From the US: Representative Dennis Kucinich Introduces Monetary Reform Bill

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The following is an article by Stephen Zarlenga (of the American Monetary Institute) and Greg Coleridge, providing an update on a significant development in the US.

Jobs and the debt are chronic problems requiring fundamental solutions rather than piecemeal approaches. A bill providing just such fundamental solutions- the National Emergency Defense Act by US Rep. Dennis Kucinich (D-Oh) – already introduced at the end of the 11th Congress – will be reintroduced soon. Americans would be wise to rally behind it.

While the bill focuses on the unemployment crisis, it contains three essential monetary measures proposed by the American Monetary Institute in the 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 system.

The three essential measures include:

  1. 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.
  2. 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 US 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!
  3. Enabling the US government to use its money power — creating and spending money into circulation – to address pressing infrastructure needs, like for fixing 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 money 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 US representative to cosponsor this Act when it is reintroduced. Ask your two US 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.

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  • http://noncredit-money.org stojan nenadovic

    Noncredit money is the only real money. Noncredit money is the best positive money.
    Noncredit money is the necessary additional quantity of money in circulation (currency=dM) as a percentage (k) of existing quantity of money in circulation (M). dM = kM ; k = (supply – demand)/demand ;
    Noncredit money demands new system of national accounts:
    P = GDP ; C = COST ; I = INCOME ;
    (P/C)P = I ; INCOME – COST = NONCREDIT MONEY ;
    I – GDP = SURPLUS OF CONSUMERS ; GDP – COST = PROFIT ;

  • Bill Clarke

    The failure of the Chicago Plan demonstrates the power of banks to influence government policy.

    There is , however a greater power, the power of the people.

    But it has to be mobilized, by educating them as to how the banks work.

    So we need to build Positive Money.

  • http://DenverPlan.com Jorge Moromisato

    I agree with the need for monetary reform, but the present proposal is, unfortunately, flawed at many levels. This is what is wrong with the ‘three essential measures’ and how they should be modified:
    1. The U.S. Treasury Deparment is a branch of the Executive Power, and should not control the Fed. The simple step required to nationalize the Fed is for the government purchase the existing privately owned shares on the U.S. Federal Reserve Bank System. The Fed would be reorganized as a public institution under direct oversight by Congress.
    2. The Fed would be authorized to issue an lend money directly to government and to the private banks. Financial institutions would not be allowed to lend their own money (or their depositor’s money) and must borrow all their lending funds from the Fed.
    3. Government should balance its budget through revenues (from interests for example) and income taxes. Borrowing from the Fed should only be used for public investment and exceptionally to balance the fiscal budget. The flow of money between the public and private sector should be kept in balanced.
    Ref: J. H. Moromisato, “The Coming Age of Freed Money”, 2010.

  • Phil Sheridan

    Good idea except if a bank has to keep 100% reserves then how will it have any money to lend? If it can’t lend, how can it make enough income to stay in business? If banks go out of business won’t there be another 1933-type round of failures? Seems like the reserve ratio would have to be well below 100% FOR BANKS TO CONTINUE TO KEEP THEIR DOORS OPEN.

    • Mira Tekelova (Positive Money)

      In order to lend money after the reform is implemented, banks will need to find customers who are willing to give up access to their money for a certain period of time. In practice, this means that the customer will need to invest their money for a defined time period (1 month, 6 months, 2 years, for example) or set a minimum notice period that must be given before the money can be withdrawn (e.g. 7 days, 30 days, 60 days, 6 months).

      Banks will then operate in the way that most people think they currently do – by taking money from savers and lending it to borrowers (rather than creating new money (deposits) whenever they make a loan, and walking a tightrope between maximizing profit and becoming insolvent).

      Note also, that after the reform is implemented, there will be more debt-free money in circulation and it will be easier for everyone to get out of debt and have savings, which will be available for investments.

      Find out more about how a sufficiency of loan finance for institutions during the period following the commencement of this reform will be ensured here: http://bsd.wpengine.com.uk/draft-legislation/part-6-transition-process/

      For customers of the bank, this means they will only be able to earn a rate of return (interest) if they are willing to give up access to their money for a certain period of time.

      Note that this policy completely eliminates the risk of a bank run and gives the bank much more stability, as it is able to plan its future outgoings up to 12 months into the future (a much greater degree of stability than they have right now).

  • http://endtheecb.ning.com Jake

    You can´s just spend money into circulation due to inflation risk. You need to introduce money as debt to be able to retire it again at the rate of depreciation of the undelrying property. Interest is the problem.

    Mathematically perfected economy is a currency not subject to interest, comprising a debt financing all permissible enterprise, paid by each and every debtor exactly as they consume of the associated production.

    There is no inflation or deflation, as the currency in circulation is always equal to the current value of existent production across however much of the economy is supported by a circulation.

    Neither the value of money or assets are altered by changing proportions of circulation to indebted assets or services. The value of the money is always consistent in quantity — both in earnability and spendability — with the remaining value of the indebted assets which exist, for which it was issued, and which constitute its immutable value.

    The remaining circulation is always sufficient to pay off debt. Further production therefore is not impeded by a deficient circulation, deplenished by paying more than what circulation was introduced for to finance the production.

    Debt is not multiplied beyond the circulation or remaining value of indebted assets. To pay debt obligations exceeding the remaining value of indebted assets sets off a perpetual cycle of re-borrowing and multiplication of debt. Merely to maintain a circulation, we must borrow again so much as we have paid beyond the original circulation which was equal only to the un-multiplied debt.

    Neither production or consumption are impeded by imposition of extrinsic cost. In every transaction, production is traded for equal production.

    So long as we make such a circulation available to production, no impediment, limitation, or inequity whatever are imposed upon production or commerce. Production and commerce are fully expedited only by a completely liquid and effectual currency.

    Mathematically perfected economy is no more than a singular prescription, dissolving unjust intervention.

  • John Steinsvold

    An Alternative to Capitalism (if the people knew about it, they would demand it)

    Several decades ago, Margaret Thatcher claimed: “There is no alternative”. She was referring to capitalism. Today, this negative attitude still persists.

    I would like to offer an alternative to capitalism for the American people to consider. Please click on the following link. It will take you to an essay titled: “Home of the Brave?” which was published by the Athenaeum Library of Philosophy:

    http://evans-experientialism.freewebspace.com/steinsvold.htm

    John Steinsvold

    “Insanity is doing the same thing over and over and expecting a different result.”
    ~ Albert Einstein

  • Phil Sheridan

    Inflation, general price level increases across many industries, is caused by many things, including broad levels of money supply increases, but also increasing costs, monopoly, lack of competition, restraint of trade, fair distribution of income, increasing purchases et al.

    The “Federal Reserve” is not “federal” but private, and it creates money and sells securities to reduce the money supply or buys them to increase it. Its governors are appointed by an elected by POTUS. It operates in secret. Read “web of debt” [Ellen Brown webofdebt.com] & “Creature from Jekyll Island”- Griffin.

    When the Fed needs money, it prints it and exchanges it for “Treasury bonds”. So it really doesn’t have a “reserve” only accounting entries. It is not federal & no reserve.

    Also read the Constitution and you will see that the Fed is not constitutional. Only congress can coin money legal tender for debts, not a private association owned by private bank corporations.

    I also think 100 % reserve rqt [in this proposal] is unrealistic. People need cash debit cards, and check books to pay their bills. They are not going to hand all their money over to the banks for 30 days or any other length of time.

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