MONEY FROM NOTHING

National debt? What, me worry?

Hockett, an economist who drafted Alexandria Ocasio-Cortez’s Green New Deal resolution, and James, the playful philosopher behind Assholes: A Theory (2012), deliver a timely argument: If the government can bail out corporations and serve up huge giveaways to the already rich, why shouldn’t everyone qualify? The coronavirus stimulus payout shows that the Federal Reserve “could regularly credit a guaranteed income….Call it one’s ‘birthright’ for being a citizen or authorized resident of the richest country in human history.” But where will all that money come from? Here, the authors’ argument becomes ethereal, befitting the abstract nature of money, and philosophical. Every dollar bill contains the words “Federal Reserve Note,” and the note in question is in essence a promise, “an IOU issued by the US central bank.” Given that the “full faith and credit” of the U.S. isn’t likely to disappear soon, and given that money in the hands of working people is usually spent and circulated quickly, generating wealth by creating markets and jobs, then money can be printed at will with the understanding that the promise it holds is neither too much (inflation) or too little (deinflation). “Lately we’ve been underpromising,” write the authors, adding, “there is not enough money in the right places.” Putting it in the right hands is the purview of the Fed, which, the authors argue, is comfortable with the notion of floating endless lines of credit to banks without demanding a profitable return—though banks, of course, don’t extend the same to their customers. Eliminating the middleman, the banker, by their account, is one of the “right policies [that] produce the means of money absorption itself—more goods and services, more real wealth—in tandem with the money issuance that finances those improvements.” It all adds up to a heady proposal for a new social compact, with every point well worth debating.

A wildly contrarian argument that contains many provocations—and some sensible solutions to big fiscal problems, too.