Coauthored by Greg Coleridge
For all the boisterous talk and debate by Congressional leaders of both parties and the President about the many ways to reduce our nation's deficit and debt while maintaining vital services and programs, there continues to be a roaring silence about a solution that has nothing to do with the budget. It has to do, rather, with our nation's monetary system.
Be it for ignorance or by intention, few federal elected officials have examined how a change in the way money in our nation is created and issued could reduce our nation's deficit and debt and, in doing so, increase millions of vital jobs to transform our economy.
One of the few exceptions is Rep. Dennis Kucinich (D-OH), who during the last Congressional session introduced H.R. 6550, The National Emergency Employment Defense Act. A revised version is expected to be soon reintroduced. Americans would be wise to rally behind it.
The basis of the bill are three essential monetary measures proposed by the American Monetary Institute in their American Monetary Act (AMA). The AMA's recommendations are based on decades of research and centuries of experience; are designed to end the current fiscal crisis in a just and sustainable way, and are aimed to place the U.S. money system under our constitutional system of checks and balances.
The three essential measures include:
The irony is that these three provisions would institutionalize what most Americans falsely believe already exists: That the Federal Reserve is public. That banks only loan money that they possess. That the government creates our money. Wrong on all counts.
Decades of distortion and deception can be remedied by this bill. Public control of the money system is not a new practice. The American colonists issued "Continentals" and the Lincoln administration "Greenbacks" to fund the Revolutionary and Civil Wars, respectively -- all debt and interest free. More than 200 prominent economists during the Great Depression of the 1930s developed and endorsed "The Chicago Plan" -- which declared that only the government should create money -- to address that crisis.
Ask your U.S. representative to cosponsor this act when it is reintroduced. Ask your two U.S. senators to contact Rep. Kucinich about becoming a Senate sponsor. This bill alone cannot solve all our current economic problems. But it will end the private/corporate control of what should profoundly be a public democratic function of any society -- issuing the nation's money. Maybe more importantly, the act will serve as a beacon of hope to a beleaguered citizenry who are seeking long-term solutions to unemployment, debt, crumbling infrastructure, and need to take power over their lives and their society.
Zarlenga is director of the American Monetary Institute and author of The Lost Science of Money. Coleridge is director of the Northeast Ohio American Friends Service Committee.
Scott Paul: It's the Economy, Stupid: Version 2011
Thanks for that link, and for the excellent work behind it.
Truly impressive stuff.
As I considered purchase of your Green Island Book, I noticed it was copy-righted as a well-reasoned public domain, and tho I could not access the pdf of the whole item, the chapters are working well, being bookmarked for future edification as time allows.
Noticing the NDPs move to the official opposition, and the election of Ms May to Parliament as a Greenie, could provide for interesting dialogue up Ottawa way. Were the Canadian Greens to adopt a similar monetary reform plank as the U.S. Green Party, she would have a solid platform from which to advocate for all the things she obviously believes in.
Thanks for all of your work there, Dave.
It makes sense that you have a central lender that loans out the money and then the interest is used to fund more human and physical infrastructure. The money stays within the communities and not spirited away to some bankster's imaginary vault. The Bank of North Dakota is the only state bank that follows this basic formula. Take the state revenues and put them in a state bank. Then use it to help students, farmers, and other small businesses to improve the state.
Benjamin Franklin was so inspired by what the colony of Pennsylvania discovered with the power to create money and run a government with nearly zero taxes that he wrote on it. Mr. Zarlenga's book nails this history. I was inspired to do further research to document what our country's brightest historical minds wrote on the subject of money. It's in this article: Top ten list of Americans for monetary reform: the most important economic policy in US history
http://www.examiner.com/la-county-nonpartisan-in-los-angeles/top-ten-list-of-americans-for-monetary-reform-the-most-important-economic-policy-us-history#ixzz1Lo8mI5PC
Thanks for caring.
This is just a suggestion.
First, do what you can to open your mind.
Second, have a read of the Kucinich Bill.
Third, have a read of the Yamaguchi paper.
Then tell us again why you might believe the stuff you wrote here.
The scary stuff is what lies ahead if we don't do this.
Thanks.
Joe,
The proposed Act legally requires that, first, the amount of real money in existence in any year be established by an independent monetary authority so as to be neither inflationary nor deflationary.
And then said Act requires that amount of new money be created openly within the government's annual budgeting process - so we know where its spent.
It's a legal requirement of the federal monetary authority - a measure which will obviously be watched by yourself and the Peterson group much more closely than the FOMC trying to establish interest-rate parameters to effect the private banking system lending of debt-money, with their self-interested motivations.
Did they have that in Zimbabwe? Or did they have Billion-fold printing of worthless bills with zero accountability?
And in Weimar, the government was divorced at that time, by the Versailles Treaty implementation, from the private central bankers who printed those marks with private printing presses. It had nothing to do with government money-creation.
But if all you have is empty rhetoric, Joe, and no real understanding of how the money system works, and zero desire to learn, then I'll leave you be.
The "roaring silence" is a lie of omission by "leadership" in politics, economics, and corporate media, and mostly ignorance from members of Congress. The reason this is a lie is that so many of America's brightest minds have expressly written on this topic, as Mr. Zarlenga brilliantly documents in the best book I know of to understand money, The Lost Science of Money.
The solution of creating money rather than debt is the single most important economic policy in the history of this nation. The cost-benefit analysis quickly demonstrates trillions of dollars in benefits to Americans every year: paying the national debt (and ending a now ~$400 billion annual interest cost), full-employment as government becomes an employer of last resort for infrastructure investment, resultant state-of-the-art infrastructure, declining real prices as infrastructure investment produces more economic benefits than cost of creation, and non-profit cost for credit (think 1-2% mortgages with that mutual savings covering any need to tax Americans to reduce the money supply).
Simply: there is literally nothing more valuable for your attention than mastering the facts of monetary reform :)
"US Revolution unleashes trillions of dollars in obvious economic solutions" is my article to communicate monetary reform.
I just finished reading Stephen's excellent book, The Lost Science of Money, which explains all of this very thoroughly. I highly recommend it. Also there's a lot of good info at their website:
http://www.monetary.org/
"ObamaCare" could not get approved until it was structured as a cash cow for Big Insurance. The GOPs problem is that insurance has to spend ANY money for their free money from govt giveaway.
Part of the problem of "govt stupid" that dweezil52 mentions may come down to "society" as a whole. Part that legislatures tend to be a mix of venal interests. But the biggest problem is that OUR govt is "captured" by super wealthy conservatives (and liberals) in business. Those who resist money-corruption are systematically weeded out. Graft is institutionalized.
A law that allowed/mandated spending ONLY on SCHOOLS and HEALTH and ROADS and public good would lead (in Austrian libertarian thought) to an excess of those areas, but that would be MUCH PREFERABLE to incentive than excesses in Financial Derivatives, Commodity Futures, Mortgage Securities, vacant commercial development, Weapons systems, and the rest of today's cash cows. Economic Policy by central "Politburo" of bankers could end.
To state this plainly, teachers, doctors, and bridge builders may "milk the system" with bribery, but not Jamie Dimon and Lloyd Blankfein and peers who are wealth destroyers not wealthy producers, as (ironically) Ayn Rand referred to such social capital parasites.
National Sovereignty is a biggie for Paleo-Conservatives. America would end dependency on foreign and domestic creditors (some who 'create' loans, not just Federal Reserve but Fed System private banks) who purchase Treasury notes.
Today, Congress can approve unlimited debt and Treasury can issue unlimited Notes as IOUs, but legally forbidden to issue MONEY itself. Banks do not issue MONEY either, rather "credit". Zarlenga emphasizes this.
In this mode, govt could still spend foolishly, but less *incentive* from for-profit creditors.
We are ignorant about "carry trade" where Fed pumped up "reserves" with Treasury notes, so banks could then loan all money they could borrow @ 0.25% back to the Govt @ 3%. Circular risk-free profit machine, based on inflation and fictitious capital.
Zarlenga wants this to pay for education, health, and many examples of negative and low-profit "public good" spending that banks and business won't finance anyhow, EXCEPT with govt funding & guarantees. Business loves ubiquitous "private-public partnerships" where they get all profits while public absorbs risks and costs.
This is also principle of Separation of Powers. Commercial Banks would still loan money they actually possess from savings, but could not *create* it .... the classic defn of "usury", since there's no "time value" nor "risk" on magic money. Spending on REAL WORK (not speculation) is not inflationary.
To prove my point that banks need to create our money, I encourage every American in the world to put their money under a mattress and wait: Not only the banking system, but the government, jobs, and all elements of the economy will crash.
This sort of economic overhaul is exactly what we must not do. The only way to solve our economic crisis is to become more educated and productive, or to lower our standards of living. It is ignorant and albeit dumb optimism, to think that their is a little button that can be fliped to fix out fiscal crisis! Only through the hard work of all Americans together (not some D-OH politician that can save us.
Former Fed credit officer Robert Hemphill, advocating for similar reforms to those contained in the Kucinich Bill, said it best a long time ago.
""If all the bank loans were paid, no one could have a bank deposit, and there would not be a dollar of coin or currency in circulation.
This is a staggering thought. We are completely dependent on the commercial Banks. Someone has to borrow every dollar we have in circulation, cash or credit.
If the Banks create ample synthetic money we are prosperous; if not, we starve.
We are absolutely without a permanent money system. When one gets a complete grasp of the picture, the tragic absurdity of our hopeless position is almost incredible, but there it is.
It is the most important subject intelligent persons can investigate and reflect upon...... becomes widely understood and the defects remedied very soon.""
After intelligent pondering of how to bring about a "permanent" money system, economists from Henry Simons to Milton Friedman to Irving Fisher have all concluded a like plan to that of the Cleveland Congressman is needed.
The Bill provides permanent, adequate "liquidity" to the banking system.
As stated in the very similar 1939 Program for Monetary Reform - . “ It is intended to eliminate one recognized cause of great depressions, the lawless variability in our supply of circulating medium.”.
I assure you if that was about to happen they would say the sky will fall, and to prove it they will start dropping the stock market as a warning to all who would get in the way.
One of the definitions of a "sovereign state" is that it is allowed to issue its own money. You don't have to take that money in your own country if you don't want to, but within that country, "This note is legal tender for all debts, public and private." Or whatever.
A country doesn't "go into debt" in order to issue money, and, pragmatically speaking, we haven't done so either. We've merely been keeping score, perhaps to assuage our own consciences. Truth is, "it isn't really debt." It never has been. The only way we can "pay it off" is by issuing more debt, which is what we can do without restriction anyway (the "raise the limit" puffery is just that ... puffery).
My concern with the present situation, and why I think it must be changed, comes to this:
(1) We are allowing private corporations to participate in, and ostensibly to "profit" from, what are the concerns of a Sovereign State and no other.
(2) This creates "huge, endlessly wealthy" banks and the powers thereunto ... or, does it really? We don't have to borrow from anyone. When you "lend," and claim that you profit absurdly thereby, what you are saying really isn't true at all. It certainly isn't "real business," and yet it will consume 100% of their focus and attention at the exclusion of people, and companies, that aren't privy to the public trough.
My guess is that this would be an easy sell to a large majority of the Tea Party groups too.
The left and the right fighting the corrupt center that is our two party system may be the only chance for such a change to be forced through.
One needs only look at the financial guillotine that the private debt industry has over the people of this country today to see the need for basic, essential reform of the money system.
The debt-ceiling imbroglio, for instance.
This would become a lesson in bad economic history once the government issues the money rather than issuing the debts for its budget balances. There is no real need for government to issue debts once these reforms are taken.
Please have a read of Dr. Kaoru Yamaguchi's paper - :On the Liquidation of Government Debt Under a Debt-Free Monetary System', available here.
http://monetary.org/yamaguchipaper.pdf
Then, there's the deficit battle.
We have a situation where the private bankers, for good banker reasons, are not willing to lend - because there are not 'worthy' borrowers.
In a debt-money system, when the bankers refuse to lend and create debt-money, the money supply contracts and real economic needs are not provided with a means of exchange.
The government should have the power to issue the monies needed to fund our potential for economic activity. This money would enter the economy at the level of those providing services to and receiving services from the government - without debts.
Then the banks could lend it out.
If the prevailing fiction is that "you've gotta borrow from me" in order to have "money for your country," then ... "my bank, which I control" ... has "your country, which you say that you control but you really don't because He Who Has The Gold Makes The Rules" ... by its ... copulatory appendages.
So, not only do you (being a natural-born member of the human species) not-mind accepting whatever money I want to pour at you (said money being coined from nowhere at all) to do whatever I bid you to do, but you might even feel obliged to do so.
The United States Government exists "by the consent of the governed" for exactly one purpose: "the governed." All 312 million of 'em. Not a couple thousand bankers and their crony friends.
To that end, the Government has the privilege of "guaranteed liquidity, no matter what." It's not a privilege that it is "privileged to be able to buy." It is ... a privilege. Conferred upon it by the consent of 311 million people to serve the necessary ends of those people; not a banking corporation.
And there wouldn't be enough space or offices in DC to accomodate the tsunami of lobbyists who would be headed there.
I understand your cynicism, but please consider that the situation you describe is already existing now, under the present set-up, and that it may be a symptomatic consequence of the present set-up.
Somebody has to be vested with the responsibility to provide our money supply, and it's surely better to have this responsibility be accountable to We the People than delegated to a bunch of "Enrons" (yes, Enron executives were on the board of the Dallas Fed bank), et al.
There's surely a much better chance of prudence and accountability when the conflict of interest of short-term profits (and bonuses) is removed from the decision-making process on how much money to create (and who to issue it to), and is replaced with a statutory obligation to serve the overall needs of the economy and country as a whole, with no conflicting pecuniary interests, and with full accountability to the American people for the results, through Congress, the GAO, the public gaze, etc., etc.
If you read the text of the Bill, you'll see the Monetary Authority is strictly independent and autonomous from political/bureaucratic interference, and it's governing principle is to furnish the nation with a stable money supply, which is neither inflationary nor deflationary - who could ask for more than that?
Nevertheless, it's not "unlimited money" that's the most serious problem with what we are doing right now: it is that private corporations (banks) are plugged-in to that national privilege on their own balance sheets.
"The United States is printing money with reckless abandon. Okay, it can do that." But what is also happening is that banks are holding that money on their own balance sheets, under the fiction that we have "borrowed it" and that we are "paying interest on it" and that it is "an asset."
We are also "buying and selling" that debt, and under the fractional money system, every time we do that, more "money" is magically created.
But ...
(1) What's happening on the banker's books has no basis in reality. It just doesn't.
(2) Banks claim to have "a fistful of dollars," but somehow, you can't actually grasp any of them. Your hands pass right through.
(3) Every blee-blee nation in the world, from Iceland to Timbuktu, is "hopelessly in debt to" everyone but these "privileged 0.1%" such that they can't pay for their own upkeep, their own people, their own government, their own roads and bridges.
(4) "Oh, really? That's utter bullshit, you know. You're speaking nonsense. Your banker's name must be 'E. F. Rumpelstiltskin.' "