A Proposal That Would Quickly Re-Set The Stage of Our Over-Long Greek Tragedy
In a September 26, 2013 article, CNBC journalist John Schoen points out:
In the current fiscal year, which ends October 1, the federal government ‘s spending gap shrank by more than a third, to a little over $600 billion, from about $1 trillion a year ago. As the economy has grown, the deficit has also fallen in relation to gross domestic product – a widely used benchmark of spending policy.
Part of the improvement comes from the year’s compromise package of tax hikes and spending cuts, which slowed the growth of federal spending by $85 billion (and is set to trim another $20 billion for the next fiscal year beginning in October.)
Following Schoen’s calculations, we should have a deficit of less than $600 billion for 2014 – a drop in a rainstorm compared to our $10.5 trillion M2 money supply (per the Fed) and $16 trillion annual GDP.
While the shrinking deficit makes us wonder why some on the Hill are inclined to undertake huge economic risks, it also suggests a tempting response to the fact that they are. In this we are reminded of the man who jumped into his red sports car every day and zoomed off to work, followed in hot pursuit by a neighbor’s ferociously barking dog. One day he stopped, looked around at the dog and called out, “OK, now that you’ve caught it, what are you going to do with it?” With more than one cause for perplexity, the dog walked away.
The numbers are such that we can stop, turn around to those who seem about to shut down the government and perhaps drive us into default, and say: “OK. You want to reduce the deficit by further cuts. We have a plan to eliminate the FY 2014 deficit entirely, with no more economy-weakening, revenue-weakening cuts. What are you going to do with that? The irony is that the plan of printing US Notes is what many of them (notably Libertarians) have urged for years, so it is no new thing to them. The new thing is the driver of the car – our current (not to say past) economics establishment - getting on board with it.
United States Notes are well known to all of us who earned money prior to 1971. They were the bills with the red Treasury Seals instead of the green ones. That’s the only way most people could remember the difference from the Federal Reserve Notes now exclusively in circulation. The same Bureau of Engraving and Printing printed both, and the Fed kept track of how many of each were printed well enough to implement monetary policy.
The Constitution provided for a sovereign currency, but it was the Republican Party in the days of Lincoln and the Congress of the time that inaugurated United States Notes or “Greenbacks” as a way of funding the Civil War and the Reconstruction without burdening future generations with debt. The famous Chicago Plan of the thirties was Greenback-based, and many feel today Roosevelt would have done better to go along with America’s leading economists than to follow Keynesianism to the extreme of the reactionary spending cuts of 1936 and the Second Depression of 1937.
Printing US Notes requires the simple discipline of not printing too many of them, whereas every Federal Reserve Note used by the government requires the creation of federal debt in like amount. Whoever came up with that idea? Some smoke-filled roomful of bankers for whom debt is a stock-in-trade, we must assume. In covering words that make no sense, such debt is described in the 1913 Federal Reserve Act as an asset should the government ever take over the Fed…but, realistically, who looks upon their debts as assets?
We’ve gotten the lead out of gasoline and the asbestos out of insulation. As long as people are willing to produce goods and services for US Notes, as they always were in the past, they will have value in trade without the economy-destroying toxin of debt. They worked for us in the past. Why not use them again?
In a September 26, 2013 article, CNBC journalist John Schoen points out:
In the current fiscal year, which ends October 1, the federal government ‘s spending gap shrank by more than a third, to a little over $600 billion, from about $1 trillion a year ago. As the economy has grown, the deficit has also fallen in relation to gross domestic product – a widely used benchmark of spending policy.
Part of the improvement comes from the year’s compromise package of tax hikes and spending cuts, which slowed the growth of federal spending by $85 billion (and is set to trim another $20 billion for the next fiscal year beginning in October.)
Following Schoen’s calculations, we should have a deficit of less than $600 billion for 2014 – a drop in a rainstorm compared to our $10.5 trillion M2 money supply (per the Fed) and $16 trillion annual GDP.
While the shrinking deficit makes us wonder why some on the Hill are inclined to undertake huge economic risks, it also suggests a tempting response to the fact that they are. In this we are reminded of the man who jumped into his red sports car every day and zoomed off to work, followed in hot pursuit by a neighbor’s ferociously barking dog. One day he stopped, looked around at the dog and called out, “OK, now that you’ve caught it, what are you going to do with it?” With more than one cause for perplexity, the dog walked away.
The numbers are such that we can stop, turn around to those who seem about to shut down the government and perhaps drive us into default, and say: “OK. You want to reduce the deficit by further cuts. We have a plan to eliminate the FY 2014 deficit entirely, with no more economy-weakening, revenue-weakening cuts. What are you going to do with that? The irony is that the plan of printing US Notes is what many of them (notably Libertarians) have urged for years, so it is no new thing to them. The new thing is the driver of the car – our current (not to say past) economics establishment - getting on board with it.
United States Notes are well known to all of us who earned money prior to 1971. They were the bills with the red Treasury Seals instead of the green ones. That’s the only way most people could remember the difference from the Federal Reserve Notes now exclusively in circulation. The same Bureau of Engraving and Printing printed both, and the Fed kept track of how many of each were printed well enough to implement monetary policy.
The Constitution provided for a sovereign currency, but it was the Republican Party in the days of Lincoln and the Congress of the time that inaugurated United States Notes or “Greenbacks” as a way of funding the Civil War and the Reconstruction without burdening future generations with debt. The famous Chicago Plan of the thirties was Greenback-based, and many feel today Roosevelt would have done better to go along with America’s leading economists than to follow Keynesianism to the extreme of the reactionary spending cuts of 1936 and the Second Depression of 1937.
Printing US Notes requires the simple discipline of not printing too many of them, whereas every Federal Reserve Note used by the government requires the creation of federal debt in like amount. Whoever came up with that idea? Some smoke-filled roomful of bankers for whom debt is a stock-in-trade, we must assume. In covering words that make no sense, such debt is described in the 1913 Federal Reserve Act as an asset should the government ever take over the Fed…but, realistically, who looks upon their debts as assets?
We’ve gotten the lead out of gasoline and the asbestos out of insulation. As long as people are willing to produce goods and services for US Notes, as they always were in the past, they will have value in trade without the economy-destroying toxin of debt. They worked for us in the past. Why not use them again?
