Critique of A. Mitchell Innes’ idea that all money must be debt

To view or print this piece in PDF format, click here.

The following critique, written in 2002, points out many of the faults with Innes’ theory. This is part 5 of a 33 page essay by Stephen Zarlenga titled “The Development of United States Money.” That essay plus another 45 page essay by Mr. Zarlenga from the March, 2005 issue of The American Review of Political Economy titled “Moving Monetary Reform to the Front Burner” is available from AMI on CD or DVD, postage paid, for a $28 donation. Please mail your check, or credit card info, and mailing address.
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Part 5:
CRITIQUE OF INNES’ “CREDIT THEORY OF MONEY”

The American Monetary Institute’s research (including that just presented) finds several points of agreement, and many of disagreement, with A. Mitchell Innes’ work and theory:

First – regarding method, Innes’ professed emphasis on and use of historical study is a refreshing departure from the typical political economists’ reliance on mainly theoretical reasoning, or mathematics. Stressing the importance of history automatically elevates elements of the empirical approach, and should tend to ground research in fact and reality. He wrote:

“Now there is only one test to which monetary theories can be subjected, and which they must pass, and that is the test of history. Nothing but history can confirm the accuracy of our reasoning, and if our theory cannot stand the test of history, then there is no truth in it.” (art. 2, p. 155)

Second – it is primarily this historical approach which allows Innes to draw the most important (and in our view the most accurate) conclusion of his work – the rejection of Adam Smith’s metallist theory of money. To his “credit”, Innes realized that the nature of money is abstract, not material; that coinage, even “precious metal” coins, are really tokens. This was no small accomplishment in 1914, when the body of political economists, as well as international monetary arrangements, were in the gold camp. But they rarely gave a theoretical justification for their definition of money; it is usually assumed, or even obscured.

For example, Adam Smith does not clearly present his position; it takes some digging to ascertain it. Indeed, Ludwig von Mises, writing in The Theory of Money and Credit in 1912, attacked monetary theorist George F. Knapp for clearly identifying Smith’s position as metallist:

“Knapp … describes the monetary theory of Adam Smith … as entirely metallistic. The mildest thing that can be said about this assertion is that it is entirely unfounded.”¹

But is it really unfounded? To find Smith’s definition of money, one must sift through dozens of pages of the most obtusely written passages of economics – in the section of his The Wealth of Nations on how money gets its value – and be careful not to skip over the one important sentence (and even it is not explicit enough):

“By the money price of goods it is to be observed, I understand always, the quantity of pure gold or silver for which they are sold, without any regard to denomination of the coin.”²

Thus, von Mises’ 500-page book did not achieve the level of understanding reached by Innes’ brief presentation, as regards Adam Smith’s viewpoint, and the abstract nature of money.

Third – Innes correctly understood that the period of Kingly control over coinage systems, with their frequent alterations and debasements, was not a question of cheating their subjects, but of taxation:

“But the general idea that the Kings willfully debased their coinage is without foundation …” (art. 1 p. 386)

Del Mar referred to this period of monetary history, from roughly 1250 AD to 1450 AD, as the “period of Kingly abuse”, and also pointed out that it was usually not a question of stealing from the populace through the monetary mechanism. Some market ideologues still advertise these 600-700 year old cases of monarchs “debasing” their coinage as a reason why modern governments should not control the monetary system.

BUT TOO MANY FACTUAL ERRORS IN INNES’ “HISTORY”

While it would be healthy for Innes to draw on historical cases, the way he did so is generally too loose and assumptive. We often see phrases like this:

“To remedy this the kings of France attempted, probably with little success, to introduce …” (art. 2, p. 153) or,

“And when we find, as we surely shall, records of ages earlier than the great King Hammurabi … we shall, I doubt not, still find traces of the same law …” (art. 1, p. 391)

These remarks are more than a stylistic problem, and belie a less than ideal attitude toward the facts. In our view, questions central to his theme should have been checked or answered more definitively before publishing the paper. (I have recently read and notated 1,500 pages of obscure writings on early Roman numismatics, in order to get 4 or 5 paragraphs correct in my book, and have little patience with Innes on this.)

There is also a very inadequate presentation of the evidence that he thinks he actually has, as opposed to evidence that he is sure will someday be found. While the articles are brief, this should not have stopped him from presenting some of his sources, and we generally see a lack of dates and names.

But more serious are the large number of factual errors – enough to allow a critic to characterize the articles more as an abuse of history, than a use of it.

THE MANY ASSERTIONS ABOUT PRIVATE MONEY

Innes makes many unsubstantiated assertions regarding the existence of extensive private coinages. On page 382 (art. 1) he writes:

“(U)nder the Frankish Kings, who reigned for three hundred years (A.D. 457-751) … coins … were issued by the Kings themselves or various of their administrators, by ecclesiastical institutions, … or by merchants, bankers, jewelers, etc. There was … during the whole of this period, complete liberty of issuing coins without any form of official supervision … There can be no doubt that all the coins were tokens and that the weight or composition was not regarded as a matter of importance.”

But other than the state issuers, and the occasional ecclesiastical issuers which are encountered in historical research, none of this is grounded in fact.

Another example on page 389 (art. 1):

“…England and France (and I think, in all countries) there were in common use large quantities of private metal tokens.”

That is the first I’ve heard of it, and no citations are given for such assertions. Which museum would claim to have any samples of such “extensive” private token issues?

Also, on page 393 (art. 1):

“… archeologists have brought to light numbers of objects of extreme antiquity, which may with confidence be pronounced to be ancient tallies …”

Pronounced by who? No citations given.

On page 396 (art. 1):

“As a general statement … all commerce was for many centuries carried on entirely with tallies.”

I sincerely wish Innes had mentioned some sources, as I’d like to know more about this.

NOT TRUE THAT THE VALUE OF MONEY NEVER INCREASES

Innes makes the following statement on page 159 (art. 2):

“But while the monetary unit may depreciate, it never seems to appreciate. A general rise of prices … is the common feature of all financial history.”

This belies an ignorance of the history of the Greenbacks and the Greenback battles and the great 19th century deflations described above in parts 3 and 4. If Innes can be excused for this lack of knowledge about “foreign” countries, what about the ignorance of his own nation’s deflation after the 1810 bullion report was taken seriously and the Bank of England adopted a restrictive monetary policy, dramatically increasing the value of the Pound for some years.

MONETARY WORKS AVAILABLE TO INNES

Knapp’s The State Theory of Money³ was published in German in 1905 and was not translated into English (at the urging of John Maynard Keynes) until 1924. Had Innes read Knapp, he could have seen that his “credit money” was only one among several subsets of money described by Knapp.Innes might have realized that to conclude that this limited subset is the full definition of money, in effect, does away with the concept of money, and substitutes the concept of credit in its place.

Other key works, which were available to Innes, were Alexander Del Mar’s History of Monetary Systems, and his Middle Ages Revisited, published in 1895 and in 1900. Both works would have given Innes a much firmer grasp of the history and nature of money, as based in law. Had he found Henri Cernuschi’s books: Nomisma or Legal Tender or Anatomy of Money, published in 1877 and in 1886, he would have learned a great deal about the legal nature of money.

Had Innes read Sir William Ridgeway’s classic The Origin of Metallic Currency and Weights Standards, published in 1892 by Cambridge University, he would never have made this erroneous assertion on the early ancient coinages:

“So numerous are the variations in size and weight of these coins that hardly any two are alike.”

In fact, Ridgeway had found a remarkable consistency around an ancient standard of 130-135 grains, identical to Homer’s “Talanton”⁴. In other words, Innes should not be cut much slack in his neglect of these available works on his subject, just because the economists generally avoided historical studies.

 

PROBLEMS WITH INNES’ THEORY:

Considering the number of factual problems, it will be no surprise that we find fault with several aspects of Innes’ theory of money.

CONFUSION OF THE MEASURE OF VALUE, WITH THE MEANS OF EXCHANGE

Innes confuses the standard – the legal measure of value – with the legal medium of exchange, and transfers the known inconsistencies and problems in the coinage, on to using metal for the measure:

“The monetary standard was a thing entirely apart from the weight of the coins or the material of which they were composed …” (art. 2, p 382), and that there is “no evidence of a metallic standard of value” (art. 2, p. 385).

But he is not thinking clearly. That a coin, whether of gold or copper, is merely a token medium of exchange, does not mean that the Legal Standard – the measure of value – cannot be a designated amount of metal by law, imperfect as that system would be.

Innes argues that:

“The frequent use of the expressions ‘money of account’ and ‘ideal money’ in older writings show that the idea was familiar to many.”

But historian Raymond de Roover, a specialist in the medieval period, would later write:

“The chief fallacy which pervades most of the work on money in the middle ages is the mistaken notion that ‘money of account’ was some kind of ideal or imaginary money which was used as a basis of the valuation of real coins. This valuation, the theory runs, could be changed arbitrarily by the monetary authorities. The ‘money of account’ was thus some kind of standard suspended in mid air … In reality facts do not lend support to the theory of ‘ideal’ money or of an independent standard … medieval monetary systems were pegged either directly or indirectly to gold and silver. They were based either on a real coin … or on a coin which had ceased to circulate; but which still represented a definite weight of gold or silver.”⁵

THE ELEVATION OF BANKERS AND BANKING

Throughout both Innes articles we encounter an elevation of bankers and banking:

On page 158 (art. 2), describing an inflation in England in 1810, he says that the Bank of England “having just been started” could not have been responsible. But in fact the Bank had been founded 116 years earlier in 1694, and Parliamentary investigations eventually determined that they were indeed the responsible party.

On page 403 (art. 1), claiming that banking is only a circulation of debits and credits, Innes asserts that it is “Shown to be so from the study of the ancient banks”. He also claims that such studies would show that the idea that a depositor in the ancient banks could withdraw his money “is wholly erroneous”. But such studies actually show him to be wrong; that withdrawals often placed these banks in trouble. See for example J. G. van Dillen’s sections on the Bank of Amsterdam in hisHistory of the Principle Public Banks⁶. Even Adam Smith’s extensive discussion of the Bank of Amsterdam in The Wealth Of Nations should have given Innes pause before making this statement. Redemption in coinage at the Bank of Amsterdam was generally not practiced, because bank money was at a premium over the coinage. But when this “agio” went negative, coinage redemptions were sued for, and again given. The bank was placed in distress, until it found a way to replenish its ‘reserves’. (see van Dillen)

Another problem – on page 162 (art. 2) he writes:

“The Bank of England (which is really a government department of a rather peculiar kind) …”

But that was not really true until it was nationalized in 1946, at the urging of the Archbishop of Canterbury. Until then it was a privately owned and controlled central bank.

CREDIT ALONE IS MONEY? ALL MONEY IS CREDIT?

Our most significant disagreement with Innes’ theory is his viewpoint that:

“Credit and credit alone is money” (art. 1, p. 392).

Reiterated in different form on page 402 (art. 1):

“Money then is credit and nothing but credit.”

He then gives this simplification of commercial activity:

“The constant creation of credits and debts, and their extinction by being cancelled against one another, forms the whole mechanism of commerce” (art. 2, p. 393).

No one would deny that it is an exceptionally important mechanism of commerce, but Innes’ intent is to exclude all else. To reach his conclusion, Innes first asserts that money is a debt:

“By issuing a coin the government has incurred a liability towards its possessor just as it would have done had it made a purchase – has incurred that is to say an obligation to provide a credit by taxation or otherwise for the redemption of the coin and thus enable its possessor to get value for its money” (art. 1, p. 402).

And again:

“A government dollar is a promise to ‘pay’, a promise to ‘satisfy’, a promise to ‘redeem’; just as all other money is. All forms of money are identical in their nature” (art. 2, p. 154).

And again:

“A government coin is a promise to pay, just like a bill or note” (art. 2, p. 155).

But in fact there are very substantial differences between credit and money. That’s one of the reasons we have two separate names for them. And Innes’ view that coinage is a government debt results from muddled thinking (see below). In fact, he “slips” from time to time in the article, showing that he realizes there is a difference. For example:

“There is no question but that credit is far older than cash” (art. 1, p. 396). Thus he knows they are different, yet keeps asserting they are the same.

Dear readers, do you now see why it was so important to the bankers to remove the example of real money that the Greenbacks provided every day? Government money that was not debt, that was not redeemable in anything else, that was issued independently of the banks!

While we can agree that credit is much older than cash (money), and that both credit and money are abstract rather than concrete, we must disagree that bank credits are essentially the same as government money, and we disagree that they are as good as government money.

THIS IS ALSO A PROFOUND MORAL QUESTION

We point out that money is more than an abstract power, it is an abstract institution of society based in law. For corroboration we offer the ubiquitous historical examples of the efforts of private bankers, central or otherwise, to be sure the LAW made their private notes acceptable for payments to government. Several such cases are described in parts 1-3 above. We have seen what happened to their “money” when this privilege was revoked (in Part 2 above).

They knew Knapp’s rule two centuries before his book was written!

The moral element arises because a society depending on private bank credits in place of government created money, is operating in moral quicksand. For that society has established a special privilege of power and money for bankers, which cannot but harm the population as a whole.

When monetizing private credit is done by law, it necessarily confers special privileges on those privates issuing the credit. This is contrary to the spirit of the U.S. Constitution, and if one considers that this privilege amounts to the formation of an aristocracy (as Martin Van Buren pointed out in Part 1 above), then it is also contrary to the letter of the Constitution.

This immorality leads to serious troubles. Excepting warfare, properly constituted government money tends to be spent more for those things and items of infrastructure of concern to the state – the broad interest of the citizenship such as bridge and road and water infrastructure; public health and education.

Private credit tends to go for fast profit, defined in its least productive manner. Particularly for quickly getting back more than one gives, in terms of shuffling paper instruments.

Monetizing credit – in particular private bank credit – can lead to such poor results (e.g. the Great Crash and the connected warfare, or the more recent savings and loan debacle), that it can even make the primitive practice of monetizing so called precious metals look good!

We regard the provision of the money mechanism to society by the government as a major advance over the prior private credit/barter arrangements. We’d agree with Knapp’s evaluation of this step:

“The most important achievement of economic civilization, the chartalism (using tokens for money) of the means of payment.”

For Knapp, the determination of whether something was money or not was:

“Our test, that the money is accepted in payments made to the States offices.”⁷

Thus, under Knapp’s classification, bank credit, when privileged in law, is a form of money.

But what Innes would do is substitute bank created credit for government created money. It is not difficult to see to whose benefit that would work.

WHERE INNES’ THEORY RUNS INTO A WALL

One sees the cracks in his theory, and then its breakdown in his proposals that clients not be allowed to withdraw money (cash) from their bank accounts:

“Too much importance is (placed on) … the amount of lawful money in the possession of the bank … In fact it cannot be too clearly and emphatically stated that, these reserves of lawful money have … no more importance than any other of the banks assets. They are merely credits like any others and it is unfortunate the United States has by legislation given an importance to these reserves which they should never have possessed. Such legislation was, no doubt, due to the erroneous view that has grown up in modern days that a depositor has the right to have his deposit paid in … lawful money. I am not aware of any law expressly giving him such a right, and under normal conditions, at any rate, he would not have it.” (art. 1, p. 403-404)

He proposed to:

“Make everybody realize once he had become a depositor in a bank he … was not entitled to demand payment in coin or government obligations” (art. 1, p. 405).

The bankers must have loved him! This is remarkable, but it follows directly from his definition of money: how will they be able to withdraw money, if in fact all money other than bank credit, has been defined out of existence?

One could point out that this is exactly what the New York banks did, in the Panic of 1907; one could also argue that the present Federal Reserve system, when it pays cash, does not pay out coin or government obligations, but rather Federal Reserve Notes. Yet within our financial system, the law has made these notes cash. The law, and afterwards the custom arising out of that law, has made them money. This denial of withdrawal rights is where the “rubber hits the road” within his theory, and it fails.

Money is of a higher order of payment and value than credit. That it is institutional in its origins and in its present most perfect form, is obviously a thorn in the side of those intent on making money a creature only of markets. Furthermore, to distinguish between money and bank credit as “high powered money” and lesser powered money, misses their essential differences and further confuses the concepts of both money and credit.

The acceptance of private credit (unless immorally monetized by law) is conditional on the creditworthiness and liquidity of the issuer. Government money is a near unconditional means of payment; and a far more suitable instrument for “advancing the common welfare”.

THE BELITTLING OF GOVERNMENT

Throughout Innes’ articles one discerns, along with the subtle praising of banks, a related monetary “put down” on government. For example, on page 152 (art. 2) he asserts that the association of money with the government is a recent development:

“So numerous have these government tokens become in the last few centuries and so universal their use … that we have come to associate them more especially with the word money.”

Well, in order to make that statement he had to ignore about 2,600 years of the history of money from Greek and Roman times.

He continues on page 153 (art. 2):

“Nor did government money always hold the pre-eminent position which it today enjoys in most countries – not by any means.”

He gives an undated French example of this, and relies on the examples of three banks with money supposedly superior to government money:

“In countries where there was a dominant bank like Amsterdam, Hamburg and Venice, the higher standard being known as ‘bank money’ and the lower standard as ‘current money’ … the wholesale trade which dealt with the bankers followed the bank standard, and the retail trade (followed) the government standard.”

But Innes seems to be completely unaware that these three banks were government operations – were owned by the government. Even Adam Smith knew that!⁸

After Innes’ many repetitions along the lines of:

“With every coin issued a burden or charge or obligation or debt is laid to the community in favor of certain individuals” (art. 2, p. 161), I realized that not only is this false for government money,because the community first received something for that money, through their government; but in fact, Innes’ repetitions tend to rhetorically obscure that his charge does hold true when the money is created in the form of a long term bank credit. Because, to the extent that reserves are fractional, that almost always represents a transfer of wealth from the general public, to private parties, by private parties.

Thus, Innes’ assertion that “the more government money there is in circulation the poorer we are” (art. 2, p. 161), is false, unless one has substituted banker’s credits for money.

HOW THEN TO EVALUATE INNES

Remember Aristotle’s admonition on evaluating a person’s actions – that in order to judge correctly we must know what their intent was.

How then is Innes to be evaluated? Getting it right about money being an abstract power and Adam Smith’s metallist monetary error, and the importance of history, but getting so much else wrong? Particularly troubling is that he missed that money is an abstract legal power, and thus the consequent necessary role of the government.

Well, I certainly would not cite him for support regarding either Smith, or history. Rather, I’d place Innes with the English “experts” Walter Bagehot and Bonamy Price, discussed in Part 3 above.

So with the above points made, we say goodbye to A. Mitchell Innes, then Consul of the British Embassy in Washington, D.C.

Lest the objection be made that I too have neglected to cite sources in this brief section on Innes, I can inform the reader that every point discussed here is dealt with in much greater detail, with full citations, in my book The Lost Science of Money, available from the American Monetary Institute, atwww.monetary.org.

 
 

Notes

1. Ludwig von Mises; The Theory of Money and Credit; 1912, Jonathan Cape, 1934; p. 474-75.
2. Adam Smith; The Wealth Of Nations; (1776) Great Books Collection, Encyclopedia Brittanica, University of Chicago Press, vol. 39, 1952; p. 20.
3. George F. Knapp; The State Theory of Money; (1905), published on behalf of the Royal Economic Society by Macmillan, 1924.
4. William Ridgeway; The Origin of Metallic Currency and Weights Standards; Cambridge University Press, 1892; pp.155-56.
5. Raymond de Roover; Money, Banking and Credit in Medieval Bruges; Cambridge University Press, 1948; pp. 220-21.
6. J. G. van Dillen; History of the Principle Public Banks; International Committee for the study of History of Banking and Credit, 1934, A.M. Kelley reprint, 1965.
7. Knapp; cited above; pp. 92-95.
8. Smith; cited above; p. 358.

Chicago Teachers Union Supports HR 2990

IMPORTANT: Please Forward To All Your Contacts!

Significant progress has been achieved in the ongoing pursuit of monetary reform. With the endorsement by the 29,000 strong Chicago Teachers Union, the NEED Act is gaining substantial momentum in the efforts to clean up our country’s unstable economy. The Exectuive Board of the Union voted support of the following:

Be it resolved that the Chicago Teachers Union goes on record to support The National Employment Emergency Defense (NEED) Act, H.R. 2990, because: The NEED Act puts back the money creation powers under public checks and balances through their Congressional representatives; The NEED Act puts any necessary functions of the Federal Reserve under public administration to be in alignment with the U.S. Constitution; The NEED Act puts any necessary function of the Federal Reserve under public administration to be in alignment with the U.S. Constitution; The NEED Act uses the money creation powers to give millions of people at all government levels work to improve the infrastructure of the country; The NEED Act allows state and local government to determine where one-fourth of the federal monies created shall be used; The NEED Act allows full funding for teaching positions, pension obligations and the building of schools.

View the official resolution document at http://www.monetary.org, or by clicking here.

Stephen Zarlenga’s Address to Occupy Together

This article is Mr. Zarlenga’s address to be delivered to the patriotic demonstrators occupying various locations in the Midwest and the Northeast in Fall 2011.

Thank you for being here – for this opportunity, and for reminding the world that our nation is on an unjust path of destruction.

We are here protesting the financial rape of our people. We are here protesting the financial rape of our nation. Is that specific and focused enough?

A battle has raged for centuries to control the money system – to dominate society through the money power.

Over time whoever controls the money system controls the nation. They can use that power to grab great wealth, but even more importantly it gives them power over the direction of society- what gets funded and what gets neglected. Will the power be used to repair bridges and levees protecting our cities and providing needed employment; or be channeled into destructive speculation – real estate and Wall Street bubbles and warfare as the banks have usually done?

The money system is society’s greatest dispenser of justice or injustice. A good one supports the creation of values for life. A bad one gives privileges to the few and disadvantages to everyone else. It obscenely concentrates wealth, causing social strife, warfare and a constellation of bad outcomes, including most of the social ills you intend to reform.

Because great power is exercised through the money system, power-hungry elements since ancient times pursued the political ambition to dominate through the money power. Societies must periodically cleanse and reform corrupted systems like ours. The main weapon in this battle is manipulation of language and thought- definitions are heavy artillery. Those benefiting from the corruption fund university economics departments to finance “professionals” (we call them economists) to promote their interests through obscure theories. That’s how this corrupt system has continued for so long, despite its repeated miserable results!

In a word, our money system has been privatized. It promotes its controllers, not the society! Monetary reform, not mere regulation, is urgently needed now. Financial abuses are pervasive and self-evident. Dominant companies focus on usury, not production. Most of our citizens are being ripped off.

Reform is based on an understanding that the nature of money is not a commodity; that money and credit are two very different things. That money is a national issue.
Define money as a commodity – as wealth – then the wealthy will control not only their assets, but the money system itself. Define money as credit, as our present system does, then the bankers will control the system, and just look at the horrible and deadly results! Define money properly as an abstract legal power, as Article I, § 8 of our Constitution does, and control over money can be brought under our system of checks and balances.
Centuries of experience and decades of research that comprise my book, The Lost Science of Money, show what is needed. Chapters 1 to 23 present historical case studies of the use and misuse of money from ancient times to the present. Chapter 24 applies those case studies to reform the present system. In 2004 the AMI began putting those rules into a law. Fifteen rewrites later, it is published as the American Monetary Act.

In 2005 Congressman Dennis Kucinich of Ohio began working on it. A month ago, he and Congressman John Conyers of Michigan introduced it into the United States House of Representatives as the National Emergency Employment Defense (NEED) Act of 2011, HR 2990. It has all the monetary reforms of our American Monetary Act:

First, it dismantles the Federal Reserve System and incorporates it into the US Treasury, where people think it is now.

Second, it removes the accounting privilege banks now have to loan their interest bearing debt into circulation by decisively ending the fractional reserve system. All serious monetary reformers know that to have real reform, we must end the fractional reserve system! The banks no longer create what we use for money.

Third, Congress creates and spends money into circulation for infrastructure, health care and education, starting with the $2.2 trillion the civil engineers tell us we need over the next 5 years.

Inflation is avoided because infrastructure and real goods and services come into existence.

Over 7 million new jobs are created!

That’s it folks. Read it! Tell your friends about it. Make suggestions to improve it if you can.

Additionally, the NEED Act will:
Limit interest rates to 8% including all fees.
End compound interest.
Pay off the National debt as it comes due.
Let the 50 states decide where one fourth of the new money goes each year through per capita federal grants.
Pay a tax-free dividend to every citizen.
Now, imagine if, instead of giving $3 trillion to the banks, they had given it to our people – that’s $10,000 for every American man, woman and child. The recession would be over.

Friends, get yourselves and your representatives out of the banker’s “trick bag.”
Get your Congressman to co-sponsor it!
Ask your national and local leaders to support the NEED Act of 2011, HR 2990!
Thank you!

Edited by Jules Brouillet
Zarlenga is director of the American Monetary Institute and author of The Lost Science of Money. Meet him at The 8th Annual AMI Monetary Reform Conference! Brouillet is a researcher for the American Monetary Institute.

Make Monetary Reform Happen Now!

Dear Friends of the American Monetary Institute,

We now face a major opportunity. Across the country, thousands of Americans, young and old, are demonstrating around the Federal Reserve Banks of Chicago, Dallas, and Boston; Wall Street in NY and in ever more places.

Our 7th Annual AMI Monetary Reform Conference in Chicago was our best yet!  The high energy of our speakers and our participants was “electric.”  Due to the immediacy of action, our conference report will be made available in November.  At the closing of our conference, we asked all attendees to us submit to us a one page plan of what they personally intend to do for monetary reform over the next year.  We ask you to respond with your one page action plans to us, if you have not yet done so.

After the conference ended, Jules Brouillet went to the demonstrations in DC for a week, and then New York for another week.  This is his report:

“Bob Poteat, my mother Carol, and I had great success in advancing monetary reform in Washington.  On my first day in DC, Bob Poteat, Jamie Walton, and I met with Congressman Dennis Kucinich, who described how he would explain to the public our money system in short episodes through his Youtube channel.

Over the following week, Bob, Carol, and I passed out hundreds of flyers to all sorts of people including the protesters at the State Department Keystone XL Pipeline Project public discussion, gave interviews, built support for HR 2990 on the Occupy Freedom Plaza economic democracy working group, marched with Occupy DC onto the US Chamber of Commerce, the IMF, the White House, and the Fed, and lobbied a handful of Congresspeople on the Act.  We saw how the Occupy DC folks are non-hierarchical yet exceptionally self-organized, completely democratic and transparent, and have committed their lives to both their daily success and a better future for all of us.  Their practice of direct democracy by consensus, their complete dedication to nonviolence, their tenacity to overcome all obstacles whether personal or external, is revolutionary, both conceptually and in practice.

During my week in New York, Sue and I spent our energy on getting our message out to the occupiers and the visitors, many of whom were quite unaware of the significance of the juxtaposition of their Zucotti Park encampment with the New York Federal Reserve.  Our flyers and my “Monetary Reform Now!  Do you want Banks to create money for private profit? No? HR 2990 of 2011, Support NEED Act!” sign (courtesy of my mom) were a huge success.  I sat in on the Alternative Economy working group for Occupy Wall Street, who agreed to pass out The Need for Monetary Reform at their table!  Based on my experience of how much we could accomplish in a short time, it is imperative that we all attend the Occupy Together protests now to inform the activists, who will in turn inform the public!”

It is time for each and every one of us to get involved on a personal level.  We need you to do the following:

We are now distributing our flyers for HR 2990 (Print them here) and advocating for monetary reform at rallies nationwide.  Our conference attendees distributed them to Occupy Chicago, Greg Coleridge is handing them out in Cleveland, Bob Poteat is passing them out in both Washington state now.  If your local group holds a daily General Assembly, contact one of the organizers to join their “alternative economy working group.”  The question is, “Can Kucinich Money Bill Provide Focal Point for Protests?” We must respond “Yes!” not with words, but through action!

Send us your reports by email on your successes and informative experiences at the rallies.

Organize people to recruit local leaders for monetary reform and pressure your Congresspersons to cosponsor HR 2990.

Read this truly excellent letter to the editor from John Howell of Athens, OH.  In your own words, write letters to your local newspapers and political blogs!

The American Monetary Institute’s campaign for monetary reform must kick into high gear to pass HR 2990.  That can only be made possible through your continued financial support.  As we currently need a full-time secretary, it would be wonderful if each of you, personal finances permitting, mailed us in this form to set up an automatic $25 (or more) donation per month!  If you would like to contribute in another way, those alternative contribution options are listed here.

We are in great need of your financial support.  We could get so much more done here at the AMI office if everybody gave a little more!

 

Warm regards to you and good luck! Remember this is a non-partisan activity!

 

 

Stephen Zarlenga
AMI

MAJOR, HISTORIC PROGRESS BEING MADE

Dear Friends of the American Monetary Institute,

IMPORTANT MONETARY NEWS ALERT:   MAJOR, HISTORIC PROGRESS WAS MADE TODAY BY CONGRESSMAN DENNIS KUCINICH.

On Wednesday September 21st Congressman Dennis Kucinich (D-Ohio, 10th District) took a crucial and heroic step to resolve our growing financial crisis and achieve a just and sustainable money system for our nation by introducing the National Emergency Employment Defense Act of 2011, abbreviated NEED. Read his announcement.

While the bill focuses on our nation’s unemployment crisis, the remedy proposed contains all  of the essential monetary measures being proposed by the American Monetary Institute in the American Monetary Act. These are what decades of research and centuries of experience have shown to be necessary to end the economic crisis in a just and sustainable way, and place the U.S. money system under our constitutional checks and balances. Yes, it can be done!

By the way, there is still time for you to join the AMI Seventh Annual AMI Monetary Reform Conference (Sept. 29-Oct. 2) in Chicago and participate in our preliminary conversation of how best to move forward. To be a part of this remarkable moment in history, you can register for the conference at http://www.monetary.org/2011schedule.html or by phone at 224-805-2200.  The conference registration, at $395 per person, ends on Friday!  To register after the deadline, there is an additional charge of $100 to process the registration.   Go to http://www.monetary.org/2011conference.html to register.

Warm regards to all,
Stephen Zarlenga
AMI

Part II: How the Economists Facilitated the Crisis and Must Now Be Held Accountable

Read the story here!

Stephen Zarlenga

How the Economists Facilitated the Crisis and Must Now Be Held Accountable

Read the story here!

Stephen Zarlenga

Kucinich bill addresses Fed Reserve

Jim McGurrin

Published in the Modesto Bee on May 10th, 2011.

In response to “We spend on wars but not people” (April 28, Letters): Someone has already asked and answered her questions, and addressed her suggestion. He is Ohio Congressman Dennis Kucinich who in December introduced into Congress HR 6550, the NEED Act.

Almost 100 years ago, the money-creating prerogative of government was surrendered to an “independent” quasi-government agency known as the Federal Reserve when Congress passed the Federal Reserve Act. We have had a century to witness the Fed’s many false promises and failures. HR 6550 would place the Fed clearly within the Treasury Department, making it answerable to the president.

Money would no longer originate as debt, but would be paid into existence by the government, in return for goods and services, primarily infrastructure. I believe the bill reflects Kucinich’s thorough understanding of the debt money system under which we labor. It offers a real hope of replacing it with one that is honest, understandable, constitutional and not based on massive government debt. It deserves our support.

McGurrin is a land surveyor from Central California.

Creating an Interest- and Debt- Free Money System

Stephen Zarlenga

Director, American Monetary Institute

Monday, April 11, 7:00 PM

Cleveland Friends Meeting / Peace House

10916 Magnolia Ave., University Circle, Cleveland

Zarlenga will discuss how the public can regain control of our money system.

Our money system is run by financial institutions, not We the People. The vast majority of money in our society is created as debt (via loans) by banks and other financial institutions that must be repaid with interest when it could be created debt- and interest-free by the government as stipulated in the Constitution. A federal bill introduced by Rep. Dennis Kucinich would “democratize” our money system and in the process reduce US debt and create jobs (re)building our nation’s infrastructure. Zarlenga will discuss the status of the Kucinich bill in the new Congress and what we can do to help raise awareness about it.

Text of Kucinich bill in last Congress here

SPONSORED BY THE AMERICAN FRIENDS SERVICE COMMITTEE

AND CLEVELAND COMMITTEE ON CORPORATONS, LAW &

DEMOCRACY

More information, 330-928-2301, gcoleridge@afsc.org

FREE Community Forum

Print the flyer for this event

The Federal Budget Through The Looking Glass

Jules Brouillet

On February 13^th Speaker of the House John Boehner addressed a letter to President Obama touting tax cuts, deregulation, and reduced government spending as solutions to reinvigorate the economy.  To it he attached a statement signed by 150 economists denouncing conventional use of fiscal policy during a recession, “To support real economic growth and support the creation of private-sector jobs, immediate action is needed to rein in federal spending.”  If federal spending creates both public-sector and private-sector jobs, how can federal austerity augment job creation?

It can’t.

John Boehner’s House plan for the federal budget includes spending cuts on low-income education and nutrition programs, food inspection services, clean energy development, Social Security disability payments, environmental protection, municipal fire department grants, Amtrak, the Clean Water Revolving Fund, the National Park Service, and the Corporation for Public Broadcasting.  According to the Economic Policy Institute, this budget would reduce the federal deficit by 4% at the price of 700,000 American jobs.  Boehner’s response to these employment projections was, “So be it.”

In contrast, President Obama’s budget prioritizes certain items including passenger rail development and federal student aid while axing others such as the Corps of Engineers civil works program and offshore drilling oversight and regulation.  His plan would reduce the federal deficit more compassionately than the House Republicans’ scorched earth policy.  Yet both budgets operate under the same flawed assumption: ultimately the government’s budget must be balanced like that of a business or a household.

The government’s faulty understanding of its powers can be traced to fundamental flaws in economic thinking.  A group of French economics students formed the Post-Autistic Economics Movement in 2000, rejecting the unscientific basis of mainstream economics.  Yet 11 years later the uncontested fundamental criticisms of their profession remain ignored in the United States.  The censorship of this central debate is a tragic disservice to America.

Domestic critics of economics include columnist Paul Krugman.  He writes, “As I see it, the economics profession went astray because economists, as a group, mistook beauty, clad in impressive-looking mathematics, for truth.”  Commenting on the ascendant philosophy of neoclassical economics, Krugman says “…if you start from the assumption that people are perfectly rational and markets are perfectly efficient, you have to conclude that unemployment is voluntary and recessions are desirable.”  A cult is defined as, “A system of religious veneration and devotion directed toward a particular object.”  Modern economics, dominated by a cult of market purists, was crowned as the naked emperor of the social sciences following its abject failure to merely predict the impending financial crisis of 2008.

Macroeconomic models take the present economic system as an indisputable given.  Their studies, their conclusions, their thoughts remain uncritical; the predominant attitude of the profession is that there is no credible alternative to our system of capitalism.  Dr. Charles Lindblom noted, “We uncritically accept what the market provides.  For American social science it is a scandal that it remains silent on so great an issue.”  Orthodox economic thinking stops Americans short of seriously reconsidering the merits of maintaining a system that has privatized their sovereign economic power.  Our economic liberty has been shackled to the privately owned Federal Reserve System.

Americans’ misunderstanding of the nature of the Federal Reserve leads to confusion over the arguments for federal austerity wielded in the debate over the 2012 federal budget.  If the federal government originates money, what keeps it from printing the money to pay off the national debt rather than strangle governmental spending?  Our government is limited to creating a minimal portion of our money supply as coinage.  It would be highly impractical to mint $14 trillion in coinage to pay off the national debt.  The rest of the money supply is loaned into existence by the privately controlled Federal Reserve and the private banking system.  As long as money originates as debt there will never be enough specie to pay off public and private debts.  This is the economic system economists have accepted without question; they have not produced any credible solutions for paying off the national debt.  Yet despite the economists’ confusion a credible solution has been proposed in Congress.

America is blessed to have a member of Congress championing a sound solution to the budget crisis in Washington. Representative Dennis Kucinich (D-OH) introduced HR 6550, the National Employment Emergency Defense (NEED) Act last December.  The bill will do the following:

1. Nationalize the Federal Reserve.
2. Create all new money through a democratic process.  The fractional reserve requirement for banks will be raised to 100%, eliminating their ability to create money.
3. Spend new money into existence through a national infrastructure program.  By spending money on real items including roads, schools, and hospitals, we can reach full employment without suffering from inflation.

These important reforms will align the mechanics of the monetary system with the public’s understanding of it.  The Federal Reserve will become a public agency, the government will create money, and banks will keep our money in their vaults.  Our inflationary credit-created money will be replaced by a sound currency.  The federal debt will be paid off as it comes due.  It is change we can believe in.

Is this what the Federal Reserve recommends to America?  This February Chairman Ben Bernanke reported to the House, “To put the budget on a sustainable trajectory, policy actions—either reductions in spending, increases in revenues, or some combination of the two—will have to be taken to close these primary budget gaps.”  Closed economic thinking has captured our highest minds.  Our central bank will not produce a decent solution nor acknowledge Representative Kucinich’s enlightened reform.

Why has the 2012 budget debate been limited to preserving certain essential government services versus across-the-board budget cuts, excluding Dennis Kucinich’s sensible alternative?  Without insider Congressional information, one must look to history for circumstantial evidence.  In 1892 the US Bankers’ Magazine explained to its members, “The question of tariff reform must be urged through the organization known as the Democratic Party, and the question of protection with the reciprocity must be forced to view through the Republican Party…By thus dividing voters, we can get them to expend their energies in fighting over questions of no importance to us, except as teachers to the common herd.”  Has America been fooled again?

Working people operate and understand the economy better than economists.  Productive people do far more for economic growth than our banks.  Thinking people can govern their country far more intelligently than most of their Congresspersons.  The people must restore economic democracy through Representative Dennis Kucinich’s NEED Act.  Until Dennis’ solution becomes law a second Great Depression will forced upon ordinary people by a profoundly undemocratic economic system.

Brouillet is a researcher for the American Monetary Institute.