Why States Going into the Banking Business Would be a Distraction, not a Solution to their Fiscal Problem by Jamie Walton, AMI researcher

“We may not be able to stop them, but we can join them. We the people need to play the bankers’ game ourselves.”1 – that was written by one of the promoters of the notion that the state governments should go into the fractional reserve banking business to beat Wall Street at its own game and solve their fiscal problems.

What an insult to humanity! How about a dose of morality and common sense. Isn’t that like saying: “We’re victims of organized financial crime, so lets join the criminals!”

Trying to beat Wall Street at its own game is obviously not the answer. As Albert Einstein once said, “We can’t solve problems by using the same kind of thinking we used when we created them.”

…

Scroll down to leave a comment. Please keep comments succinct (generally under 300 words) and on topic! Thank you!


35 Responses to Why States Going into the Banking Business Would be a Distraction, not a Solution to their Fiscal Problem by Jamie Walton, AMI researcher

  1. It is truly a great and helpful piece of info. I’m happy that you just shared this useful information with us. Please keep us informed like this. Thank you for sharing.

  2. LarryL says:

    Part of the problem with the move to state banking is that the BND has become the model in which to emulate. Public banking has potential but I think the BND falls short of delivering adequate benefits to the people of the state.

    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.


  3. AMI says:

    I will leave it to a quote from the Stephen’s Lost Science of Money, “While it’s outside the scope of this book to resolve all elements of [the usury problem], nationalizing the money creation process is a precondition to solving the usury problem and its wealth concentration effect. Continuing historical research and logical documentation would be helpful. For example applying serious computer models to this question could provide valuable information on how quickly usury concentrates wealth to insupportable, society busting levels.”

    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

    • AMI says:

      Here is a brief history of thought on usury. http://www.monetary.org/usurytalk.htm

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

      (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

  4. AMI says:

    Today many people rely on credit to maintain a standard of living that they could not sustain on decline wages and income alone. How would this act help?


    -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


    -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

  5. AMI says:


    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

  6. The American Monetary and Financial Security Act will pay off the entire national debt as it comes due, simply by replacing interest-bearing Treasury Bills, Notes and Bonds with U.S. Money created for that purpose.

    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
    in billions of dollars

    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%

    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.

    • Alwie says:

      Which credit are AMI propose to monetize? Government debt or private debt in commercial banks? or All?


      • moneyreform says:

        Dear Alwie,

        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

  7. Clyde Weller says:

    My question was:

    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.
    Stephen Zarlenga

  8. James Novak, M.D. says:

    I live in Caliofrnia, a state with a major cash flow crisis, and many pressing needs. The recent closure of the San Francisco Bay Bridge is emblematic of the many unmet physical and social infrastructure needs.

    While I agree that a state bank issuing debt based money will not solve the problem, I think that a state bank issuing a state sanctioned script to directly pay for needed infrastructure, healthcare, and education services would address the problem. As long as the script can be used to pay state related debts and taxes it should be able to work side by side with the national currency to increase employment and create real wealth.

    It would be nice to fix the problem once and for all at the national level, but given the current inertia and corruption in the national government, I see that as very unlikely. Given this situation, successful state initiatives of this sort could move the national discussion forward.

    • Mari says:

      Since California’s current financial system is dragging the state into deeper debt, it is time to try something different. Instead of begging the big banks that hold and manage California’s cash reserves for loans to operate, California can withdraw some of its holdings and invest in its own banking system to regain control of its own money. Once that system is up and running, California can withdraw the rest of its funds and tear up its credit cards.

  9. Cary says:

    Good explanation by Jamie. One could also look at the history of he Lottery to understand monetary and fiscal distractions. During the Great Depression Ireland experimented with the Irish sweepstakes as a measure to raise income that was hard to come by for needed public services. It was so successful that most countries followed suit but it didn’t cure the Great Depression from a general standpoint. Years later in the sixties ,many US states began to implement Lotteries and the revenues earned were generally used to fund educational budjets. Lotteries today are generating huge amounts of revenues, but has that made-up for the existing fiscal shortfalls in the states?And wasn’t gambling once looked at as a heinous immoral activity like usuriuos loans that todays banks indulge in?

  10. Doug Wolfe says:

    Ellen Brown’s proposed concept of state owned banking system for each state is more than a distraction for the proposed AMA, it is an opening for the Federal Reserve System to have continued control of their war based policies. It is a very bad idea. Private banking and a private money power have been and still are the nemesis of mankind for hundreds of years. There are major problems with her proposal. Mainly, it gives the Federal Reserve System a distraction in which to use for their advantage so that they may continue to own the money power and have control of our democracy by way of issuing interest-bearing debt to the people of this country. How convenient of you to provide a smoke screen so that these absconders can capitalize on your actions.

    If you have most states on board and each state has many independent state banks doing their thing to keep their state in financial health, including any state mandated and any locally popular agenda, how is it that it won’t cause major inflation or deflation? Who will monitor the 50 extra, independent, credit issuing state entities? Also, as Jamie asks, who will buy the bonds when no one has money, only credit. The results will be diluted and confusing. Sounds like it will be a free for all, a credit grab with the privately owned Federal Reserve System as the watchdog. Sounds scary to me seeing how the fed just crashed the world economy again. Are you blindly playing into their hands?
    The real chance of getting back the money power, the most important fundamental right of a democracy will be lost, as will that democracy. Opportunities for such change come but rarely, if ever. Is it worth risking the only good chance of obtaining control of the Money Power with no strings attached just to have a fleeting moment of perceived duel ownership?

  11. Allen Smith says:

    This is so good that I printed several hard copies, hoping that family and friends will humor me and accept a copy. It goes so directly to what needs to change, and comes at a time of real opportunity for fog to clear.

  12. Hoz Turner says:


    I certainly agree that monetary reform is most urgent; in order to prevent a terrible situation of more speculative-bubbles generated as short-term “solutions” to the credit-crisis.

    I have written an OPEN LETTER to all world politicians on the issue of monetary reform and I have the “American Monetary Act” cited as a model example: –


    Please read and comment.

  13. James McGurrin says:

    Thanks for the excellent article on state run banking. I appreciate the clear explanation of the mechanics of fractional reserve banking in terms of reserve requirements. I also liked the treatment of the constitutional issues involved and the reference to Robert Natelson’s article which I was unaware of.

  14. Matt Olive says:

    I’m an ex-farmer. I come from the town that started the National Farmer’s Organizarion (NFO). It was the primary voice for farm parity from the mid-50s through the mid-70s. Charles Walters Jr., an AMI member and probably the formost expert on parity, wrote the definiative book on the subject, “Unforgiven”. That book plus his primer. “Raw Materials Economics” can be found at Acres USA. Anyone interested in this topic should read those books. The National Organization of Raw Materials (NORM) carry on the struggle to get the farm parity experience shared. I think a represenative of that group spoke at a past AMI conference? So there are certainly interested parties that can expand this section of the Act.

    The NFO started as a result of the sunsetting of the Steagall Amendment. The Steagall Amendment was enacted into law in 1942 and lasted until 1952. It guaranteed 90% parity pricing of most farm commodities at market entry point. This created a prosperous period for farmers and the economy. Some suggests that it was as responsible for pulling us out of the Depression as WW II. After a prolonged depression and with young men dying in Europe, the forces of corruption weren’t so entrenched and a larger percentage of our representatives were responsive to their constituents. This allowed this common sense leglislation to become law. It was implemented from the top. After a duration, the corrupting influences retrenched and allowed this Amendment to sunset in contrast to its clear benefit to the common good. Prices quickly dropped and farmers rallied behind this new organization, the NFO. For 30 years the NFO tried tirelessly to reinstate parity through collective bargaining and holding actions. Ultimate NFO failed due to the power of radical corporate agri-business’ control of government and the relentless propaganda of their paid lapdog, Farm Bureau.

    The lesson from NFO’s experience relative to monetary reform may be that Farm Parity worked quickly and effectively when it was implemented at the top via the Steagall Amendment. It became a Herculean task attempting to implement parity from the bottom up through the NFO, especially after corrupting influences regrouped. This may also be the case with monetary reform. To attempt to get there via state banking would give the opposition time to confuse, corrupt and propagandize a population that is semi-literate when it comes to economics (I include myself in this group). The Act is honest and concise. I feel very comfortable handing it out because people can understand it. Monetary Reform, parity pricing of raw materials, and elimination of corporate personhood is the holy trinity for a healthy economy. I think monetary reform is the first stake to use because it best strikes at the heart of the vampire sucking the lifeblood out of OUR economy, and it is the stake that most common folk can rally behind. Even though farm parity is contained within the Act and needs to be expanded upon, I think the primary emphasis should remain on nationalizing the Fed.

  15. Steven Lesh says:

    This should obviously have been negated, i.e.
    “…and NOT in the language and tone of monetary-reform fundamentalism.”

  16. Tommy Gregory says:

    On August 27 David Snieckus wrote, “Could we create a new US Currency and back it with the oldest collaterol: grain?”

    This question raises two important points: (1) the concept of backing money, and (2) the relationship of commodities to money.

    Many ancient and medieval societies believed money must be backed by some commodity in order to persuade the population to actually use the money. Modern societies have learned this concept is not true.

    In the modern world governments define what its population will use as money in the law. They establish the money as money by guaranteeing that the government will accept it in full in payments of taxes. If the population accepts the legitimacy of the government and begins using the money ‘as money,’ then it is money for that population.

    Everything depends on legitimate governments and widespread respect for the law.

    Stocks of grain are much more valuable than gold if the stocks are too low. If the stocks are too high their value plummets faster than a used car. Any farmer will attest to this fact. Grain’s value changes minute by minute based on obscure events in the United States and on the other side of the world. This extraordinary viability makes grain unsuitable for use in money creation.

    Stocks of grain actually represent wealth, not money. But the American Monetary Act recognizes the important role agricultural commodities play in sustaining our very lives on the earth. It is possible to create money in such a way that we insure the abundant production of real wealth. See http://www.monetary.org/ for a copy of the American Monetary Act, Title V, Sec. 504.

    If any readers of this post are farmers, then you and I need to help AMI develop Section 504 on an even stronger basis.

  17. capital says:

    We are a great Nation with many countries abroad and a people of freedom and liberty.
    If we look to history many problems have been overcome free trade, war, debtor nations
    etc. But as we have evolved new technologies etc. the creation of debt instruments not
    understood headgefund, credit swap, derivatives, and complex modeling i believe has made
    additional strain. there could be less deficit as a whole if rating agency and credit freeze
    could not burden free society, as we deal with deficit as a whole it canot be overcome without real revenue created by people. Our bankruptcy was enacted to understand that
    problems would accure and modify a fresh start. Now the countries financial and lending institutions are frozen based on underwriting guidlines gathered by credit scoring, fico, etc.
    Free nations and people will do better with less complexity, open markets, and fairness. We
    need to open available credit that produces revenue and close the abuse of complex products corporate options unnessesary drain of capital that drain our society as a whole and expand our growth potential that only unrestricted people can ad to our resumption of
    growth and prosperity. Monetary is fine to keep it simple and sound will ad value and preserve the basic function of exchange and growth.

  18. Dave Redick says:

    go to my web site and click on # 1 Fake Money in the left margin. I recommend 1. real money, gold-backed paper, convertible to metal by anyone on demand, 2. end all legal tender laws and let anyone create money subject to item 1 (see ‘Redicks four rules for money’ on my site), 3 the govt’s only role would be to monitor and publish amount of metal reserves that back paper for each issuer.
    Money is a commodity (gold is best) and paper is a receipt for gold in reserve. No politics or ‘stimulation’.
    It works. DR

  19. Tommy Gregory says:

    Stuart Weeks wrote, “Can you play this process of coin creation out?”

    The key to understanding this issue is the fact that the Federal Reserve is not part of the United States Government. It behaves as a private corporation to which Congress has delegated the power to control American monetary policy. See the excellent article at http://www.monetary.org/federalreserveprivate.htm.

    The Fed is responsible for distributing coins and currency to commercial banks as those banks request them. The Fed purchases the coins from the Treasury at the face value of each coin. Since the Treasury is paid the face value for the coins, the coins are “true” money. They are true money because the government incurred no debt in the manufacture or creation of the coins.

    The paper currency is another matter. Rather than paying the Treasury the face value of the currency, the Fed pays only the cost of paper, ink, and labor. Thus, a profitable source of revenue for the government is surrendered to the commercial banking system.

    No one can come into possession of a single coin or dollar bill without triggering a corresponding reduction in some bank account in the Federal Reserve System. So, even though the Treasury creates real debt-free money in the form of coins, the distribution of those coins fuses or intertwines them wholly within the fractional reserve banking system.

    Today we could create debt free money as paper dollars as easily as we do now with coins. We need only charge the Fed the face value of the paper dollars. It’s silly not to do so.

    We could also create debt free money as electronic digits in the Treasury’s numerous accounts. Then we could use those electronic digits to build hospitals, repair levees, establish great public universities, etc., etc.

    After all, what is money far?

  20. joebhed says:

    Congratulations to Jamie and to AMI for this comprehensive explanation of the potential pitfalls of advocating for state-taxpayer owned banks. This is an excellent and clear annunciation of the risks involved if more avenues were opened for fractional-reserve banking.

    Having said that, I am not completely convinced that there are no other sub-national jurisdictions that could benefit from efforts similar to the old NPLers in North Dakota and the Socreds in Alberta. Some form of state “credit” agencies could, under the right circumstances, possibly enhance the well-being of state citizens. But not if they are adding more debt-money to the system.

    Having said that, I am concerned that the message was delivered in an unnecessarily heavy-handed kind of way against state-bank advocates. While we may think it advisable to head-off the state-bank bandwagon for the reasons we “know” are right, those advocating state-banks surely come from their own common perspective of economic injustice and the need for substantive reform.

    Ultimately, the collective of monetary reformists form a miniscule portion of the populous – it is likely a good idea to have a friendly, open dialogue about what needs to happen and why. I am sometimes criticized for advocating the immediate and direct move to what I consider the Money System Common. I try to engage that criticism, and to avoid the unnecessary disparaging of my opponents position.
    You never know who might be listening.

    Ultimately, the truth of the piece stands in strong opposition to the state-banking efforts. It is really the best piece of writing I have seen on why the move to MORE fractional-reserve banking takes us ALL in the wrong direction.

    Congratulations, again.

  21. john buck says:

    Jamie, Your article refuting the benefit of individual states going into the banking business was outstanding. I also appreciate your help in evaluating my work. I hope my responses to Stephen re your questions was helpful. Keep up the good work! I know you both are both extremelybusy ahead of the Chicago conference. I am sorry but due to my wife’s health problems I won’t be able to attend. I look forward to reading about it on your website.

  22. Bob Owens says:

    Interesting, thought-provoking article. Great work Mr. Walton. The term “Banks are Debt Factories” is a great analogy to help average people understand the way the banking system is structurally defective. Thanks.

  23. On the surface the idea of having states join the present privately-owned, debt-based banking system so that the state banks could also create debt-money “out of thin air” sounds good, but the fact is that banks can only create new money in the form of interest bearing debt. Which means that the state banks would not only be validating the present unjust and immoral banking system by joining it, the only result of state banks loaning more debt-money into circulation would be to put our nation even deeper in debt. Certainly not what we need to have happen.
    What the so-called “too big to fail” banks don’t want you to know is that all of their money was created in the form of debt, and when they can no longer create more “debt-money” it will disappear as the debts are paid or defaulted, which means we will have to replace their debt money by spending real U. S. dollars into circulation.
    Then we will finally get the benefits we should have received in the first place – and all these benefits come without debt, without taxes, and without inflation. It will be a permanent money supply, not temporary as the present bank-created “debt-money” which disappears when debts are paid. The American Monetary Act IS the way out of the present recession.
    Use the link below to read the American Montary Act

  24. David Snieckus says:

    Could we create a new US Currency and back it with the oldest collaterol: grain?
    Here’s a letter I sent to President Obama.
    A bit outrageous? Willing to look at ONE possibility?
    Unthinkable? I know it’s a bit far-fetched..but the thought…It is possible!

    The thought of buying the Federal Reserve is most likely an outrageous statement to most. However, think: Congress created the privately owned Federal Reserve in 1913 (a bit suspiciously, I might add) therefore it can un-create the Federal Reserve as soon as it wants to…(or has the guts!)

    Recently Senator Dodd and Senator Schumer were rejected when they requested credit card companies to immediately halt retroactive interest rate increases from the Federal Reserve.

    Heck…I say…TELL THEM! Individuals in Congress have to start taking their leadership role and change the behavior of the Federal Reserve from transferring wealth to a few to all citizens of the United States.

    One of the reasons the Federal Reserve exists is to keep all of us including many nations in perpetual debt, something I let go of years ago.

    I believe the United States Government can also get out of debt. Here’s how!

    In 8 years, the greatest ECONOMIC IDEA ever to hit America could come to fruition!

    The Goal: For the United States to be out of debt and have global prosperity.

    Edited here for length. Please keep blogs on the subject and under 300 words folks!

  25. Elliot says:

    Good Article! Keep writing. I tell everyone one I know to read the Lost Science of Money. I even wrote to one the Ludwig von Mises people and told them to stop the gold is money talk. They are simply wrong. The AMI website could use some sprucing up. Al Gore’s We can solve it is a nice model.

    E Stolerman

  26. Glenn Fritz says:

    A big difference, as I see it, is that money coming from a state owned bank is going to have to be paid back rather than be part of an exchange that puts money into circulation. This still leaves the decision of how the money is to be spent and accumulated for repayment out of the control of the public interest and in the control of private interests which can be wildly at odds with the public interest.

    Real money issued from the Treasury is paid out in exchange for goods and services of value which leave both parties free of debt after the transaction is complete.

    Loaning money at lower interest rates into a recession is referred to as “pushing on a string.” Interest rates can be lowered to zero but no one borrows without the prospect of accumulating more money than is required to pay back the loan. The increase of interest rates lowers money supply by “pulling on a string.” This only works well to remove money from circulation.

  27. Tony B. says:

    Excellent! Just what I told a friend when he sent me an email of that woman’s “solution” to the states’ economic problems. But with much more in the way of reasons than I considered.

  28. John Mugge says:

    If the Federal Government would take the actions proposed by the AMI that would be great, but in the face of the inaction of Washington there is something the State Governments can do besides sit on their hands. Think of California with a multi-billion dollar shortfall and Congress, while bailing out the banks, chooses not to bail out the states to the extent needed. Services have to be cut back. State employees are laid off. People continue to suffer in the economic downturn.

    The Governor, however, was on the verge of a powerful idea. He issued IOUs. Warrants, they were called, but in effect they were State Government Bonds paying 3.75% interest annualized. Now this Government Debt had one good aspect to it – it put money in the hands of people who would otherwise have not had it. (Anyone reading this blog is most likely to acknowledge that the economic problem we face is one of liquidity.) The downside of the IOUs was that it was debt and that it was going to put the state into a deeper hole what with the interest that would come due.

    My question at the time was, why should the IOUs pay interest? One reason, mentioned in the article, was that only Congress (and the Federal Reserve) can issue money. But states can issue debt! So why does it have to be 3.75%? Why not .001%? Or less?

    One reason why not is the banks. The only reason the banks were taking any of it at all during that first week they were issued was they stood to gain the interest. But why would the banks have stood in the way of this program then? Possibly because they understood how close California was to issuing its own currency which would cause the banks to lose the upper financial hand.

    The solution to this problem could have been a State Bank of California. If California had its own bank it could issue debt-laced IOUs – with interest rates so nominal they would be practically non-existant – which would amount to being a California Fiat Currency. They wouldn’t have to worry about the commercial banks not taking the IOUs because the state bank would.

    Waiting for Washington is not the only option.

  29. Stuart Weeks says:

    You write: “Money doesn’t have to be created like this; coins aren’t, they’re just created as money, with no debt attached; when they’re issued, it’s revenue for the U.S. government, saving taxpayers $$$. All money can be created this way. And; if we don’t start with any debt, then we don’t start with any interest either.”

    Are you sure the first part of the forgoing statement this is the case? (I agree with the conclusion.) Can you play this process of coin creation out? Who puts in the request for coins to be minted? Where do the coins go? (I don’t imagine defense contracts being paid with pennies, nickles, dimes etc.) We do know that coins end up in banks. How do they get there? Are they simply donated to banks?

    I would very much appreciate clarity on this matter, at your earliest convenience.


  30. craig macclean says:

    to amplify stephen’s introduction re: health care to your fine piece- this was a response i made to a friend’s e-mail recently sent to me. post if u consider it pertinent.
    It is only “confusing” because the powers that be want to keep the bewildered herd (we mortals) ‘confused and entertained.’
    it is all quite simple- single payer; (like monetary reform- fiat currency should be directly issued by the treasury; not loaned by a private bank (aka the federal reserve).
    below is a great piece explaining it all in a nutshell:
    This Isn’t Reform, It’s Robbery
    Posted on Aug 23, 2009
    By Chris Hedges
    Percentage change since 2002 in average premiums paid to large US health-insurance companies: +87%
    Percentage change in the profits of the top ten insurance companies: +428%
    Chances that an American bankrupted by medical bills has health insurance: 7 in 10
    —Harper’s Index, September 2009
    Capitalists, as my friend Father Michael Doyle says, should never be allowed near a health care system. They hold sick children hostage as they force parents to bankrupt themselves in the desperate scramble to pay for medical care. The sick do not have a choice. Medical care is not a consumable good. We can choose to buy a used car or a new car, shop at a boutique or a thrift store, but there is no choice between illness and health. And any debate about health care must acknowledge that the for-profit health care industry is the problem and must be destroyed. This is an industry that hires doctors and analysts to deny care to patients in order to increase profits. It is an industry that causes half of all bankruptcies. And the 20,000 Americans who died last year because they did not receive adequate care condemn these corporations as complicit in murder.
    snip snip snip

    Edited here for length. Please keep blogs on the subject and under 300 words folks!

  31. Steve Hummel says:

    Jamie and Stephen,

    It is obvious that we need to lobby Congress, briefing them on The American Monetary Act and pressuring them directly as much as we can. However, with the degree to which so many of our congressmen are either unconscious of our monetary problems at all, or worse yet, consciously or unconsciously in agreement the people and institutions that currently afflict us I begin to think that the way to make better headway is to “take to the streets.” In a peaceful way , of course, but with a greater passion than we have seen in 4 decades. As a catalyst to such a movement I believe we need the modern day equivalent to a William Jennings Bryan or a Dr. Martin Luther King, Jr. In tribute to their incredible oratorical skills and King’s inspirational effect on the Civil Rights Movement I post the following which is modeled structurally on his great “I Have a Dream” speech addressing the AMI’s program for monetary reform:
    (Read at Hello World} Edited here for length. Please keep blogs on the subject and under 300 words!

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s

%d bloggers like this: