[R-G] [BillTottenWeblog] Monetary Proposal

[Bill Totten]

Return to the Greenback Dollar

by Ellen Brown, JD

http://webofdebt (March 06 2008)


We no longer have a government "of the people, by the people, for the
people". We have a government run by and for Big Business, and Big
Business has gotten control because its affiliated banks have
monopolized the business of issuing the national money supply, a
function the Constitution delegated solely to Congress.  What hides
behind the banner of "free enterprise" today is a system in which giant
corporate monopolies have used their affiliated banking trusts to
generate unlimited funds to buy up competitors, the media, and the
government itself, forcing truly independent private enterprise out. Big
private banks are allowed to create money out of nothing, lend it at
interest, foreclose on the collateral, and determine who gets credit and
who doesn't. They can advance massive loans to their affiliated
corporations and hedge funds, which use the money to raid competitors
and manipulate markets. If some players have the power to create money
and others don't, the playing field is not "level" but allows some
favored players to dominate and coerce others. These giant cartels can
be brought to heel only by cutting off their source of power - the power
to create money - and returning it to its rightful sovereign owners, the
people themselves.

Two independent monetary systems have competed for dominance in the
United States ever since we were a collection of colonies. In provincial
America, paper money was issued by local governments. In England at the
same time, paper banknotes were issued and lent privately by banks,
headed by the Bank of England, the first private central bank. The major
flaw in the private banking system was that the banks created the
principal but not the interest necessary to pay back their loans, so
more money was always owed back than was put into the money supply,
requiring more loans to be taken out to cover the interest, spiraling
the people into debt.The most effective and efficient of the American
colonial systems was in Pennsylvania, where a publicly-owned bank issued
paper money and lent it to farmers. The money returned to the government
with interest, preventing inflation; and to keep enough money in the
system to prevent the debt spiral of the private banking system, the
government issued and spent a sum of money on public works as well. The
Pennsylvania system worked so well that it completely funded the
provincial government without taxes or inflation. Benjamin Franklin and
others maintained that the chief reason for the American Revolution was
that Parliament forbade the colonies from issuing their own money. Paper
money issued by the Revolutionary government got the colonists through
the war, but the British heavily counterfeited the Continental currency
as a deliberate war tactic, and by the end of the war it had been
inflated so much that it was nearly worthless. Fear of inflation led the
Continental Congress to completely omit paper money from the
Constitution, which does not say who can issue it or under what
circumstances. The private banks filled the breach, and by 1913 the US
had the same private central banking system that England had. Ever since
the dollar went off the gold standard in 1933, all of our money except
coins and a few rare US Notes has been created privately by banks
(including the private Federal Reserve) and lent to the government and
the people. Two centuries after the Revolution was fought, the pyramid
scheme of lending ten dollars and requiring eleven back has reached its
mathematical limits. We are "all borrowed up" and the banking system is
imploding. It is time we tried the system for which our forefathers
fought and died: real, debt-free, publicly-issued US money. This tack
would not only not add to inflation but could actually reduce or
eliminate it. Inflation results from an increase in "demand" (money)
over "supply" (goods and services). Today inflation is caused by
borrowing to repay debt: the money created into existence by banks goes
to pay interest rather than to produce goods and services. If the
government were to issue money and use it to pay for real goods and
services (roads and bridges, sustainable energy development, health
services, and the like), demand and supply would remain in balance and
inflation would not result. The "Federal" Reserve is actually a
privately-owned corporation that issues money and lends it to the
government. A truly federal central bank would issue funds directly to
the Treasury as debt-free US Notes, or as "national credit". This was
done successfully in Australia and New Zealand during the 1930s and
1940s. A state-owned central bank funded public projects that put people
back to work, at a time when most of the rest of the world was
struggling with a depression brought on by a global shortage of
bank-created money. Today we are facing the same sort of bank-created
credit crisis, and it could be resolved in the same way. Steps Congress
might take include:

1. Amending the Federal Reserve Act to make the Federal Reserve a truly
federal agency, acting under the auspices of Congress in conjunction
with the Treasury.

2. Updating the Constitutional provision that "Congress shall have the
exclusive power to coin money [and] regulate the value thereof" to read,
"Congress shall have the exclusive power to create the national currency
in all its forms, including not only coins and paper dollars but the
nation's credit issued as commercial loans; and it shall not delegate
this power to any private entity".

3. Authorizing new issues of federal legal tender backed by "the full
faith and credit of the United States", to be spent on programs that
promoted the general welfare. To prevent inflation, this currency would
be advanced only for programs that contributed new goods and services to
the economy, keeping supply in balance with demand. Issues of the new
currency would also be capped by some ceiling - the unused productive
capacity of the national work force, or the difference between the Gross
Domestic Product and the nation's purchasing power (wages and spendable
income).

4. Advancing credit interest-free to state and local governments, for
rebuilding infrastructure and other public projects. The emphasis would
be on projects that were self-sustaining, such as the development of
cheap, effective alternative sources of energy (wind, solar, ocean wave,
et cetera) that could be sold to the public for a fee; or the repurchase
of homes in default, to be resold or rented as low-income housing.

5. Establishing a network of national banks to serve as local bank
branches of the newly-federalized banking system, either by FDIC
takeover of currently insolvent banks or by the purchase of viable banks
with newly-issued US currency. Besides serving depository banking
functions, these national banks would be authorized to service the
credit needs of the public by advancing the national credit as loans.
Any interest charged on advances of this credit would be returned to the
Treasury, to be used in place of taxes.

6. Authorizing the Treasury to buy back and retire the federal
government's outstanding debt as it comes due, using newly-issued US
Notes or Federal Reserve Notes. In most cases this could be done online,
without physical paper transfers.

7. Regulation and control of the exploding derivatives crisis, either by
imposing a modest .25 percent Tobin tax on all derivative trades in
order to track and regulate them, or by imposing an outright ban on
derivatives trading. If the handful of banks responsible for 97 percent
of all derivative trades were found after audit to be insolvent, they
could be put into receivership and their derivative trades could be
unwound by the FDIC as receiver.

8. Initiating a new round of international agreements modeled on the
Bretton Woods Accords, addressing the following monetary issues among
others:

- The pegging of national currency exchange rates to the value either of
an agreed-upon standardized price index or an agreed-upon "basket" of
commodities;

- International regulation of, or elimination of, speculation in
derivatives, short sales, and other forms of trading that are used to
manipulate markets;

- Interest-free loans of a global currency issued Greenback-style by a
truly democratic international congress, on the model of the Special
Drawing Rights of the IMF; and

- The elimination of burdensome and unfair international debts. This
could be done by simply writing the debts off the books of the issuing
banks, reversing the sleight of hand by which the loan money was created
in the first place. Just as we need publicly-operated police, courts and
laws to keep individual and corporate predators at bay, so we need a
system of truly national banks, in which the power to create the money
and advance the credit of the people is retained by the people. We trust
government with sweeping powers to declare and conduct wars, provide for
the general welfare, and establish and enforce laws. We should trust it
to create the national money supply in all its forms. The federal
government need not and should not go into debt. A government with a
properly designed and monitored system of publicly-issued money could
fund itself without taxes, debt or inflation.

http://webofdebt.wordpress.com/monetary-proposal/


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