Ellen Brown on the Fiscal Cliff

Another nice piece from Ellen Brown - this one's called "Fiscal Cliff : Time to Call their Bluff". She proposes a number of ways of dealing with the problem.

I was particularly happy that one of the options that Ellen considered is the idea of using a Financial Transaction Tax. She even uses my numbers to back her case (thanks Ellen!)

"Simon Thorpe, a financial blogger in France, cites figures from the Bank for International Settlements, showing total U.S. financial transactions of nearly $3 QUADRILLION in  2011.  Including other sources, he derives a figure of $4.44 QUADRILLION.  Even using the more "conservative" $3 quadrillion figure, a tax of a mere 0.05% (1/20^th of 1%) would be sufficient to raise $1.5 trillion yearly, enough to replace personal income taxes with money to spare." 

Actually, since producing those numbers, I've found yet another big player that doesn't appear to get a mention in the BIS figures. It's the CME Group, which in a recent presentation of its "Financial Milestones for 2011",  boasted that it

"Traded 3.4 billion contracts worth more than $1 quadrillion in notional value, which included record average daily volume of 13.4 million contracts".

How many other organisations like CME Group are operating? Does anyone even know? It seems to me obvious that all financial transactions should be monitored so that the true figures can be determined.And it seems insane that I have been forced to try and add up all the numbers from home because nobody in authority seems to think that these numbers should be public.

I suppose that it is possible that some of these transactions go through several different agencies and that this might lead to an overestimation of the the total volumes of real transactions. But actually, I don't mind. If the tax was implemented according to my rule book, the 0.05% tax (or whatever) would apply at every stage of the transaction. That would simply encourage the dealers to simplify their transactions - a good thing for everyone.

Ellen also mentions another interesting (and highly amusing) option. It's called the "Trillion Dollar Coin Trick".  The idea is that the US Government could use its constitutional right to "coin" money, and mint a few trillion dollar coins. Ellen proposed the idea in her Web of Debt book back in 2007 at which point is was just a "wacky idea". But she notes that :

"In a December 7^th article in the Washington Post titled "Could Two Platinum Coins Solve the Debt-ceiling Crisis?," Brad Plumer wrote that if Congress doesn't raise the debt ceiling as part of the fiscal cliff negotiations, "then some of these wacky ideas may get more attention."
Ed Harrison summarized the proposal at Credit Writedowns like this:

• The Treasury mints a $1 trillion coin, or whatever amount is desired.
• The Treasury deposits the coin into the Treasury's account at the Fed.
• The Treasury buys back bonds.
• The retirement of bonds is an asset swap, no different from QE2.
• The increase in reserve balances is not inflationary, as Credit Easing 1.0, QE 1.0, and QE 2.0 already have shown.
• These operations by the Treasury create no new net financial assets for the non-government sector.
• The debt ceiling crisis is averted. "

Plumer cites Yale Law School Professor Jack Balkin, confirming the ploy is legal.  He also cites Joseph Gagnon of the Peterson Institute for International Economics, stating, "I like it.  There's nothing that's obviously economically problematic about it." 
To the objection that it is a legal trick that makes a mockery of the law, Paul Krugman responded, " These things sound ridiculous -- but so is the behavior of Congressional Republicans.  So why not fight back using legal tricks?"

Wonderful!  It's precisely the sort of "wacky idea" that I really like. And, like the idea of paying off the entire UK national debt in 5 easy stages by using the insane fractional reserve banking trick to hoist the banking system by its own petard, it might actually work!