Monetary Realism

Understanding The Modern Monetary System…

Carlos Mucha in the New York Times

Carlos Mucha of Monetary Realism discusses the Trillion Dollar Coin for the New York Times:

“Under the Constitution, Congress is given the authority to create money. Congress has delegated this power to create money to two agencies: the Federal Reserve and the U.S. Mint. For decades, the Fed has issued paper money and assisted the Department of the Treasury in issuing enough new debt to fund the budget deficit.

Meanwhile, the Mint quietly issues circulating coins to banks and numismatic coins to collectors (all U.S. coins are legal tender). One seemingly minor difference is that coins aren’t debt. They’re sold to Federal Reserve banks at face value. Selling Treasury bonds to the public increases the public debt. Selling coinage is an asset sale and pure profit for Treasury after minting costs.

Compared to the trillions in T-bond issuance, the Mint’s output has been, well, chump change. Then in 1996 something remarkable happened. Over the objections of a Democratic administration Republicans in Congress passed a statue, 31 USC 5112(k), permitting the issuance of platinum numismatic coins. The astonishing part was that Congress set no specific denomination, writing perhaps the biggest blank check in history.”

The coin is one of the great ideas. The coin is impossible to forget, and it turns out the coin is impossible to ignore as well. The coin illuminates the idea of fiat money with such arresting force. People who don’t understand money still  get it. I had a friend ask me tonight – “How much is too much? How much isn’t enough?” That’s exactly the kinds of questions we want people to ask!

And it’s all your idea, Carlos. :)

If you get a chance, go on over to the New York Times and leave a comment.



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14 Responses

  1. james hogan says

    The US Note vs FED Note might be a better way to communicate the underlying issue to people. The only visible difference is the color of the seal and some of the lettering (and the name). But two entirely different things though. I’ve read some of Beowolf’s stuff on that ; maybe he’ll stay out of “retirement” to pursue it.

    Wouldn’t have near the impact as a coin worth a trillion dollars though! This has certainly gotten the public’s attention.

  2. Erik V says

    The way this story has spread like wildfire has truly been amazing. And while the TDC never came to pass, it will at least have the effect of getting modern monetary types a seat at the table in future discussions. Hopefully we can get to the point where our ideas become accepted by politicians they way some accepted the TDC as a legitimate idea.

  3. vimothy says

    Congratulations, Beowulf!

  4. peterc says

    “The coin illuminates the idea of fiat money with such arresting force. People who don’t understand money still get it.”

    Yep, it will have opened some minds. Great job, beowulf.

  5. Cowpoke says

    Paul Krugman Scolds Jon Stewart for Platinum Trillion Dollar Coin Coverage

  6. beowulf says

    Death star proposal is stupid. Project Orion, now THAT was diabolical (and achievable with 1960s technology).

  7. JKH says

    Canada’s National Post this morning:

    “The US government has been forced to respond to two wild proposals – one pushing for it to issue a trillion dollar coin and the other to build a Death Star – with a staunch “no”.


    I think its time you called a press conference, at least to clarify your role in the association between these two proposals.

    I’d be interested also if you could provide links to your blog comments elsewhere regarding how you saw the integration of the legal framework with the accounting for the Death Star component.


  8. Joe Firestone (LetsGetitDone) says

    Congratulations, Carlos. It’s wonderful that someone who knows something was finally asked to write something by the Times!

  9. wh10 says

    Congrats Beo!

  10. beowulf says

    Ha ha, watching Up with Chris Hayes now (I don’t get up that early on a Saturday but DVRed it), its like watching an Agatha Christie mystery and suddenly realizing the killer is ME! :o)

    Stephanie Kelton and Joe Weisenthal (and of course Chris) were excellent. This part of Chris’s intro slayed me, seeing as I’m actually a Republican.
    “And you can tell, I think that the trillion dollar coin idea spooks Republicans, precisely because it would be so out of character, it would so gleefully and flagrantly violate their own expectations about how Democrats play the game.”

    • Matt Franko says

      beo, WAY…TO…GO… man.

      “the trillion dollar coin idea spooks Republicans, ” yeah: HA!

      I think it really spooks ‘libertarians’ of sorts… I’m starting to view this as some sort of libertarian vs authoritarian thing… the “politicization” of this wrt “Democrats v GOP” is misreading where the lines are really drawn…. as you point out many of us are GOPers… so what Hayes asserts here is manifestly not true in all cases.

      Your words from the Times: “Under the Constitution, Congress is given the authority to create money.”

      I think seeing that word there: “authority”, makes many uncomfortable, “spooks” them.

      The opponents to your idea here in my view just don’t want to see (probably cannot see) the govt as possessing this authority… it spooks THEM, but that distinction does not correlate along party lines as you point out…

      I’d like to see the discussion start to address this ideological distinction vice the typical “Dem vs GOP” party politics claptrap…

      Great op-ed beo. rsp,

      • L. F. File says

        Shouldn’t Libertarians love MMT? The government would just exist to
        make a market for money. Taxation would mean that everone used the
        governments money since that is what they would need to pay their taxes.
        The government would print money to cover its expenses and tax to limit
        the amount of money in circulation to control inflation. Citizens would
        decide democratically what the government should spend money on and the
        rest of the world would decide what our money is worth to them. The
        international free market would feed back directly to consumers
        regarding costs of foreign and domestic goods and consumers would
        quickly understand what the trade offs would be between government
        services that put more money in circulation and drive up prices on
        imported goods so they could make rational economic decisions on what
        government spending should be.


  11. Clonal Antibody says

    Three of the five debaters do a good job. Beo does a great job. The remaining one does a pathetic job – thinks of public debt in the framework of a private debt – but unfortunately has the last word.