Blue Dollars: How the Blue States Can Be Fiscally Independent

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    Creigh Gordon

    So the basic idea is that a coalition of states announces that it will pay all its bills and collect all its taxes in “Blue Dollars” which are created out of thin air by a monetary authority set up by participating states. Taxes which would have been payable to the US Treasury would now be payable to the coalition.

    This would be unconstitutional because states are not allowed to “coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts.” (Article I Section 10, but how many divisions does the Constitution have?)

    The monetary authority would accept unlimited green dollars in exchange for blue dollars at par for some very limited time, after which the exchange rate would float (with the expectation that in a short time green dollars would be worth less than blue dollars due to the relative economic strengths of blue states vs. red states. If the monetary authority accepts unlimited green dollars, it can be expected that the great majority of those dollars would be exchanged. The monetary authority would also redeem currently issued US Treasury bonds with blue dollars at maturity. US Treasury bonds issued after float would not be redeemable in blue dollars (What I’m saying here is that the blue states would assume the great majority of the current US National Debt. Why is this OK? Because the National Debt is fundamentally just a number with no real economic significance.) Green dollars turned in for blue dollars would be shredded.

    The point of creating a new currency under the control of a blue state coalition is that the coalition would have complete control of spending and taxing within the blue state coalition. The blue states would exist in a situation much like Britain in the EU, where Britain retained its own currency and therefore control over its own fiscal policy. (Not that fiscal independence prevented Britain from screwing up fiscal policy…)

    Under our current system, there are significant fiscal transfers from blue states to red states. Under control of the blue state coalition, these could be continued as a form of “foreign aid” as the coalition wishes. The point is not to screw over red states, just prevent them from dictating policy due to Constitutional artifacts like an undemocratic Senate.

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