Kucinich bill addresses Fed Reserve

May 19, 2011

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

March 29, 2011

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

March 14, 2011

Jules Brouillet

On February 13th 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.


Discussion Guidelines for the AMI Blog

February 4, 2011

Many of the comments on the blog entries over the past few months have been well-received here at AMI.  Unfortunately, many other comments that were submitted with good intentions have been too confusing or too long or misleading to be included.  We’d like to make this blog a leader in raising internal blogging standards.  We provide this guide to help you write comments that add to rather than detract from our blog entries.

  • Discuss the post.  This is not a space to plug your magic solution the world’s problems.
  • For the sake of space, don’t post an entire book or model constitution that you wrote.  Keep it to less than 200 words.
  • Educate yourself about monetary history and monetary reform before you judge it but don’t write jargon.
  • Base your arguments on verifiable facts and reason rather than prejudices and generalized notions; don’t lead readers down false trails.
  • Have positive faith in the democratic process even if you lack faith in Democratic officeholders.
  • Provide constructive dialogue and criticism; not name-calling.
  • No negative attitudes, like “I have given up completely on humanity’s future.”  That’s an unhealthy and dangerous form of surrender.

We hope this doesn’t put you off.  We really want your participation.  Your participation is an important part of moving forward.

Stephen Zarlenga

PS If you have any questions about these guidelines you can post them as comments to this entry.


Create Jobs and Improve the Economy through Public Control of Our Money System

January 21, 2011

Stephen Zarlenga and Greg Coleridge

Jobs and the debt are chronic problems requiring fundamental solutions rather than piecemeal approaches. A bill providing just such fundamental solutions- the National Emergency Defense (NEED) Act by US Rep. Dennis Kucinich (D-Oh) – already introduced at the end of the 111th session of Congress – will be reintroduced soon. Americans would be wise to rally behind it.

While the bill focuses on the unemployment crisis, it contains three essential monetary measures proposed by the American Monetary Institute in the American Monetary Act (AMA). The AMA’s recommendations are based on decades of research and centuries of experience, are designed to end the current fiscal crisis in a just and sustainable way, and are aimed to place the U.S. money system under our constitutional system of checks and balances.

The three essential measures of the NEED Act include:

  1. Moving the mostly private Federal Reserve System under the US Treasury Department. The Fed would no longer be a virtual fourth branch of government, unaccountable to the public. Their important financial research functions would continue. But the Fed would no longer make unilateral monetary policy decisions beyond the reach of We the People.
  2. Making the power to issue money a public function – bypassing the current system which invited the careless and risky lending that led to the global economic crisis. The US Government would be authorized to issue dollars debt free. This power would replace the current undemocratic and unstable “fractional reserve” system in which money is created as debt through loans by financial corporations who lend many more times what they possess. Banks would no longer have this privilege to create our money supply!
  3. Enabling the US government to use its money power — creating and spending money into circulation – to address pressing infrastructure needs such as repairing our crumbling roads, bridges, rails and highways.  The government also would be enabled to invest in health care and education. These projects would provide a huge numbers of jobs without going into debt and having to repay interest on debt to financial institutions.  Economist Kaoru Yamaguchi’s computer model has shown that a public-based money system and spending government money on jobs fixing our infrastructure is the best form of economic growth.

    The irony is that these three provisions would institutionalize what most Americans falsely believe already exists: That the Federal Reserve is public. That banks only loan money that they possess. That the government creates our money. Wrong on all counts.

    Decades of distortion and deception can be remedied by this bill.

    Public control of money is not a new practice. The American colonists issued “”Continentals” and the Lincoln administration “Greenbacks” to fund the Revolutionary and Civil Wars respectively – all debt and interest free. More than 200 prominent economists during the Great Depression of the 1930s developed and endorsed “The Chicago Plan” – which declared that only the government should create money – to address that crisis.

    Ask your US representative to cosponsor the NEED Act when it is reintroduced. Ask your two US Senators to contact Rep. Kucinich about becoming a Senate sponsor. Last year’s bill can be read at

    http://thomas.loc.gov/cgi-bin/query/z?c111:H.R.6550:

    This bill alone cannot solve all our current economic problems. But it will end the private/corporate control of what should profoundly be a public democratic function of any society – issuing the nation’s money.  Maybe more importantly, the Act will serve as a beacon of hope to a beleaguered citizenry who are seeking long term solutions to unemployment, debt, crumbling infrastructure, and need to take power over their lives and their society.

    Zarlenga is Director of the American Monetary Institute and author of The Lost Science of Money. Coleridge is Director of the Northeast Ohio American Friends Service Committee.


    Kucinich Proposes Landmark Reform of Monetary Policy

    December 18, 2010

    Begins Discussion to Make Monetary Policy Work to Rebuild Economy

    Read the Act here!

    Washington D.C. (December 17, 2010) –As the nation struggles with long-term unemployment at rates not seen in generations, contracted credit and the hoarding of public dollars by the banks, Congressman Kucinich (D-OH) today introduced a dramatic new proposal to establish fiscal integrity, reassert Congressional sovereignty and regain control of monetary policy from private banks.  The National Emergency Employment Defense Act of 2010 would allow the federal government to directly fund badly-needed infrastructure repairs and fund education systems nationwide by spending money into circulation without increasing the national debt.  The bill would end the current practice of fractional reserve lending, whereby the economy depends upon private financial institutions to lend money into circulation.

    Congressman Kucinich stated, “The staggeringly bad employment and economic numbers represent a massive problem which cries out for bold action.  Rather than crossing our fingers and hoping that banks will finally lend some of the billions of public dollars they haven’t thus far seen fit to lend, we can take action. My bill would replace the Federal Reserve System’s dependence on private banks to create credit.  In its place, a Monetary Authority under the Treasury Department would directly inject liquidity into the economy by purchasing much needed public infrastructure repair. Today, we have idle capital, millions of able-bodied but unemployed workers, unused equipment, and record low interest rates. These conditions are the best possible time to make a long-term investment in our nation’s infrastructure. My bill would do exactly that.”

    See a copy of the legislation here.

    Please read through the proposed legislation and share your comments below.


    How The New York Times Continues To Spread Monetary Disinformation – a continuing AMI series featuring commentary by Richard Distelhorst

    August 16, 2010

    In our continuing series of articles showing how monetary disinformation is spread by the media, AMI Researcher and Chapter Leader Dick Distelhorst again dismantles each paragraph of another recent travesty by The New York Times.  The article is reproduced as presented on The New York Times’ web site, interspersed with Distelhorst’s piercing commentary in bold italics.

    FED MOVE ON DEBT SIGNALS CONCERN ABOUT ECONOMY

    Published: August 10, 2010

    By Sewell Chan

    WASHINGTON — Federal Reserve officials, acknowledging that their confidence in the recovery had dimmed, moved again on Tuesday to keep interest rates low and encourage economic growth. They also signaled that more aggressive measures could follow if the job market and other indicators continued to weaken.

    Keeping interest rates low does not encourage economic growth, it encourages economic debt.  With our nation and its people already over $52 trillion in debt, the last thing we need is more debt.  Click following link to see Total Credit Market Debt:

    http://www.federalreserve.gov/RELEASES/z1/current/accessible/L1.htm

    While low interest rates are desirable, in today’s world where most of the American people are up to their eyeballs in debt and unable to borrow, the low rates do not help the economy.  What the American people need is money to spend, what they definitely do not need is to go even deeper in debt.  The Fed has kept the Fed Funds Rate (the rate banks pay to borrow money) at zero to 1/4 of one percent which IS a great way to make the profits of the “too-big-to-fail” banks grow – they borrow money at 1/4 of one percent or less, then lend it out at 5%, 10% or more.  Sometimes, on credit cards, they charge 30% or more.  Who couldn’t make money this way?  Can you or I borrow for 1/4 of one percent and then invest it to return far more?  Wouldn’t you like to get on this deal?  The Fed is “encouraging economic growth” all right, but only for the big banks who got us into this mess in the first place.

    Read the rest of this entry »