{"id":78431,"date":"2013-10-12T13:48:59","date_gmt":"2013-10-12T12:48:59","guid":{"rendered":"http:\/\/rinf.com\/alt-news\/breaking-news\/solution-to-the-shutdown-the-fed-could-simply-cancel-2-trillion-of-government-debt\/78431\/"},"modified":"2013-10-12T13:48:59","modified_gmt":"2013-10-12T12:48:59","slug":"solution-to-the-shutdown-the-fed-could-simply-cancel-2-trillion-of-government-debt","status":"publish","type":"post","link":"http:\/\/rinf.com\/alt-news\/breaking-news\/solution-to-the-shutdown-the-fed-could-simply-cancel-2-trillion-of-government-debt\/","title":{"rendered":"Solution to the \u201cShutdown\u201d: The Fed Could Simply Cancel $2 Trillion of Government Debt"},"content":{"rendered":"
\"pm-gov_debt_v-624\"\/<\/a><\/div>\n

Bipartisan Proposal Would Take Pressure Off the Budget Crisis<\/h3>\n

Congressman Alan Grayson and former congressman Ron Paul are two of the fiercest warriors against an out-of-control Federal Reserve.<\/p>\n

Paul has campaigned to dissolve the Fed for 35 years, and wrote an entire book called “End the Fed<\/a>“. Grayson has repeatedly<\/a> slammed<\/a> the Fed, and absolutely demolished it<\/a> … to its face<\/a>. Paul and Grayson also co-sponsored a bill<\/a> to audit the Federal Reserve. (Their desire to rein in the Fed is supported by numerous top economists<\/a>.)<\/p>\n

So when the two of them support a Fed-related solution to the “government shutdown” crisis, I listen.<\/p>\n

Congressman Grayson writes<\/a> today:<\/p>\n

\n

A simple solution to the impasse is as follows: Federal Reserve<\/a> Chairman Ben Bernanke<\/a> should simply cancel the Treasury debt that it owns. The government can just forgive the government’s debt.<\/p>\n

This wouldn’t solve the debt problem entirely. The Federal Reserve<\/a> doesn’t own all U.S. government<\/a> debt; it owns only roughly $2 trillion of it. (Well $2,076,927,000,000.00, as of last Wednesday, but who’s counting?)<\/p>\n<\/blockquote>\n

NPR<\/a> has a helpful graphic showing the various holders of U.S. government debt, including the Fed:<\/p>\n

Source: NPR<\/a><\/p>\n

Congressman Grayson continues:<\/p>\n

\n

Yet canceling this debt would give the government substantial room under the debt ceiling to manage its finances. It would end the debt ceiling standoff in Congress<\/a>, and it would prevent a default.<\/p>\n

The debt held on the balance sheet of the Federal Reserve<\/a> can be canceled without any significant consequence, because it is a bookkeeping artifact corresponding to the money supply. In essence, the government owes this money to itself. If I owe money to myself, I can cancel that debt at will and without consequence, essentially taking it out of my left pocket and putting it in my right pocket.<\/p>\n

Last year, the Federal Reserve<\/a> declared a “profit” of roughly $91 billion, much of which came from interest payments from the U.S. Treasury. The Federal Reserve<\/a> then quickly remitted nearly all of this profit right back to the U.S. Treasury.<\/p>\n

The Federal Reserve<\/a> does this every year. Reducing or eliminating this unearned “profit” actually will provide a more realistic view of federal finances.<\/p>\n<\/blockquote>\n

Grayson gives credit to Paul for coming up with the idea:<\/p>\n

\n

I am a Democrat, and known as a progressive. But this idea was put forward a few years ago not by me, or by a member of my party, but by Republican Representative Ron Paul<\/a>.<\/p>\n

He thinks, as do I, that the Federal Reserve<\/a>‘s dramatic expansion of its balance sheet is simply a way of financing the government by printing money. The Fed isn’t really “buying” Treasury bonds, it is just letting the government finance its deficit by adding to the money supply.<\/p>\n

***<\/p>\n

While canceling the Treasury debt held on the Federal Reserve<\/a> balance sheet might be considered unorthodox, it is no more unorthodox than the quantitative easing that has added much of this debt to the Fed’s balance sheet.<\/p>\n<\/blockquote>\n

Indeed, quantitative easing – the radical program the Fed has engaged in for years, which doesn’t help the economy<\/a>, benefits the the super-elite and hurts the little guy<\/a>, and more than offsets any savings from budget cuts in other areas<\/a> – is largely performed through buying U.S. debt … $45 billion each month<\/a>.<\/p>\n

Grayson concludes:<\/p>\n

\n

In any event, preventing a financial meltdown, with its attendant risks of interest rate and price spikes as well as staggering employment losses, is certainly central to the Federal Reserve<\/a>‘s mandate of ensuring price stability, maximum employment and moderate, long-term interest rates.<\/p>\n

Bernanke could alleviate the debt ceiling crisis simply by canceling the debt held on the Fed’s balance sheet.<\/p>\n<\/blockquote>\n

Copyright: Global Research<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Bipartisan Proposal Would Take Pressure Off the Budget Crisis Congressman Alan Grayson and former congressman Ron Paul are two of the fiercest warriors against an out-of-control Federal Reserve. Paul has campaigned to dissolve the Fed for 35 years, and wrote an entire book called “End the Fed“. Grayson has repeatedly slammed the Fed, and absolutely […]<\/p>\n","protected":false},"author":1,"featured_media":78432,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[487],"tags":[],"class_list":{"0":"post-78431","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-breaking-news"},"_links":{"self":[{"href":"http:\/\/rinf.com\/alt-news\/wp-json\/wp\/v2\/posts\/78431","targetHints":{"allow":["GET"]}}],"collection":[{"href":"http:\/\/rinf.com\/alt-news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/rinf.com\/alt-news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/rinf.com\/alt-news\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"http:\/\/rinf.com\/alt-news\/wp-json\/wp\/v2\/comments?post=78431"}],"version-history":[{"count":0,"href":"http:\/\/rinf.com\/alt-news\/wp-json\/wp\/v2\/posts\/78431\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"http:\/\/rinf.com\/alt-news\/wp-json\/wp\/v2\/media\/78432"}],"wp:attachment":[{"href":"http:\/\/rinf.com\/alt-news\/wp-json\/wp\/v2\/media?parent=78431"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/rinf.com\/alt-news\/wp-json\/wp\/v2\/categories?post=78431"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/rinf.com\/alt-news\/wp-json\/wp\/v2\/tags?post=78431"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}