United States Notes serve no function that is not already adequately served by Federal Reserve Notes.
In fact, United States notes, but not Federal Reserve notes, can enable: (1) large, direct, prompt debt reduction; (2) interest-free financing; (3) exact economic tailoring; and (4) pay-as-you-go, collection-free, flat-tax funding. The vast differences suppressed by the Treasury are manifested in Iceland's proposed switch to a "Sovereign Money System." See A Better Monetary System For Iceland. See also the Sovereign Money section in Scott Baker's new book, America Is Not Broke!
Such terminological inexactitudes enforce the mantra that governments cannot conceivably be trusted to print their own money. This is an absurd article of faithlessness, up against the facially more credible proposition that an open government is more trustworthy than relatively opaque private banks. Yet such a mindset thrives in and drives the banking world, looking backward (e.g. Frank L. Lee III in the March 2010 Bank Note Reporter: "During the U.S. Civil War, the federal government grabbed a monopoly on the money-issuing power within the United States [by] issuing legal tender Treasury notes"") and forward (e.g. Ben Bernanke, May 25, 2010 speech at Institute for Monetary and Economic Studies International Conference: "giving the government the ability to demand the monetization of its debt [is] an outcome that should be avoided at all costs").
3. Cognitive Impairment Already Sacrifices Monetary SovereigntyIt is facile to argue that the statutory delegation of the power to issue the currency--together with the power of repeal--is per se sufficient to show monetary sovereignty. At best, it keeps the monetary power within the nation's business sector. To some degree, the delegation sacrifices the capacity of the US to exercise its sovereign=people power to issue the nation's fiat currency. In particular, wide ignorance as to the distinct option and advantages of directly issued government currency per se sacrifices the power to issue it. As JF points out "giving up monetary sovereignty is a monumentally risky thing to do."
JF contends that the US "cannot be forced into insolvency by external financial or economic factors that are beyond the control of the Federal Government (including the Congress)," because the statutory limits on government money borrowing or issuance can be repealed, and because the 14th amendment's public debt clause obliges the executive to unilaterally issue money sufficient to avoid imminent default. [5] Thus, US insolvency is possible only if Congress and/or the executive willfully fail to act. But that which is not comprehended is beyond control; and re monetary sovereignty the Congress is cognitively impaired.
What JF glosses over is the fact that a government captured by private interests may de facto lack the capacity to properly or fully exercise monetary sovereignty, e.g. by rescinding delegations, in which case there is an ongoing diminution, with or without a risk of default. JF's gloss is completely at odds with his own emphatic recognition that the exercise of sovereignty rests on the intelligent consent of the governed.
On the New Economic Perspectives blog, JF gave his article the rhetorical title How Can Our Senators and Representatives Vote for Giving Away Our Monetary Sovereignty? [6] The TPP's ISDS provisions don't give it away. JF himself gives it away, by burying the fact that it is already sacrificed by the ignorance of senators and reps. Under the intelligent consent standard that JF otherwise insists on, right now the monetary sovereignty of the US is a joke.
Part II of this article makes this point by showing how, due to decades of Fed resistance and GAO financial misinformation, the US is not capable of exercising monetary sovereignty even over its very own one dollar coin, let alone of intelligently overseeing and authenticating currency creation per the Fed's passe (R.I.P. 2008) structurally deficient "structural deficiency" regime, and ongoing "excess reserves" regime. [7]
[1] Of course, unleaked sections of the TPP could contain financing constraints that usurp monetary sovereignty.
[2] Insofar as the general concept of monetary sovereignty embraces public banking/state financing, the TPP poses a huge threat, due to ideological provisions against "state owned enterprises," defined in terms that could outlaw, for example, the highly successful Bank of North Dakota. See Is the Trans-Pacific Partnership a Danger to Public Banks? By Matthew Stannard. I deem this a threat to fiscal rather than to monetary sovereignty. It is not addressed in JF's article, or herein. Likewise, rules against capital controls are not discussed.
[3] Herein (and as used by JF), "US" means the United States government.
[4] See Scott v. Federal Reserve Bank Of Kansas, 406 F.3d 532 (8th Cir. 2005): "The Bank is considered a separate corporation owned solely by commercial banks within its district, distinct from the Board of Governors. See 12 U.S.C. 282, 287, and 341. The United States does not own stock in the Bank. Id.; see also Lewis v. United States, 680 F.2d 1239, 1241 (9th Cir.1982) (explaining the structure of Federal Reserve Banks)." See also Fox News Network, LLC v. Bd. of Governors of the Fed. Reserve Sys, 601 F.3d 158, 160 (2nd cir. 2010): "[S]ome records at the Federal Reserve Banks -- those kept at the Federal Reserve Banks under certain conditions for 'administrative reasons' -- are records of the Board; these [only] must be searched [in response to a FOIA request.]"the lending activities of the Federal Reserve Banks do not take place 'on behalf of' or under the 'delegated authority' of the Board. The Board itself has no power to make a loan to any bank, and does not authorize each loan made by the Federal Reserve Banks. The power to make loans is explicitly granted by statute only to the Federal Reserve Banks themselves. 12 U.S.C. 347b(a). In that way, 'Congress divided the powers of the Federal Reserve System between the Board, which is a federal agency, and the [Federal Reserve Banks], which were established as regional banks.' "
[5] Because constitutional mandates trump statutes, the executive could issue very large denomination United States notes in the required amount. This would seem both more expedient and more diplomatic than minting platinum coins and trying to pretend that Congress had intentionally authorized such an issue.
[6] In a follow-up article, Fast Track/TPP: The Death of National Sovereignty, State Sovereignty, Separation of Powers, and Democracy, JF vaguely worries that the TPP could "prevent the Treasury from replacing the practice of issuing Treasury debt with other funding methods." But again, he contemplates more Treasury-issued money (versus debt) only under the 14th amendment, to avoid default. The option of routinely issued Treasury money--i.e. the most fundamental exercise of monetary sovereignty--is entirely glossed over. Again, JF's various arguments (which I wholly endorse) are against inherently fiscal invasions of sovereignty.
[7] These regimes are explained in Open Market Operations and Why Are Banks Holding So Many Excess Reserves?
(Article changed on May 6, 2015 at 19:28)
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