The Need for Monetary Reform
GroundSwell, May-June 2008]
Monetary reform is the critical missing element needed to move
humanity back from the brink of nuclear disaster, away from a future
dominated by fraud and warfare, toward a world of justice and beauty.
The power to create money is an awesome power -- at times stronger
than the Executive, Legislative or Judicial powers combined. It's like
having a magic Checkbook, where checks can't bounce. When
controlled privately it can be used to gain riches, but more
importantly it determines the direction of our society by deciding
where the money goes -- what gets funded and what does not. Will it be
used to build and repair vital infrastructure such as Levees to
protect major cities? Or will it go into warfare or real estate loans,
creating asset price inflation -- the real estate bubble.
Thus the money issuing power should never be alienated from
democratically elected government and placed ambiguously into private
hands as it is in America in the Federal Reserve System today.
Indeed most people would be surprised to learn that the bulk of our
money supply is not created by our government, but by private banks
when they make loans. Through the Feds fractional reserve process the
system creates purchasing media when banks make loans into checking
accounts. So, most of our money is issued as interest-bearing debt.
Our money system is controlled by private banks for their agendas
when it should be run for the common good. Our government has the
sovereign power to issue money (Art.1, Sect.8) and spend it into
circulation to promote the general welfare through the creation and
repair of infrastructure, including human infrastructure -- health and
education, rather than misusing the money system for speculation as
banking has historically done. Our lawmakers must now reclaim that
Money has value because of skilled people and resources and
infrastructure, working together in a supportive social and legal
framework. Money is the indispensable lubricant that lets them run.
It is not tangible wealth in itself, but a power to obtain wealth.
Money is an abstract social power based in law and whatever
government accepts in payment of taxes will be money. Money's value
is not created by the private corporations that now control it.
Unhappily, mankind's experience with private money creation has
undeniably been a long history of fraud, mismanagement and even
villainy.* Banking abuses are pervasive and self-evident. Major
companies focus on misusing the money system instead of production.
For example, in June 2005, Citibank and Merrill Lynch paid over $1.2
Billion to the Enron pension fund to settle fraud charges for
assisting Enron in its racketeering.
Private money creation through fractional reserve banking fosters
an unprecedented concentration of wealth which destroys the
democratic process and ultimately promotes imperialism. Less than 1%
of the population claims ownership of almost 50% of the wealth, and
receives a record 21% of all the income, but vital infrastructure is
ignored. The American Society of Civil Engineers gives a D grade to
our infrastructure and estimates that $1.6 trillion is needed to
bring it to acceptable levels. That fact alone shows the world's
dominant money system to be a major failure crying for reform.
Infrastructure repair would provide quality employment throughout
the nation. There is a pretense that government must either borrow
or tax to get the money for such projects. But it is a well enough
known, that the government can directly create the money needed and
spend it into circulation for such projects, without inflationary
Monetary reform is achieved in three parts which must be enacted
together for it to work. Any one or any two of them alone won't do
it, but could actually further harm the monetary situation. **
First, incorporate the Federal Reserve System into the U.S.
Treasury where all new money is created by government as money, not
interest-bearing debt, and spent into circulation to promote the
general welfare; monitored to be neither inflationary nor
Second, halt the banks privilege to create money by ending the
fractional reserve system in a gentle and elegant way. All the past
monetized private credit is converted into U.S. government money.
Banks then act as intermediaries accepting savings deposits and
loaning them out to borrowers; what people think they do now.
Third, spend new money into circulation on infrastructure,
including education and healthcare needed for a growing society,
starting with the $1.6 trillion that the American Society of Civil
Engineers estimate is needed for infrastructure repair; creating
good jobs across our nation, re-invigorating local economies and
re-funding government at all levels.
The false specter of inflation is usually raised against such
suggestions that our government fulfill its responsibility to
furnish the nation's money supply. But that is a knee jerk reaction
-- the result of decades, even centuries of propaganda against
government. When one actually examines the monetary record, it
becomes clear that government has a far superior record in issuing
and controlling money than the private issuers have had.* Inflation
is avoided because real material wealth has been created in the
Lawmakers have often believed they could ignore the big questions
on how our money system is structured. Right from the Constitutional
Convention delegates ignored society's monetary power and the
excellent record of government issued money in building colonial
infrastructure and giving us a nation.* They left the money power up
for grabs when properly estimating it would have meant placing it in
a fourth, monetary branch of government. "We marvel that they
saw so much, but they saw not all things," wrote Civil War
General and money reformer Ben Franklin Butler 80 years later.
My Friends, our Great Task is to complete that part of government
left unfinished by the founders. History shows that the money power
will be a fourth branch whether we recognize it as such or not. It's
not safe to leave so much power and privilege in private hands! It's
counter to our system of checks and balances. The developing crisis
requires us to re-evaluate and focus on it now. Let's fulfill our
responsibility to get a real understanding of this problem and act
on the solution.
As the late Congressman Wright Patman, Chairman of the House
Committee on Banking and Currency for over 16 years, said, "I
have never yet had anyone who could, through the use of logic and
reason, justify the Federal Government borrowing the use of its own
money....I believe the time will come when people will demand that
this be changed. I believe the time will come in this country when
they will actually blame you and me and everyone else connected
with the Congress for sitting idly by and permitting such an idiotic
system to continue."
*For a primer on monetary history and reform see The Lost
Science of Money by Stephen Zarlenga (2002)
**The American Monetary Act is proposed legislation under
construction to achieve these three minimum objectives placing time
on the side of justice. The Monetary Transparency Act forces a
transparent presentation of the facts, demonstrating both the need
for and benefits of monetary reform.