(The video and transcript of the briefing will be added here as they become available)
On Tuesday, July 26th, a day Washington DC was consumed by turmoil and posturing over "solving" a phony budget and debt crisis; in one place in the Capitol there was common sense -- the best America can offer. Congressman Dennis Kucinich hosted Professor Kaoru Yamaguchi (Berkeley & Doshisha universities) for a Monetary Briefing to present to members of Congress the real solution to the real problem. The problem is that the monetary system itself is broken. It is controlled not by our government but by corrupt financial interests. The solution is genuine monetary reform!
The room was filled to capacity - more people than the number that showed up for the Subcommittee on Domestic Monetary Policy Hearing, the following day, to which we brought Dr. Yamaguchi so he could meet Congressman Ron Paul.
While the phony government austerity debates resulted by attacking normal Americans and protecting wealthy corrupt interests (Please stop calling them "special" interests!), Kucinich's and Yamaguchi's prescription protected all Americans except the wealthy bankers' privileges to control and misdirect America's money system!
Dr. Yamaguchi explained how real structural reform of our monetary system would solve the most intractable of America's national and local problems, including the budget and debt problems.
Using accounting system dynamics, he builds a dynamic model of the economy which identifies distinct economic actors, including the Federal Reserve System, households and government, and then computes the outcomes and cash flows between them over time. He then can see the effect of two different money systems: debt money issued at interest by banks when they make loans; and money issued by the government as money. He can see how the systems affect government's ability to pay off the national debt.
Dr. Yamaguchi's conclusions are astonishing. Regarding the present Keynesian debt-based money system where banks create money when they make loans of ten or more times the amount of money they have on hand:
This money system requires government and private debt to grow exponentially and indefinitely. Dr. Yamaguchi finds that it inevitably leads to either a Financial Meltdown, a Debt Default, or Hyper-Inflation. If the government attempts to reduce this problem by raising taxes and cutting services, then economic growth is paralyzed and unemployment skyrockets. The downturn further reduces government revenue, requiring even more cuts. The economy may remain in a recession for decades, assuming government debt reduction remains the goal, as the recent "compromise" between the nitwits indicates.
Furthermore, such a recession is contagious; foreign economies are dragged into recessions of their own. Dr. Yamaguchi says, "This indicates that the debt money system combined with the traditional Keynesian fiscal policy becomes a dead end as a macroeconomic monetary system."
Translation: it won't work.
The real surprise comes when he examines what would happen with a government money system, where government creates the money as money, not debt, and spends it into circulation for things the country (i.e. the people) really need, like infrastructure.
The government money system Dr. Yamaguchi examines is based upon the American Monetary Act. The American Monetary Act fundamentally rearranges the nation's financial architecture in three simultaneous thrusts:
First: It incorporates the Federal Reserve into the Treasury Department. A nine-member board appointed by the President to conduct monetary policy is instructed to prevent inflation and deflation, yet maintain enough money to facilitate trade. New money is spent into circulation by the government.
Second: The privilege banks now have to create what we use for money and loan it into circulation ceases completely. "Fractional Reserve Banking" ends once and for all!
Third: New money is spent into circulation by the government on a $2.2 trillion national infrastructure program, ending unemployment.
Dr. Yamaguchi describes the three main effects of reforming a debt money system into a government money system:
A It will pay off the government debt in full, as it comes due, without further borrowing!
No recession is triggered.
B It will provide the necessary funding for infrastructure creation and repair, which then solves the unemployment problem. Foreign economies are unblemished.
C It does these things without causing inflation!
Dr. Yamaguchi sets himself apart from mainstream economists by also questioning the morality of the present system. He writes, "it continues to create unfair income distribution in favor of creditors... [and the] obligatory payment of interest forces the indebted producers to continue incessant economic growth to the limit of environmental carrying capacity...In short, a debt money system is unsustainable as a macroeconomic system."
What can a government money system do for all of us? Both the American Monetary Institute's American Monetary Act (AMA) and Congressman Dennis Kucinich's National Emergency Employment Defense (NEED, HR 6550) Act outline the opportunities. It could pay for what the American Society of Civil Engineers describes as the $2.2 trillion in needed national infrastructure repairs over the next five years. That ends unemployment!
States, counties, and municipalities could receive grants from the Treasury Department, solving the many state budget crises, keeping our word on pensions and paying for unfunded Federal mandates.
Universal pre-school and undergraduate education could be provided without indebting our youth. Medicare could provide universal coverage. All of this without adding neither a dime to the national debt nor a tic to inflation!
Congressman Dennis Kucinich will soon reintroduce his bill into the House. Please see to it that your Congresspersons read all 14 pages of it and encourage them to co-sponsor it! You are a person, not a mushroom! Act now so that your Congresspersons act! Tell us which Congressman you urged to support this bill. We'll work together to make this non-partisan solution happen.
Edited by Jules Brouillet.
Zarlenga is co-founder and Director of the American Monetary Institute and author of
The Lost Science of Money. Meet him at The 7th Annual AMI Monetary Reform Conference!
Brouillet is a researcher for the American Monetary Institute.
Follow Stephen Zarlenga on Twitter: www.twitter.com/AMImonetary