Recommended Reading: Blue Bonds: A Fiscal Strategy for Overcoming Trump 2.0
James Keenan
"Blue Bonds: A Fiscal Strategy for Overcoming Trump 2.0" is a position paper issued on May 9 of this year by the Money on the Left Editorial Collective.
In response to "[t]he President’s destructive executive orders and Elon Musk’s aggressive interventions in state agencies and payment systems," the Collective argues that the U.S. needs "a comprehensive public finance program capable of countering right-wing austerity." In such "a bond drive for democracy," "Democrat-controlled “Blue” states and allied municipalities can issue municipal bonds to supplant funds illegally cut and impounded by the federal government. These Blue Bonds would represent a bold financial resistance." The essay goes on to describe the legal framework in which these bonds would exist.
I stumbled upon this essay by following a link from the Law and Political Economy group's weekly update. I vaguely recalled the phrase "Money on the Left," but as I was reading I began to think, "This essay is fully grounded in MMT -- even though it doesn't mention that term." That was confirmed when I began to click on the hyperlinks in the essay and when I saw that at least eight members of the Collective have been speakers at MMT conferences since 2018.
It is very gratifying to see academic and legal scholars responding to Trump's and Musk's rampages through the federal government and the U.S. economy. Please check it out.
Warren Mosler
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Jay Mills
Warren Mosler
Jay Mills
James Keenan
I wrote: "The Fed can purchase Blue Bonds as soon as they are issued, immediately converting them into circulating U.S. dollars."
Warren responded: "The Fed is an agent of Congress so this will require Congressional approval."
That may be so, but the authors of the MOL Blue Bonds essay have commented on its legal underpinnings:
"The Fed is fully equipped to accommodate Blue Bonds. Section 13(3) of the Federal Reserve Act permits the Central Bank to purchase debt in any amount “in unusual and exigent circumstances,” such as during financial crises. More than a formal possibility, the Fed has taken advantage of its emergency powers on multiple occasions in recent history. It has established what are called “Special Purpose Vehicles” (SPVs) to stabilize balance sheets across multiple critical sectors during both the Global Financial Crisis and the Covid-19 Pandemic. In 2023, it even called upon its Section 13(3) authority to redress the failure of Silicon Valley Bank. As a result, the Fed currently holds nearly $7 trillion of purchased assets and, as Central Bank representatives have repeatedly emphasized, it can continue to do so without limit.
"To purchase Blue Bonds, the Fed can revive the “Municipal Liquidity Facility” (MLF), which was established during the Covid-19 pandemic to assist sub-federal governments threatened by plummeting tax receipts. To be effective, however, this time around the MLF necessitates more capacious terms and eligibility conditions."
The essay is unsigned, but I suspect that Rohan Grey is one of its
authors. And it does cite Fed watcher Nathan Tankus. So while this
would be a big political lift, it's not unprecedented as an MMT-inspired
policy recommendation.
Warren Mosler
Jay Mills
On May 23, 2025, at 9:20 AM, Warren Mosler <warren...@gmail.com> wrote: