This article is part three of three, of Mr. Zarlenga's address at the Eastern Economic Association Annual Meeting in NYC on February 26th, 2011. Listen to it here.
Part one stressed that those in control of the world's monetary/economic agenda and the theories supporting it have helped bring the world to its knees. Part two identified the economists' misdefinition of money as credit, subject to collapse in a crisis, as their primary error and source of so many wrong-headed public policy decisions they influence. For example, their misconception that a government budget must be run like a family's or a shopkeeper's, ignores the power and responsibility of government to provide the nation's money supply and then misconstrues the role of the national debt in that process in our mis-structured system. This has placed the nation at the edge of a dangerous precipice of following such ideological errors down to the gates of hell under the banner of "austerity."
Over time, whoever controls the money system controls the nation. Society's definition or concept of money will determine who controls the money system. For example, misdefine money as wealth (say gold or silver) and the wealthy will control both their assets AND the money system, and therefore the nation. Misdefine money as private credit and those who dominate credit - the bankers - will control the nation And see how they are abusing that power!
Properly define money as Aristotle did, "Money exists not by nature but by law," as an abstract social and legal power, and the society has a chance to operate a just, sustainable money system under our constitutional checks and balances; as put forward in the American Monetary Act and Congressman Kucinich's HR 6550.
The economists don't recognize that any money system where private banks are in control of the money supply is fraudulent at its core by giving unearned advantage to some and disadvantage to others. Over the centuries this immorality has been "legalized," by corrupt interests and bad habit, and further institutionalized through the propaganda known as "economics" at the university levels. Such immorality at the core fosters crime all down the line, from Bank management to Wall Street, mortgage lending procedures, to foreclosures, etc.
How can we solve this problem?
Enter the Congress' best economic mind and its most courageous reformer - Congressman Dennis Kucinich! On December 17, 2010, Congressman Dennis Kucinich introduced HR 6550, the National Emergency Employment Defense (NEED) Act that contains all the monetary reform provisions of the American Monetary Act. It is much more than regulation; it fundamentally reforms our private credit/debt system now destroying our nation and endangering all humanity, and replaces it with a government money system of integrity. The Act achieves reform with three basic provisions. All three are necessary; excluding one or two could do more damage than good.
First, the Federal Reserve is incorporated into the U.S. Treasury where all new money is created by our government, as money, not debt - what people think happens now.
Second, the fractional reserve banking system is ended by stripping banks of their accounting privilege to create our money supply when they make loans. All their previously issued credit is converted into U.S. Money through an elegant and non-disruptive bookkeeping revision. The banks are held accountable for this conversion and from that point banks operate the way people think they do now - as intermediaries between depositors and borrowers.
Third, new money is introduced by the Government spending it into circulation, paying for infrastructure, beginning with the $2.2 trillion the engineers tell is needed to properly repair our infrastructure over the next 5 years. Then the necessary human infrastructure of health care and education can be fully funded. Inflation is avoided because we get real value from the creation of infrastructure, goods and services.
Banks are encouraged to continue lending as profit making companies; lending both their own money and customer deposits designated for that purpose, but they are no longer allowed to create our money supply through their loan making. They are no longer "Masters of our Universe".
Thus, Kucinich's NEED Act nationalizes the money system, not the banking system. Banking is not a proper function of government, but providing the nation's money supply can only be done properly by government.
Talk of nationalizing banking businesses, at the only time that true monetary reform is possible, is a foolish distraction from real reform. The nonsense of having states going into the banking business, and keeping the fractional reserve system would actually worsen the problem and reform nothing. All serious monetary reformers understand that banks can not be allowed to create our money supply. All serious monetary reformers know that we have to end the fractional reserve banking system whereby the banks create our money supply when they make loans.
Because of prejudice against government, most people are surprised to learn that history shows government has a far superior record running the money system than the private bankers have. And that includes the Continental Currency, the Greenbacks and even the German Hyperinflation of the 1920s, which by the way took place under a privately owned and privately controlled German central bank purged of governmental influence! These facts, though not taught in most economics classrooms or texts, are discussed at length in my book, The Lost Science of Money. The hundreds of sources I read to create this work are cited in the bibliography.
In August of 2010 Prof. Kaoru Yamaguchi analyzed the effect of the reform in his Systems Dynamics Study of the American Monetary Act. His system dynamics macroeconomic model applies engineering modeling frameworks to present a simple and readable analysis of the effects of implementing the American Monetary Act. He found that the American Monetary Act:
Pays off the national debt.
Provides the funds for infrastructure, thereby solving the unemployment problem.
Does this without causing inflation.
This reform becomes a reality through the political process. Imagine! It has already been introduced into the Congress! It is being handed to you on a special platter of not gold nor silver - but Aristotelian. Everyone of us need to commit some time and energy to making it happen. We at the American Monetary Institute will do our best to educate our fellow Americans.
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.