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:
- Moving the mostly private Federal Reserve System under the US Treasury Department. The Fed would no longer be a virtual fourth branch of government, unaccountable to the public. Their important financial research functions would continue. But the Fed would no longer make unilateral monetary policy decisions beyond the reach of We the People.
- Making the power to issue money a public function -- bypassing the current system which invited the careless and risky lending that led to the global economic crisis. The U.S. government would be authorized to issue dollars debt free. This power would replace the current undemocratic and unstable "fractional reserve" system in which money is created as debt through loans by financial corporations who lend many more times what they possess. Banks would no longer have this privilege to create our money supply!
- Enabling the U.S. government to use its money power -- creating and spending money into circulation -- to address pressing infrastructure needs such as repairing our crumbling roads, bridges, rails and highways. The government also would be enabled to invest in health care and education. These projects would provide a huge numbers of jobs without going into debt and having to repay interest on debt to financial institutions. Economist Kaoru Yamaguchi's computer model has shown that a public-based money system and spending government money on jobs fixing our infrastructure is the best form of economic growth.
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.