(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.
I now live in Texas and am focusing my efforts there. I am in contact with Kay Bailey Hutchison and Joe Barton, condemning them for their support of S 365: Budget Control Act of 2011 and demanding support for HR 6550.
S. 365 is possibly the final stage of the greatest theft in history. When deciphered, it simply says; eliminate any programs created to Promote the General Welfare, while insuring that no limit may be set upon spending for illegal invasions, wars of conquest, or the specific welfare of the ultra-rich parasite class.
Under S. 365, what little wealth remains to the People will be redistributed upward to those who have bought our government.
Meanwhile, the last of our rights will be stripped from us in the name of the fictitious war on terror.
S 365 authorises the creation of a twelve member "super committee", which is the last nail in America's coffin, enshrining in law the transition of our government to a tyrannical oligarchy, which is owned by an international plutocracy comprised of individuals whose only purpose is the totalitarian control of Earth and all its resources and people.
HR 6550 is our best and perhaps last chance to end the usury that passes for our monetary system. I will demand its passage in the strongest possible terms until that goal is achieved or I am disappeared by DHS.
As a half-measure to fix our immediate problem, consider supporting the re-issuance of debt-free U.S. Notes: http://www.change.org/petitions/end-the-debt-crisis-with-debt-free-united-states-notes - our longest lasting and only true sovereign currency.
The Law must protect the new Treasury and its money power. So, the law is going to have to evolve to include money. Simply said, our legal profession is going to have to change and become more responsible, while our economists will have to become historians and better legal scholars.
Please don't forget about Federalism. The founder's goofed when they left the money power unchecked. If HR6550 passes it will fix this defect,
The 17'th should also be repealed as the populism of the Senate could undo the new Treasury over time. Money is a fiat of the law, but it also interesects with the political sphere. I forsee attacks by political elements to use the new Treasury for rent seeking. Therefore populism must be held at bay.
We know from the Templar's history that a poltical authority can always trump over money power. Be wary and make sure powers balance out.
I see no reason to believe that there would be other than per-capita(Congressional District) distributions of grants to States.
Besides this broad language in Section 502, Monetary Grants to States :
"The States may use such funds in broadly designated areas of public infrastructure, education, health care and rehabilitation, pensions, and paying for unfunded Federal mandates."
there are the provisions of 505 (Education), 507 (Direct Monetary Grants to Citizens) , 508 (Healthcare), and 510(Interest-free Loans to Local Government Bodies).
ALL of which provide funds to either citizens or states or municipalities for THEIR needs.
I agree that this must represent the New Federalism - as if the States matter.
In the post HR6550 world, private bankers will take a fee for matching up people who want a loan with people who have savings. In this way, a free people will be able to trade their output, and their output will be monetized safely with lawful money.
It's just that I'm a worry wart when it comes to the rent seeking defect at the heart of man. Clever people have always found ways to feather their bed. Witness the recent Graham Leach Blily act. Another example: TARP which taxed the public via the 16'th ammendment, in order to socialize risk in the private banking system.
Perfection is the enemy of the good, so I know that the act would be just a start. But, short on the heels of the act passing (if someday it does), we would need strong laws that cannot be easily overturned by rent seekers. I consider populism to be the entry wound for rent seeking attack, much in the way the 17'th is used today to corrupt the Senate.
We would also need to look at fiscal policy to see where wealth vectors. Even in a 100% world, tax policies can favor certain groups to the detriment of others. I would favor a Georgist type rent value tax, to offset income taxes. The free lunch that the FIRE sector consumes needs to come to a stop.
The American Monetary Act is the most revolutionary piece of legislation in US history. There is no question our current depression is clear proof of the abysmal failure of the privately owned and operated Federal Reserve monetary system.
The truth is that private banking interests from the beginning, represented by Alexander Hamilton, with the blessing of George Washington, have conspired to control the US financial system and to prevent the government from exercising its sovereign power to issue its own money. Professor Yamaguchi's work further substantiates studies done of Lincoln's greenbacks. The debt-free greenback was a beloved and successful money.
The power of private banking destroyed the greenback and has successfully defeated any attempt by government to control money, what is in reality the people's money, and as such a public utility. The oligarchs, represented by mild Ben Bernanke, will go to any extreme to keep the public money a private concession.
For this reason Kucinich's legislation will not see the light of day. But we need the AMA to complete the American Revolution. Just as the Civil Rights Act fulfilled the promise of the Declaration, The American Monetary Act will create a democratic money. It will no longer be a private concession of the rich.
Credit money has to be insured because it expands and contracts lawlessly. Another way of controlling credit money is to bring it under political control, such as Glass-Steagall. GS kept the investement banks, commercial banks, and insurance companies from counterpartying each other, and thus preventing towering levels of fake leverage.
100 percent reserve systems like HR6550 do away with Credit Money. The money itself is nationalized and backed by the faith and credit of the people. The money is NOT counterpartied and leveraged and gamed by private actors.
There is a huge difference between our parasitic credit based monetary systems and HR6550 (100% reserve) system.
Therefore the Glass Steagal does NOT need to be re-introduced. It would be a red herring and distract people from the real monetary reform we need.
For anyone frustrated by thinking there is no solution, research this proposal.
And order a copy of Zarlenga's "Lost Science of Money"