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I have kept my mouth shut for most of the insanity of the "fiscal cliff" goofiness, the Republican debt ceiling blackmail, and the hopeless Democrat reactions.  No longer.  

I have hoped for many years now that the American people - hey, the world's people - would wake up to see who is exploiting them and what is causing the unending mess we are in.  Let's see - there was the Savings and Loan debacle, then the Enron debacle, and finally the ongoing disaster of the "Great Recession," to mention a few obvious candidates for a wake-up call  Every time the banking cartel managed to cover up the workings of their money machine, pin the blame on the victims, and skate away with even more power - yet the people didn't wake up.  Well, here goes.  Wake Up!

Here's the straight fast ball:  The worldwide financial oligarchy and banking cartel (comprising such entities as the Federal Reserve, most central banks, the big players (i.e. Goldman Sachs, JP Morgan Chase, et al), and the branches of governments they control) create virtually all the money in the world out of thin air, call it loan it to us, and demand repayment.  This includes the national debt of the USA.  Except for a trivial amount of coins, all the money we are forced to use is debt money, we have been suckered into saying we will repay.  No government, no laws, no Constitution (least of all the US Constitution), or any other legal nicety gave the financial oligarchy this power.  They took it.  Don't believe it? - read on.

Andrew Jackson believed it.  Abraham Lincoln believed it.  Many others did too, but all - all - have been defeated by the private financial juggernaut of private money creation.   Jackson, Lincoln, and many others knew that the cure for the problem was simple - take the power of money creation from the private sector and give it to the people.   Jackson tried to get us a truly national bank that would fund government with debt-free money.  Lincoln funded much of the Civil War with debt-free "Greenbacks," only to be ultimately driven back to selling bonds to the private sector, and, need we mention, be assassinated.  Assassinated just months after issuing a monetary policy that would have freed the American people forever.  Read that policy here Lincoln's Monetary Policy

Why should the government borrow money created out of thin air by the private sector, when it could create the money debt-free itself?  Lincoln knew that it was right, just, moral, and eminently practical for the government to create the money the people need.  Real credit.  Real money that stays perpetually in circulation.  Many others do too, and it is time the American people get it clearly in their heads that this is literally the only course that will save us.  No debt ceiling ever again, because there need not ever again be any national debt.  

The financial world powers devote all their might and influence in government and the media to convince the world's people that debt-free money will be abused, cause inflation, and bring an end to civilization as we know it.  All lies.  That fact is the present debt-money system is responsible for all the ills the bankers want you to believe would be caused by public credit.  The private debt-money scheme causes constant demand for unlimited growth, perpetual inflation, uncontrollable booms, inevitable busts, and it is right now leading to the collapse of civilization as we know it.

The economics behind all this is really quite simple.  Every dollar created is money owed which must be repaid with interest, but the debt money machine does not simultaneously create the money for the interest.  Where does that come from?  You guessed it - more debt in the future.  This endless borrowing is a treadmill that neither individuals, businesses, or governments can ever get off of.  Private debt-money creates an endless cycle of vicious competition, overproduction , and repeated collapses as debt is finally so large as to be unpayable.  If your interested in reading a real economist's explanation, read Michael Hudson.  If you want the full picture with all details, read Michael Rowbotham's brilliant book, Grip of Death.

So, forget about debt ceilings and all the associated nonsense.  Mint trillion dollar coins or just enter credit in the account of the people.  Do whatever it takes, but pay off all the private debt with real credit created by our own governments.   Remove the grip of the financial oligarchy on us and our future.   The minute we stop borrowing from the financial oligarchy (translation: giving them our money - our IOUs and claim on our future earnings), their power is ended.  Only then can we begin to rebuild our lives, our infrastructure, our schools, our towns, and our world with real credit, real money that will never have to be paid back, but remain in circulation as the true medium of exchange as envisioned by Adam Smith and all the great economists who followed him.  Wake up, everybody.

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Comment Preferences

  •  Rich People won't like that. (3+ / 0-)
    Recommended by:
    a2nite, Mannie, Bisbonian

    They want to have and control all the money.

  •  Actually a law - The Federal Reserve Act of 1913 (3+ / 0-)
    Recommended by:
    John DE, HamdenRice, Neuroptimalian

    did establish that. And I don't get where this notion that the Federal Reserve is "the private banking industry" comes from. It's a creation of congress, no private institution can make "money out of thin air".

    •  The Fed is a weird hybrid critter (6+ / 0-)

      Authorized by the government, but not part OF the government and accountable to absolutely no one.

      Maybe it ought to have to present an annual financial report to Congress...?

      If it's
      Not your body,
      Then it's
      Not your choice
      And it's
      None of your damn business!

      by TheOtherMaven on Fri Jan 18, 2013 at 12:14:58 PM PST

      [ Parent ]

    •  If you don't believe that private banks (2+ / 0-)
      Recommended by:
      phonegery, Bisbonian

      can make "money out of thin air", then you really do need to watch this video which makes it very clear that is exactly what banks do when they take in deposits and make loans.

      When a bank takes in a deposit it sets aside (reserves) a portion of the deposit and loans out the rest. The loan itself then becomes an asset and enables the creation of another loan. So long as a bank keeps a certain percentage of assets on reserve it can go on making additional loans.

      The cumulative effect of making these loans makes new "money out of thin air".

      Don't believe it? Watch the video to see how it works.

      The only trouble with retirement is...I never get a day off!

      by Mr Robert on Fri Jan 18, 2013 at 12:28:22 PM PST

      [ Parent ]

      •  Actually (2+ / 0-)
        Recommended by:
        Roger Fox, Neuroptimalian

        You have it backwards, the private bank loans out the money, then goes to the Fed to purchase enough reserves to meet their reserve requirement based on the new loan.  The only thing that prevents them from lending out 'too much' is capital constraints.  Smaller banks can only lend up to a certain dollar amount based on their capital.  If an under-capitalized bank gets asked to loan out $200,000,000, to one person they need to go find another bank to add in their portion based on their capitalization limit.  It's called a participation loan.  Banks like Wells Fargo or Citi have capital limits that probably don't slow them down much if they want to lend.  They may do a participation loan on something like financing the building of a new consolidated Dreamliner manufacturing plant (costing billions, upon billions) from the ground up, but more to the point, they probably wouldn't because they would look at it as tying up too much risk in one basket more than as a capital contstraint.

        The big QE hoo-ha was an asset swap to recapitalize the banks by the Fed buying up crap capital (pledged assets that investors were starting to look at as hinky) and replacing it with good capital - Treasuries/Reserves, so they would hopefully (let's cross our fingers) start lending again.  

        Another constraint on banks making all the loans they want is Loan Demand.  When there is no demand, there are usually no loans made.  Which is partly why we still have a problem today.  Loans are made to finance equipment, new infrastructure and day to day operations, and business just hasn't been willing to do that since they don't need the added capacity right now.

        Loyalty to petrified opinion never yet broke a chain or freed a human soul in this world--and never will. Mark Twain

        by whoknu on Fri Jan 18, 2013 at 03:13:29 PM PST

        [ Parent ]

        •  Nothing you say contradicts anything I propose (0+ / 0-)

          I don't know if your point is to show I am wrong, you are smart, or what, but suffice it to say your cute point about "backwards" does seem designed to get the uninformed person to discount my main point.  Have you thought about a job as a Treasury or Fed spokesperson?

          To cut to the chase, whether money is created at the local bank level, amongst banks, or at the top, makes utterly no difference from the perspective of we who are debtors and taxpayers.  The "backwards" statement you make is taking a side in a discussion amongst economists as to whether money is created "endogenously" (throughout the banking system) or strictly "exogenously" (from the top, like with QE only).  This makes no real difference when it comes to where the power lies, although I suppose it might affect squabbles among parts of the banking system.  The point is that money creation (all of it) lies firmly in the hands of the private, for-profit sector.  The Fed has taken to routinely creating capital for favored banking entities, and the whole "reserve requirement" and "capital ratio" stuff is outrageously manipulated (along with interest rates, LIBOR, and just about everything else financial) to keep the whole machine jammed full of money and firmly in power.

          As to the constraint of no loan demand, now you're talking.  In the end, without demand from the real economy (that's individuals, businesses, and governments who build real things, provide real services, and employ real people) as opposed to the financial economy (all the night money, repurchase agreements, interbank loans, the discount window, and other miscellaneous financial jiggery), the whole thing collapses.  That is because in the short run, medium run, and long run we all need to eat, have shelter, stay warm, receive health care, etc.  This is a real current problem, as you note, and stems from the outrageous demand that all debts not only be fully paid, but the "take" of the financial system be increased (!) (think bonuses, fees, and other rake-offs), and that whole machine borrow its way out of the huge morass of debt it has created.

          We need to get rid of the bloated FIRE (Finance, Insurance, and Real Estate) sector that is - let's face it - pretty much parasitical.  To do this,  we need to get rid of the notion that every scrap of money created has to be debt.  No need to make debt illegal or do away with banks, just make sure they are loaning their own money.  Then "capital requirements" will really mean something.

          •  my intention wasn't to piss you off, (0+ / 0-)

            it was just to clarify a point for readers because I have seen people claim the order is important in making the argument that banks must have reserves before they can lend.  They take this to mean it's not the case they can't just create money out of thin air.  If it is understood that it is in truth the other way around, then we are all on the same page as far as understanding that banks do create money through a keystroke that credits your account, 'out of thin air.'

            Loyalty to petrified opinion never yet broke a chain or freed a human soul in this world--and never will. Mark Twain

            by whoknu on Sat Jan 19, 2013 at 01:33:18 AM PST

            [ Parent ]

    •  You are dead wrong, my friend. (6+ / 0-)

      The Federal Reserve Act of 1913 was conceived in secret by the most powerful of the financial oligarchy of the time.  And it was created for the express purpose to keep money creation in private hands.  Yes the Act was tweaked to get poor souls like William Jennings Bryan to believe a public institution was being created, but it was really the master stroke of the oligarchs and it stands today as one of the main instruments of their private power.

  •  Wait (3+ / 0-)
    Recommended by:
    Theston, Roger Fox, Neuroptimalian

    You think Lincoln's monetary policy got him assassinated, or are you just implying that to be cute?

    •  Sure was a convenient coincidence (0+ / 0-)

      and they never found all the people who collaborated with and enabled John Wilkes Booth (the man was certainly not a lone assassin, even if he was a lone-wolf nutbar - there really was a conspiracy and he at least thought he was running it).

      If it's
      Not your body,
      Then it's
      Not your choice
      And it's
      None of your damn business!

      by TheOtherMaven on Fri Jan 18, 2013 at 12:18:07 PM PST

      [ Parent ]

    •  I don't know, (1+ / 0-)
      Recommended by:
      Bisbonian

      but read Lincoln's Monetary Policy, apply the test of cui bono to the assassination, and draw your own conclusions.

      •  If that's going to be your approach (2+ / 0-)
        Recommended by:
        Roger Fox, Neuroptimalian

        you better stock up on tin foil first.

        •  It is not my approach (0+ / 0-)

          but the facts are the facts.  Whether Lincoln was killed by a "lone gunman" (our preferred explanation for these sort of things in this country), by a conspiracy, or fell out of his box seat and died, makes no difference to me.  The point is that he was on to something big, something so fundamental that our entire way of life could have, just possibly, been immeasurably better.  I will say this, however things happened, I'll bet there were a lot of private bankers thanking their lucky stars that Lincoln's monetary policy died with him.

  •  If we are going to have a society that (2+ / 0-)
    Recommended by:
    doc2, Roger Fox

    makes commitments and honors them, we can't abolish debt. Debt is the alternative to theft. Debt, or obligation, is concommitant with respect for human rights. Otherwise, if everyone just takes what he needs on the spur of the moment, without a "by your leave" or "please," we are nothing but dumb predators. Even bees communicate with each other and respond to the needs of the hive. Dollars are nothing but certified IOUs, an official record of what is owed and due, some time in the future. In fact, most of the debt on the books is owed to our own citizens.
    The practice of taking back dollars that people don't immediately need as deposits and paying out more than we take in is a system that guarantees rewards for bankers for doing essentially nothing. It's a charade that lets the Congress claim to have no power over the purse at the same time that it rewards the financial class for putting the screws on people who don't co-operate. Sadly, the latter now constitute about 99%, whose fault is a lack of obedience. The country elected the wrong President and now we're going to have to pay. The manufactured crisis of 2008 obviously wasn't severe enough because not enough people got the message that they better "behave."

    The issue of the 21st Century is who rules.  Is it the people who govern, or the petty potentates on Capitol hill and in the capitals of the fifty states continue to crack the whip and dole out goodies to whom they please.

    We organize governments to deliver services and prevent abuse.

    by hannah on Fri Jan 18, 2013 at 12:14:34 PM PST

  •  Mistaken (3+ / 0-)
    Recommended by:
    doc2, S F Hippie, Neuroptimalian

    Banks "create" money by changing an asset into money. They don't create it out of thin air.

    Go to a bank to borrow mony. They take your IOU and give you an IOU which is a deposit tinto your account. The bank's IOU is money, your IOU is not. That is not magic, nor is it prejudice.

    You will accept a bank IOU in payment of debt. You won't accept my IOU in payment of debt.

    •  You are on the verge on catching on, (1+ / 0-)
      Recommended by:
      psyched

      but you have a ways to go.  A debt created by a bank is is money creation, my friend.  When you take out a loan at your local bank, they and the powerful financial cartel behind them want you to believe that you are borrowing one of their deposits, like Aunt Ethel's account or the deposit made your neighbor down the street.  Untrue.  Aunt Ethel's money, your neighbor's, and everyone else's are demand deposits, withdrawable at any time.  These deposits are untouched by your new loan, which is brand new money which the Fed allowed your bank to create.  And, crucially, the brand new money is really yours - you promised to pay them with your business or labor.  Slick trick, eh?

      •  Money ≠ Wealth. (3+ / 0-)
        Recommended by:
        roundhead, S F Hippie, Neuroptimalian
        A debt created by a bank is is money creation, my friend.
        That debt may be money creation, but it's not wealth creation. Money is a proxy for labor or goods, nothing more—and if a bank creates more nominal money without increasing the labor or goods (or proxies therefor) represented by the whole of its monetary supply, then each individual piece of nominal money has less real value.

        "When I give food to the poor, they call me a saint. When I ask why the poor have no food, they call me a communist." --Dom Helder Camara, archbishop of Recife

        by JamesGG on Fri Jan 18, 2013 at 01:18:02 PM PST

        [ Parent ]

    •  Mistaken (2+ / 0-)
      Recommended by:
      Bisbonian, psyched

      They may or may not encumber an asset. In either case, they book a loan (asset) and a demand deposit (liability) by entry on their balance sheet. The loan proceeds are "created out of thin air." The money created in the transaction will eventually have to be backed by reserves, so I find it hard to reconcile your assertion that new money was not created.

  •  Credit for what? (0+ / 0-)
    Do whatever it takes, but pay off all the private debt with real credit created by our own governments.
    I'm no economist, but it seems like "real credit created by our own governments," offered as payment for private debt or as payment from the government for services rendered, would eventually have to be redeemable for something.

    If the government creates fiat currency backed by nothing whatsoever, and makes clear that it will create unlimited amounts of this currency in order to pay off its debts instead of using that currency as a proxy for assets collected and then disbursed by the government, then how is that any different than me writing on a piece of paper "This is worth $10" and trying to buy a six-pack of beer with it?

    "When I give food to the poor, they call me a saint. When I ask why the poor have no food, they call me a communist." --Dom Helder Camara, archbishop of Recife

    by JamesGG on Fri Jan 18, 2013 at 12:15:39 PM PST

    •  Good thinking, but take the next step. (1+ / 0-)
      Recommended by:
      psyched

      Our current money supply is just fiat money.  The Federal Reserve is neither Federal nor a reserve.  It answers only to the private sector.  It creates money by entering a number onto the screen, calls it an liability, then creates a corresponding asset by buying a bond with this money conveniently plucked from their private money tree.  This sleight of hand eludes 99% of the population, and the financial oligarchy loves it that way.  The Fed does not earn any money, promise gold for the new money, or anything else that might qualify as non-fiat reserves of some kind.  The next step you need to take is to realize that fiat money is actually necessary in the modern world.  There is not enough gold or anything else to provide an adequate medium for the world economy.  Once you have made that realization, then you will rapidly conclude that putting money creation under some sort of democratic public control and rational basis is the only solution.

      •  There's no such thing as non-fiat money. (1+ / 0-)
        Recommended by:
        Roger Fox
        Our current money supply is just fiat money.
        All money is "fiat money," whether it's paper or gold or what-have-you; if some token without any use-value in and of itself is being used as a proxy for real goods or services, it only has value insofar as both people involved in the exchange agree that it has value.

        Gold is only worth something because people agree that it's worth something; while it's useful as a conductor, that's not the reason it sells for $1600+ per ounce. It's a valuable metal simply because we all consent to the idea that it is a valuable metal, because we all agree that certain weights of this metal could be exchanged for other things as a proxy for labor or real objects or land in the real world. Sever that link, and gold's "value" is nothing more than its use-value.

        Once you have made that realization, then you will rapidly conclude that putting money creation under some sort of democratic public control and rational basis is the only solution.
        It would only be "the solution" insofar as those elected to exercise "democratic public control" wouldn't do something completely stupid with it, like thinking that by creating money they were creating wealth. Suggesting that the federal government simply create enough dollars by fiat to pay back the public debt would be doing exactly that.

        The money the federal government disburses to the various people and companies it pays (which is what "government spending" is) doesn't have intrinsic value; it is valuable only insofar as it represents taxation, which is the amount of people's proxy-labor or proxy-assets they give to the government in exchange for the whole "living in a free society" thing.

        If that crucial link between dollars and assets/labor were severed—as it would be if the government paid down the debt by the creation of massive amounts of additional fiat currency, without actually taking in more labor/assets to cover that—then the money paid by government to its workers would be worth no more than Monopoly money, and would have no value for them as they tried to exchange it for food, clothing, shelter, services, etc.

        In short, what you propose by suggesting that we simply print enough money to cover the entirety of the national debt is that we make American money worthless. That would result in nothing short of disaster and pure anarchy.

        "When I give food to the poor, they call me a saint. When I ask why the poor have no food, they call me a communist." --Dom Helder Camara, archbishop of Recife

        by JamesGG on Fri Jan 18, 2013 at 01:08:44 PM PST

        [ Parent ]

      •  The real value of fiat money is that it is NOT (1+ / 0-)
        Recommended by:
        psyched

        tied to a commodity and its ultimate value is founded on the productivity and resources of the society whose government issues it. Fundamentally, the dollar is the unit of account and it has value founded qualitatively on its power to extinguish your liabilities to the state (taxes, fines, fees), and quantitatively on what you, as a member of the society, are willing to do to obtain it.

        A little disagreement about the fed - it does (or would) have to answer to congress if congress exerted its will. Most in congress are totally clueless on economics, and monetary theory is something in the Andromeda Galaxy, so they sit on their hands and loud, useless noises when Uncle Ben comes to testify.

    •  You've stating causality backwards (1+ / 0-)
      Recommended by:
      psyched

      All currency in circulation is first spent into existence by the government. Logically, this must occur prior to either collecting taxes in the currency, or exchanging bonds for the currency. All government spending has been paid in cash as demand deposits, which add directly to bank reserves. Those payments in excess of revenue (deficits) create excess reserves which drives the interbank lending rate down. When that hits the target rate the fed trades excess reserves for treasuries to keep the interest rate from falling further. If the fed did not do this the overnight rate would drop to zero. Currently, with quantitative easing the fed pays 25bp on reserves and lets them accumulate. That sets the interest floor at 0.25% and sets the basis for longer note and bond yields. So printing money and paying the debt does nothing to dilute to monetary aggregates and it would have negligible inflationary impact (arguably, it would be less inflationary since $340B/year debt service would NOT be added to the monetary aggregate.

      •  Fair enough. (0+ / 0-)
        All currency in circulation is first spent into existence by the government. Logically, this must occur prior to either collecting taxes in the currency, or exchanging bonds for the currency.
        But absent people's faith and trust that the second step will actually occur—that the money they're being given by the government is, at some end of some process, a proxy for a real asset of labor or goods—currency has no worth.

        The currency has value only insofar as it can be exchanged for something else, and to the government it has value only insofar as the government is the only entity that has the power to either directly or through delegation create currency in that government's name.

        Sever the link between government circulating currency and that currency representing some kind of labor or goods coming in, and the currency is nothing more than paper, a line in a ledger, or a series of choreographed electrons. It seems to me that severing that link is precisely what the diarist is proposing.

        "When I give food to the poor, they call me a saint. When I ask why the poor have no food, they call me a communist." --Dom Helder Camara, archbishop of Recife

        by JamesGG on Fri Jan 18, 2013 at 01:13:42 PM PST

        [ Parent ]

        •  I think taxation is the primary driver (1+ / 0-)
          Recommended by:
          psyched

          of the currency having value. The language often seen in MMT is that "taxes drive money." I'm not really sure what the diarist is proposing, but I interpreted his language as referring to reissue of United States Notes. The Treasury issued this currency from the Civil War up until 1971. It was circulated side by side with Federal Reserve Notes. You may remember $5 bills with a red seal instead of a green one. That was debt-free money - essentially monetary credits that you can use to pay taxes and as legal tender. As to the link between the currency and what it represents, that occurred when the currency was spent into the economy. The exchange of the treasury for the currency did not break that bond, and neither does the complementary transaction.  

        •  I like your engagement, JamesGG, (2+ / 0-)
          Recommended by:
          Old Surgeon, psyched

          and you type pretty damn fast, but you make a few missteps in logic in your apparent eagerness to dismiss my proposal for public banking.  First of all, I make no such suggestion that the link between money and that money "representing some kind of labor or goods coming in" should be severed.  Quite the contrary, the whole value of public credit is that money can be spent into existence to build and create what the people want.  In fact, that should be the real purpose of the government in the first place.  Leaders are elected to do things people ask them to do, and with the power of the purse, unfettered by the bloodsucking middle parties like big banks, the people have the potential to get what they want.  Right now, the people get what the banking cartel says they should get, end then only if the people are willing (sucker enough?) to borrow the money to do it.

          Every system can be abused and power corrupts, but why not start with the money supply under democratic control, and work to ensure that public control is not abused, rather than giving away the whole shebang to a private, for-profit cartel, that has demonstrated, as I said in the beginning, that they are corrupt, care nothing about the real welfare of the people, and are beholden only to Mammon.

          •  Good, this is much clearer (1+ / 0-)
            Recommended by:
            psyched
          •  Wealth can't be spent into existence. (0+ / 0-)
            Quite the contrary, the whole value of public credit is that money can be spent into existence to build and create what the people want.
            Money can be spent into existence, but wealth can't; money by itself can't be used to build or create anything if both parties in the transaction don't agree on the money's value. Only if that money represents a proxy for the transfer of some actual resource from government to the person or company being paid, will it be a means capable of building or creating what the people want.

            Every dollar represents a single sliver of the overall pie that is the nation's wealth in resources, assets, and labor; simply increasing the money supply, in this metaphor, doesn't make the pie any bigger—it just means that every individual slice is that much thinner.

            If the government wants to pay Joe's Contracting to build a road, but the money issued by the government is worthless and thereby can't be translated into some kind of real good or labor on the other end, in the company's employees being able to use it to make their mortgage payments and put food on their families, then Joe's Contracting will refuse to build the road.

            I still haven't seen anything here to contradict my original understanding of your proposal: that you ultimately want government to retire its debt by simply creating enough money to pay it off in nominal dollars. Absent any new actual wealth coming in to government—meaning either actual goods and labor or some proxy therefor—that means that each individual dollar would be worth less, in that it represents a smaller piece of the overall pie.

            "When I give food to the poor, they call me a saint. When I ask why the poor have no food, they call me a communist." --Dom Helder Camara, archbishop of Recife

            by JamesGG on Fri Jan 18, 2013 at 02:16:48 PM PST

            [ Parent ]

      •  Now you're thinking (1+ / 0-)
        Recommended by:
        psyched

        As to "causality":  Whether the government spends the money first or not hardly matters, since every dollar is ultimately owed to someone.  Every dollar is debt and if this debt were paid off (this seems to be a conservative fixation in this country and others), the money supply would shrink accordingly.  Imagine if the national debt were eliminated (which some Republicans seem to think would be a good idea), as opposed to being paid off with public credit, then the money supply would shrink by about $16 trillion dollars.  This amount of money withdrawn from the economy would not just create a depression, it would utterly collapse the entire economy.  Hence the national debt can never be eliminated under the present system and remains just a convenient political football.  It actually functions exactly like the public credit system I describe, except that we have to pay interest to private parties to keep the money out there.  This is the hold the private sector wants over the public, and they will do anything to keep it that way.

        •  So what exactly are you proposing (1+ / 0-)
          Recommended by:
          psyched

          Are you saying merge the treasury and fed and consolidate their operations - OK good plan requires major overhaul of both fed and treasury, requires a competent congress, something we no longer possess.

          Are you saying congress should reassert itself and assume its lawful control of the fed - see above

          Are you suggesting we return to the "greenback" and have treasury issue united states notes to buy back the debt. That's a lot of printing! See, the fed can do it by just entering numbers on its spreadsheet. But (except for the reasons given above) congress could authorize this and require bond holders to take their principal and interest in US Notes which they could then deposit into their own banks and thus flood the reserves and drive interest rates to zero.

          Causality cannot be dismissed. To do so you entirely misrepresent the nature of both the monetary units and the bond units. The dollar is "final payment" for all goods and services. In that form (in private sector hands) please explain what debt attaches except for the obligation of the state to accept it in discharge of liabilities to the state.

          •  Why I love the $60T Platinum Coin (1+ / 0-)
            Recommended by:
            psyched

            Achieves the goal, requires no congress.

          •  I don't understand what you are asking (0+ / 0-)

            Especially your last sentence....  All money is debt.  It really is that simple.  And that needs to be changed.  What don't you understand?

            In the future, every project funded with government created, debt free money (be it printed notes, entries on computers, or credit somewhere) releases into the economy permanent and stable additions to our means of exchange.  Believe it or not, the economy really will function quite well if there is enough money free from claims of creditors, and that is exactly what the financial oligarchy fears.  Let's get the job done.  I'm not sure what else I could explain.

            •  I understand your statement (0+ / 0-)

              that "all money is debt" but say it and saying that it "is really is that simple" explains your comment. If I come to you and say, "Hey, I really like you widget, will you sell it to me for $1?" and you say "Sure" and I take the widget and you take the dollar. At that point I have discharged my debt obligation since that dollar was my net financial asset. There is no offsetting liability in the entire private money system. I what you are claiming is that since it is a liability on the governments balance sheet it is necessarily a debt. I don't argue that it is eventually encumbered in debt, but that is in a separate process that has really very little to do with monetary aggregates and everything to do with fixing interest rates.

              When you say

              Believe it or not, the economy really will function quite well if there is enough money free from claims of creditors
              that's fine, but my question above was how do you accomplish this? We can lay out all kinds of Utopias based on things that could happen but which in actuality never will happen. That is a fun academic exercise but it is of little practical value. The platinum coin was at least a genuine idea that bypassed obstruction. Ideas aimed a the center of the obstructive powers are simply wasted energy.
              •  Decrying good ideas as "utopian" is a classic (0+ / 0-)

                dismissal.  Where would you have us start - with bad ideas?  With some half-baked band-aids that have repeatedly gone down as utter failures over last few decades?  

                Yes, we face a daunting task - a useless Congress, a President beholden to Wall Street, a mainstream media bought and paid for by the plutocracy, good economists cowering in every corner trying not to offend conventional thinking, and a huge army of liberal apologists out on the street and in the blogs to control any "radical stuff" before it actually reaches the public or anyone in power.  

                However, there is no idea as powerful as one whose time has come.  Public banking is one of those ideas.  Congress and Big Banks are currently vying for the title of "Least Popular" on the streets of America.  There is opportunity for change in such a situation.  The financial oligarchy cannot change this, but they have and are using the time-tested tricks of empire - Divide and Conquer (make absolutely sure that the conservative rednecks who hate Wall Street do so for reasons that will keep them distant from the progressive-minded citizens who hate Wall Street), Control of Information (use money, power, and advertising to make sure confusion and obfuscation reigns, disseminate disinformation made vaguely plausible by hired authority figures, and divert attention to pointless debates - fiscal cliff, etc.), and Bread and Circuses (make sure the public is focused on TV dramas, reality shows, and sports, and better yet, get your message of "everything is fine, don't question the established order" in with the TV and sports).  

                What defeats empire?   Times so hard, situations so dire, and prospects so bleak, that the system must change. Our job is is make a good alternative available when this point is reached.

                •  Trying to dissect you rant (and you needn't be (0+ / 0-)

                  defensive, I'm probably on your side) Are you suggesting nationalizing the banks, or a "public option" bank to compete with the existing bank structure? Or, as I asked above, various forms or merger of the Treasury and FRB functions? I don't blame you for cursing the darkness, I do that regularly myself, but if you wrote this diary to light a candle, you have yet to make that light penetrate the darkness. Accepting your premise that "[o]ur job is is make a good alternative available when this point is reached", what practical steps do you see as being available?

                  •  OK (0+ / 0-)

                    Step One:  Create a national bank.  This would be a public bank with the primary job of managing the money supply, and the secondary job of managing the fiscal affairs of government.  It would, in its best form, be a merging of the Federal Reserve and the US Treasury Dept, as you suggest.  The accounting would be simple, as all revenues received by the government would be deposited in the National Bank, and all expenditures be made from it (think of the Bank of North Dakota as a rough model).  But it would serve more than an accounting function, as it would also create whatever money supply was needed simply by paying out whatever was authorized by Congress (this is nothing more than a combination of what is done now by the Treasury and the Fed, but without the step of creating bonds and selling them).  There would be no national debt, only a national money supply.  The infrastructure for getting money into circulation would be the existing private banks (the ones who elect to join the national bank system - see below) supplemented by whatever public branches become necessary to create.

                    Step Two:  Replace existing Federal Reserve regulation of banks with direct regulation by the people through their elected government.  The regulation, at its heart would be simple in the extreme, and consist of nothing more than requiring private banks to lend only their own money (100% capital requirement).  Under this rule, it is likely that most "regular" banks would elect to join the national bank system, leaving only the shadow banking system of hedge funds, venture capitalists, insurance companies, etc, to continue to find business where they wanted and charge whatever interest they chose, subject to reasonable usury laws.

                    Step Three:  Gradually develop the national banking/public finance system into a smoothly functioning means of stabilizing the economy against booms and busts and begin planning for common sense public goals like preserving a livable, intact environment.  First steps would be the phased buyout of private debt, of course, but a central element of the new public finance regime would be a completely revamped set of economic metrics.  The GDP measure would be gone and replaced be direct measures of public happiness and welfare.  This would throw into the dustbin of history the absurd notion that perpetual growth should be a goal.  

                    None of these ideas are original to me but have been elaborately developed by a huge range of original and productive thinkers.  To name just a few - Michael Rowbotham, David Korten, Michael Hudson, and Ellen Brown.   I have merely synthesized the best of their proposals into a few basic essential elements.

                    Note particularly, that the steps I have outlined can be made to work in a capitalistic, socialistic, or hybrid economy, but would work best, in my view, in a dispersed, local, cooperative enterprise based economy, with international corporations playing a vastly reduced and strictly regulated role.  It is a strictly a monetary proposal, and designed to turn money back into the medium of exchange it should be, rather than an instrument of private power.

                    •  Sounds like it basically boils down to: (0+ / 0-)

                      1. Issue more money instead of IOUs when the government hasn't collected enough.

                      2. Require 100% capitalization.

                      3. Alter the economy such as to eliminate all debt, and stop growing the economy beyond what is needed to accommodate population growth.

                      Correct?

                      •  Pretty close (0+ / 0-)

                        except for the "when the government hasn't collected enough" part.  The new system is more than simply a method of balancing the governments books, it is simultaneously the means to provide money to the economy at large.

                        The new Fed/Treasury branch will have taken over all money creation through operation of the national bank system.  Money will be spent into existence, in accordance with national policies and as need is identified, at thousands of local branches of the national bank system.  This is basically what is partially happening at present through an overly complicated system of "grants," "loans," and "budgets" of multiple departments and multiple levels of senior and junior governments, combined with private sector loans (the demand for repayment of which causes the huge and recurring problems we have now).  Of course, needs are never quite met, because there is never quite enough money due to the chokehold engineered at the top echelons of the present financial structure.  The crucial difference under the national public banking system is that the new money spent is not debt, and as such continues to circulate in the economy.  The root cause of debt-collapse depressions is eliminated.  

                        As long as the pace of money creation matches the level of real economic activity (and it always will if real needs are funded initially) no inflation occurs and no instability occurs.  The frenetic pace of overproduction, competition, and bankruptcy (driven at present by the incessant need to borrow more to pay interest on past borrowing) slows and stops because no interest is charged and no repayment required.  Individuals and firms continue quietly supplying each other's needs with plenty of money in circulation, which will now be serving simply as a medium of exchange, rather than as a means to control the economy.   Supply comes into balance with demand, full employment is achieved (perhaps with job-sharing, and much more vacation since there would then be not only plenty of money but plenty of goods and services).  One might go so far as to say that people would truly be guaranteed life, liberty, and the pursuit of happiness.

                        If you have gotten this far, you have no doubt grasped why the financial oligarchy has gone to such great lengths over the last several centuries to prevent the people from controlling their own money supply.  Money creation is the magic touchstone of civilization, the ring that controls all rings, the instrument of ultimate power.  To keep that ultimate power, everything, including war, violence, conspiracy, corruption, fraud, and deception, will be used.

                        •  So all money would be vertical? (0+ / 0-)

                          How would that shake out in the private sector - I am thinking about mortgages and commercial borrowing? I can see it working for industrial borrowing by issuing equities, but how about household borrowing? In the current system banks create money when they lend since loans create deposits and they are constrained only by the bank's capital, not reserves. That's horizontal money in MMT parlance.

                          The fed does what all banks do, it creates money by a balance sheet operation, posting an asset against a liability, but it is vertical - the asset flows to the private sector while liability stays with the government. That's how we deficit spend. But that's simply a balance sheet operation - it is a debt by definition, however the liability is meaningless, other than the attached asset must be accepted in payment of financial obligations owed to the government.

                          After the treasury deficit spends the payees' accounts are credited along with their bank's reserve account at the fed. Typically, as reserves exceed requirements in the system, the value of excess funds goes down (the interbank lending interest rate falls) and would continue to fall to zero if the fed did not intervene by selling treasuries to soak up reserves. This is why we have continued to have a treasury bond market after leaving the gold standard and allowing the dollar to float. Since 2008 the fed has curtailed some bond and note sales and currently pays 25bp on reserves. It HAS TO do that with QE because its collecting treasuries as they mature and returning cash to shorten the term structure. They believe this will stimulate the economy but it actually drains capital in the amount of debt service forgone. In other words, a two-edged sword.

                          MB, do you spend any time over at NEP? There is an excellent 5-part series there by Scott Fullwiler that begins as a comparison of neoliberal (neoclassical) and MMT approaches to the issue of deficits and debt sustainability. Several subsequent articles go on to discuss the positive ramifications of paying interest on reserves and gives a number of insights into a more effective mix of fiscal and monetary policies. It's wonkish and you'll probably have to read it more than once - I certainly did - but it's VERY informative and well worth the time.  -OS

                          •  Perhaps you can instruct me (0+ / 0-)

                            on the subtleties of the terms "vertical" and "horizontal."  I checked out the site you mention and will read further, but my quick impression is that the economists involved are focused more on Keynesian sorts of fixes than on an overhaul of the monetary system.  

                            This is not to discount their efforts at all, but I really do believe that the monetary approach is vital.  It is no doubt true that with enough regulation and fine tuning, the present system could be made to limp along and perhaps even avoid new booms, busts, and further inequalities with constant vigilance.  This has been the dream, and the work, of legions of economists since the 1930s.  I was of that mind for the longest time, but have now concluded that unless the root problem (i.e. who has the power of money creation) is addressed, all the tinkering and fine tuning will be bent back to the same perversity of plutocratic control that we have seen over and over again.  

                            The scales dropped from my eyes when I read Grip of Death by Michael Rowbotham.  Try to get hold of a copy for yourself.  It is a bit dated (1998) but still correct.  I am a retired engineer, and it took the hard mathematics of it to allow me to finally grasp the flaw that permeates most convention economics.  In essence, one of the core assumptions of classical economics, Say's Law, is invalid under a regime of 100% debt-money.

                            Thanks so much, OS, for your willingness to engage on this issue.  It is of vital importance for us and future generations.

                          •  Prehaps a more thorough perusal (0+ / 0-)

                            of the NEP site is in order

                            I checked out the site you mention and will read further, but my quick impression is that the economists involved are focused more on Keynesian sorts of fixes than on an overhaul of the monetary system.  
                            Since the site is completely devoted to  Modern Monetary Theory, monetary function, functional finance, and the proper use of the monetary system to further public purpose. Try clicking on the "MMT Primer"

                            Vertical and horizontal refers to stocks and flows in among and between sectors. Vertically, the sectors are currency issuer (consolidated government sector) and the private currency user (non-government sector). Among the latter most exchanges a through credit money that banks create by lending and destroy as loans are repaid, net gaining the interest. Vertical money transactions either create (spend) or destroy (tax) money in the banking reserves, adding and subtracting from the private sector net financial assets.

                            When new money is created by the government, the liability is held by the government and the asset passes vertically to the private sector. From the perspective of the the private sector the money is exogenous. Credit money such as that created by commercial banks is endogenous to the private sector. For every dollar of financial asset created, there is a corresponding liability of debt. At any time the aggregate sum of these endogenous assets and liabilities is zero and the net financial assets of the private sector are the exogenous dollars which have no private sector liabilities attached.
                          •  I clicked MMT Primer (0+ / 0-)

                            and I still remain confused.  Perhaps I don't understand the proper definitions of terms, but it does seem that the MMT folks are having some trouble with definitions as well.  

                            To make any proposed reform possible, it first has to be made simple and clear, just like in science.  Useful laws in physics are quite simple.

                            Therefore I still like my approach, although I am happy to try to understand alternatives.  I want to be persuaded.

                            In my approach only a few simple ideas have to be grasped: a) all money is debt in the present system (i.e. if all debts were paid in full, there would be no money left); b) the present debt-money system forces individuals, businesses, and governments to constantly borrow ever increasing amounts of money to payback the principal and interest on past debt; c) The debt treadmill in (b) causes crises of overproduction, booms, and busts while conveniently enriching the controllers of the debt-money system; and d) issuing credit instead of debt would eliminate the problems of (c) by creating a permanent money supply that would function, not as obligations to others, but as a medium of exchange.

                            It still takes some mental effort to grasp the basic principles, but this is still within the capabilities of most people.  

                            Someone once told me that to be effective ideas had to be able to be summarized in about a paragraph, then reduced to a single sentence, the essence of of which should be able to be captured with one or two words.

                            I have given my paragraph above.  The single sentence is "Creating money as debt is ruining our lives."  My few words?  Debt kills.  Credit frees.

                            To be a proponent of MMT, I need it broken down into a few simple concepts.  Can you help me here?

                          •  Honestly, the only way I know of to gain (0+ / 0-)

                            an understanding of MMT - which I thoroughly believe is THE accurate description of monetary reality in either our sovereign fiat money system or in convertible or fixed exchange systems - is to suspend ALL current judgments, hold all questions, and read the complete argument. Then reflect, ask your questions and go back and reread. I am very experienced is understanding complex systems (mostly human biology, physiology, pathophysiology and disease) and I will say that understanding MMT is a quantum process - kind of like huh? huh? huh, OMG YES! If you don't let loose of what you think you know, the epiphany will not happen. Even for a pretty smart guy with a lot of complex systems experience it takes time. I studied it for many weeks before any of it clicked. Joe Firestone's (letsgetitdone) early blogging here on the platinum coin fascinated me and studying the idea put me right in the middle of the MMT community.

                            What I can tell you now is that you share many ideas in common with the MMT community. That's why I believe it is really important for you to learn to express your views in terms that a larger audience already understands. It won't relieve the frustration of seeing what's right and watching what's wrong, but I find great comfort in knowing there is a cadre of brilliant economists sharing both that frustration and that understanding, and who are working diligently to effect positive societal change. That and the honesty and elegance of their approach puts me solidly in their camp.

                          •  I'll give it a try (1+ / 0-)
                            Recommended by:
                            Old Surgeon

                            but I'm not sure there is value in slogging through the MMT blogs if there is no "there" there.  What we need are solutions and if the MMT folks have them, I want to have them explained - succinctly.  If the solutions can't be summarized succinctly, briefly, and in clear language, they may not have the correct solutions, or perhaps they are not interested in solutions at all, but only in "understanding the problem."  

                            We will not reform the current system by out-wonking the Fed/Treasury wonks - they have a huge lead in the wizardry department.  Our goal should be to rip away the smoke, mirrors, and illusion from the financial wizards who now hold sway over us, not create our own conjuring show.

                            I am glad that you believe I share many ideas in common with the MMT folks.  Let's leave it that we are on the same team, and both try for a common message.  I am planning a another diary on the subject, and maybe I can improve the call for reform, and not run counter to any perceived truths in other reform camps.  I continue to believe that a core element in finding common ground is a single answer to the question, "What is money and how is it created?"  Before I reached the point of writing anything on the subject, I tried asking friends and acquaintances that question.  Almost no one responded with, "Money is debt created by banks."  The range of answers was something like I imagine one would have received in 1300 AD to "What is plague?"

                          •  Some things are not a simple as we may wish (0+ / 0-)

                            there are 311 million stakeholders.

                            As to the question of what is money and how is it created, that is a part of the fundamental tenets of MMT. The whole study of MMT begins with the essential nature of money and money-things. That first distinction, money (the unit of account) vs money things (tokens, credits, bills, notes, bonds) is very difficult for many people to internalize. But it leads the discussion in an entirely different direction when the topic is government debt.

                            It is all well and good to want to smash up the corrupt extant system and replace it, but in both surgery and real economics, that would be a disastrous course. Very specific moves to evolve from the current to an improved system are in order. Explosive jumps tend to have the most deleterious effects on the vulnerable in society, the poor and those on fixed incomes. Take QE for example. I think it's great that they are shortening the treasury term structure and converting to excess reserves at 25bp. It saves lots of money, but that is money that was flowing to the private sector. In 2012 QE reduced private sector earnings by $90 Billion. Much of that was removed from household income of fixed income retirees. Reducing their income directly reduces economic activity, hurting both the individual and the economy as a whole. What would the immediate reduction of $360B per year in debt service to the private sector do to the economy as a whole? In two words, severe austerity, particularly for those at the bottom of the economic pyramid. The cancer patient may have a good response to chemo, but if you give the whole course all at once you just kill the patient. But, hey, you killed the cancer, too, right?

                          •  Good thoughts. (0+ / 0-)

                            I have always understood the moderate position of distrusting radical steps.  And I remain fully aware that those relying on fixed incomes which they hope to supplement by interest and dividends on retirement savings are hurt by the FED-engineered low interest regime. Getting hold of pension funds, retirement accounts, and small-time "investments" was part of the genius of the financialization of the economy, and one of the great triumphs of modern empire.  The big players are counting on us never figuring out how simple it would be to separate the finances of regular folks from the casino, money-printing world of Wall Street.

                            Here are two further thoughts:  Why are we as reformers supposed to "go slow" when the Wall Street gang can engage in as much radical, sudden, "smash-up" destruction as they want to?  Whether it was planned or unplanned, the collapse of Lehman Brothers, the near death experience of the world financial economy, the virtually instantaneous grab of hundreds of billions in TARP and trillions in prop-up loans, quasi-legal changes in big bank structure, among all the rest, were all super radical, rapid, and highly dangerous actions.  

                            And I think you would agree that the "patient" - the 99% of us who suffered the radical actions of the top banking clique - is not doing well as a result of these radical actions, and perhaps the "chemo" was designed to kill not save.  The top echelons found how easily they could enrich themselves, so why not settle the hash of the pesky bunch on the losing end of the class war while they were at it.

                          •  Continuing the analogy (0+ / 0-)

                            the chemo currently being used is the wrong one. In fact, it's not chemo at all, it's a form of monstrously stupid medicine from a time ruled by superstition. I wrote a diary about that a few weeks back. What I was getting at, though, was how vigorously the patient can be treated has a lot to do with her fitness and general state of health apart from the disease. A lot of our society is now chronically ill and frail in an economic sense. Personally, if I had to live off of my own financial resources without new or recurring income I could last quite a while. My sister has not been as fortunate as I and she could last only a month or two. Most people have personal debt in excess of net financial resources, and are closer to being in my sister's position than mine.

                            I actually have first hand knowledge of going too fast in the context of this analogy, both as an old man and a patient, and as an old surgeon since it was generally my job to intervene after others had made a hash of things or at least gotten their patients into deep doo.  I would argue first that a "near death" experience is an interesting concept to ponder. During a code many drugs will get pushed that ultimately do not alter the outcome. A chest thumps and multiple defibrillations may not be enough. A needle in the heart perhaps, or crack the chest (Hail Mary ER style)? It is the outcome that is important. It is that all important adjective "near" that makes all the difference to the patient who recovers.

                            From a fiat money standpoint, cleaning up the mess using money for the mops and rags is not the problem in my view. The problem was they just cleaned the grand foyer and left the rest of the house a festering mess. Another $2-3T and we would have wiped it all up and had the economy humming along like in the late 90's. But hopefully without the idiocy of mounting a government surplus which requires a private sector debt bubble. Remember back then? One job seeker per vacancy instead of 5 or 6? What went wrong then? How did we get there, and how did we get from there to here? Thirteen years? We've had the Fed for 100 years, we've had fiat currency for 41 years. One of the most important questions a clinician asks is "Why now?"

                        •  I think you overestimate the effect of replacing (0+ / 0-)

                          the money supply.

                          Of course, needs are never quite met, because there is never quite enough money due to the chokehold engineered at the top echelons of the present financial structure.  The crucial difference under the national public banking system is that the new money spent is not debt, and as such continues to circulate in the economy.  The root cause of debt-collapse depressions is eliminated.  
                          I don't see this changing. Sure, the government no longer has a debt issue, but money would still accumulate at the top, and (almost) everyone else would still rack up debt buying things they can't afford yet. Changing the nature of money doesn't change our spending culture.
                          As long as the pace of money creation matches the level of real economic activity (and it always will if real needs are funded initially) no inflation occurs and no instability occurs.
                          You would also have to continuously supply more money to account for the trade deficit unless the entire world  moved to the same money supply (or we shut down foreign trade).
                          The frenetic pace of overproduction, competition, and bankruptcy (driven at present by the incessant need to borrow more to pay interest on past borrowing) slows and stops because no interest is charged and no repayment required.  Individuals and firms continue quietly supplying each other's needs with plenty of money in circulation, which will now be serving simply as a medium of exchange, rather than as a means to control the economy.  
                          You'd have to stop all consumer borrowing and somehow abolish greed. People won't suddenly stop coveting more money.
                          Supply comes into balance with demand, full employment is achieved (perhaps with job-sharing, and much more vacation since there would then be not only plenty of money but plenty of goods and services).
                          See above regarding greed. I do agree that in the relatively near term, we will have to see a re-balancing of what is considered full-time work and reasonable compensation, but that'll have to happen regardless as we constantly increase and improve automation.
  •  So what's the implementation path? (0+ / 0-)

    Do you print the $2.7B M1 money supply? The $10.6B M2 money supply? The $58.1B total US debt? Do we declare all existing debt null and void, and start fresh, giving everyone an equal share of the printed money, or do we use the new money to pay off existing debt?

    Or are you just proposing that the government just replace Federal Reserve Bills with US dollars and leave everything else the same?

    •  All of your ideas would work (0+ / 0-)

      with varying degrees of effectiveness, but my public banking proposal envisions paying off existing debt in a, say twenty year, phased operation with new debt-free money.  The gentlest way to phase this would be to pay off debt as rolls over, and don't issue new debt.  The more draconian tactic of declaring debt null and void forces a redistribution that would probably be too disruptive.  

      You don't mention the M3 money supply, which is significantly larger than M1 or M2, and which is no longer reported by the FED.  Although much is still shrouded in secrecy, it is widely assumed that M3 is no longer reported because it involves the FED and the US government taking onto its books the financial sludge of various derivatives connected with the mortgage mess and the collapse of 2008.  My suggestion would be to re-evaluate the worth of these derivatives, and only pay the actual market value with new public credit, even if it required reversing some prior actions.  If this resulted in some of the "too big to fail" financial behemoths entering bankruptcy, so be it.  As long as we preserved their "real " parts, the public would be much better off.

      As to "regular" debt (mostly M! and M2) which is enmeshed with the world's pension funds and other investments, loans, and deposits, I would replace debt-money with debt-free money on a one-to-one basis.

      Thanks for your thoughts.  We must spread the simple concept of public banking as widely as possible, until the notion becomes commonplace.  At that point, enacting it will be vastly simpler.  Right now most people, including most politicians, haven't a clue how the system really works at the present time, and hence cannot grasp the simplicity of public banking.

      •  I left out M3 intentionally, as it consists mostly (0+ / 0-)

        of long-term deposits and is a rather nebulous concept. I admit I really don't see the advantage of replacing our current fiat-money system with another fiat-money system, other than simplifying the accounting of the government owing itself money. And that can easily be accomplished without the need to reprint all that money.

        •  You may have missed the main point (0+ / 0-)

          The government does not "owe itself money," it owes to the owners of its bonds, mainly the FED, which is NOT under the control of any branch of the government.  To repeat, money creation is at present 100% in the control of a private for-profit system.  This is what the whole debt ceiling business is all about.

          •  Strictly speaking, yes, but the Fed returns its (0+ / 0-)

            profits to the treasury. So the Gov pays interest to the Fed, the Fed returns the profit to the treasury, and the Gov owns the treasury. So in effect, the Gov pays itself with a little taken off for overhead.

            •  You are correct (0+ / 0-)

              in that 85% of the interest is returned by the FED (a requirement due to the decades of work by the late Congressman Wright Patman, an early campaigner against Fed overlordship).  It is also true that both Congress and the Fed go to great lengths to portray an image of the Fed working in the public interest - high gravitas appearances by Bernanke and earnest discussions of the "problem" of unemployment, for example.  And yes, The Fed and the government do work (collude?) together, but not for the welfare of the people.  At its heart, the Federal Reserve system is in existence as a private entity designed to retain the power of money creation in private hands.  The Fed takes orders from its Board of Governors, not from any branch of the government.

              •  Yes, and the board of governers are appointed (0+ / 0-)

                by the President and confirmed by the Senate. So its effectively a quasi-independent federal agency directed by a leadership board appointed by the Presidency, who's members serve 14 years. Its the financial equivalent of the Supreme Court, with higher turnover.

                •  It is not quasi-independent (0+ / 0-)

                  it is independent, period.  Its actions cannot be questioned or overturned by any elected official, or by any agency controlled by any elected official or body of elected officials, as explained in the FED's own publications.  The operation and management of the Fed is heavily weighted to privately appointed managers of constituent banks.  The mere fact that the Board of Governors is appointed (the appointment process itself is skewed to private interests, and for long terms -14 years) by the President does not make it a Federal Agency, since it is would be virtually impossible for the appointment process to exert any practical political control due to the way it is structured, not to mention that such control is essentially ruled out by the laws which govern the appointment process.

                  Your "equivalency" with the Supreme Court is superficial only.  If the Supreme court had real management control over people's lives, rather than the job of interpreting laws written elsewhere, there might be a real parallel.  Barring that, the judgement that the Federal Reserve System is an independent de facto private entity still stands.

                  If you still doubt that the FED is part and parcel of the private banking system, try converting it to a transparent public institution like I am trying to do.

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