
<html><head><meta http-equiv="Content-Type" content="text/html charset=windows-1252"><base href="x-msg://114/"></head><body style="word-wrap: break-word; -webkit-nbsp-mode: space; -webkit-line-break: after-white-space; "><div><blockquote type="cite"><div style="margin: 0px; padding: 20px 50px; font-size: 16px; font-family: arial, sans-serif; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; orphans: 2; text-align: -webkit-auto; text-indent: 0px; text-transform: none; white-space: normal; widows: 2; word-spacing: 0px; -webkit-text-size-adjust: auto; -webkit-text-stroke-width: 0px; "><img src="http://www.sng.ecs.soton.ac.uk/mailscanner/images/1x1spacer.gif" width="1" height="1" alt="Web Bug from http://r20.rs6.net/on.jsp?t=1115254720112.0.1101807978350.5681&ts=S0966&r=3&o=http://ui.constantcontact.com/images/p1x1.gif" style="margin: 0px; padding: 0px; "><div id="content" style="margin: 0px; padding: 0px; "><div id="article" style="margin: 0px; padding: 0px; "><h1 class="article-title" style="margin: 0px 0px 10px; padding: 0px; font-size: 20px; ">Solution to the “Shutdown”: The Fed Could Simply Cancel $2 Trillion of Government Debt</h1><div class="author" style="margin: 5px 0px; padding: 0px; font-size: 12px; ">By<span class="Apple-converted-space"> </span><a href="http://r20.rs6.net/tn.jsp?e=001Xgw1gfSCoacVIfPM9zPDu9sZOKU66yU8x6555_P29-jFsAicKm7pPodBIpJvx8pD2WtNpj3ekdY0QU_OBrCBLYoA_-l1loivr207PL14pwKAycukxsJ5JySFPZBWvBXLymqodCZmE9APBhWchx4fTjrOvaAZY2Pk" title="Posts by Washington's Blog" style="margin: 0px; padding: 0px; ">Washington's Blog</a></div><div class="grDate" style="margin: 0px 0px 5px; padding: 0px; font-size: 12px; ">Global Research, October 12, 2013</div><div class="url" style="margin: 10px 0px; padding: 3px; font-size: 11px; background-color: rgb(228, 228, 228); position: static; z-index: auto; ">Url of this article:<br style="margin: 0px; padding: 0px; "><a href="http://r20.rs6.net/tn.jsp?e=001Xgw1gfSCoadL5W5qZ5PP5tcQCxaVNmEVinS92jFtjfyg-vfuu5HDIAMFnMOkeWZJ7ZyCCq8P9hrm_A8J0DBLSzBUEo_9fPmBlMWPWvhrfxvir2giqoW2ul6IysurADjK1F3Tsb5mAookwA5eA6MnEiUw1_9wfWWih5DYs22N0eWz_c4DRcft_SqgnT2UFmf1hFz3W9_RhLtoM3AuIQ5VJitl5SiAYeP3mnNpijdlvvV5RtQPdvYVUw==" style="margin: 0px; padding: 0px; "><span class="Apple-converted-space"> </span>http://www.globalresearch.ca/solution-to-the-shutdown-the-fed-could-simply-cancel-2-trillion-of-government-debt/5354037</a></div><br style="margin: 0px; padding: 0px; "><br style="margin: 0px; padding: 0px; "><div class="article-content" style="margin: 10px 0px; padding: 0px; text-align: justify; "><p style="margin: 10px 0px !important; padding: 0px; "><strong style="margin: 0px; padding: 0px; ">Bipartisan Proposal Would Take Pressure Off the Budget Crisis</strong></p><p style="margin: 10px 0px !important; padding: 0px; ">Congressman Alan Grayson and former congressman Ron Paul are two of the fiercest warriors against an out-of-control Federal Reserve.</p><p style="margin: 10px 0px !important; padding: 0px; ">Paul has campaigned to dissolve the Fed for 35 years, and wrote an entire book called “<a href="http://r20.rs6.net/tn.jsp?e=001Xgw1gfSCoadpdcdKkYD-rhK3dKn0xgOjxLauz3CcALSi-uQ2gf9JK_GN_hMy_8MX5UMQeGVtwo46XE05myiDh8oQb1Te1dMd6GMTxaEKEtj0_LI5BrfgN6H9bLAjsZcn0BHdMnCBAd8p3202KQ95XKNL9dWjFtakkAwyILvBWbuy3k0XUp14X60QJ_7NQkG6OVVhYPTu_NuHXamIeGVwaBDt5-1Bujl9ERQ4OefF0JJG3zXwO6K04jLxzNaUD-NvMyewnNOrRD7fbHWrCgmPLQ==" target="_blank" title="End the Fed" style="margin: 0px; padding: 0px; ">End the Fed</a>“. Grayson has<span class="Apple-converted-space"> </span><a href="http://r20.rs6.net/tn.jsp?e=001Xgw1gfSCoae9DpZbMi2mAeLC5_AFU0Tmm9HZCReLXZVTpmSjmsN5n0uD1bgojv1rw6ZcHU8OJiBw1Q7GabGS-UFIRfXnCzSvmLLUwqwIRGDipxZEQBb1KRMyDJi3QovpFQ_jZ-yzhZaGKnkQznm9SkxEHIpF_alBwl750f_V1dn9cbbkj48xXX6iDWWS_wNvk6S23ccd__CgesPE0GqnxGJnXaoe7W7J-jmWSbdniCzWvG2qx_foPua8evPl86Vfld1dJN4A6hGVzBJImtg87YbBr1u6vi5J2IBhmdHWs62CqsSRQXWLV7xS9O8dir1JO1bqP54EMXA=" title="repeatedly" style="margin: 0px; padding: 0px; ">repeatedly</a><a href="http://r20.rs6.net/tn.jsp?e=001Xgw1gfSCoacCuzNVMPKPOU9KZLM0JlMMFpo8Asu_ABGrmlgJJB92RVmm3KKe1O847GIvB8iEyZpzgr4IWZls3xSs_iWJMtxAnJrAfr7mW-rfNqBP0EfMswyL_q7BguYrrGUCLbSke6OK0b_K4CRWg-c_VCbGCC4PoJNSFGaycy92HRnfgJXIQW95UVfCuEDV2G7r8zN_LSQy7zoO8J0w0KnNqs1PYg2OqwemcYjXrixFjgq-Ai45fBMj8pJn-rQ9" title="slammed" style="margin: 0px; padding: 0px; ">slammed</a><span class="Apple-converted-space"> </span>the Fed, and<span class="Apple-converted-space"> </span><a href="http://r20.rs6.net/tn.jsp?e=001Xgw1gfSCoaeSgUKN-KzmHqUSZ3lddSNztPgbjIe3Ym_vih6Qru2lYVwGGCrQ_s559VwpiHxdGV3fUbEtUR1n-RrU4aAX9_w8YYJiH4MqJRV4zGL-JDm3Fb-2rbu8GI89dn_hCM_6jbgFI8zKX6VHeQ==" target="_blank" title="absolutely demolished it" style="margin: 0px; padding: 0px; ">absolutely demolished it</a><span class="Apple-converted-space"> </span>...<span class="Apple-converted-space"> </span><a href="http://r20.rs6.net/tn.jsp?e=001Xgw1gfSCoad6_ebE0djYM7jJBI0suqjiSVW5gMAwnF9W_dZ6O8PdH52XKSImr5j5kl3l_eXihV79i9YmD8D5aZvmGpeDHuPF_Qi29Q8f5Kl_whCqCcNYX8IWHODxkCVQGlRINv4SpVC94UQrbGr4cQ==" target="_blank" title="to its face" style="margin: 0px; padding: 0px; ">to its face</a>. Paul and Grayson also<span class="Apple-converted-space"> </span><a href="http://r20.rs6.net/tn.jsp?e=001Xgw1gfSCoafxXwUJ_bw6J0Ig3ni7alcwUgpivgqOxu0yvYfPDlCxKAQbHipqIGRp3pMpsCdKlEU9fGVgY3FZDbLZKLDXYmYe8sGYSKpxJ8p3ipWDIuKd9T4v3pSFACefcLsd3S_wWtRp9aR_RgLjQ-N8woDSWrwrIgla8ovvOrg3AS5yaS9XgNF8VM4ZgOl0etJJtFCvQYoOWyEmEMVGvZL-MWlf0SYV-sTiJZjcDnfKqrRMFoBwpw==" target="_blank" title="co-sponsored a bill" style="margin: 0px; padding: 0px; ">co-sponsored a bill</a><span class="Apple-converted-space"> </span>to audit the Federal Reserve. (Their desire to rein in the Fed is supported by<span class="Apple-converted-space"> </span><a href="http://r20.rs6.net/tn.jsp?e=001Xgw1gfSCoaeyaUSpzHbCd24f5sO5tcgrgqYMtmKbOGGHK0qMBt9h6MjfeGu0FHKx8bPN2pRtTPMMYnQ8PpVbNmfs0prnYpHXy0lFjOL7mcq8RsS1fVEQjzEd0ckPJP4XIWcc_MTxGqiNKJpgmrxzylYxEkC0iD_erPf7w6FKB_VdmUW9RpIqFkpixYQNpaok" title="numerous top economists" style="margin: 0px; padding: 0px; ">numerous top economists</a>.)</p><p style="margin: 10px 0px !important; padding: 0px; ">So when the two of them support a Fed-related solution to the “government shutdown” crisis, I listen.</p><p style="margin: 10px 0px !important; padding: 0px; ">Congressman Grayson<span class="Apple-converted-space"> </span><a href="http://r20.rs6.net/tn.jsp?e=001Xgw1gfSCoafyyctQbL-ilV6YP7O_BbrlJFJcuGiZSzpyazwnKTTLNmCnaFjG-nauzvXYGa6a41tyte8Tmz8rOI-IGx-zuuMVyB4YAXdsgJpA8LAeca7JdFKEZ4q9u5m6uz35omPYvoWOJ5wDM60QEOd0RpV75mqDEuuqOpLEdRVhQ3jjnqk2t5oLMwdkBwqleuAEuT9TzQ26202i_F4Lrw==" target="_blank" title="writes" style="margin: 0px; padding: 0px; ">writes</a><span class="Apple-converted-space"> </span>today:</p><blockquote style="margin: 0px; padding: 0px; "><p style="margin: 10px 0px !important; padding: 0px; ">A simple solution to the impasse is as follows:<span class="Apple-converted-space"> </span><a rel="nofollow" style="margin: 0px; padding: 0px; ">Federal Reserve</a><span class="Apple-converted-space"> </span>Chairman<span class="Apple-converted-space"> </span><a rel="nofollow" style="margin: 0px; padding: 0px; ">Ben Bernanke</a><span class="Apple-converted-space"> </span>should simply cancel the Treasury debt that it owns. The government can just forgive the government’s debt.</p><p style="margin: 10px 0px !important; padding: 0px; ">This wouldn’t solve the debt problem entirely. The<span class="Apple-converted-space"> </span><a rel="nofollow" style="margin: 0px; padding: 0px; ">Federal Reserve</a><span class="Apple-converted-space"> </span>doesn’t own all<span class="Apple-converted-space"> </span><a rel="nofollow" style="margin: 0px; padding: 0px; ">U.S. government</a><span class="Apple-converted-space"> </span>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></blockquote><div style="margin: 10px 0px !important; padding: 0px; "> <br class="webkit-block-placeholder"></div><p style="margin: 10px 0px !important; padding: 0px; "><a href="http://r20.rs6.net/tn.jsp?e=001Xgw1gfSCoacekpGFKkSEomU-qOR34BPvYBDE0zoIQy35c5yyvVMTHXh4vWUMR6_z1E9W_nCYkFdqas86ymk8_tDoOvbhAomL6zctYg8AUqxteV7DzPDYoma1cBG_XnlcZUwdvHhrkSbpLEqcrKfNsmAvhEGoihSrrPhJIMHvk3uLLTUkA6htEIZDpVXWpj8lY_ITbyiX_MKXOQNGnC1Enqxz6f2vxvf0ujhvJK-QVkFBqz9fbq1KVQ==" target="_blank" title="NPR" style="margin: 0px; padding: 0px; ">NPR</a><span class="Apple-converted-space"> </span>has a helpful graphic showing the various holders of U.S. government debt, including the Fed:</p><p style="margin: 10px 0px !important; padding: 0px; text-align: center; "><a href="http://r20.rs6.net/tn.jsp?e=001Xgw1gfSCoacbm2C6BucMwiFuMLbwR3-JYMgpM2x6EInGBOWRgbgGmSb33pO1_dqehGIU_63MouhPoSNKnd17pSH_KK2M53sAs7UktrFD_DS2Oq75Zf3zwpAwOUQihOzAe7DNwveHIlZAShWG-6I3aB1UEz1V00zuFm6P_O75rOWgU-RqcWKqKtamN09bz_OBh9l0hZ1ec1Q=" target="_blank" style="margin: 0px; padding: 0px; "><img class="aligncenter" src="http://www.ritholtz.com/blog/wp-content/uploads/2013/10/pm-gov_debt_v-624.gif" alt="pm-gov_debt_v-624" width="625" height="915" style="margin: 0px; padding: 0px; "></a>Source:<span class="Apple-converted-space"> </span><a href="http://r20.rs6.net/tn.jsp?e=001Xgw1gfSCoacekpGFKkSEomU-qOR34BPvYBDE0zoIQy35c5yyvVMTHXh4vWUMR6_z1E9W_nCYkFdqas86ymk8_tDoOvbhAomL6zctYg8AUqxteV7DzPDYoma1cBG_XnlcZUwdvHhrkSbpLEqcrKfNsmAvhEGoihSrrPhJIMHvk3uLLTUkA6htEIZDpVXWpj8lY_ITbyiX_MKXOQNGnC1Enqxz6f2vxvf0ujhvJK-QVkFBqz9fbq1KVQ==" target="_blank" title="NPR" style="margin: 0px; padding: 0px; ">NPR</a></p><p style="margin: 10px 0px !important; padding: 0px; ">Congressman Grayson continues:</p><blockquote style="margin: 0px; padding: 0px; "><p style="margin: 10px 0px !important; padding: 0px; ">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<span class="Apple-converted-space"> </span><a rel="nofollow" style="margin: 0px; padding: 0px; ">Congress</a>, and it would prevent a default.</p><p style="margin: 10px 0px !important; padding: 0px; ">The debt held on the balance sheet of the<span class="Apple-converted-space"> </span><a rel="nofollow" style="margin: 0px; padding: 0px; ">Federal Reserve</a><span class="Apple-converted-space"> </span>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><p style="margin: 10px 0px !important; padding: 0px; ">Last year, the<span class="Apple-converted-space"> </span><a rel="nofollow" style="margin: 0px; padding: 0px; ">Federal Reserve</a><span class="Apple-converted-space"> </span>declared a “profit” of roughly $91 billion, much of which came from interest payments from the U.S. Treasury. The<span class="Apple-converted-space"> </span><a rel="nofollow" style="margin: 0px; padding: 0px; ">Federal Reserve</a><span class="Apple-converted-space"> </span>then quickly remitted nearly all of this profit right back to the U.S. Treasury.</p><p style="margin: 10px 0px !important; padding: 0px; ">The<span class="Apple-converted-space"> </span><a rel="nofollow" style="margin: 0px; padding: 0px; ">Federal Reserve</a><span class="Apple-converted-space"> </span>does this every year. Reducing or eliminating this unearned “profit” actually will provide a more realistic view of federal finances.</p></blockquote><p style="margin: 10px 0px !important; padding: 0px; ">Grayson gives credit to Paul for coming up with the idea:</p><div style="margin: 10px 0px !important; padding: 0px; "> <br class="webkit-block-placeholder"></div><blockquote style="margin: 0px; padding: 0px; "><p style="margin: 10px 0px !important; padding: 0px; ">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<span class="Apple-converted-space"> </span><a rel="nofollow" style="margin: 0px; padding: 0px; ">Ron Paul</a>.</p><p style="margin: 10px 0px !important; padding: 0px; ">He thinks, as do I, that the<span class="Apple-converted-space"> </span><a rel="nofollow" style="margin: 0px; padding: 0px; ">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><p style="margin: 10px 0px !important; padding: 0px; ">***</p><p style="margin: 10px 0px !important; padding: 0px; ">While canceling the Treasury debt held on the<span class="Apple-converted-space"> </span><a rel="nofollow" style="margin: 0px; padding: 0px; ">Federal Reserve</a><span class="Apple-converted-space"> </span>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></blockquote><p style="margin: 10px 0px !important; padding: 0px; ">Indeed, quantitative easing – the radical program the Fed has engaged in for years, which<span class="Apple-converted-space"> </span><a href="http://r20.rs6.net/tn.jsp?e=001Xgw1gfSCoafDO57VYOB6pYGe2wOAKmkbGR-uEhTtP5wzb7UtvZhsBeGV4j62hxovhu1NNFPk_hfkIl2bK4wcli6QOshFQiej8zTxSd_hvtv2FC6uABN_veGoqP6UDn2POM6NPpo-d1XCyigxJBw0eGtVh9dqtGHJQa39ip28cJ_STrvd8GkTxuyIsh3K_lRoE2-p2kzT4I7IMcqozA0bWgsvqSWDwkvJQoPxb_-rfy8CVsv1atSXnwi_Wu_AxMHiMMRrsU6BQ3IDqvZwYT-3p3Me0Xkk17yi5UlZ-ZGYBns=" title="doesn’t help the economy" style="margin: 0px; padding: 0px; ">doesn’t help the economy</a>,<span class="Apple-converted-space"> </span><a href="http://r20.rs6.net/tn.jsp?e=001Xgw1gfSCoadWpM5DC0xfkrOYGjNc0f4SBcxf6HJ_MRXyn8Eenuc5QoBTJwdmNpmwHnePHWr7x5jiZF57LtFPyHKXf4BKnKA2njQrbEO9uELl__AP3nK_1JPdJeylngB60vtmqYU7eagqTkQ-d6nuu_ZomfhchD_7kbYUdwkjPLKmIAzIEKKaq8CfEoNwOWyi9z2u4s6ICgnvRipHdm5Ht67nHlCGB4O8Em6kYz4MbuH2L351V7hMojAoFP43xpIJPm_fZGgDsa9kG2-bf2vJAw==" title="benefits the the super-elite and hurts the little guy" style="margin: 0px; padding: 0px; ">benefits the the super-elite and hurts the little guy</a>, and<span class="Apple-converted-space"> </span><a href="http://r20.rs6.net/tn.jsp?e=001Xgw1gfSCoadmNRJZrQtPZANa326yVf2rT19qyoN266Z0oP2ea0_YnoP7cB30ezTRU45wQcMNmoHc69g9Q63Lg6hwDdu1eWitvTakBNDyc0XJP2bQMezFJdF9sPbh-Zlsy9RwoDUPZPxgPh1SbhkS7nro3Q_KaDV1cJPm2dmpBrcKn2T3hdOcP1MxmSQsHchpja4wnWDdJ5nXWXL9tweWvlDtyEKoVTMSv8Gmjl1-T0WT2tKwjeCrr8-FZKwVzsAU" title="more than offsets any savings from budget cuts in other areas" style="margin: 0px; padding: 0px; ">more than offsets any savings from budget cuts in other areas</a><span class="Apple-converted-space"> </span>– is largely performed through buying U.S. debt ...<span class="Apple-converted-space"> </span><a href="http://r20.rs6.net/tn.jsp?e=001Xgw1gfSCoacfNsu-YA15PFN1IfjSYANFg60_Rcj0n7qT2n-wQBZa1QuX7qurmZaWNY7Gm5Xz9VOsNWApUwuOmyBf5eTpjjM3PMUjj7Ty9W-xqMrM8kgwbjbesZJr0RnXxC35OdKI0Kc=" target="_blank" title="$45 billion each month" style="margin: 0px; padding: 0px; ">$45 billion each month</a>.</p><p style="margin: 10px 0px !important; padding: 0px; ">Grayson concludes:</p><blockquote style="margin: 0px; padding: 0px; "><p style="margin: 10px 0px !important; padding: 0px; ">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<span class="Apple-converted-space"> </span><a rel="nofollow" style="margin: 0px; padding: 0px; ">Federal Reserve</a>‘s mandate of ensuring price stability, maximum employment and moderate, long-term interest rates.</p><p style="margin: 10px 0px !important; padding: 0px; ">Bernanke could alleviate the debt ceiling crisis simply by canceling the debt held on the Fed’s balance sheet.</p></blockquote></div></div></div><div id="footer" style="margin: 20px 0px; padding: 0px; ">Copyright © 2013 Global Research</div></div></blockquote></div><br></body></html>