The American Monetary Act

The American Monetary Act, a legislative proposal intended for U.S. Congress, recognizes that through the creation of the Federal Reserve in 1913, private banks effectively took over from Congress the sovereign power to create money, and that this has resulted in “a multitude of monetary and financial afflictions, including:

• an uncontrollable national debt
• excessive taxation of citizens
• inflation of the currency
• drastic increases in the cost of public infrastructure investments[*]
• excessive un- and under-employment and
• erosion of the ability of Congress to exercise its Constitutional responsibilities to provide for the common defense and general welfare”

[Notes: Bullets added.]

The proposed legislation, created chiefly through the initiative of Stephen Zarlenga and his American Monetary Institute, is breathtaking. It is brief, simple, commensensical, practical, revolutionary. The Act isn't entirely new: it's an update of legislation first proposed by respected American economists in the 1930's. Zarlenga lays out the rationale for it at the end of his magnificent (if inexpertly edited) 700-page globally comprehensive history of money, which he personally gave me a copy of back in 2002 or so, The Lost Science of Money.

The language of the Act is relatively simple, but it may still be too laden with technical terms to be easily comprehensible to the newcomer. A supporting, 32-page explanatory pamphlet available at Zarlenga's web site can be downloaded here. This document itself is one of the best primers on the current monetary situation that I have seen. It gives a good synopsis of Zarlenga's book as well as of the proposed Monetary Act. I recommend that newcomers to monetary policy read this pamphlet before diving into The Lost Science of Money. It will make the larger book more easily comprehensible by providing a clear overarching framework.

Among other things, the proposed American Monetary Act is intended to:

• Convert our money system from one running on debt-based money (today’s money that is created primarilty through private banks "lending" at interest) to one running on real money issued directly by the government.
• End “fractional-reserve” banking (where 95% of money in circulation is created through bank loans), making banks into what almost everyone today already believes that they now are, banks of deposit that manage real money.
• Over time, eliminate the national debt and burdensome interest payments on that debt, which eats up a large and growing portion of our tax dollars.
• Catalyze spending on public needs at a fraction of prior cost and in the service of full employment and enhanced productive capacity by bringing additional money into circulation, not through lending, but through debt- and interest-free spending on public works. (Under the current system, the costs to government for infrastructure construction are increased 100%-200% by unnecessary interest payments to banks.)
• Keep inflation at bay by matching new disbursement with expanding productive capacity.
• Reduce or replace taxation with government issuance of money through spending on public priorities. 
• Bring the Federal Reserve, now a consortium of private banks only nominally overseen by government, within the U.S. Treasury.
• Help to eliminate the terribly destructive boom/bust cycles that further enrich the elite at the expense of the rest, in part by replacing the "house of cards" of "credit money," which is like an unstable Ponzi scheme, with real money.
• Reduce influence of private interests on government.
• Provide a new, ethical princple for government monetary policy: that of “furnishing sufficient liquidity to support the reasoned sustainable expansion of the physical economy, providing for the common defense and general welfare of the United States, and full employment of the nation’s working population.”
• Set out country on a new healthy course more supportive of the common good.

Reading the Act, I find it quite beautiful to imagine all of us exchanging the filthy luchre of “Federal Reserve Notes” for cleaner, greener “U.S. Money,” and throwing the old notes in the trash. This is in the section stipulating that, in timely fashion: “the Secretary [of the Treasury] shall establish the capability of converting outstanding Federal Reserve Notes to United States Money of equal face value upon presentation to any domestic ... financial institution by the bearer;" “all fund accounts within United States financial institutions shall be denominated only in United States Money; and “The Secretary shall promptly dispose of all Federal Reserve Notes upon receipt.”

The fact that this Act can be proposed in such straightforward simplicity seems to me a good sign. If Obama and his ilk were ever publicly to take notice of it, I would know they were for real. Bernanke the current Fed Chair seemed a pile of nerves in one interview where I saw him responding to unprecedented focus on the Federal Reserve, as Ralph Nader and others began asking for a first-ever comprehensive audit of that institution. But it seems to me that the Fed has, for now, successfully deflected the recent scrutiny.

As Thomas Alva Edison once remarked, if the U.S. Government can issue IOUs to private banks (as it now does to the Federal Reserve at interest, with the banks subsequently creating the money supply through subsequent loans based on this initial fractional reserve), the government can just as well issue U.S. currency directly.

Here, again, is a link to Zarlenga’s proposed American Monetary Act (http://www.monetary.org/American_Monetary_Act_version_10_feb_06.htm).

Toward A More Just Money System (Money as Debt II - Video by Paul Grignon)

A set of short, animated videos by Paul Grignon -- available on YouTube and entitled "Money as Debt II" -- provides a pretty good overview of money and its history as I’ve been learning about it over the past several years, and points to the historical opportunity we have today of transforming money to the world's benefit.

The videos tell the story, in brief, of the rise of our current private-bank-controlled, debt-based monetary system, and point out some of its consequences in, for example, unsustainable environmental exploitation, gross economic injustice, overwhelming imbalance and concentration of power, war, and a whole host of familiar ills.

A valid point is that the current money-system, while it gives rise to many evils, has also unleashed extraordinary human productivity by introducing extraordinary liquidity into the world of human relations and human exchange. Defenders of the current system have a legitimate perspective: If a population is thirsty, then even filthy, muddy water is a godsend. Dirty oil is preferable to no oil to keep an engine running. Maybe this is why our emotional response to money has always been so ambivalent.

But now with historical hindsight growing rapidly in the wake of modern progress, we are gaining the clarity necessary to separate the baby from the bathwater; i.e. we are opening a new prospect of having abundant money, but clean stuff, rather than filthy. Imagine clean money that helps repair the world, that builds human relations of cooperation and mutual benefit rather than extends systems of domination and exploitation, that supports rather than destroys a healthy environment. Can we exchange our filthy luchre for pretty?

The history of money is a story whose basic arc, I hope, will gradually come to the public’s attention over the next several years. ("The cat is out of the bag," I say to myself. "Too many people are starting to write about this and spread awareness. How many years will it take before these new realizations about our money system reach the general public? Five? Ten? Fifteen?" Or am I overly optimistic and is the capacity of mainstream propaganda simply too much to overcome?)

Grignon's video series points, in its final segments, to the existence and need of such alternatives to the current system. (I noticed, for instance, passing references to the Guernsey dollars I blogged about some months ago, as well as to colonial scrips, the old U.S. Greenbacks, and to the currently burgeoning community currencies, all of which I’ve also commented upon.)

The videos even make brief reference to Stephen Zarlenga’s work at the American Monetary Institute and his American Monetary Act, legislation [discussed in my following blog] that Zarlenga hopes to bring before Congress and in which Dennis Kucinich has shown an interest. (Look for the unidentified cartoon images of Kucinich and Ron Paul that briefly pop up in the Grignon videos; alert me if you see others that I missed!) I believe Zarlenga’s thinking is a bit stronger and clearer in some respects than Grignon’s, but these videos are very good nonetheless; then again, Grignon no doubt has valuable insights of his own to bring to Zarlenga's thinking.

To see the videos, click here (series 2) or here (series 1) and/or search YouTube for:

money as debt ii promises unleashed (1 of 8) through (8 of 8)
money as debt (1 of 5) through (5 of 5)

See also:

Stephen Zarlenga: His book, The Lost Science of Money and his non-profit organization, The American Monetary Institute (http://www.monetary.org/)

The American Monetary Act (at http://www.monetary.org/)

Paul Grignon's Web site (http://www.moneyasdebt.net/)

Ellen Hodgson Brown: Her book: The Web of Debt (http://www.webofdebt.com/) -- Brown’s book is a good overview and compendium of many of the things Zarlenga addresses, and it’s more accessible and more focused on modern U.S. Monetary history (but much less historically comprehensive).

The Money Masters: How International Bankers Gained Control of America (http://www.themoneymasters.com/) -- This 3.5 hour video can also be found in free segments on YouTube; it’s a great and revealing piece, although the unfortunate and strong “conspiracy theory” tone and slant might drive some people away.

Henry George Institute (http://www.henrygeorge.org/) -- The above thinkers are concerned with the privatization and monopolization of the inherently public money power by the private banking system. The economist Henry George instead focuses on another critical and related concern: the privatization of the earth, or land.