I think we should be discussing what a public bank might do for the people, forget the existing models.

For example, North Dakota schools, municipalities and local government must still resort to bonds to fund projects and maintenance. Bonds are a terrible way to generate money – currently in North Dakota, bonds are paying around 5%, so a 10 year, $1 million dollar bond issue will cost the state $500,000 in interest over the term of the loan – and here is the kick in the ass; at the end of the 10 years, the issuer will still OWE $1 million!

Instead of being a backstop and balance sheet dump for local private banks, a public bank should eliminate the need for expensive bonds. There are many other opportunities but we seem content to applaud the BND.

Larry

Usury should be tightly controlled at the very least. From the American Monetary Act:

SEC. 303 INTEREST CEILINGS
(1) The total amount of interest charged by a financial institution to
any natural person borrower through amortization, including all
fees and service charges, shall not exceed the original principal
of any loan, except mortgages;
(2) The maximum interest rate of 8% per year will apply
throughout the U.S. inclusive of all fees

We put a muzzle on the loansharks. We don’t completely eliminate usury but we do greatly restrict its scope. You could consider this proposal a stepping stone on the path towards an interest-free society.

Jules Brouillet

We do not purport the American Monetary Act to be the end-all, be-all reform for every aspect of the monetary system. Perhaps deposit accounts, savings accounts, and lending are proper functions of government. Perhaps they aren’t. The AMA reform will limit usury but won’t end it. Our purpose is to substitute the current private creation of money system with a democratically-controlled money power, which is the reform we need most. A law banning usury could be one of many reforms that would follow it.

Jules Brouillet

Supply-Side

-The national debt will be paid off with money. Those investors, sitting on $9 trillion in cash, will invest a large portion of it in loans to individuals and businesses, making credit plentiful and keeping interest rates down
-Interest-free loans to state/local governments will further reduce interest rates for private lending

Demand-Side

-Public infrastructure investments will increase employment rates, increasing the income of working people
-Single payer health care and publicly-funded education will be a much lighter burden on an individual’s budget
-Monetary dividend to citizens will further reduce the need for loans.

These important structural changes will increase the supply and reduce the demand for private loans significantly. I believe the credit market would be more than sufficient after the American Monetary Act to keep both borrowers and lenders satisfied.

Jules Brouillet

One component of the American Monetary Act is an interest-free lending Treasury program to service states and local governments. If they have access to unlimited loans (within reason) with no strings attached, why would they need to establish State Banks? They could issue “organic” grants and loans, fund construction and research, and extend public services without needing a sleight-of-hand institution to get around that troublesome Art. I §10 “No state shall…coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts”.

What concerns me about public state banks solution is not the activities nor the integrity of said banks. Rather, it is the undiminished power of the private banking system. The creation of state banks will not curtail the private banks’ money creation power at all.

When the banking system uses its power to expand and contract credit, it creates the business cycle. During the recession side of a business cycle the states are plundered of their paper wealth and huge budget deficits arise in response to the surge in demand for social services and diminished tax revenue.

If the state has its public assets (public parks, state buildings, etc) tied up in a state bank and the state bank fails to generate enough loans to bridge the difference for budget crisis during a recession, what can happen? It could raise taxes on the wealthy. It could buy time by issuing short-term bonds or “borrowing” from state pension coffers. Should those options fail the state would have to rely on a federal bail-out or start selling its public assets. A public bank would forestall those grim choices but only temporarily.

The American Monetary Act is a solution because it eliminates the power of the private banks- their ability to create money and replaces it with a democratic monetary system. State banking by itself would be a band-aid solution.

The American Monetary Act and public banking sides of the monetary reform movement are frank to say that these individual proposals are incomplete solutions to the structural flaws of American monetary and economic system. For example, in Web of Debt Ellen Brown suggests twelve essential reforms for a new populist party that include the elimination of the fractional reserve system. The Section 5 of the American Monetary Act includes a laundry list of tasks for Congress to undertake with Treasury bills, but it is not complete. As for choosing which reform to pursue first, the American Monetary Act would be the much more beneficial choice for America.

Jules Brouillet

Thank you for your question. This is another very good question.

It’s not really accurate to talk about ‘monetizing’ either ‘credit’ or debt in relation to the American Monetary and Financial Security Act. In any case, you seem to be talking about (at least) two different things.

Under the Act, all existing bank account ‘money’ (bank ‘credit’) becomes money. It will be treated the same as ‘paper money’ (‘currency’) and coin. The people who borrowed from banks will still have to repay banks, but they will be repaying with money, and this money will be treated as though it had been created by the U.S. Government in accordance with the U.S. Constitution, so as banks receive this money from borrowers, they will pass it on to the U.S. Government as though they had initially borrowed it from the U.S. Government. The Monetary Authority will monitor this and ensure that the U.S. Government creates new money and re-issues existing money that has been received from banks in such a way that it will not cause inflation or deflation, but will provide a sufficient supply of money to meet the needs of the overall economy.

Under the Act, all outstanding instruments of indebtedness (Treasury bonds, notes, bills) issued in the past by the U.S. Government will be paid in full as they come due, i.e., they will not be ‘re-financed’ by issuing more instruments of indebtedness. This money will then be available for true investment in the private sector. As above, the Monetary Authority will monitor this and take it into account to ensure that the money supply is maintained at a level that will not cause inflation or deflation, but will provide a sufficient supply of money to meet the needs of the overall economy.

I hope this answers your question(s).

Jamie Walton

Thanks.

As inventor Thomas Edison once said, “If our nation can issue a dollar bond, it can issue a dollar bill. The element that makes the bond good makes the bill good. The difference between the bond and the bill is that the bond lets the money brokers collect twice the amount of the bond and an additional 20 per cent, whereas the currency pays interest to nobody.”

Here is the latest information I have on how long this would take to pay off the privately held part of the national debt. (The part that “we owe to ourselves” will be cancelled. When we create, issue and regulate our own money, we cannot owe money to ourselves.”

TABLE FD-5 Maturity Distribution at end of June, 2009
AMOUNT OF NATIONAL DEBT HELD BY PRIVATE INVESTORS
in billions of dollars
Total

Amount due within 1 year $2,611 billion 43.9%
Amount due within 1 to 5 years 1,892 billion 31.8%
Amount due 5 to 10 years 900 billion 15.2%
Amount due 10 to 20 years 362 billion 6.1%
Amount due 20 years or more 178 billion 3.0%
Source:
http://www.fms.treas.gov/bulletin/b2009_3fd.doc

If you type the above URL into the internet you will be able to acess the FD-5 Maturity Report and all other FD reports.

With enactment of the Monetary Reform Act, how many years>
would it take for US Treasury to retire the entire US Public Debt?

Mr Zarlenga responded:

Thanks for your important question. The American Monetary and Financial Security Act (see http://www.monetary.org) retires US debt as it comes due, by creating and paying out new U.S. Money, rather than repaying the bonds by borrowing more money through new bonds. For the exact time scale simply check the duration of the debt. Certainly most of it within the first 3 or 4 years, a great part of it within 10 years and all of it within 30 years, the maximum length of treasury securities.
If you will redirect your question to our blog (see bulletin # 5 at our
website) we’ll reply with a table of durations. This is a good question for the blog.
Sincerely,
Stephen Zarlenga