though he seems to give a different number every day and I hear that he and Paul Ryan have even been known to give different numbers on the same day, the Governor is promising to add as many as 23 million jobs, with his imaginary jobs plan, while he is the President. Ummm…no. Times three. No. No. No. The plan isn’t his.” The number isn’t 23 million. The time span given in the plan is ten years.

Romney on Women – No matter what you thought you heard during the debates, Romney opposes abortion of all kinds in all cases and has said he would be “delighted” to sign a law and/or appoint Supreme Court judges who say just that. No matter what you thought you heard at the debate, Romney supports the Blunt amendment, which would make it lawful for any and all employers to refuse to include contraceptive coverage in any company sponsored health plan. And all of this is before I even mention “binders full of women” a subject upon which I have a whole blog entry here.

Romney on Medicare – First of all, the President did not take $716 billion dollars away from Medicare thereby weakening it. The money was moved around from one line item to another in an effort to strengthen Medicare. This bureaucratic change extended the life of Medicare for eight more years. Anything else you might hear from the Governor on that subject is likely a lie and is patently disproven here. Second, the Governor really does believe in eliminating Medicare and replacing it with vouchers. Here is the thing that will always be true, Medicare and government-based systems may not be perfect but they are not in health care to make money. They are invested only in providing care. Anthem Blue Cross/Blue Shield is rewarded every time they deny care for a customer. It is money they do not have to spend. The Governor wants more of that. He wants you on your back with an insurance company’s fangs on your throat. Listen to a rabbit when I say, “don’t do it! Don’t go into the light!”

Romney on China – Then there is the new story about the Governor and his ownership in the company Sensata that is right in the middle of shipping jobs to China. It isn’t the first time Romney companies have done so and it won’t be the last. Oh, he can tell you his investments are in a “blind trust” but know this, he can see through that blindfold just fine. One of the things I would like to know in Monday’s foreign policy debate:

If Bain Capital was to bring back every job they had sent or caused to be sent to China back to the US, how many jobs would that be?

I’m just guessing but mightn’t those jobs be enough to reverse the negative jobs numbers in Wisconsin or Nevada, two of only six states with jobs numbers which are down from over a year ago? Governor, I suspect that when you speak of taking a tough line with China, you mean something entirely different than what the rest of us mean. You mean things like how many kilowatt hours of grid time will your factories be allotted. Or, how do you keep Chinese factories you don’t own from reverse engineering the products of Chinese factories you do own. In the story of the Garden of Eden, the serpent talks Eve into taking a bite of an apple. When the Governor speaks of China, he does so with a forked tongue and we all know where that leads.

Romney on the World – The Governor thinks he is tough. He certainly likes to talk tough. Americans eat that up after all. We love the image of being the biggest and baddest country in the world. We think it suits us. Well, guess what. News Flash. Twitterstorm. The world has changed. National entities are not the only actors on the international stage and they are only an increasingly small percentage of the conversation. The Governor’s tough talk could severely damage our relationship with allies (see the news coverage of his trip to the UK for reference) and it could easily tip us into war with both Iran and Syria. (Regarding Syria see here and here.) What it will not do is make us any safer. What does make us safer is being perceived as going in the same general direction as the majority of those engaging in the conversation worldwide. Governor, in case no one told you, the thing most likely to change the balance of power in the world today is the cell phone. Brace yourself…and learn to use Twitter.

GOP Facts are Fungible

The GOP has struck upon the manna of “facts as fungible commodities” and they have been worshiping at that alter since the infamous “Contract With On America.” Yes, the Contract was able to hypnotize the electorate but it also was the beginning of the rise of the economic policies which ultimately lead to the W’s Great Economic Collapse. Democrats, meanwhile, have steadfastly, and to our past electoral detriment, continued to rely upon facts, logic, luck and the intellectual stick up our proverbial butts. [Note: none of those three things alone are the way to win an election, guys.]

My Thoughts on 2012 Election Cycle Take-Aways

• Lies (aka Romnesia) will be progressively harder to sell and impossible to maintain as fact checking becomes both common and instant…by everyone. (But this is one of my current favorites.) While the GOP has still been successful, to an extent, in 2012, try it again in 2016 and see where it gets you.

• There are and always will be people who are too afraid of change to be willing to accept any truth which encompasses said change. These people are the GOP base from here on out. The GOP is no longer the party of fiscal conservatism, it is the party of fear.

• Demographics do not favor the GOP – not with women, minorities or the young, none of whom are interested in being in binders any more…ever.

• Technology and social media do not favor the GOP either in the US or around the world…and neither does science (but that last part is another blog post isn’t it.)

• Democrats have to remember to show up and fight – not just our President, all of us.

• OH – and when you are a Mormon, Republican and the Salt Lake Tribune endorses the other guy because you haven’t been truthful enough, well that’s just… … … …. I’m sorry, I can’t seem to stop laughing.

To those of you who follow me, this has not been my usual humorous posting. I apologize. As you can tell, I am especially disapproving these days. Besides, I’m allowing others to carry the awesome burden of humor for me and I have to say that Mr. Eastwood has done a fine job. Thank you, sir, and have a seat.

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