- 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).
