Collective Conscious

Like me, Neil Sin­hab­abu fig­ures out that seignior­age isn’t just a crazy solu­tion to this crazy cri­sis, it’s good policy:

The more I think about mint­ing trillion-​​dollar plat­inum coins to bal­ance the bud­get, as an answer to debt ceil­ing prob­lems or just for its own sake, the bet­ter it sounds.

The big prob­lem with cre­at­ing new money is that it might cause more infla­tion. But this is the time when we need more infla­tion! We need more peo­ple with money to think that their money is going down in value if they save it, so they’d bet­ter spend it now. That’s how you escape the liq­uid­ity trap where nobody spends or invests because they’re wor­ried about their finan­cial sit­u­a­tion. Give them a rea­son to spend or invest (in the lat­ter case, to develop resources that’ll catch the fresh money com­ing into the sys­tem) and they’ll be the demand you want.

That’s the short-​​term way to put the case, but there’s a long-​​term way too. If peo­ple on the Fed always feel that they shouldn’t actively pur­sue looser money because that’s not the stodgy banker thing to do or the rich cashed-​​up guy thing to do or what­ever, they’re always going to pur­sue exces­sively tight mon­e­tary pol­icy. Turn­ing fis­cal pol­icy into a vehi­cle for mon­e­tary loos­en­ing by set­ting a prece­dent for bal­anc­ing bud­gets by mint­ing plat­inum coins off­sets the insti­tu­tional bias towards exces­sively tight mon­e­tary pol­icy.

Pro­gres­sives should note that there’s also a good dis­trib­u­tive jus­ti­fi­ca­tion for infla­tion. Who has lots of cash? Rich peo­ple and rich cor­po­ra­tions, almost by def­i­n­i­tion. Who doesn’t have much cash? Poor folks and espe­cially peo­ple in debt, who kind of have neg­a­tive cash. So if you reduce the value of cash rel­a­tive to other assets, you’re putting poor peo­ple (who just have their future labor and some debt) in a bet­ter posi­tion rel­a­tive to rich peo­ple (who have cash). Dis­trib­u­tive win!