Month: October 2021

In this bonus episode, Rohan Grey speaks with Philip Diehl about #MintTheCoin in the wake of this season’s debt limit showdown. Director of the United States Mint under President Bill Clinton from 1994 to 2000, Diehl is best known today as the person most responsible for 31 U.S. Code 5112(k). The law permits the Treasury Secretary to “mint and issue platinum bullion coins and proof platinum coins in accordance with such specifications, designs, varieties, quantities, denominations, and inscriptions as the Secretary, in the Secretary’s discretion, may prescribe from time to time.” This clause charts a completely constitutional path to avert recurrent debt crises and furnishes a ready framework for a new kind of radical financial literacy. No wonder why much ink has been spilled and many hands have been wrung trying to explain away or dismiss its radical implications. Grey’s conversation with Diehl explores the history of the platinum coin, offering a fascinating and unprecedented behind-the-scenes glimpse of life in the U.S. Mint.

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Music by Nahneen Kula: www.nahneenkula.com

Transcript

The following was transcribed by Rohan Grey and has been lightly edited for clarity.

Transcript of #MintTheCoin! – Interview with Former Mint Director Philip N. Diehl by Rohan Grey^[1]

[1] Assistant Professor of Law, Willamette University & Director, Public Money Action.

Grey: Well thank you so much for joining me. My name is Rohan Grey, and I’m an Assistant Professor of Law at Willamette University in Oregon. I’m also a Director of Public Money Action, a 501(c)(4) that promotes public education and tries to improve our public policymaking process around money and financial issues.

And I’m joined today for this very special one-on-one interview with Philip Diehl, the former Director of the United States Mint, appointed by President Clinton, and currently President of U.S. Money Reserve, to talk about this idea that’s been taking the world by storm, and getting into the press, about how we could potentially resolve the ongoing and recurring debt ceiling crises that we’ve been experiencing through a provision of the Coinage Act, that authorizes the minting and issuing of platinum proof and bullion coins of whatever denomination the Treasury Secretary determines to be appropriate.

So we’re going to go into some detail about the history of that law, and some of the sort-of edges and boundaries of it. But before I get into that, I’d like to let everybody get to know you a bit more, because you’re the sort-of architect behind this in many respects, and have had a pretty incredible and unusual career. So would you mind telling us a little about what got you to be the Director of the U.S. Mint, where you were beforehand, and what that journey was like?

Diehl: Well, I went to Washington D.C. when I was thirty-nine years old, so I had a long career before that in government, some in politics, but mostly in government and the private sector. I went to Washington to be Legislative Director to Senator Lloyd Bentsen (D) of Texas. And I served in that role for almost two years, until he appointed me to be Majority Staff Director of the Senate Finance Committee. And I was probably the shortest-lived Director of Senate Finance, because within three months Bill Clinton was elected, and a few weeks later Bentsen was chosen as Secretary of the Treasury, and then I went in as his Chief of Staff at the Treasury Department on the first day of the Clinton Administration.

I was in that job – a thankless job, my kids never saw me, I had young kids at home – and after about six to nine months, I felt like I had helped the Senator, and now Secretary, transition into the job. And so I decided that I was ready to go home back to Austin, Texas. And he said, well, why don’t you go look at the United States Mint, that’s a turnaround situation, I know you want to run a company.

And I was never a collector. I knew hardly anything about the U.S. Mint. But you don’t tell the Secretary of the Treasury, “No.” So I went over there, and I was very fortunate because a fellow by the name of David Rider was Director at the time, and he was a Bush Administration – H.W. Bush Administration – holdover. And he and I really made a connection. He gave me a great orientation to the U.S. Mint.

So I went back to the Secretary after three weeks and told him, “Yeah, I am interested. This looks like a real good opportunity.” And that’s a very unusual move for someone who came to Washington because of his policy interests. And this really isn’t a policy foundation, it’s a manufacturing and marketing operation. But I saw it as a diamond in the rough, and I thought, “I could do something with it.” And one of the things that really animated me, and animated the team around me at the U.S. Mint, is we had, and have, a very strong commitment to demonstrating what government – well-led government agencies – can do for the American people. That there’s a real role for an active government.

And I really liked this particular audience that I was playing to – the U.S. Mint customers on the bullion and numismatic side of the business – who are, I used to say, white, male, and over fifty, conservative, Republican. And I said the white male over fifty thing was something I aspired to – now I’m well into that demographic – and I think we really had an impact on them, surprising them in what we were able to accomplish in a whole lot of areas.

Grey: Yeah, it’s incredible, you would think that sometimes people come up through the ranks of the Mint, or they come in thinking that their job is just to keep the lights on, and not make waves. But as you said, you came in thinking of it as almost a turnaround, and you had had experience both on the hill, and in the heart of the Treasury, and seen a sort-of bird’s eye view, and saw what this agency could do and what it could become. And not only a vision for active government, but a vision for how to take an agency and to make it bigger than what it might have been. And history is full of people who’ve really kind of had a vision for making something bigger than what it was when they came into government, and to be creative about that.

So do you mind going into a bit more detail about what your sort of vision was for the Mint, what your agenda was? I know you were there for quite a while, but sort of looking back, what would you say your kind of priorities were, or how do you feel your legacy of what you left the Mint, what shape you left it in versus where it started?

Diehl: I started well, what I thought was small, and ended up being pretty big, and with three priorities that I, in my confirmation hearing, I called those out. And one of them was the financial situation at the Mint – both performance and in terms of the whole financial structure – was a terrible mess. And we were one of the first agencies – because we had private sector-like functions – we were one of the first agencies subject to a new federal law that subject government agencies to outside audits. And eventually that spread to every agency. And our first audit, the U.S. Mint failed. And for any number of reasons. So I said we need to fix that.

The second thing was we had a real problem with customer service to our numismatic customers.

Really all three of our customers: bullion, numismatic, and then circulating coins, where the Federal Reserve is the U.S. Mint’s customer. And I said we needed to fix that, that was a big problem with just performance, morale at the agency, the tremendous criticism from outside the organization because of that failure of performance.

And then the third thing was there was – there is – this commemorative coin program, in which the U.S. Mint produces, upon a mandate of Congress, a series of commemorative coins. And Congress mandates every one of those programs. And this is a way of raising funds for organizations that have access to very powerful members of Congress, and it’s a way of circumventing the appropriations process. So there grew to be a feeding frenzy for these programs, and as a result, by the time I became Director, the market for these coins had collapsed because of abuse, really, by Congress. And so getting that program under control was my third priority. And I could only do that with the help of Members of Congress, especially a couple of committee chairs, to reign in that program.

So that’s really where I started. But as we built our capabilities and our confidence in our capabilities, and there’s a psychological element to that, there’s a personnel element to it, there’s a structural element to it, there’s a financial element to it—

Grey: There’s a precedential element, yeah.

Diehl: Yes, yeah. So we grew in confidence and capability in what we could do. Which ultimately led to a series of highly innovative, entrepreneurial programs, that we had Congress enact, and that we built on to build our credibility and our capabilities. And the first one of those programs was the Platinum Eagle program. And I wanted to—first of all, I’d begun to build a relationship with the new Republican Chairman of our Banking Committee, Financial Services Committee, Oversight SubCommittee, Michael Castle from Delaware. And so I went to him and said we have this idea for a brand new platinum coin, that allows us to – will allow us, if we structure it correctly – to compete in international markets. And we had never competed in international bullion markets before.

And so I asked for a blank slate. Completely unprecedented in U.S. Mint and U.S. coinage – two hundred years of U.S. coinage – history. Where in the past, Congress mandated every little detail, and the Mint could not deviate from those details, had no discretion. And I asked for virtually total discretion to design a coin, based on market research and building a relationship with the person, the company, and the patriarch of the company in Japan – which along with North America are the two big international platinum bullion markets. And so that included everything from design to denomination.

And that’s what we were granted. I drafted that bill, he got behind it and carried it to fruition. It got embedded in a much larger Coinage Act that was designed to fulfill one of my promises, and that was to get the commemorative coin program under control. To limit it. So that’s relevant to the issue of the platinum coin, because it has been described as our intent, and Congress’s intent, to create another collectible. And that was not the intent. The intent was to authorize a bullion coin. And as I sidelight of that, it also allowed us to produce a proof coin, which is a collectible coin. It was never intended to be a commemorative coin of any kind.

So that’s sort of how we got started. And that program was immensely successful. Within six months of launching the bullion version of this coin, we had taken sixty, sixty-five percent of the Japanese market away from another competitor. And we’d also, of course, taken the American market away. And that success laid the groundwork for Congress to pass the Fifty State Quarters Program. We demonstrated our ability to perform on an entrepreneurial project.

Grey: So I want to just take a step back – I want to get into the platinum coin provision in particular, but two things that you mentioned were interesting to me. One is you were talking about the idea that Congress had previously micromanaged all of these different coin programs, and you wanted more discretion. One of the things that I traced out in my research on this issue was that if you look at the debt ceiling – before the debt ceiling existed, Congress would micro-manage the issuance of Treasury debt. You have to issue this amount of this kind of duration for this spending program, and this amount for this program, et cetera.

And in the earlier twentieth century that became increasingly unwieldy as the government got bigger. And one of the goals of the original debt ceiling, if not the primary goal, was to give more discretion to the Treasury to choose how to finance, right? You tell us how much to spend, and we will work out how to do it. In fact, I think it was Secretary Mellon in the thirties that said we [the Treasury] should have complete discretion – using similar words to you – in what kinds of securities we issue, in what denominations, to meet our needs. Get Congress out of it entirely.

And it seems like there’s that trend in general, as the government gets bigger and more complicated, to put more discretion on the executive branch. Not to make the important political decisions, but to execute on the sort-of priorities and commitments. And it seems to me that’s kind of consistent with – that there’s a sort of parallel there – with you getting more of that discretion within the Mint’s sort of authority, the way that the Bureau of Debt Management, or Office of Debt Management would have done with Treasury securities.

Diehl: Yes. Yeah, that’s exactly right. And there’s another element to this, and that is that Congress has delegated more authority to the executive branch as it has become more politicized over decades. And a great example of that is the Base Closure Commissions, in which – because it is so politicized, in terms of who are the winners and losers – that Congress in the past was paralyzed in its ability to make the Defense Department more efficient by closing down bases that had outlived their usefulness. And so what did it do? It turned over to the executive branch a process by which it presented a package of bases to be closed and consolidated, and then that package went to Congress, and they could vote it up or down. They could not amend that package whatsoever. So basically what Congress did was said “put these handcuffs on us, and then, you know, just give us a simple option.”

That’s also what they did with that whole Commemorative Coin Program. I basically put together a Base Closure Commission for these coins, so that there was a committee that was formed that would make recommendations to Congress. And Congressmen would make recommendations to us, but they didn’t have to say no. They could say, “Oh, the executive branch committee over here, they said no.

Sorry.”

Grey: Mhm. And you can see a clear parallel with the debt ceiling today, where everybody knows it needs to be increased or abolished, but nobody wants to take political responsibility.

Diehl: Yes.

Grey: And so, for the executive branch to step into the breach and say: look, we’re going to do what everybody knows needs to be done–

Diehl: Yes.

Grey: …but may be politically unpalatable, and that might be to use authority that you’ve clearly given us, you know–

Diehl: Yes.

Grey: …in ways that maybe you want to be able to say, hey, you didn’t want this–

Diehl: Yes.

Grey: …and that’s useful political theater, because you can distance yourself a little bit, but it allows us to keep doing what needs to be done.

Diehl: And that is part of the magic of the trillion dollar coin, is it takes – it depoliticizes the whole issue. After you bite the bullet – or bite the coin – and do it, it takes that issue out of the hands of Congress. Everybody is off the hook, except the Secretary of Treasury and the President. And actually, I think what happens – right now what’s happening – is the trillion dollar coin, and also the Fourteenth Amendment, serve as a failsafe–

Grey: Yes.

Diehl: …on the coin. So everybody can play games with the politics of this, knowing that in the end that there are outs to this. And to sort of settle markets down as they pretend to approach this disaster of the economic collapse of default. And I, you know, I think that’s part of what’s happened this week, when all of a sudden, you know, Senator McConnell decides that, well, let’s put this off. Because there were escape hatches.

There were other things that were going on too, like, you know, the Department of Defense intervened, and said–

Grey: We need to keep the lights on, this is a national security issue.

Diehl: Yeah, we need to pay our people. And so there were other things at play too. But the timing of the article that was written by Felix Salmon, that said, you know, that quoted me, saying, Oh, the Treasury Department could–

Grey: could be done in hours.

Diehl: Yeah, can produce this coin overnight, virtually, if they set up a couple of ducks in order. And that’s the first time, I don’t think that had ever been said.

Grey: No, it hadn’t.

Diehl: And so – and it got tremendous play. As you know, Drudge put it at the top of their page, and then gave a spin to the title that suggested it was already–

Grey: They’re going to do it, yeah.

Diehl: …They’re doing it right now. So–

Grey:  The hyperbole helped bring it further into reality.

Diehl: Yes, yeah, yeah. It certainly blew up the whole story.

Grey: Yeah, and I want to just go and take a step back also. Because you were just talking about taking this out of – about depoliticizing this. But of course, this isn’t about depoliticizing the budget itself.

This isn’t about depoliticizing spending itself.

Diehl: Exactly, yeah.

Grey: That’s still an incredibly political process. In fact, maybe the most central political process for Congress. This is just about honoring that spending once it’s already been committed, and not saying we’re going to ignore Congress, or go back on our debts and things. And I just to sort of connect that, because one of the things that you haven’t mentioned about your legacy – and correct me if I’m wrong about when this, the timing of this – but my understanding is that you were also the Mint Director when the Mint really sort of separated its own budget from the rest of Treasury, and became a nonappropriated fund instrumentality, which means essentially that it funds itself through its own operations. You know, the CFPB [Consumer Finance Protection Bureau] does this with fines, other agencies do this with fines, the Fed does it with its own money creation powers.

But you essentially sort of elevated the Mint back up to an equal status with the Fed in terms of being, kind of, off balance sheet from the rest of the government. Which, when you combine that with the Mint’s sort of, internal powers, makes it a very very, you know, powerful institution. As you said, the Mint has been around for two hundred years, it’s the oldest monetary institution in the U.S. government. But that seems to have been a pretty key moment in making the modern Mint what it is today. Do you have any thoughts?

Diehl: Yes, it absolutely was. And when I proposed this to Treasury I got laughed at. They said, how are you going to get Congress to let go of the purse strings on your agency. And I said, I’m going to do it through the Appropriations Committee. Which made them laugh harder, because of course the Appropriations Committee is where that power is exercised. But I already know at the time that the Chairman of my Appropriations Sub-Committee was going to back it, because he and I had talked about it, and he really–

Grey: You worked on the hill, you know how this works.

Diehl: Well, yes, exactly. But also I was very fortunate, because the new Republican Chairman of the Committee – this was in ‘95, so right after the Gingrich revolution – the new Republican Chairman of the Appropriations Sub-Committee was a conservative – very conservative – Republican. But he and I hit it off on a personal level. And he really liked the idea of what I was doing at the United States Mint, of turning it into an entrepreneurial, you know, business-like agency.

Grey: Believing the government can do something, ironically.

Diehl: Yes, yes. This was before there was this commitment in the party – his party – that the best way of showing the government could not perform was to sabotage it. And so he was not like this at all, a guy by the name of Jim Lightfoot from Iowa. And so he said yes, you know, and I explained that all these things that we need to do, I need to have this flexibility. And so I need to operate off my own profits. The U.S. Mint is a profit-making enterprise for the U.S. government. Our profits go directly into the general fund of the Treasury. And I told him, you give me this flexibility, and I’m going to send a lot more money into the General Fund.

Grey: Which means less government debt, right? Less borrowing.

Diehl: Exactly. I mean, that’s exactly right. The money from the United States Mint, part of it, is exactly the same as tax revenue. And the other part of it, which gets to the trillion dollar coin, is very much like the issuance of interest-free loans, uh, bonds. So the combination of that, you know, really was compelling to him. He carried the legislation. Not only did we get completely off the appropriations process, but we also got the FAR, the federal procurement regulations, were lifted from us. So we took a document that was like *this* thick, and turned it into a pamphlet, to describe to outsiders what our acquisition process was.

Grey: So once again, it’s the story of more flexibility, more discretion.

Diehl: Yes. And I will say this: later on, we went to OMB [Office of Management and Budget] and asked for flexibility around the personnel rules. And I had such a good relationship with our unions that I actually had the endorsement of our unions to lift the personnel rules from us. And when my Deputy Director and I went in, we explained what we wanted to do, and pointed to our success on the procurement and on funding. He said, “you don’t understand. It’s not failure we fear, it’s success.” So we realized, okay, we’re at that point of hitting the Catch-22.

And the concern was, and he said – we said, what’s that mean? – and he said well, if you achieve this kind of flexibility, every other government agency is going to want it. And we said, our response was, “well, if they earned it, why wouldn’t you give it to them?”, knowing that is a very high bar to reach, and not very many government agencies are going to do that. One of the reasons they wont do it is because the professional risk – and therefore the financial risk – that leadership in Washington D.C. takes if it wants to make a significant change in how things work in Washington, and in the performance of an agency.

So there were a lot of things that, sort of came – and we got really lucky. We had friendly Republicans in key positions. But it is, yeah, it is hard to get that kind of flexibility.

Grey: It’s just incredible to hear this story in detail like this, I mean I feel like it needs to be a book or a movie, or something. I’ve spent a fair bit of time studying the origins of the Federal Reserve, and it’s incredible to hear this story – that you sort of almost did single-handedly – when you think about the Federal Reserve’s origins as this sort of confluence of massive banking interests in the heart of a crisis. And you’re just behind the scenes, sort of quietly doing something that ends up creating a level of budgetary and legal autonomy that’s sort of comparable within its own space.

But a couple of things were sticking out to me. One is the Federal Reserve also has budgetary independence, but doesn’t have the same kind of independence with its employees, for maybe a similar reason. So there are court cases and things where they say, look, in one sense the Federal Reserve System is clearly a government agency, but it’s got its own separate budget process, but in certain circumstances employees will be considered government employees.

But your point about the seigniorage revenue being a source of income similar to interest-free loans: at the Fed, of course, they create Federal Reserve Notes; they create reserves, which banks use as money. And the profits that the Fed returns from the assets that it buys by creating those dollars, when it returns it to the Fed, at least very recently, it was booked in accounting terms as Interest on Federal Reserve Notes. So the whole thing was, we can create this one kind of currency, and anything we do within our agency will be sent back as the sort of seigniorage profit, or the charge that we pay on what we earn on creating these instruments.

And so it’s sort of interesting to me that we have this moment where, you know, when the Federal Reserve returns eighty billion dollars a year in this revenue, we say this is great, you know, this reduces the need to borrow, thank you so much. This isn’t against Federal Reserve independence, this is good for, you know, statutory agency independence. But nobody kind of notices that the Mint’s also been doing that, often because the numbers are maybe an order of magnitude smaller. But as you noted, in your tenure they went up. And they could have kept going up. And there’s never been a limit historically on the upper limit. It’s only been, sort of, how visionary the Mint Director has been, it seems like.

Diehl: Yes, yeah, those are good points. And it gets to one of the points I like to make, [which] is: the trillion dollar coin is nothing novel. I mean, it has been made out to be this gimmick. And as you say, you know, it’s [an] everyday occurrence at the Fed, and at the United States Mint. Creating seigniorage – seigniorage being the difference between the face value of a coin, in this case, and the cost of production. And that represents sort of a profit, but really it represents more of a loan in this case, because the U.S. Mint sends a coin – a quarter, let’s say – to the Federal Reserve. The Federal Reserve purchases it for the face value – twenty-five cents. Let’s say the Mint produces it at a cost of eight cents. So that’s seventeen cents, margin, that the Mint makes on that coin. Well, you add up all of that in the course of the year, and that acts as – the U.S. Mint moves it over to the Treasury Department – and that seigniorage acts as a means of funding the government, just like a bond does.

And so the only difference a trillion dollar coin represents, is it has more zeroes on the end of it. And, yeah, that’s a huge thing. But it’s not a different process. It’s not a different concept. In fact, this is a concept – seigniorage goes back, you know, I don’t know–

Grey: Yeah, Founding Fathers.

Diehl: …two hundred years.

Grey: Pointy hats–

Diehl: Yeah.

Grey: …and tin whistles, and, you know, the HBO mini-series.

Diehl: Yeah.

Grey: It’s as American as apple pie.

Diehl: [Chuckling] Yes. Yeah, yeah. And it’s because governments have used seigniorage to fund their operations – the King’s operations – for hundreds and hundreds of years. And Mint Directors in the past, if they shaved too much – if they shorted the amount of metal that was in a coin beyond what the Crown had authorized – they were hung, you know. 

Grey: It was a big deal.

Diehl: It was a really big deal, yeah.

Grey: Isaac Newton was the Mint Director in the U.K, took his job very seriously. Yeah, I mean, two things on that. One is, you know, you say it’s sort of like issuing government debt. But it’s important, and this is where, again, being very clear about statutory language – as a law professor I love this whole moment because it’s forcing people to learn how statutes work – but the public debt limit is quite narrow. It’s for things that have interest and principle, and it includes only a certain group of instruments. So for example, Federal Reserve Notes and coins have never been counted in the national debt. If they did, then we’d have probably accidentally violated the debt ceiling a number of times already.

Diehl: Yes.

Grey:  But not only that, there’s actually been instruments that the Federal Reserve issues – interestearning term deposits, which they started issuing in 2009 – that pay interest, are a legal obligation of the government, but are not included in the debt ceiling. And so there’s a lot of instruments out there – including the Greenbacks that Lincoln authorized, that are still legal on the books at the Bureau of Engraving and Printing – that are not included in the debt ceiling. We could call them debt, we could call them a means of financing, but they are no “Debt Subject to Limit” in the same way. And this coin would be very clearly in that category, not in the category of debt subject to the debt ceiling, because that’s a very narrow category. And that’s sort of one of the other confusions. People say, “oh well this is basically violating the spirit of the debt ceiling law.” Well, no more than issuing a quarter is, right?

Diehl: Yes, that’s exactly right.

Grey: And you mentioned, you know, that this was a sort of bullion coin program initially. And I think this is one other confusion – we were just talking about this earlier – people often think, well, bullion coins have to represent the underlying metal value and nothing more. And the reality – correct me if I’m wrong – is that a lot of bullion coins are sold, you know, over their face value because the metal is more expensive.

But there’s nothing that says the face value couldn’t be more than the metal, and we certainly aren’t on a gold standard, or a metal standard in general. And it’s the face value of the coin that matters. In fact, I pulled up a couple of statutes – 31 U.S.C. § 5112(q)(4), which concerns the sale of $50 denominated gold bullion coins, says that the bullion coins shall be sold for an amount the Secretary determines to be appropriate, but not less than the sum of the market value of the bullion, and the cost of designing the coins, including labor, materials, machinery, et cetera.

So even with regular bullion coins – and there’s another one for § 5112(o)(4)(A), which governs the sale of $10 denominated commemorative gold coins, that says that bullion coins shall be sold at a price that is equal to or greater than the sum of the face value and the cost of designing the coins. So even when we think of bullion coins, we’re not thinking of something that can only ever be the value of the metal. That might be a floor, but it’s not necessarily a ceiling. Does that sound correct to you?

Diehl: Yes, that’s exactly right. And it’s only by practice, and sort of practicality, that the U.S. Mint sells bullion coins at a small premium over the spot price of gold, that represents those costs of production, of marketing, sales, and all that. And that’s because the purpose of the coin is to compete in marketplace with other bullion coins. And so those sorts of price constraints apply because of the intent, and the intent of the product, and the circumstances in which the product enters the marketplace. None of that applies to a trillion dollar coin. Its purpose is very different. And so it wouldn’t make sense for it to follow that model, because it is so different.

The other thing that’s important is there is no language in that provision of law that authorizes the platinum coin that says anything about pricing.

Grey: That’s right – other than that the Treasury Secretary has absolute discretion, right?

Diehl: Yes, yes. So the restraints that are in the statute, that apply to gold and silver bullion coins, aren’t there for platinum.

Grey: And I believe it was Harvard Law Professor Lawrence Tribe that talked about this. He said, you know, if you look at all the other statutes, and they have constraints. And then you look at one that doesn’t. And it was intentionally written to not have the same constraints as the others. Then you have to take that seriously as a matter of statutory interpretation. You can’t say, “oh, they meant it to have similar constraints, they just forgot.” You wrote it! You didn’t forget. You made it.

Diehl: [Chuckling] Yeah, no, it’s a feature not a bug.

Grey: That’s right, that’s right. That’s exactly right. And you mentioned also, you know, there was also this other language for “proof” coins in the statute as well. And there’s been some sort of debate around this. People say well, proof coins means they have to only be entered into as collectibles. And obviously, most proof coins are collectibles. But my understanding – correct me if I’m wrong – is that the word “proof” there refers to the method of production. Can you describe that for people that aren’t that very familiar with the minting process, what proofing is?

Diehl: Yeah, so proof coins are produced in a very different way from circulating coins and bullion coins. And they are produced to much higher standard. Also, they look different. They have a frosted image, typically, and a marred background. They are sort of a fine art of coin production. And so those coins are typically sold to collectors. But there’s no restriction. They could be sold as bullion coins. They could be produced and put into the Fed as circulating coins.

Grey: You wouldn’t do it because it would be a waste of money and high production grade, but you could if you wanted to, right?

Diehl: Exactly. I mean, you could do it – and we actually talked about doing something like this – to put a very small portion of, like, a State Quarter,into circulation through these huge ballistic bags that we send to the Federal Reserve, and they put into rolls and they ship to banks. And we decided that there was enough interest in the 50 State Quarters when we launched it without doing something like that, there was–

Grey: Sort of like Charlie and the Chocolate Factory and the golden tickets.

Diehl: [Chuckling] Yes, yeah exactly, yes. And so, yes, we completely had the authority to do it. The economics of it does not work if you’re doing all the coins like that. If you took a very small, you know, percentage and did it like that, then the accelerant would easily pay for itself, because all these other coins would be collected hoping to get those. And you get all the seigniorage profit on that.

Grey: In fact, I believe it was Andrew Jackson who issued a Gobrecht Dollar that was a proof circulating coin. And you might know the history better than me, but my understanding was that it was the sort of reintroduction of a dollar coin. And so it was a sort of, as you say, an attempt to drum up interest, and to make a big show of it. And so the reason that you used this higher production grade quality was precisely to get the marketing and the attention, more than you might for a regular coin. And that was a proof coin that happened to circulate. So there’s no kind of inconsistency there.

Diehl: Yes. There’s a similar situation that as far as I know was an accident. I was not aware it was happening, I don’t at all know it was intentional. But when the Sacagawea coin was launched, there were some of them that were produced on a more highly refined blank, and those coins became especially valuable collector items once they were discovered, and–

Grey: Semi-proof, huh? Quasi-proof?

Diehl: Yeah, but it had a better strike to it. And as a result we had a similar kind of effect that you’re describing.

Grey: And the idea of, kind of, having a high – you know, you call it the [high] art of of coins – seems to be pretty appropriate for a trillion dollar coin. You know, I’ve always said, people say “what happens if it gets stolen?” or something, and its sort of a funny joke. And yeah, we all get to laugh about it. Of course, if you steal a trillion dollar coin and then try to use it, there’s going to be a pretty strong legal presumption you didn’t get it legally, right? But I’ve always thought it would be great to have some ritual and symbolism around this, especially if it was to save the government from itself and this insanity of the debt ceiling.

When you think about the Federal Reserve and its announcements – you know, the ritual of these Federal Reserve pronouncements – when you think of courts and them wearing robes, when you think of military service and the, you know, the music they play, and the folding of the flag, ritual is very important to our government. And if we were to going to mint a trillion dollar coin, having it to be beautiful quality, and then, you know, having a child walk it from the Mint to the Fed–

Diehl: Yep.

Grey: …and say, you know, here we are, I’d like to hand this over, and then “I accept this on behalf of the American people,” you know.

Diehl: Yes.

Grey: And then maybe on the other side it ends up at the Smithsonian, and everyone can tour it in schools as part of their, you know, American history education. It seems like proof coin, there, is sort of the appropriate one. Even if the law had said “bullion, proof, or circulating coins,” if you were going to create a trillion dollar coin, you’d probably want it to be proof.

Diehl: Yes, yes. Well, not only would you stand out if you carried a trillion dollar coin and tried to use it in commerce, but hard to make change for it to. But yes, sitting at the Smithsonian, obviously you’d have to have it well guarded, but the–

Grey: Alongside the Declaration of Independence, or something.

Diehl: Exactly, yes. But the key to this – and to address another knock that we hear that is fallacious on the coin – the key is that the coin does not, and of course, can not go into circulation. It has no impact on the money supply. And that is the wrap, is that all of a sudden, it’s going to be like Venezuela. All of a sudden, you’re increasing the money supply by a trillion dollars, and you’re going to have all of these disasters and consequences. You know, it never goes into commerce. It’s not like other coins, or currency, or QE [Quantitative Easing] for that matter, in which money is being inserted into the economy. This coin is produced at the United States Mint, goes to the Federal Reserve, stays in a vault. There will be, when sanity prevails and the debt limit is increased, that trillion dollar coin can come back to the U.S. Mint, just like any other coin. That seigniorage is taken off the books, and the coin is destroyed.

Grey: Right. The only spending that would happen is the spending that Congress has already said needs to happen, that should be happening anyway, and in fact is constitutionally required under the Fourteenth Amendment.

Diehl: That’s exactly right.

Grey: The money going out of the Treasury’s account into people’s pockets should have kept going anyway, but for the insanity in Congress, and these misunderstandings that the debt ceiling is supposed to stop us from being able to continue honoring those obligations.

Diehl: Yes, yeah, exactly.

Grey: So, one question – you mentioned there, you said the coin doesn’t need to go into circulation. Usually, my understanding – and correct me if I’m wrong – is that coins are sold to the Fed, and that the Fed sells them on to banks, who then, you know, get it out into the public. But the Fed isn’t the only actor that has bought coins directly from the Mint, apart from collectors and bullion investors, right? There are other ways that coins do get into circulation. Do you want to tell us a little bit about some of that history?

Diehl: [Chuckling] Okay, yes. It’s sort of notorious. So we were given a mandate by Congress to produce a new dollar coin to replace the Susan B. Anthony, which was an utter failure for a number of reasons. And this is something that Congressman Castle and I worked together on as well. And we were given discretion in this case too, but only over the design of the coin. And it was through a design competition that the United States Mint executed, that the image of Sacagawea and her infant Jean Baptiste on her back, during the Lewis and Clark expedition, was chosen for that coin.

And so we did a lot of market research – part of the entrepreneurial basis. The United States Mint hadn’t done that before to any significant degree; certainly hadn’t with the Susan B. Anthony. And part of the market research was to go the banks and the Fed, and say, you know, to make a pitch: you should get this coin, it’s going to be much more popular than the Susan B. Anthony, and they won’t be in the vaults forever. Here’s the market research of consumers that shows there will be this demand. And the response from the banks and the Federal Reserve was, “well, you have to demonstrate to us – actually demonstrate to us – that there will be demand for this cause.”

Well [it was] the ultimate Catch-22, because if we can’t get through the Federal Reserve into the banks, how do you demonstrate the public is going to want it.

Grey: It’s almost like they just didn’t want it.

Diehl: They didn’t want it, yeah. The coins and the Federal Reserve – I mean, the banks and the Federal Reserve, they don’t like coins. And for–

Grey: It’s an unpleasant reminder that there’s other monetary traditions other than theirs, right?

Diehl: Yes. And coins are more expensive for the Federal Reserve: they’re heavier, they’re–

Grey: They have to pay face value, not the paper cost if they buy paper notes.

Diehl: Exactly, yes. And a dollar coin that was highly popular, the banks in particular didn’t like. Because what happens if you have a really popular coin? Customers come into the bank, they ask for it, they come to the drive-through. That imposes a cost on the banks they don’t want to incur. So no way, they weren’t going to do it, we couldn’t persuade them. It wasn’t a big enough issue for the Secretary of the Treasury or certainly the Chairman of the Fed to get involved in–

Grey: Small change for them.

Diehl: Yeah, exactly. Doesn’t matter. Penny-ante. And, so–

Grey: In fact, I believe I’ve read some Government Accountability Office reports saying, you know, it would be much better for costs and things to have less dollar paper notes and more dollar coins, but it’s very hard to get people to use it, and it would certainly be hard if the banks are not actually on board with helping people use it, and actively resist.

Diehl: Yes, yes. So, being entrepreneurial, we decided we’d go around the Fed and the banks. And I had a lunch with the brand new lobbyist for Walmart, who’d never done any lobbying before. He didn’t know this kind of entrepreneurial stuff wasn’t smart in Washington, D.C. So I said, what I want to do is I want to launch this coin on the same date in three thousand locations, Walmart locations across the country. And we will direct ship, you know – and it was, my recollection was it was two hundred million coins over the period of those two months – to all those locations. A huge number. They wanted as much as we could produce, well we couldn’t produce more than that. And so none of the banks ordered it, Walmart ordered it, and we did a marketing campaign, and at the end of January 2000, that coin was launched.

People lined up. People think the Sacagawea coin was a failure. And it ended up being a failure for a couple of reasons – one is hostility in the banks and the Federal Reserve. But when we launched it, people lined up at the stores. They were out of the coins by the end of the first day. They wanted to order more, we were on a production schedule. But when people couldn’t get the coin that they wanted at Walmart, they went to their banks, and the banks didn’t have them. And so they were embarrassed.

And so what did they do? They don’t say, “oh, you know, we made a mistake.” They call their contact at the Federal Reserve. And the complaints all come in to Greenspan, Greenspan calls the Secretary of the Treasury, I get a telephone call, and I explained why we had done it this way, and it faded the heat. But what we ended up doing was, we went back to Walmart and said, “we’re not going to be able to provide the second one hundred million coins.” It’s a government contract, and also they had achieved their objective.

So we took that hundred million coins, and direct shipped them to the banks based on orders they made online.

Grey: On the day.

Diehl: Huh?

Grey: On the day.

Diehl: Yes, yeah. And we direct shipped it because the process of getting coins from the Mint through the Federal Reserve to the banks was so slow that we, you know, it frustrated the demand. So we bit the bullet and direct shipped it to them, and so it kind of ended the controversy.

Grey: It’s an interesting story on two levels, because on one level it’s showing that – you know, people often say well the Fed wouldn’t accept the coin – well, maybe there are other people that would accept, maybe not a trillion, you know, not everyone’s looking for a trillion in cash, but there are certain investors and things that are looking for, you know, a billion dollars in liquid cash and things. And if you could say, “hey, you know, we can’t sell any more T-Bills this month, but we can sell some coins that you can store, and they’re legal tender, and they will satisfy your fiduciary responsibilities to invest in safe assets, you know, I think there could be people that’d be interested.

But the other part of that story is that, you know, we often think that, “oh the Fed said it can’t be done, so it can’t be done.” But the reality is that’s just one opinion of one agency within the government, and there’s other agencies with other opinions, and who ends up winning that battle when there’s a difference is often about who’s more creative in putting pressure in the right way. And the story you just told is about precisely putting the pressure. And you mentioned a similar story in the past about the 50 State Quarters, where the antagonist was the Treasury in that situation, if you want to share a little about that story.

Diehl: Well, opinions are a dime a dozen. And so of course, you have to look behind the opinions at the facts. And on all of these monetary issues, they’re very complex. So it’s hard to sort through, and usually you have to rely on somebody whose judgment and independence you trust. But the other thing is it’s crucial to look at what is the motive behind – the economic motive, the emotional motive, whatever–

Grey: The partisan, the political motive.

Diehl: …the power motive behind an opinion. And also, what is the strategic situation. For example, we are hearing from the Treasury Department and the White House that “no, no, we won’t do the dollar coin, I mean the trillion dollar coin. It’s a gimmick.” Well, okay, that may be a sincere expression of their intent, or their adamant commitment not to do it. But also it’s very clear that the White House and the Treasury Department wanted a particular outcome, which they got by standing firm. And to say, “yeah, you know, the trillion dollar coin is an option” releases the pressure, the negotiating pressure, to get the outcome they really wanted. And–

Grey: It was Margaret Thatcher that famously popularized “There Is No Alternative” as a justification–

Diehl: Yes.

Grey: …for doing anything. And often there was. But–

Diehl: Yup.

Grey: …it was a useful line. In fact, I remember speaking to some senior Treasury officials back – about the situation in 2011, and they said that. They said, “we didn’t want there to be another option,” because–

Diehl: Yes.

Grey: …we wanted to force the Republicans to come to the table.

Diehl: Yep.

Grey: And so anything that showed that this could be resolved on our side–

Diehl: Yeah.

Grey: …was inconvenient for us.

Diehl: And it’s easy to frame that in partisan terms. That, okay, the Democrats were smarter, tougher, stood hard this time, as opposed to last time; they prevailed. But it’s crucial to rise above that partisan – you know, it’s really a partisan dismissal of what’s really at stake.

Grey: That’s right.

Diehl: What’s at stake here is using the debt limit as a cudgel by threatening the country with default. And now it’s happened three times. The first two times, the Democrats compromised. They were the responsible party. And what did that do?

Grey: Yep.

Diehl: That just laid the foundation for the next time that–

Grey: Yep.

Diehl: …you know, that their opponents would push them to the wall. And this time, they took a stand and the prevailed.

Grey: And, you know, Mitch McConnell managed to get, what? Ten Senators, or something, on board with this, or to vote to change the rules to extend it for another two months? But–

Diehl: Very difficult.

Grey: …all you need–

Diehl: Very hard.

Grey: …all you need is a slightly more radical, you know, opposition party, or maybe not three branches, where there’s enough, you know, members on one side or the other. And yeah, I’ve described it as putting a gun to the head of the American economy–

Diehl: Yes.

Grey: …and saying, “we’ll pull the trigger if they don’t come to the table.” And, you know, even if they’re being unreasonable by not coming to the table, the fact that you’re putting a gun to the head of the American economy is its own form of, kind of, degradation of the process, and what the public understands, because you’re telling them something that isn’t true–

Diehl: Yes.

Grey: …to achieve an outcome–

Diehl: Yes.

Grey: …and in doing so eroding that trust in government, and in the fact that you can, that your politicians are actually telling you what is going on. And they’re doing so in a way that is playing with fire. And if it gets burned will affect everybody. And–

Diehl: Yes.

Grey: …we’ll go, “I can’t believe this happened,” you know?

Diehl: Yes, yeah. And in – I think in the past, when it came up in 2011, 2013, this became increasingly difficult to believe. But, there are some who believed – and some very smart people, savvy people, who believed – that this was only traditional politics: using leverage to – in a negotiating situation – to get an advantage over your opponents. I think we’ve increasingly come to realize – not just because of previous debt limit fights, but from other political situations – that there are people in the country who believe that they benefit, in terms of power and–

Grey: Disruption.

Diehl: …political organization by damaging the economy of the country when the opposing party will be held accountable for it. And it’s a form of economic sabotage. And there is still a group of people who would benefit from that. Or who could sustain their position for a period of time in those circumstances. But the vast majority of us would be losers.

Grey: And we saw that, almost, with some of the – some of the people motivated behind Brexit, for example.

Diehl: That’s right.

Grey: Now they might have been quite aware of how damaging it could be to their economy, but they didn’t care.

Diehl: Yeah.

Grey: So I don’t know if you don’t want to talk about the 50 State Quarter Program and the Treasury experience there, if you – we can move on on that one. But the other thing was, you know, people have been saying, “well, the Fed could just refuse to accept the coin, and it wouldn’t be booked as legal tender until it was sold. And so it’d have to be sold to someone first, and if the Fed refused to accept it then that would be that.” And you were telling me earlier about, sort of, the difference in the legal rules around when something gets counted as, you know, legal tender – when it leaves the Mint, versus when it gets to the Fed.

Diehl: Yes.

Grey: And it reminded me a little bit of when I teach in Contracts. You know, people talk about the Mailbox Rule, you know, when you accept a contract. You send it in the mail versus when the other person receives it; it’s a question of, kind of, when was it accepted. But can you tell us a little bit about that rule, and how it’s changed, and, sort of, what you think about it?

Diehl: You bet. First of all, I think this is a highly unlikely–

Grey: Right.

Diehl: …  theoretical scenario, where–

Grey: …the Federal Reserve would have to be refusing to go along with the Treasury, and saying, “we prefer default in this eleventh-hour moment”–

Diehl: Yes.

Grey: …we will be the ones putting our hand up, saying–

Diehl: Yes.

Grey: …‘we’re willing to cause this default–

Diehl: [Chuckling] yes.

Grey: …in the name of Federal Reserve independence, which, by the way, we hope will still be around tomorrow–

Diehl: That’s right.

Grey: …if we do this.”

Diehl: [Chuckling] Yes, yes. That’s one half of the equation that makes it virtually impossible to happen. The other half of it is just politically, the President, and the Secretary of Treasury, and the Chairman of the Federal Reserve are going to have to agree on doing this beforehand. It’s just, it’s inconceivable that the White House would try to jam this into the Fed. But, I mean, there are scenarios you can conjure up where something like that may happen. So–

Grey: I had a colleague remind me that it’s still on the books that the Treasury Secretary can remove the Fed Chairman for cause, and–

Diehl: Yes.

Grey: …maybe this would be moment–

Diehl: Yes, yes.

Grey: …that unthinkable moment where you might actually be able to remove the Fed Chairman for cause, because they’re standing in the way of preventing unconstitutional default.

Diehl: [Laughing] Yes. I definitely think that would be cause.

Grey: As far as stakes go, you would hope–

Diehl: Yeah, that would be cause.

Grey: …that would be high enough. If the President said, “it’s my sincere belief that–

Diehl: Yeah.

Grey: …this Fed Chair is standing in the way of us, you know, preventing default, I can’t imagine the Supreme Court getting in the way and reversing it. So, you know [shrugs].

Diehl: Yes, yes. And I can think of at least three members of the Senate who you could move into the Chairmanship of the Federal Reserve [clicks fingers] that would accept a trillion dollar coin that fast.

Grey: I won’t ask you to name their names right now.

Diehl: Yes, I’m not gonna name them. But they – and not just because it avoids default, but because there are a whole set of other policy issues that come together in the trillion dollar coin that people don’t talk about because they’re complex. Very complex. And they are downstream from what we are talking about here today.

So this caveat here, to answer your question – this is my recollection of what happened twenty-plus years ago at the United States Mint, and why it happened. And I do not know whether it has changed since then or not. I’d be very surprised if it changed because of the reason why it changed.

So during my term and before my term – during most of my term – seigniorage was booked when coins left the Mint loading dock, on its way to the Fed. So in the case of the trillion dollar coin, we, you know – the U.S. Mint strikes it, they send it to the loading dock, a truck takes it over to a helicopter, which flies it over to the Federal Reserve in New York City in an hour. So under that scenario, boom. The seigniorage would be booked immediately.

There was a point late in my term, when it was the OMB (the Office of Management and Budget), I believe – it could have been Treasury, but I think it was OMB – that changed that booking procedure. And changed it so that the seigniorage wasn’t booked until the Fed had accepted the coin. And – a quarter, whatever coin. And the reason – and it might have happened during the Fifty State Quarters Program (that would make sense) which was launched in 1999 – [was] because we were shipping so many coins to the Federal Reserve, that OMB looked at that and said, “oh, we need to change the incentives for the shipment of coins to the Federal Reserve.”

Grey: You’re too successful. You’re getting to many out the door.

Diehl: Well, it was just the concern that some time in the future the U.S. Mint would produce a whole bunch of coins, send them over to the Federal Reserve – or the Administration would order it to happen – and then inappropriately book – “inappropriately” [inverted fingers] book – all the seigniorage.

So – and this is ironic, because – when I got to the [Mint], there was this boom and bust cycle of the production of coins. And as you can imagine, the demand for coinage depends on the economic activity in the economy. More coins are needed when there’s more economic activity.

Grey: We had a coin shortage last year. I think it’s still enduring, because–

Diehl: Exactly.

Grey: …of the pandemic.

Diehl: Yes. And so – and this was magnified by the Fed’s terrible model for projecting coin demand. And so I had a very smart young economist, who I brought in and said, “uh, we gotta fix this.” Because what happens is we fall way behind in production when all of the sudden all of this demand comes in. And then so we’re so slow in cutting off production, the Federal Reserve vaults fill up with coins. Then those back up into – we had them not in vaults, but in hallways back in those days.

And then when demand comes back up, all that flows out; we have to crank up production. And so the irony of this is that we [the Mint] were responsible for changing the model that the Fed used in cutting down this shipment of excess coins and seigniorage and everything.

But – so, that change occurred. And that would obviously affect the trillion dollar coin, because if the Fed refused to accept it, then the seigniorage wouldn’t be booked. But as we were saying, that’s a highly unlikely situation for all kinds of reasons. It, you know, it would only be done as a failsafe measure. And –

Grey: And the rule that the OMB set could just be changed, right?

Diehl: Well that’s the other thing. Yeah.

Grey: It’s not legislative, it’s not statutory. It wasn’t Congressional intent. This is all within the executive branch, this is all internal baseball between different agencies and internal politics, right?

Diehl: [Nodding] It wasn’t even a regulatory rule change–

Grey: Right, so it wouldn’t need to go through the–

Diehl: …that required public notice and all that stuff. It was just [snaps fingers] you know, they’re just done.

Grey: So if Biden needed to change that rule five minutes before that coin got struck, he could, potentially.

Diehl: Yeah. Absolutely, yeah.

Grey: So I know we’ve been going – we’re [at] the end of time, but I’ve got one last question, sort of. You mentioned all of these downstream, second-order implications of the coin. One of the things that I was writing – and found this, you know, whole issue so fascinating – is because, you know, I was an elementary school teacher. I like social myths and public narratives – about how our government works, that provide the basis for us to understand the world we live in – that are accessible to people.

A colleague of mine – a sociologist named Jakob Feinig – talks about this term “monetary silencing:” where average people are taught to, you know, “you don’t need to know about this stuff. It’s very complicated. There’s people in the room – you know, who wear suits, who have finance backgrounds – they understand all of this stuff. You shouldn’t try to understand it at all, you know?

Diehl: Yes.

Grey: We need economic literacy and monetary/financial literacy in schools, but what we really mean is you,you know, you should balance your checkbook. You shouldn’t learn how the government actually works, and how this sort of ‘veil of money’ works.

And even, you know, very respected scholars who I otherwise respect, you know – there was an op-ed in the New York Times by Peter Coy, just recently, about this – they would say, “look, yes, it’s a Noble Lie that we can’t make money out of thin air, and things like that. But, you know, even if Noble Lies aren’t great in some situations, we shouldn’t probably be drawing attention to this too much right now.” And at least to me, if you look at the alternative, it’s this catastrophic debt ceiling that we keep coming back at. It’s politicians saying we can’t afford to deal with climate change, we can’t afford to deal with poverty, because we don’t have enough money.

And as you said before, it’s a useful political kind of rhetoric, to say, “oh, there’s no alternative to austerity. There’s no alternative.” But if there is an alternative, then these myths are not just things that keep the lights on – they are things that actively harm us. And maybe we could be looking to a new set of myths. Something that meets our new moment and our new needs.

And if we’re in a world now where – you know, bitcoin, and dog[e]coin, and all these things – people have embraced the idea that you can coin an asset out of thin air. It could literally be made of zeros and ones on a computer.

Diehl: [Chuckles] Yes.

Grey: And the value is: how people accept it, how people use it, what’s backing it, has it got the force of law behind it, et cetera. That, if we think about coins, there’s actually maybe a time for a renaissance of coins as a sort of symbol of the money power–

Diehl: [Nodding] Yeah.

Grey: …and going back to that two hundred year history. And one last little point on that before I get your thoughts is: I know that we’re in now this world of government digital currencies – we’ve been talking about, you know, they say a “central bank” digital currency.

Diehl: Yes.

Grey: And I’ve testified to Congress, saying “why don’t we talk about coinage? Why don’t we talk about digital coinage?” Because if you think about a bank account, there’s a third party in the middle. There’s not as much privacy. In fact, there’s a whole third-party legal doctrine that says you don’t have privacy if you put your money with the bank. But even paper currency has a barcode. Coins are the original, anonymous money. If it’s in your pocket, it’s yours.

And one of the earliest forms of digital currency that was tested by a government was Canada, and it was the Royal Mint. They created the “Mint Chip” program–

Diehl: Yes.

Grey: …and it was an attempt to create a digital coin. So maybe, you know, I’d be curious to your thoughts – as we’re entering a digital world, as we’re discussing how to create a whole new form of currency, that maybe the Mint should be in the room. Maybe we should be thinking about this beyond just the Federal Reserve. Beyond just a better bank account. And what lessons we can learn from the history of coinage – and from the design of coinage – even if it will be, you know, a digital equivalent.

Diehl: Well Mike Castle – Representative Mike Castle – back in, probably, ‘96, ‘97, had a Congressional hearing on the future of money. And I testified at that. And all these issues sort of came up in a primitive form.

Grey: You were talking about stored value cards at the time, if I remember that correctly.

Diehl: Yes, yeah, that’s exactly right. Stored value coins. And this is one of the things that I was – you raised one of the issues I was really intent on at the time – was that coinage is the ultimate private exchange. Cannot be traced.

And that – in those days, people weren’t concerned about privacy. I mean, it was amazing to me how nonchalant people were about privacy. And then we saw all that take off with social media. Where people told their life stories, and said things online that inevitably would come back to haunt them. And people just sort of didn’t care about it.

Well now, especially after 9/11 and the surveillance act–

Grey: The Patriot Act.

Diehl: Yeah, Patriot Act. People woke up to what that meant. And so, you know, it’s begun to sink into the culture. And I think you’re absolutely right.

You know, coinage is the physical embodiment of that set of privacy values, which are being expressed in what I believe is a highly-dangerous-to-individuals-form in crypt[o]currency. And also, you know, has the potential of destabilizing the larger economic system. So–

Grey: If the only kind of privacy we get is these volatile crypto private-currencies–

Diehl: Yes.

Grey: …then it will be a very bad day for privacy, because–

Diehl: Well, if we–

Grey: …it doesn’t have the full faith and credit of the United States. It doesn’t have that whole infrastructure. You can’t use it at a store, necessarily. All those kinds of things. 

Diehl: Well we’ve lived through that before too. Leading into the Civil War, when before there was the American Greenback.

Grey: Greenback, yeah.  

Diehl: And so you had all these banks issuing their own currency. And yeah, you know, if you were using it locally you knew something about the stability and reputation of that bank. But the further you got away from that bank, that note would still be used, and people didn’t know, you know, what was the providence behind this note. And–

Grey: I remember someone saying it used to be better to get a counterfeit note on a good bank–

Diehl: [Chuckling] Yes.

Grey: …than a good note on a bad bank.

Diehl: Exactly right, yes. And the U.S. could put up with that, economically. And there wasn’t the political will to do anything about it until the Civil War. And then the U.S. federal government – number one – had the ability to do it because half the nation who opposed doing anything about that left Congress. And the other was: we need to finance, you know, the war.

So necessity bred a change. And unfortunately that’s how the government works; our government works. It reacts. So there will have to be some disaster that occurs around cryptocurrency that will drive Congress, the Federal Reserve, the regulators, to do something about it. Hopefully that occurs somewhere else, not in the U.S., and we learn the lesson from somebody else.

But let me address the assumption that underlies this question. And that is that people don’t really understand fiat currency. I think that may have been true in the past. Probably was true in the past. But people have driven into their minds, over and over again – certainly since 2009, with the QE, and the, you know, and the opening, basically, of the flood of the money supply into the economy to save the economy (not just the U.S. economy, but the world economy) – people came to understand that what fiat currency means.

And they don’t necessarily understand what it means: the “full faith and credit of the United States Government.” What that means. But – especially when you’re threatening to default on your, you know–

Grey: Especially when it doesn’t mean as much as it used to, maybe.

Diehl: Yes, yes. So I think people are getting that. The other thing, why people are being educated on that, is that a conservative mantra has been against fiat currency [and] for the gold standard. And, you know, that’s been the case since, you know, ‘33? Since FDR got us off the gold standard. And – well, informally–

Grey: They’ve been predicting the–

Diehl: …and then Nixon took us off. But – so I think the predicate has been laid for the trillion dollar coin. People just don’t – it looks like a gimmick. And when you think about it, this is a branding problem.

Grey: Yep.

Diehl: Because “QE” (Quantitative Easing), it hides what it does. Those words, it sounds really complex. Beyond our comprehension. Whereas a trillion dollar coin sounds ludicrous, you know? Grey: Yep. What we’re doing is we’re easing, quantitatively–

Diehl: Yeah.

Grey: …with a trillion dollar coin. Let’s just, Mint Quantitative Easing. Yeah. And you’re absolutely right. You know, there were newspaper headlines: “oh trillions of dollars have been created.” If that was going to cause a panic in the streets, where was it? Where was it the last ten years? When the last debt ceiling crisis happened, even Standard & Poors downgraded the U.S. credit rating. And what happened? People flooded into Treasuries, not out of them.

And I remember Neel Kashkari, last year – the President of the Minneapolis Fed – said, “we have an infinite amount of dollars that we can use to save us from this crisis.” I’d never heard a Federal Reserve person use the word –

Diehl: [Chuckling] No, that is pretty good.

Grey: …“infinite” in public before. Maybe in private, but not in public. And the New York Times had an op-ed headline saying, “the Coronavirus money is being pulled out of thin air.” And if that’s not going to cause a crisis, you know, I think you’re right. The idea that the public can’t handle this truth that it’s too big, it’s too scary – even if that had some credibility in 2006, it doesn’t have the same credibility in 2021.

But maybe you’re right. Maybe it does take necessity to breed government action. And maybe we do need to get even closer to that debt ceiling cliff, you know, before we will entertain the unthinkable.

Diehl: If I could–

Grey: Sorry.

Diehl: If I could make one other point, that has really been impressing on me under these current circumstances. There will come a day when it’s inevitable: what comes down must also go up. And I’m talking about the inflation rate. And all know this in the back of our minds, that once the inflation rate goes up, and the federal government is no longer paying what is essentially zero-interest on an inflation-adjusted basis for, you know, on its bonds. When inflation goes up and we have to pay more, and we have thirty trillion dollars in debt, then we are going to see interest payments – the financing of that debt – devouring larger and larger sections of the federal budget.

Grey: Yeah.

Diehl: And coinage – and seigniorage – is one of the ways to think conceptually about how to deal with that. And this is particularly relevant in terms of the whole starve the beast strategy, [which] is that we will build all these deficits, at some point the government will have to face reality, and will have to start cutting social security, and killing all the old New Deal and Great Society programs. And Obamacare, now. All that will have to die, and there won’t be any choice.

Well, there are choices. And we just need to be aware that that day is gonna come.

Grey: And we need to be preparing pre-emptively to do that marketing work, and do that public education, and building the institutions. And I know I speak to people, and they say well, you know, even if the Treasury issued zero-interest financing, the Fed would pay interest on reserves if it wanted to raise the interest rate. So it doesn’t matter, which way.

And I say to them, “but you know it’s very different in the public mindset if this is the cost of ‘borrowing’ or the cost of government spending on one hand, or if it’s the Federal Reserve choosing to pay money – for free – to people because it wants a higher interest rate. If the Fed wants to do that – if it wants to take responsibility for paying, you know, hundreds of billions of dollars of interest as part of its monetary policy – it can take responsibility for doing that, and see whether or not that’s the best way to actually limit inflation.

There were debates in the ‘70’s, in the ‘50’s, about using other forms of qualitative and quantitative credit regulation, and other ways to limit, you know, investment in the economy – to cool the economy down – that didn’t require raising interest rates through the roof like Paul Volcker did. And my guess is when it’s easy to blame the Treasury for those interest payments, then it’s a lot easier for the Fed to raise rates. If the Fed had to own the politics of raising rates like that – and giving free money to interest-earning, you know, people who hold interest-earning reserves, or other assets issued by the Fed – and had to take responsibility for that on their balance sheet, my guess is they would be a little more creative about finding other ways to manage inflation.

Diehl: Yes, yeah. Yes.

Grey: Well thank you so much. It’s been an absolute pleasure, Director Diehl. I honestly feel like this is the kind of conversation that will hopefully go into the history books. Because I’ve never heard these kinds of stories from within the government before. So thank you so much for taking the time with me, and for your voice and for your courage in speaking out. And I hope I don’t have to see you again because we don’t have this problem recurring, but–

Diehl: [Chuckles] Yes.

Grey: …maybe we will, and I look forward to connecting again in the future. Thank you very much.

Diehl: My pleasure. Thank you.

End of Transcript

* Thanks to the Money on the Left production team: William Saas (audio editor), Rohan Grey (transcription), & Meghan Saas (graphic art)

Anna Kornbluh joins Money on the Left to discuss the politics of form and literary realism as theorized in her provocative book, The Order of Forms: Realism, Formalism, and Social Space (University of Chicago Press, 2019). In The Order of Forms, Kornbluh lays bare the problematic “anarcho-vitalist” underpinnings of neoliberal discourse which, she argues, also inform much  critical theory and left critique. In contrast, she upholds the necessity, malleability, and contestability of social form. Focusing, in particular, on English novels from Wuthering Heights to Alice in Wonderland, Kornbluh reads myriad nineteenth-century literary realisms as at once speculative and generative abstractions, capable of newly mapping and scaffolding social space. At the same time as forms might oppress, she concludes, abstractions also liberate. Wrapping up the conversation, Kornbluh considers how the politics of form reorient our approaches to contemporary academic labor, pedagogy, and learning. 

Kornbluh is Professor of English at the University of Illinois, Chicago. Her research and teaching center on the novel, film, and theory, especially formalism, marxism, and psychoanalysis. Kornbluh is the author of Marxist Film Theory and Fight Club (Bloomsbury 2019), and Realizing Capital (Fordham 2014), and has just completed a manuscript “Immediacy, Or, The Style of Too Late Capitalism.” She is a founding facilitator for The V21 Collective (Victorian studies for the 21st Century) and InterCcECT (The Inter Chicago Circle for Experimental Critical Theory).

Find Anna Kornbluh on Twitter @V21collective

Visit our Patreon page here: https://www.patreon.com/MoLsuperstructure

Music by Nahneen Kula: www.nahneenkula.com

Transcript

The following was transcribed by Richard Farrell and has been lightly edited for clarity.

Scott Ferguso: Anna Kornbluh, welcome to Money on the Left.

Anna Kornbluh: Thanks for having me. It’s so fun to be here.

Scott Ferguson: Yeah, it’s so great to have you here, and especially since you are a dear, old friend of mine who I have learned so much from throughout the years. It’s great to finally have you on our podcast.

Anna Kornbluh: It’s really exciting to listen to you guys and see the conversations you’ve been creating.

Scott Ferguson: Thanks. So maybe to begin, I know you, but our audience doesn’t necessarily know you. Maybe you can say a little bit about your scholarly background and maybe your personal background if you feel like that’s relevant?

Anna Kornbluh: Sure. I live in Chicago–the best city–where I teach at the University of Illinois at Chicago. I’m in the English department and teach a lot of literature, especially focused on the novel and the history of the novel, as well as film, and then a fair amount of literary and critical theory when I’m lucky to do that. I earned a PhD in English with a focus in theory at UC Irvine. I met Scott when I lived in Los Angeles and when I was getting a Master’s in Film at UCLA. Before that, I had an undergrad degree in political theory. I love the Midwest. I’m stupidly lucky that I am a person who got a job in 2008, and a job with job security and research money. I just couldn’t be more fortunate and wish nothing but these conditions for my fellows.

Scott Ferguson: Perhaps more so than some of our regular guests, your work is deeply critical and theoretical. I think you have a grammar and a style that is very precise, and it does a lot of rich important work. And so, we can improvise it a little bit and that’s cool, but we decided we were going to put together some more formal questions in order to kind of honor the complexity of your thoughts. So perhaps unlike some of our other episodes, we’re going to unabashedly read these questions, just because we wanted to make sure we were getting it right. And with that, I’m gonna hand it off to Billy to take the first one.

William Saas: We’ve invited you here to speak with us specifically about your brilliant scholarly monograph The Order of Forms: Realism, Formalism, and Social Space, which was published in 2019 with the University of Chicago Press. In that book, you articulate a scathing critique of what you deem the “anarcho-vitalist tenor of much contemporary critical theory.” Inversely, you develop a comparatively capacious political formalism which you uncover in the modern novel. We would love it if you could flesh out some of these reciprocal moves for us. How do they intervene in debates in critical theory past and present, and what do they tell us about the construction of what you term social space?

Anna Kornbluh: Thanks for the question. Yeah, so it is a book that’s integrating a lot of different things, right. Chiefly, it is trying to integrate aesthetics and politics, and trying to think about the ways that the traditions of critical theory, and of humanistic interpretation, especially for people who work in the aesthetic humanities–literature, film, art and so on–how they have tended to think about what is that relationship between aesthetics and politics. What does art have to teach us about politics? What is artistic about political arrangement and political dispensation? Maybe I’ll try to put my finger on some of the kinds of biases or habits that have emerged in some of those traditions.

So specifically, I tried to track a position that would associate freedom with formlessness and would privilege a lot of artistic forms of dissolution, disintegration, fragmentation, hybridity, irony, instability, and so on. It has this whole aesthetic vocabulary about those things, because one imagines that those are actually political virtues or values, or that they’re emancipatory. So what gets built into that reinforcing framework then, are some judgments about what kind of art is good. What kind of art is politically educational? What kind is politically not conservative and innovative? Then, there are also some mistakes, maybe, about politics, and chiefly some biases against institutions, such as a kind of reflexive anti-statism we see across aesthetic humanist positions and a horizon in which what we understand to be the nature of a political act is to disrupt something, to break something, to suspend something, rather than to hold it in place or build it up.

Scott Ferguson: I wonder if you could follow up specifically about your critique of Giorgio Agamben’s idea of “destituent power,” is that correct?

Anna Kornbluh: Yeah, so I sort of take him as exemplary of some of these habits of mind in the opening of the book, because he’s such a tremendously influential theorist in the 21st century. I think Homo Sacer is Stanford University Press’ best selling book of all time. In his consummating of Foucault’s biopolitics, in his really trans-historicizing of these tendencies of the state, and of institutions to control life, he has this consummation of an idea that all of Western political power could be schematized according to its constituent tendencies, to make things, to contain things, and to bring things under the purview of control and under the purview of power. And the alternative for him is destitute power, or taking it apart. This is the realm of play, the realm of freedom, and the realm of dissolve for him. If constituent power is violent–like he thinks any active kind of making, forming, putting into place, and instituting is always going to be violent–then, if you want to be on the side of the good, you have to be on the side of the unmaking. So I take him as just kind of emblematic of, or a crystallization of, these habits. Again, I find humanist method and interpretation that have built in these aesthetic and political suppositions insufficient, really.

William Saas: So you’ve named Giorgio Agamben. Are there any other sort of leading lights of this position that you are, in fact, taking a position against?

Anna Kornbluh: Yeah, this is such an interesting problem, right? It’s like when you’re trying to put your finger on a structure of, not feeling, but of ratiocination, or a kind of prevalent form of argumentation. And in one that crosses disciplines and schools, then who are its leading lights? Does it have leading lights? Is an episteme identifiable with a person? And what’s the frame of argument in which you would say there are figureheads of this movement, and then their bodies of thought are consistent with it entirely and so on. Because, obviously, I have friends who deeply love Agamben and who are unhappy about this characterization. But I think some of the other positions that I might name in the book, or certainly in schematising the field, would be queer antinomianism, certain kinds of queer of color critique and feminist critique of institutions, a kind of immediatising, anarchic tendency in certain strains of Marxist theory, in the tradition of thinking aesthetics and politics, the almost messianic or ceaselessly negative kinds of positions of certain texts in the corpus of, and then certain interpretations of, Walter Benjamin and Theodor Adorno. I also identify the most recent real innovations in the theory of aesthetics and politics from Jacques Rancière and Caroline Levine as also continuing to privilege disruption, dissolution, unmaking, hybridity, collision, aleatory, and unpredictable as the kind of value pole, or the good side. We don’t like what stands in place. We don’t like what is sustainable. We don’t like what is form.

Maxximilian Seijo: So then contra this anarcho-vitalist unmaking, your political formalism emphasizes building, making, and structuration as not just a possibility, but as this sort of constitutive engine or motor of politics. Could you perhaps talk more and spell out then what your, dare I say, positive articulation of that critique forms and what it means for thinking the aesthetics of politics or the politics of aesthetics?

Anna Kornbluh: For sure. So the little word vitalism is doing a lot of work for the imaginary that life just springs forth, right? And that there is a kind of Eden of effulgent plenitude that we could be liberated to if only we stopped having the state, or if only we stopped having law, or we stopped having the symbolic. The alternative, the formalistic position that I try to propose and substantiate, and indeed, try to argue that the history of ideas provides plenty of fodder for and eloquence about, is one in which we think forms are not opposed to life, forms are actually infrastructure for life, and forms are essential to life. Human beings have no given format for their existence. It takes a village, should we be in small states, or how should we be organized? But we’re interdependent animals and that’s something that actually differentiates us from other animals. We have this prolonged infantile need of one another in order to survive, not just to live well, but to live at all.

So what shape should that take? There have to be arrangements, patterns, and orders for the making of life. So there’s a kind of ontological claim that form is essential for our well being and for our existence, and that we can recognize and admit that necessity and that essence without having to naturalize particular forms or without having to give up on, forget, or repress the contingency of particular forms. So historical materialism is something like a procedure of accounting for the contingency that human social experience takes. And the content of the formalist doctrine, as it were, also is necessity and contingency at the same time. Human beings need form, but there are no given forms.

But also thinking that every form has been made, every form has been contrived, instituted, and can be remade, and that we can have a horizon of political activity which is about reformation, not in any anti-revolutionary sense, but in the sense of like actually contriving and designing the structures that will enable human wellbeing and that will facilitate flourishing. What’s the best shape? What should be our voting system? What should be our governance? We’re confronting this question now on ecocide, and your previous guest, Kim Stanley Robinson, is very good at thinking about this problem. Is there something about ecocide that requires a super state formation, or an international confederation and what should that look like? That’s a speculative problem for us. And you can’t solve that speculative problem if a priori, or out of the gate, you think forms are bad, forms are oppressive, and we just need to burn it all down. We just need to get out of the purview of power or something.

Scott Ferguson: Yeah, absolutely. I think before we dive into your specific, sustained literary focus in your book, I just wanted to draw attention to something that I think is implicit here, but we can tease out, which is the convergence and unintended complicity between anarcho-vitalist, destituent modalities that are anti-formal, or are about pushing to the limits, or accelerating past extant forms, with neoliberal logics, if not broader modern capitalist logics of disruption. Marx has a dialectical gambit in mind when he says, “All that is solid melts into air.” He thinks that history is going to generate something out of it, but I think you’re holding us back from that precipice and saying, “Well, wait a minute. This is actually the dominant regime. It has a hegemonic logic of dissolution. Maybe that’s not what we should be doing.”

Anna Kornbluh: Exactly. And I think one wants to articulate not in an idealist sense. We don’t want to say, “Oh, theorists are causing these conditions in the world.” We want to do it in a materialist sense, and say, “The structure of theory is determined by the structure of the world.” The ideas in every society are the ideas of the ruling class, and the vocation of theory is to make a cut from that determination. The vocation of theory is to know from which it speaks, and understand its conjunctures, and then figure out what some other logics might be. So if we are supplied, since 1973, with the abundant logic of the dismantling of social institutions, and the highly minimalist vectoring of state power towards the purpose of accumulation and away from the purpose of flourishing–and of course, people will argue that’s never been the purpose of the state, as Marxian anthropology would suggest–but if we cannot see this affinity of our thought with the kind of empirical practices of power, that is an aporia in our reasoning and an insufficient self scrutiny.

The whole gesture of critique, as Kant, Hegel, and certainly Marx produce it, is to look back on the conditions in which your thought is possible. So I do want to articulate that affinity is true. And I do want to point out the underside of that. I think the political theorist, Jodi Dean, is really eloquent about this. We have actually lived through a revolution in the United States in the last 40 years. It’s been a revolution of incredibly disciplined exercise of collective sovereignty by the collective that is against us. It has been incredibly disciplined from the level of school boards and local elections on up to the presidency and the Supreme Court, and the interpreting and mobilizing of institutions for the sake of oligarchic and plutocratic wealth transfer, and anti-democratic consolidations. It’s not the truth of those institutions, necessarily, but they’re mobilizing for that. This has been a highly disciplined and effective practice. That has to be a lesson to us, that our suspicion of the vehiculations of collective agency haven’t gotten us anywhere.

Maxximlian Seijo: So moving from one revolutionary context to perhaps one of a different kind, in your book, you focus, as Scott sort of already mentioned, on literary realism in general, and then on the Victorian realist novel in particular, which the latter you suggest is a rich historical vehicle for thinking through the stakes of what you just diagrammed as political formalism. So against certain currents in Marxist literary theory, as you’ve already mentioned, you argue that literary realism is irreducible to a certain metaphysics of representation, where, in the novel, its various signs, affects, and grammars are judged according to whether they succeed or fail to correspond or refer to an extant historical reality. So then, in this context, what exactly is literary realism on your analysis and how does this particular mode of political formalism work?

Anna Kornbluh: Yeah, that’s a great question. So I’m extremely interested in thinking about literary realism as an experiment, as speculative, and as a wild kind of thought that isn’t available to us in ordinary life. Who gets to think in the third person? Who gets to produce an omniscient perspective? Who gets to survey broad swaths of psychic interiority, social expanses, social depths, different social classes, and long historical arcs and stuff? Only these made up, realist narrators. And this experimental quality is taking into account or giving itself certain constraints. Realism could be defined as against, say, an irrealism of infinity. We take time and space constraints seriously in realism. Nobody lives forever. There’s a lot of death and birth and sex in the realist novel. We’re not on other planets. We’re just stuck on Earth. Like this is what we have. But within these constraints, the great moment of ferment of literary realism in the 19th century is one of tremendous social transformation with the Industrial Revolution, imperial expanse, and then imperial contraction and contestation, democratizing movements, great explosions of literacy, and the urbanization of mass population for the first time in world history.

So there’s all this social churn going on, and realism is this experimental form for trying to figure out like, what should society be shaped like? What should we be doing all day long? Given the constraints that human beings are mortal, and that they’re vulnerable, what should our societies look like? So I like to think about realism as a kind of theory of institutions, a theory of limits, and a theory of human sociability that maybe has some different precepts than the reification that might be attributed to it, or the kind of boringness or un-imaginativeness that might be attributed to it, but also has some different precepts from say, the anarcho-vitalist imaginary. The realist novel is super into schools, banks, governmental agencies, churches, and the places where banal existence is produced and the offices where it happens. And somebody has to think about those banalities. There’s a lot of power there and a lot of possibilities there.

William Saas: So is it possible that the mode of literary realism is conflated with the limited imagination, or the constrained perspective, of the author when it’s sort of at the expense of the mode itself? Would that be fair to say?

Anna Kornbluh: Yeah, I think that’s right. We end up with these kinds of approaches to realism and literary study where we want to correlate it to the context of the author, or correlate it to the biography of the author. We want to sort of say, “Well, the realist novel is only a voice box of the values of its time,” instead of, “No, there’s an immanently critical operation that’s possible in any kind of literary production, and these people are involved in an extremely voracious and demanding kind of imagining of what the world should be like.” I like to say, I know I say it in the book, that all of the major Victorian realist novelists were all journalists, and they were all successful journalists. They all gave that up, because they wanted to do something else. Trollope a little bit less so, he was a bureaucrat his whole life, or a postman. But Thackeray, Eliot, and Dickens, they had jobs writing how things were, they wanted to say something else, they wanted to know something else, and they started writing how things could be.

Scott Ferguson: Okay, so I have the big doozy of a question. I’m just gonna start reading. And hopefully I can get it off the page. With the caveat that we don’t wish to simply conflate your project with the work we do within the Money on the Left editorial collective, we nevertheless find many areas of sympathy and convergence between us. Perhaps above all, we find that your emphatically anti-lapsarian insistence on the speculative and political generativity of abstraction resonates greatly with our conception of money as an abstract and constitutive political form. While you don’t overtly thematize this in your book per se, you come closest to doing so in a passage on page 46, which if you don’t mind, I’m going to read for our audience. Differentiating your theory of literary realism from other influential Marxist interlocutors, you write:

“Prominent recent efforts to advance Marxist aesthetic theory of the contemporary have once again taken up realism, and here too Alberto Toscano, Annie McLanahan, Leigh Claire La Berge, Alison Shonkwiler, and Joshua Clover generally prize reference above all else. For Marxists, realism thus paradoxically occupies two poles simultaneously: the paragon of ideology–the imaginary resolution of real contradictions, the false suture of a partiality as a totality–and the paragon of artistic truth-telling, the gold standard representing  actualities behind the veil.”

This is supercharged language for us. So what’s striking for us in this passage is how it links a problematic metaphysics, a literary reference, to what is, in our view, an equally problematic metaphysics of money qua passive representation. Money is regularly imagined to be a veil over real extant relations and private resources, and the gold standard as a system of signification in which truth telling is somehow guaranteed. Against this monetary representationalism, we would contend that money is constitutive. It’s transformable and it’s public. And it is, above all, an abstraction that is contestable. As such, it enables radical forms of political activation, including urgent contemporary struggles for abolition, reparations, universal healthcare, and an expressly anti-imperialist global Green New Deal. So what we’re wondering is, would you be willing to reflect a bit on this language and some of these resonances that we’re picking up on?

Anna Kornbluh: Yeah, I think that’s a really great question. That may be the best question of all the ones that you guys prepared for me because it speaks to how generative and creative you guys are that you can think about the capacity of abstractions across disciplines, and that you can think about the affinities of different kinds of arguments. I’m just a lowly literary form person. I did write a book about the history of finance, but that’s not this book. But I think that you’re fundamentally right. My most favorite sentence in this whole book, it’s only three words, maybe you guys liked it too: “Abstractions also liberate.” We’re very familiar, as aesthetic humanists, with the position that generalizations are bad, that abstractions are bad, that institutions are bad, and that big ideas exclude the particulars. We think that we can only have this job of championing the particular, the content, the substance, the real, and the body.

So the work that I’m trying to do in terms of pointing out that viewpoint and mindset, and how pervasive it is in the aesthetic humanities, I think, is a parallel logical move and parallel critical move to the work you guys are trying to do you in suggesting that the way that we regard the institution of money is really impoverished, that given the social circumstances of the late capitalist state, and given the tools available to us of the Fed, for instance, that there is a possibility to activate the political determination of what money represents, or how money functions, and that that possibility should be seized by people. And it should be articulated and named by our leaders. So I think that there’s a lot of affinity, or a lot of parallelism, between the approach to institutions, the approach to the state, the approach to representation, the symbolic, and so on, that I’m interested in and you’re interested in.

If one was to try to articulate a possible point of disjuncture, it is how we acknowledge the outside of that position. So I say the existing forms that are available to human beings can be repurposed, re-constellated, they’re malleable, they can be mobilized for different ends, that politics is the work of collectively deliberating what kind of shape for our lives we should have, and that we don’t have to have a kind of revolutionary iconography of the endless horizon of messianic new forms or non-forms. We can work with some of our available forms. How do we articulate that dialectical capacity, that existing possibility, that political prospect, while also acknowledging that this is a delimited horizon of action. Of course, people who want to abolish the value-form are always going to be unsatisfied with your work and with Stephanie Kelton’s work. Of course, our radical, anarcho bro colleagues are always going to think that Stephanie Kelton is insufficient, that Bernie is not enough, and so on.

So what is the kind of gesture intellectually, but then also rhetorically, that gets us to avow money as an instrument in this concrete situation which we find ourselves, that the available determinants of the situation permit to be used and deployed quite differently? That’s a different question from: should we have a society with no money or should we have a society with no abstraction? So what I really find exciting is the insistence by your working group, and by some of its great, accomplished scholars and leaders, that we could do different things with these tools. I got super excited when Janet Yellen gave her induction speech. That might be something you have to delete, I might get fired, haha. I mean, the things that she said about what state power actually has available to it to produce values that benefit the greater good, the greater masses of the people and so on, those were really exciting formations. So yeah, I think there’s a lot of affinity between our projects.

Maxximilian Seijo: I think to that last point on Yellen, at least in the context of the COVID response and the seeming ongoing crackup of the orthodox monetary policy mold that has been dominant for the last 40 to 50 years, this, as you say, sense of the potential for malleability, it’s interesting to see in context with your work that opening and potential thinking. We had KSR on the show a while ago about the way that opening in a formal sense, in the political economic sphere, is also producing all different types of openings in literary spheres. I think that it’s a really interesting way in which there’s almost like a dialogic phenomenon between the different disciplines or areas in which we’re thinking along these similar terms.

Anna Kornbluh: Yeah, I think that’s a great point. Different aesthetic formations are possible and different aesthetic practices are possible when you have a different relationship to mediation. So if you can understand money as a collective sovereign driven determination of value, that doesn’t have a substance behind it in large part, but that can be deployed, you have a kind of orientation towards what forms are able to do that isn’t predicated upon their transparency of representation or their presencing function.

Scott Ferguson: What you just pointed out there, I just want to, not really pushed back, but just kind of clarify something. I know when you say that we think money as not being backed by a substance in the standard understanding of gold or silver, or whatever it is, but I think our relationship would be to say that it is not non-substantial in the same way that I think a lot of us would probably treat language. Language is not without substance. Language really organizes the world. But it doesn’t have to be a chit or a finite thing. We don’t have to presume a chit or a finite substance somehow behind language. The language of the world is participating in the whole of the world in heterogeneous ways. So again, I just think breaking with the metaphysics of representationalism is something that you do quite well. And I think other humanities scholars can do, but not when it comes to money. Money is this kind of blinding social form in that way.

Anna Kornbluh: Yeah, I think so. One way that I like to think about that is that there is a material efficacy to money. There is a performative power, there is an agency of the symbolic that isn’t reducible to a fixed substance behind it, as you say, or that isn’t conflatable to the presences. It does produce things. It does act. And we can have more or less collective exertion of power around those acts given that it’s the vehicle of valorization in our society–within these constraints of what this society is. So yeah, what’s our vocabulary for thinking about that performative efficacy, thinking about forms that produce things, activations of materiality, or what Lacan refers to as the letter has a material substrate? That’s not a substance, that’s not a solidity, and that’s not a concrete thing. It’s an abstraction too, but it is one that takes hold of us.

William Saas: I want to get to our next question, but I want to get there by way of some editorializing and maybe recontextualizing some of the conversation so far. So returning to Jodi Dean’s comments on the revolution of the last 40 to 50 years, we might call that neoliberalism. It strikes me that it might be reasonable to call the folks who are at the head and have orchestrated and been instrumental in that revolution as being really good at political formalism. So I think the sympathy between our projects boils down to this fundamental question that cannot be probably articulated as beautifully as, “Abstractions also liberate,” but, “How’s that worked for you?” might be another way to pose it. So another similarity or affinity between our projects, I think, is, in the face of frustration and ultimately calling for violent revolution or exodus or refutation, we’re up to recovery, re-examination, and re-discovery. And one of the ways that your book demonstrates this is through case study. We’d love for you to walk us through your second chapter in which you reread Marx and Engels’ Manifesto of the Communist Party through the lens of Emily Brontë’s Wuthering Heights, which I think is a very strange pairing, but wonderfully done. But what theoretical or meta-methodological moves are you making here? And how do they serve an alternate history of political form, which can be, as you put it, necessary, malleable and constructible?

Anna Kornbluh: Okay, that’s great. So I think the issue is almost like what is the middle distance? What is the mid-level that we can think about that isn’t total abolition of the value-form or the complete hypothesis of a realm without abstraction or of unstructured life, of anarchic, primordial chaos? And then, on the other side, just only adhering too closely to the smallnesses is where nobody ever wants to think about what power is actually available to us. So I think that mid-level is tactical thinking. I think that it is strategic thinking. It is about what are the tools available in a situation and how do you use them. And the thing that I’m really interested in as a problem between the Manifesto of the Communist Party, which is a document that Marx and Engels produced in late 1847, that comes out in the winter right before 1848, and then has, arguably, an exhortative relationship to the springtime of peoples across Europe in 1848, that document, which comes out at the same time as Wuthering Heights, is exactly this problem of what is the distance or what is the middle? How are we thinking about the constraints of a situation? How are we thinking about the absolute quality or the openings in the political horizon?

So, to make that more clear, in the manifesto, there is an assertion that all of human society is a history of class struggle. And there is also a kind of concluding gesture that the communist revolution will bring with it an end to all antagonism. So what is, I think, a problem of the rhetorical strategy there, of the exhortative anti-capitalist strategy there, is a reduction of the expanse, or this total set as it were, of social contradiction and social antagonism, to the specifically capitalist version of it. Because it simply isn’t true that if we did away with capitalist antagonism, we would have a non-antagonistic society. And it simply isn’t true that we would have a motivated or immanent or natural logic of how to be organized, to go back to our earlier discussions about how there isn’t a given form of human life. And if Marxism implies this, which I don’t think Marx at all consistently does, but I think he deleteriously does at points, then it’s failing the bar of historical materialism, of understanding what is contingent about the capitalist articulation of social antagonism and what is contingent about its managing of social antagonism through the class system.

It’s a problem of how, yes, we can organize a phase theory of history according to the kind of basic class relations, and, yes, we can particularly tell the progressive kind of development of capitalism according to this simplification, he calls it, of class relations, but this isn’t all of human history. And if we represent history in these bombastic ways that he does, as all of this, then we lose the underside or the underlap of history with capitalism. We lose the other part of the set of human antagonisms. And what I think is so amazing about Wuthering Heights is that it has this repertoire of vocabulary of images and tropes that let it think about antagonism as a kind of transhistorical problem for human beings. The basic problem of the hearth, where so much of its action is set, of architecture, of construction, of house holding, of familial shape, all of these are just inexhaustible dilemmas in that book.

And at the same time, there’s this just exuberant, hyper-stylized, incredibly beautiful, and uncanny kind of production of symmetry, of forms, of doubles, and the kind of problematic of formalization itself that just helps us to think about how you can have infinity of social contradictions, and the ability to inscribe and formulate the fact of that infinity of contradictions, such that your proposed political solutions don’t imagine or fantasize that you would ever be away or be done with contradiction.

Maxximlian Seijo: Thank you for that. I think that is a really cogent way of saying that. I wanted to dig in a little bit into some of what you mentioned about the spatialization in Wuthering Heights in an architectural sense. You also motivate this through a photographic analysis, as well, in the way photography as a forming medium does this too. In Wuthering Heights, as you said, we think about the construction of homes, rooms, window frames, this doubling that you mentioned, which these forms seem to shelter, maintain, and then also open social space in ways that even outstrip domination and antagonism at times. Can you give us a little bit more detail or taste of this specifically architectural analysis? And why, in the context of this ontological argument about antagonism, and this ontological argument, essentially, about historical materialism that outstrips these very specific immanent capitalist class antagonisms, why you see these architectural mediums and modes as so important for thinking that transhistorical problematic?

Anna Kornbluh: Yeah, so architecture is kind of a master trope throughout the book. There is, as you are getting this in an hour in a kind of a Frankenstein sense, a lot in the book, but architecture is one of the spines of it. And that is partly because it is a trope of construction, and I’m interested in constructive criticism. It’s a trope of building and I’m interested in putting things together. It is art that straddles the line between necessity and contingency. It’s Hegel’s first art for that reason. Human beings need shelter. But how are you gonna make it? What shape is it going to have? These are questions that are on that threshold of materially and necessarily essential, but also kind of open to variability, to different formations, and to the different processes of creativity. So, for me, architecture just holds so much of this problematic up, of how we need shape to live, and how we need shelter to live. Should you have a triangle roof or A-frame? How should you be living? 

And in Wuthering Heights, it’s just part of the absolute, extreme–I can’t even find adjectives for it–sublime force of that book. It keeps constantly trying to juxtapose highly textured, extremely attentive figurations of the made environment, of the built environment, of fence posts, window frames, lintels, doors, hearths, walls, and house structures overall. It just cannot stop lavishing attention onto those things. And that is a whole vocabulary of ideas and images. What is that doing in the same book with stuff about the arrival of the bourgeoisie, stuff about the insufficiency of the family form, and stuff about immoderate desires? So there’s all this stuff in the plot that is excessive and wild and unsolvable, and then there’s all this stuff in the form that is detailed, material, instantiated, and installed. And then, you can trace the contour of it and you can study it.

So this is how I think novels work. They kind of produce these weird combinations where you’re like, “Okay, so, what do those things have to do with each other?” That is the thought the novel is trying to have. So, what is Wuthering Heights doing with this incredible lavishness of form and this just incredible immoderacy and un-containability of passion and of antipathy and of fighting and of economic transformation and of the slave trade? It is trying to tell us that form is a technique for managing antagonism and a necessary one and a useful one and not a dispelling of antagonism, not one that means that you have to lose track of its extent or its scope.

Scott Ferguson: So one of the things I really appreciate that’s coming out here is, to kind of come back to the critique of anarcho-vitalism, what you’re showing throughout the book, but in this chapter that we’re talking about in particular, is that vitality is with form. It’s shot through form. You’re not arguing against vitality. You’re saying, it seems to me, that form is a question of vitality. It’s not the expunging of vitality.

Anna Kornbluh: Yeah, not the containing of it. That opposition that form constrains, form contains, that institutions police us…

Scott Ferguson: Which they do.

Anna Kornbluh: Which they do, but it’s not the limit of what they do, or containment is not the only thing we can say about what they offer us. That the whole value that emerges, the negative Rubin’s vase illusion of that, formlessness, lack of containment, and lack of constraint is what freedom is. As opposed to, freedom is the meaningful deployment of forms for human flourishing or capacitating our management of necessity so that we don’t denigrate necessity.

Scott Ferguson: So speaking of books that hold very different things together, on the opposite end, maybe, from Wuthering Heights, we have your chapter on Alice in Wonderland. Which you, very provocatively, in a super cool way, you’re trying to convince us that it’s a realist novel. Which, I’m not sure that anyone’s ever made that case before. But you’re not just being shocking for the sake of being shocking. You’re drawing something out about the abstractness of the realist novel that we tend to repress or not avow by calling Alice in Wonderland a realist novel. That’s my initial gloss, but maybe you can unpack what you’re doing here and why it’s so important?

Anna Kornbluh: Sure. Yeah, that’s totally the chapter where I’m talking nonsense, except that the point of the nonsense is to produce something by this dramatic inversion. And it’s less saying Alice in Wonderland is realist as a text, but that its own internal properties of form function as a kind of distillation or crystallization of realist form, that it is something like the symbolic logic, the reduction to the minima, of what realism tries to do. Because Alice is such an experimental investigation into what words are and who fixes the meaning of words. What is social order? And who puts it in place? What is sovereignty? And to whom does it belong? How do we undo it? And what do these things have to do with each other? Why is the question of beheading, and “off-with-their-head-ness,” and the sovereign decision on life, also a question of punning and of the containment of, or the proliferation of, semantic quality? So it’s a kind of prismatic intensification or hardening of the tendencies of experimental inquiry into how society should be that I think realism performs. So that’s the kind of force of it. And then, it’s also kind of playing with some of the historical events of its author having been a mathematician and a revolutionary advent of symbolic logic in relation to other kinds of mathematics in the 19th century. So what does it mean to think about distillation as a representative strategy? And what does it make possible even as it is boiling things down? It’s, yeah, a little bit bananas. But hopefully it’s a breather in the middle of the book, too.

Maxximilian Seijo: I just really appreciate how you boil down to something like Alice in Wonderland is asking ontological questions. By necessity, your political formalism then can kind of feed into that nonsense with a certain logical structure. I just really appreciated the way you took on that so paradoxically. Moving from that context, I wanted to talk about your final chapter, which reads states of psychoanalysis, formalization, and the space of the political. Within it, you plumb deep impulses within psychoanalysis, which in case listeners haven’t sort of picked up on yet, is another one of these combinatory substrate themes in this book. So you plumb these impulses to theorize what might be called the inescapable psycho-political problem of the polis. On your account, why is psychoanalysis such a meaningful tradition through which to confront this indelible, political problematic?

Anna Kornbluh: Sure. Psychoanalysis is like another one of the bolts in Frankenstein’s neck. So I think the first thing to say is psychoanalysis is a discourse of the objective. However much we would want to assimilate it to an egoistic, self help, personalizing kind of pathological formation–bourgeois, insidious, etc–it is an account of the structure of social relations. It is an account of language as the medium of social relations, of ungrounded non-theocratic reason, and of the problem of secular modernity as the structure of the kind of scaffold against which the human subject emerges, or the void that the human subject answers. So it’s an extremely descriptive kind of project in this course of trying to understand the contradictions of modernity that also attend capitalism. It has a kind of different register and a different idiom for investigating those contradictions. So in the biggest sense, it makes sense of social relations. And it puts the arbitrariness of social relations first and foremost, front and center. Why do human beings suffer? Why is there discontent in culture? Why is there discontent in civilization? Because there is not an immanence to it. Because there’s not a groundedness of it. Because we can’t make the words coincide with the things. So it has affinities with the formalist project I’m articulating, as well as affinities with what I think a historical materialist project is. So that’s why it’s so important.

But then, more specifically in that chapter, I’m working with some of the Lacan and Freud’s own thinking about institutions and their own thinking about the relational space of psychoanalysis. You can’t do psychoanalysis on yourself. It’s not self help. It is a dyadic relation that has to take place within very specific formal conditions, the conditions of the clinic, the couch, the two people, the variable session, and usually with the authorization of the institution that will enable the analyst to have been trained, and the patient to transmit what it is that they have done in their processes that they are working on. So there is a lot in the history of psychoanalysis of meditation on what an institution is and why you need it for this practice of health and human beings suffering less. So that makes it an intrinsically political theory. And then, of course, Freud wrote a whole number of political and theoretical texts, as did Lacan. So that’s why I look at psychoanalysis in a way. Then, there are also slightly more historical reasons. Like Freud was one of the great appraisers of the realist novel. He said that Eliot, Dickens, Trollope and Thackeray had invented psychoanalysis before he had. So there’s a kind of according and an esteem for the realist novel in psychoanalysis that is also really enabling for me.

William Saas: Thank you. To get us to the end of the interview, we want to step out of The Order of Forms, or get a little bit adjacent to it as you have in other articles. You’ve written about everything from the so-called method wars in literary studies to reflections on what you have named the climate realism of contemporary novelist, Kim Stanley Robinson, who was a recent guest on our show. So throughout these articles and publications, you place front and center the question of theory, or better, of theorizing as a social formation. And through this writing, it appears that for you, theorizing is not simply a specialized mode of academic labor within the Academy. But it is rather at once a critical and generative activity that takes place through fiction as much as through nonfiction. We like this commitment, and partly, because it links the labor of the humanities to constitutive world building, while pushing back against certain self-loathing impulses in the neoliberal Academy. See before: “how’s that working for you?” Is this a fair characterization of your work? Or are we way off base? If it is fair, could you say more about why it is that you prize this kind of unconventional, even promiscuous approach to theorizing?

Anna Kornbluh: Yeah, I think that’s very fair. And I appreciate it very much. I’m so glad that you guys could read that. I just think that creative, speculative, wild utopian inventiveness is a deep, deep faculty of the human. I really do, I am a humanist in that way. I think humans enjoy play and abstraction. I think it’s a staggering truth that human beings made abstract cave paintings before they knew how to make houses 70,000 years ago, before they knew how to bury bodies. Abstraction is a faculty of our creative power and our creative capacity to make things. So I love that I have labor conditions that afford me the security and the time and the venue to try to take my mind wild places. This is equipment for living. Our ideas clearly haven’t sufficed till now. We live in a society of mass immiseration with more and less brutal instantiations of it and spectacles of it, more or less viciousness, and mass inequity. And we are rapidly losing the ability to live. And that’s not a generic problem of human beings, that is a problem of our oligarchs, but it is going to be true and unevenly distributed that people won’t be alive. This is a fact that in 20 years billions of people will live on land that will be uninhabitable or hot or underwater or both. This is a recipe for mass death, a recipe for forced extinction, and a recipe for mass violence as well.

So shit is not working. People are miserable and the earth is burning up. So we need new ideas. And we need ideas that aren’t just messaging and telegraphing and DMing what’s already here. There’s a kind of real collapse of both the theoretical and the aesthetic imaginary right now into this just endless, sadistic documenting of how bad shit is. And that’s not really galvanizing as art, that’s immobilizing as art. So I would kind of just defend ontologically, politically, tactically, and libidinally what theory has to offer us, what big ideas, what speculation, what thinking abstractly, what defamiliarization, and getting outside the normal frames of reference have to offer us.

William Saas: I just wanted to acknowledge and show some appreciation for your own acknowledgement of the conditions of the labor that you’re doing. And I’ll maybe invite you to say a little bit more about theorizing and the space-time labor value that is required into this essential labor of theorizing our way out of this climate mess and out of all other associated messes. What do we need to do that?

Anna Kornbluh: Right, so we obviously need lots of collaborative time, I think, because none of the available idioms are working. And that includes that the engineers don’t know how to convey the crisis of value that we’re living in even if they know how to decarbonize. They don’t know how to motivate the political action. But the storytellers haven’t quite figured out how to galvanize a mass insistence on decarbonisation or on other ameliorative measures, because maybe they don’t have enough riveting facts or they don’t have a good enough sense of what the functional storytelling is. But we need a lot more collaborative, imaginative, and technically inventive work together across disciplines. I do think that’s true. And I think that individuals need time to spend reading, to spend marinating, and to spend producing collaborative knowledge in the space of the classroom. I don’t at all oppose research and teaching. I think that is just totally not what I mean when I say like we need time for thinking.

But people need time for teaching. And that means that they need small class sizes, they need workable loads, and they need the ability to have preparation that involves reading new things and changing their course syllabi all the time and like genuinely encountering and making ideas happen in the classroom. There’s this line in Rachel Buurma and Laura Heffernan’s book, The Teaching Archive, about how like in the humanities you deal with students saying like, “I couldn’t make it to class, what did I miss?” And they say, “You missed everything and you missed it forever.” Because we make the knowledge happen in that haptic, collaborative, and dynamic moment of mutual determination of meaning. That is what you missed. So I think we need time for research driven teaching and research generative teaching. And what we also know is that it is just emphatically and empirically good for students, about small class sizes, about a lot of individual attention, about a lot of dynamic kind of evolution of what’s on the syllabus, and a lot of in-person collective work.

The other thing I might say about that, because I really, really care about this, is we need people who think about our conditions of labor and who are willing to do the work to make the place where we work, work. Service in the institution, being the associate head of my department of a hundred people, working in my academic union, these are things that have taught me so, so much about big ideas, about communication, about pattern, about organizing, about power and politics. It is a formal problem, how should you organize a class, make a budget, or at what level should departments cooperate, and so on. And I wrote two books in the last five years while I was doing really heavy administrative work, and I think that every faculty member must do it, and also must do it in their union. Because self governance has to mean something and because making our institutions functional and habitable is also content.

William Saas: Just wondering, returning to the self-loathing academic and the neoliberal Academy, part of that being potentially linked to perpetuation, and throwing one’s hands up at the structure as it is and saying, “I can’t do anything about it. I can’t create that space that I know is necessary in the classroom. Let’s just burn it all down.” Right?

Anna Kornbluh: No, I think that’s absolutely pervasive. And some of it is a response to feeling themselves burnt out. Burnout is a generational and cultural structure of feeling and so on for lots and lots of reasons. We, again, have a society that is immiserating people on a mass scale. The amount of overwork that is extracted from people no matter what their level of compensation is, or the level of job security is, is just intolerable. And I think it’s really, really vivid in the pandemic that academics are like essential workers in how much they’ve been asked to over function, how much they’ve been asked to overproduce. Many people, not all, were insulated from the dangers that say healthcare workers or grocery store workers had in the last 20 months, but not from the extremizing intensification of the demands on our work, and certainly not from the emotional toll of what it has taken to try to be there for students and invent new modalities and respond to our employers contempt for our survival and so on. So you can understand what the burnout is, you can understand what the dissolution is, but your fellow people have some power to join with you and transform a lot of those conditions.

A lot of these power structures are actually open and available. It’s not that hard to be a department head, it really isn’t. And people can do that work together. And that’s what faculty governance, another beautiful promise of it, is. It is really, really, really rewarding to make a faculty union. And it is really rewarding to do that in relationship to student unions and in relationship to graduate employees unions and in relationship to staff and janitorial unions and in relationship to your public school teachers union. And to think about 4 million people work in higher education. That’s more than in the airline industry, or the restaurant industry, these giant sectors that got COVID bailouts, that we did not in the same way or that we didn’t have value for. We serve 20 million people nationwide. Like our work is incredibly valuable. There’s a lot of power in that value that we can collectively seize up together. I know everybody’s tired and everything is terrible. But I really think that affirming the good stuff that we have and the agency that we have is the only way out.

Scott Ferguson: Anna Kornbluh, this was an incredible conversation. Thank you so much for coming on the show.

Anna Kornbluh: Oh my god, I’m so honored that you guys read my work and I’m such an admirer of the efforts you guys are making to just think differently.

* Thanks to the Money on the Left production team: William Saas (audio editor), Richard Farrell (transcription), & Meghan Saas (graphic art)