Solution to USA debt crisis; A possible solution is to finish the logic of the petrodollar and go to energy money: such as the 10KwH dollar.
Keep in mind most money is already energy, that is to say electro-optical 1/0s.
Energy money allows us to generate our way free, releases the “animal spirits” of self improvement, restores actual value to money, and provides an enormous amount of energy at exactly the point we need it - now.
I've long wondered about the feasability of an energy standard. A currency based not based on a commodity, like gold or oil, but on the abstract concept of energy itself: Joules, kiloJoules, and MegaJoules.
Seems like it could be decentralized. Energy producers could print coupons for energy (with perhaps some rate limit and date of expiration) and spend them directly into the economy. Banks could act as clearinghouses for a massive set of energy producers; a few banks with good reputations could issue their own currency based on their holdings. Some banks could be "green" and promise only to hold green energy coupons. It would be a true market-based currency, based on production (and potential production).
On the other hand, the folks at https://monetary.org make a solid case that currency is a creation of law, rather than the market.
Perhaps some combination of the two could work. All it takes for a currency to become widely accepted is for the sovereign to accept it as payment.
What to do with the products produced by a farmer with the help of his horse? Or with some artisans who make pottery on a potter's wheel? What to do with the paintings of artists? And how to evaluate the work of inventors for such money? Or do you mean that only the issuer changes, and everything else remains the same as it is now? I understood you so that you want to pay for the product in accordance with the energy spent on this product.
No, I speak only of the nature of currency. The market should still set prices, because the value of any good or service is not based on the energy it took to create it — it’s based on the amount of energy others are willing to trade for it.
Example: I could spend a great deal of energy building the world’s biggest pile of dog doo; if no one wants to buy it, it’s value is zero no matter how much time and energy it took.
Yes, and digital seigniorage says “THIS” is money… and the rest is energy, and now we proceed to Barter.
Any business and home needs energy. Every farm, etc. needs energy.
Fertilizer/Food needs energy.
The Bills of Exchange, Full Bills of Lading never went away. Any % of energy needed is digitally seigniorage and the rest to production and debt retirement.
14th Amendment, Section 4. The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned.
I hope you are not suggesting default on the debt. No punishment is specified under the constitution for questioning the debt, but you are treading on thin ice.
No, **no one has ever been prosecuted** for violating **Section 4 of the 14th Amendment** — and in fact, it is **not a criminal statute**, so **prosecution is not its intended function**.
### Key Points:
* **Section 4 is a constitutional provision**, not a criminal law. It lays out a *principle* of constitutional obligation: the U.S. government **must honor its lawfully authorized debts**.
* There is **no penalty or enforcement mechanism** in the text for individuals who might “question” the debt.
* **No court case or criminal charge** has ever been brought solely on the basis of violating Section 4.
### Legal Role:
* Its primary role is **preventive and declarative**, not punitive. It was designed to:
* Ensure **confidence in the U.S. government's creditworthiness**.
* Prevent any future Congress or administration from **repudiating federal debt**, particularly that accrued during the Civil War.
* Establish that **Confederate debts** and claims for the loss of enslaved people were null and void.
### Modern Context:
* It has occasionally been cited in debates over the **debt ceiling**, with some scholars and officials (including former President Obama) suggesting it could be interpreted to prohibit a default on U.S. obligations.
* However, **courts have not definitively ruled** on its application in such modern fiscal disputes, and **no legal actions have tested or enforced it** in recent history.
So while it’s a powerful symbolic and constitutional safeguard, it’s not something anyone can be prosecuted for violating.
The Amendments are as worthless as the judges that routinely violate them. When is the last time you cried out, "I thought I was promised a speedy trial!" and anyone took it seriously.
No, **no one has ever been prosecuted** for violating **Section 4 of the 14th Amendment** — and in fact, it is **not a criminal statute**, so **prosecution is not its intended function**.
### Key Points:
* **Section 4 is a constitutional provision**, not a criminal law. It lays out a *principle* of constitutional obligation: the U.S. government **must honor its lawfully authorized debts**.
* There is **no penalty or enforcement mechanism** in the text for individuals who might “question” the debt.
* **No court case or criminal charge** has ever been brought solely on the basis of violating Section 4.
### Legal Role:
* Its primary role is **preventive and declarative**, not punitive. It was designed to:
* Ensure **confidence in the U.S. government's creditworthiness**.
* Prevent any future Congress or administration from **repudiating federal debt**, particularly that accrued during the Civil War.
* Establish that **Confederate debts** and claims for the loss of enslaved people were null and void.
### Modern Context:
* It has occasionally been cited in debates over the **debt ceiling**, with some scholars and officials (including former President Obama) suggesting it could be interpreted to prohibit a default on U.S. obligations.
* However, **courts have not definitively ruled** on its application in such modern fiscal disputes, and **no legal actions have tested or enforced it** in recent history.
So while it’s a powerful symbolic and constitutional safeguard, it’s not something anyone can be prosecuted for violating.
Thin ice? Please try to be a little more hysterical and scoldish
Did it not occur to you that a revolutionary government overthrowing the United States would be as unlikely to follow the rules of it's enemy as the French or Russian revolutionaries were to follow the rules of theirs?
Closing the gold window in 1973 IS default. Not only that, after the French Revolution, USA told the new government to take a hike when they demanded monies owned the monarchy. Two can play this game. But this was why the financial elite love democracy. The people think like the normies when it comes to debt. The statesman would rather default before compromising the economic and martial health of his people. The army can always find more money later.
Thin ice? Please try to be a little more hysterical and scoldish
Did it not occur to you that a revolutionary government overthrowing the United States would be as unlikely to follow the rules of it's enemy as the French or Russian revolutionaries were to follow the rules of theirs?
There are two interesting points for me here. "the National Assembly confiscated Church lands" - shouldn't this fact have brought relief from the debt burden? It should have. You write that "the assignats instead led to hyperinflation due to over-issuance" - shouldn't this inflation, together with the tangible value of church lands (which could not completely evaporate), have eased the burden?
And, finally, were the spoils of the Napoleonic wars used to pay "worthless paper for the repudiated portion"? If not, I wonder why? Perhaps because Napoleonic rule was a revolution within a revolution, and it refused to pay the debts of another revolution?
Actuaries will be calculating age and longevity of those currently receiving SS and Medicare. When those numbers are in the range where legislators don’t feel threatened by angry constituents voting them out of office, they’ll go after SS and Medicare.
Thank you for this fascinating history. I look forward to your analysis of the present situation. I hope it addresses the important distinction of whether a government has issued debt in its own currency, or in foreign currency. Debt in a government’s own currency can be paid by money that the government can itself create.
PS: I didn't know you were using this substack to raise funds for your research group, I hope that works out!
@PT "This was one of the largest sovereign defaults in European history, which undermined trust in the state and fueled political instability throughout the revolutionary period." The default took place in 1797 while the Revolution ended in July 1794 with the execution of Robespierre and his allies. Do you consider the Directoire, Consulat and Empire as part of the revolutionary period?
I would say that the French Revolution created its own new nobility - the bourgeoisie. And the new elite started to buy the land from the very beginning. Let's not forget that even Danton for example had big manor. The Empire in no mean meant return to the Ancien Régime because it still was a country of the bourgeoisie, not a country of landed aristocracy. The entire essence of this revolution was the move from domination second to the first. The Entire Napoleon's fight was dedicated to gaining better position for the French bourgeoisie, and the Continental system was the main and most prominent sigh and proof of it. And the return of the Ancien Régime was a clear return to previous order, what was the reason for all following revolutions that shattered France during 19th century.
In addition to the domestic policy, wouldn't a contracting share of the global trade done in dollars also act on the currency as inflationary? It kinda looks like the plan is to print and inflate till a crisis hits, AI disruption of employment, a war in, just picking a place at random, the middle east, at which point we could shift to a CBDC for reasons. Call it the 'digital dollar' but hide a default and the issuance of, in essence, a new currency in the turn over.
"In addition to the domestic policy, wouldn't a contracting share of the global trade done in dollars also act on the currency as inflationary" - yes, it will
The US Federal government can directly sell land (freedom cities anyone?) and oversees bases or a 21st version of assignats in digital form (crypto only exchangeable by American citizens or whomever). I don't see a tax route to solvency; from looking around, its unpromising.
The "thin ice" comment is meant to be somewhat humorous. But an actual default on debt is extremely unlikely for the US as the debt is in US$. A debt crisis (high interest rates as investors balk) would likely be resolved by a mix of tax increases and inflation.
An actual default would have devastating economic consequences, far worse than higher interest rates.
If all US dollars were returned almost immediately, and at the same time, frightened foreign investors pulled their money out of US stocks, bonds, etc. and sold assets at the same time (simply out of panic), wouldn't the scale of inflation and the necessary tax increases paralyze the US economy? Wouldn't an actual default look much more attractive? Wouldn't refusing to default lead to a riot and something akin to a revolution?
An official default would be far more disruptive, with the financial markets paralyzed. Inflation allows the debt to be reduced quietly to manageable levels.
Contrast the deflationary situation which led to a partial default in 1935 (https://en.wikipedia.org/wiki/Gold_Clause_Cases). Under the Gold standard, you are not borrowing in your own money, so default can have advantages for a government. In 1935, the US went off the actual gold standard, changing to a nominal gold standard (which was abandoned in 1971). Inflating was better than defaulting.
Excessive public debt can have bad consequences but when borrowing in your own currency, you can manage it. All of the crises listed here https://en.wikipedia.org/wiki/List_of_sovereign_debt_crises involved debts in gold, external currency, technical problems with payments or brinksmanship on budget issues.
I think the crux of the debate today is not what is worse, an official default or huge inflation, but whether or not the US current account deficit is a danger to the US. Democrats argue that it is manageable and nothing to worry about. Well, you can still take some proactive steps, that would be good, but it's not that urgent. The Republicans see the situation as really dramatic and gloomy. From my point of view, if China manages to develop further, it will become a real threat to the United States precisely because foreign investment will change its direction and go to China. And this will inevitably provoke the crisis we are talking about, one way or another. Trump's point is that the situation is really dangerous and requires immediate action.
I think Peter Turchyn means that in both cases (official default or huge inflation), events without active intervention will provoke an uprising.
The problem is not foreign investment, but moving away from the US as the international reserve currency. But this doesn't lead to a devastating crisis.
It could lead to a period of stagflation like the US experienced from 1967-1982.
I agree. I meant that the rise of China will cause a whole set of problems, including a change in the direction of investment and the international reserve currency and, as a result, the ability of the United States to influence world politics - the whole complex that will be caused by the change of the world leader. I just don't understand why you think it will be like in 1967-1982. The United States was still the world leader in those years. So, from my point of view, the change will be incomparably worse and incomparably more destructive for the United States.
Every crisis has its own characteristics, but I look 1967-1982 stagflation period as best analogy to our current situation. Can you suggest a better analogy?
Even imperfect analogies can be helpful. For example, I had analogized the COVID crisis the drop in economic production that occured in 1945 with the demobilization of the US economy at the end of WW2. I expected a fairly fast recovery once the epidemic waned, which is what happened.
In both situations there any made differences, but good analogies are start of good analysis.
It is unclear how one can generalize about the debts of the state without speaking to the ability to collect revenue...which depends on economic production. I believe it was Adam Smith who said the wealth of nations lay in the division of labor, both in individual skills and the use of machinery, not in the currency itself.
Solution to USA debt crisis; A possible solution is to finish the logic of the petrodollar and go to energy money: such as the 10KwH dollar.
Keep in mind most money is already energy, that is to say electro-optical 1/0s.
Energy money allows us to generate our way free, releases the “animal spirits” of self improvement, restores actual value to money, and provides an enormous amount of energy at exactly the point we need it - now.
I've long wondered about the feasability of an energy standard. A currency based not based on a commodity, like gold or oil, but on the abstract concept of energy itself: Joules, kiloJoules, and MegaJoules.
Seems like it could be decentralized. Energy producers could print coupons for energy (with perhaps some rate limit and date of expiration) and spend them directly into the economy. Banks could act as clearinghouses for a massive set of energy producers; a few banks with good reputations could issue their own currency based on their holdings. Some banks could be "green" and promise only to hold green energy coupons. It would be a true market-based currency, based on production (and potential production).
On the other hand, the folks at https://monetary.org make a solid case that currency is a creation of law, rather than the market.
Perhaps some combination of the two could work. All it takes for a currency to become widely accepted is for the sovereign to accept it as payment.
What to do with the products produced by a farmer with the help of his horse? Or with some artisans who make pottery on a potter's wheel? What to do with the paintings of artists? And how to evaluate the work of inventors for such money? Or do you mean that only the issuer changes, and everything else remains the same as it is now? I understood you so that you want to pay for the product in accordance with the energy spent on this product.
No, I speak only of the nature of currency. The market should still set prices, because the value of any good or service is not based on the energy it took to create it — it’s based on the amount of energy others are willing to trade for it.
Example: I could spend a great deal of energy building the world’s biggest pile of dog doo; if no one wants to buy it, it’s value is zero no matter how much time and energy it took.
Yes, and digital seigniorage says “THIS” is money… and the rest is energy, and now we proceed to Barter.
Any business and home needs energy. Every farm, etc. needs energy.
Fertilizer/Food needs energy.
The Bills of Exchange, Full Bills of Lading never went away. Any % of energy needed is digitally seigniorage and the rest to production and debt retirement.
14th Amendment, Section 4. The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned.
I hope you are not suggesting default on the debt. No punishment is specified under the constitution for questioning the debt, but you are treading on thin ice.
The US will need to raise taxes eventually.
ChatGPT says:
No, **no one has ever been prosecuted** for violating **Section 4 of the 14th Amendment** — and in fact, it is **not a criminal statute**, so **prosecution is not its intended function**.
### Key Points:
* **Section 4 is a constitutional provision**, not a criminal law. It lays out a *principle* of constitutional obligation: the U.S. government **must honor its lawfully authorized debts**.
* There is **no penalty or enforcement mechanism** in the text for individuals who might “question” the debt.
* **No court case or criminal charge** has ever been brought solely on the basis of violating Section 4.
### Legal Role:
* Its primary role is **preventive and declarative**, not punitive. It was designed to:
* Ensure **confidence in the U.S. government's creditworthiness**.
* Prevent any future Congress or administration from **repudiating federal debt**, particularly that accrued during the Civil War.
* Establish that **Confederate debts** and claims for the loss of enslaved people were null and void.
### Modern Context:
* It has occasionally been cited in debates over the **debt ceiling**, with some scholars and officials (including former President Obama) suggesting it could be interpreted to prohibit a default on U.S. obligations.
* However, **courts have not definitively ruled** on its application in such modern fiscal disputes, and **no legal actions have tested or enforced it** in recent history.
So while it’s a powerful symbolic and constitutional safeguard, it’s not something anyone can be prosecuted for violating.
It is funny how literally bibliolatrous Americans take their Constitution. “You are treading on thin ice”! It is hard to imagine such a mindset.
What I have seen discussed, as that any debt-holder could go to court and insist on payment. You can check out this article https://dlj.law.duke.edu/article/the-debt-limit-and-the-constitution-how-the-fourteenth-amendment-forbids-fiscal-obstructionism/ and https://www.ncsl.org/state-legislatures-news/details/the-debt-ceiling-and-the-14th-amendment-the-jury-is-still-out
How many legions does the judge have?
The Amendments are as worthless as the judges that routinely violate them. When is the last time you cried out, "I thought I was promised a speedy trial!" and anyone took it seriously.
ChatGPT says:
No, **no one has ever been prosecuted** for violating **Section 4 of the 14th Amendment** — and in fact, it is **not a criminal statute**, so **prosecution is not its intended function**.
### Key Points:
* **Section 4 is a constitutional provision**, not a criminal law. It lays out a *principle* of constitutional obligation: the U.S. government **must honor its lawfully authorized debts**.
* There is **no penalty or enforcement mechanism** in the text for individuals who might “question” the debt.
* **No court case or criminal charge** has ever been brought solely on the basis of violating Section 4.
### Legal Role:
* Its primary role is **preventive and declarative**, not punitive. It was designed to:
* Ensure **confidence in the U.S. government's creditworthiness**.
* Prevent any future Congress or administration from **repudiating federal debt**, particularly that accrued during the Civil War.
* Establish that **Confederate debts** and claims for the loss of enslaved people were null and void.
### Modern Context:
* It has occasionally been cited in debates over the **debt ceiling**, with some scholars and officials (including former President Obama) suggesting it could be interpreted to prohibit a default on U.S. obligations.
* However, **courts have not definitively ruled** on its application in such modern fiscal disputes, and **no legal actions have tested or enforced it** in recent history.
So while it’s a powerful symbolic and constitutional safeguard, it’s not something anyone can be prosecuted for violating.
Thin ice? Please try to be a little more hysterical and scoldish
Did it not occur to you that a revolutionary government overthrowing the United States would be as unlikely to follow the rules of it's enemy as the French or Russian revolutionaries were to follow the rules of theirs?
Closing the gold window in 1973 IS default. Not only that, after the French Revolution, USA told the new government to take a hike when they demanded monies owned the monarchy. Two can play this game. But this was why the financial elite love democracy. The people think like the normies when it comes to debt. The statesman would rather default before compromising the economic and martial health of his people. The army can always find more money later.
Thin ice? Please try to be a little more hysterical and scoldish
Did it not occur to you that a revolutionary government overthrowing the United States would be as unlikely to follow the rules of it's enemy as the French or Russian revolutionaries were to follow the rules of theirs?
Tell me you’ve never been sued without telling me you’ve never been sued. This is America, anybody can sue anybody.
Won't someone please think of the debt?
There are two interesting points for me here. "the National Assembly confiscated Church lands" - shouldn't this fact have brought relief from the debt burden? It should have. You write that "the assignats instead led to hyperinflation due to over-issuance" - shouldn't this inflation, together with the tangible value of church lands (which could not completely evaporate), have eased the burden?
And, finally, were the spoils of the Napoleonic wars used to pay "worthless paper for the repudiated portion"? If not, I wonder why? Perhaps because Napoleonic rule was a revolution within a revolution, and it refused to pay the debts of another revolution?
Actuaries will be calculating age and longevity of those currently receiving SS and Medicare. When those numbers are in the range where legislators don’t feel threatened by angry constituents voting them out of office, they’ll go after SS and Medicare.
Just a cynical thought.
As one cynic told me a nasty virus could solve the retiree problem
Thank you for this fascinating history. I look forward to your analysis of the present situation. I hope it addresses the important distinction of whether a government has issued debt in its own currency, or in foreign currency. Debt in a government’s own currency can be paid by money that the government can itself create.
PS: I didn't know you were using this substack to raise funds for your research group, I hope that works out!
@PT "This was one of the largest sovereign defaults in European history, which undermined trust in the state and fueled political instability throughout the revolutionary period." The default took place in 1797 while the Revolution ended in July 1794 with the execution of Robespierre and his allies. Do you consider the Directoire, Consulat and Empire as part of the revolutionary period?
Do you consider the Directoire, Consulat and Empire as a return to the old aristocratic order?
I would say so. After all, the Empire created its own nobility (so-called noblesse d'Empire in French).
I would say that the French Revolution created its own new nobility - the bourgeoisie. And the new elite started to buy the land from the very beginning. Let's not forget that even Danton for example had big manor. The Empire in no mean meant return to the Ancien Régime because it still was a country of the bourgeoisie, not a country of landed aristocracy. The entire essence of this revolution was the move from domination second to the first. The Entire Napoleon's fight was dedicated to gaining better position for the French bourgeoisie, and the Continental system was the main and most prominent sigh and proof of it. And the return of the Ancien Régime was a clear return to previous order, what was the reason for all following revolutions that shattered France during 19th century.
I feel sorry for bitcoin, whose epitaph is: "For oh, for oh, the bitcoin is forgot." Or maybe not...
In addition to the domestic policy, wouldn't a contracting share of the global trade done in dollars also act on the currency as inflationary? It kinda looks like the plan is to print and inflate till a crisis hits, AI disruption of employment, a war in, just picking a place at random, the middle east, at which point we could shift to a CBDC for reasons. Call it the 'digital dollar' but hide a default and the issuance of, in essence, a new currency in the turn over.
"In addition to the domestic policy, wouldn't a contracting share of the global trade done in dollars also act on the currency as inflationary" - yes, it will
Eliminate the Debtee, is the easiest and oldest of ways.
No Debtee, No Debt.
But who owns this massive American debt that runs at 35 trillion dollars.
The US Federal government can directly sell land (freedom cities anyone?) and oversees bases or a 21st version of assignats in digital form (crypto only exchangeable by American citizens or whomever). I don't see a tax route to solvency; from looking around, its unpromising.
The "thin ice" comment is meant to be somewhat humorous. But an actual default on debt is extremely unlikely for the US as the debt is in US$. A debt crisis (high interest rates as investors balk) would likely be resolved by a mix of tax increases and inflation.
An actual default would have devastating economic consequences, far worse than higher interest rates.
If all US dollars were returned almost immediately, and at the same time, frightened foreign investors pulled their money out of US stocks, bonds, etc. and sold assets at the same time (simply out of panic), wouldn't the scale of inflation and the necessary tax increases paralyze the US economy? Wouldn't an actual default look much more attractive? Wouldn't refusing to default lead to a riot and something akin to a revolution?
An official default would be far more disruptive, with the financial markets paralyzed. Inflation allows the debt to be reduced quietly to manageable levels.
Contrast the deflationary situation which led to a partial default in 1935 (https://en.wikipedia.org/wiki/Gold_Clause_Cases). Under the Gold standard, you are not borrowing in your own money, so default can have advantages for a government. In 1935, the US went off the actual gold standard, changing to a nominal gold standard (which was abandoned in 1971). Inflating was better than defaulting.
Japan has heavy level debt of 263% (https://en.wikipedia.org/wiki/National_debt_of_Japan#:~:text=As%20of%20January%202025%2C%20the,the%20highest%20among%20developed%20nations.) but being its own currency there is no pressure to default.
Excessive public debt can have bad consequences but when borrowing in your own currency, you can manage it. All of the crises listed here https://en.wikipedia.org/wiki/List_of_sovereign_debt_crises involved debts in gold, external currency, technical problems with payments or brinksmanship on budget issues.
I think the crux of the debate today is not what is worse, an official default or huge inflation, but whether or not the US current account deficit is a danger to the US. Democrats argue that it is manageable and nothing to worry about. Well, you can still take some proactive steps, that would be good, but it's not that urgent. The Republicans see the situation as really dramatic and gloomy. From my point of view, if China manages to develop further, it will become a real threat to the United States precisely because foreign investment will change its direction and go to China. And this will inevitably provoke the crisis we are talking about, one way or another. Trump's point is that the situation is really dangerous and requires immediate action.
I think Peter Turchyn means that in both cases (official default or huge inflation), events without active intervention will provoke an uprising.
The problem is not foreign investment, but moving away from the US as the international reserve currency. But this doesn't lead to a devastating crisis.
It could lead to a period of stagflation like the US experienced from 1967-1982.
I agree. I meant that the rise of China will cause a whole set of problems, including a change in the direction of investment and the international reserve currency and, as a result, the ability of the United States to influence world politics - the whole complex that will be caused by the change of the world leader. I just don't understand why you think it will be like in 1967-1982. The United States was still the world leader in those years. So, from my point of view, the change will be incomparably worse and incomparably more destructive for the United States.
Every crisis has its own characteristics, but I look 1967-1982 stagflation period as best analogy to our current situation. Can you suggest a better analogy?
Even imperfect analogies can be helpful. For example, I had analogized the COVID crisis the drop in economic production that occured in 1945 with the demobilization of the US economy at the end of WW2. I expected a fairly fast recovery once the epidemic waned, which is what happened.
In both situations there any made differences, but good analogies are start of good analysis.
It is unclear how one can generalize about the debts of the state without speaking to the ability to collect revenue...which depends on economic production. I believe it was Adam Smith who said the wealth of nations lay in the division of labor, both in individual skills and the use of machinery, not in the currency itself.