by Stephen Zarlenga and Greg Coleridge
President Obama presented worthy economic goals during his State of the Union address of investing in our physical and social infrastructure and increasing employment. Absent was any specific plan of how to achieve these ends without further increasing the national debt.
We have a specific plan President Obama. Take public control of our money system.
A bill was introduced at the end of last year that can put people to work by building and repairing our nation's infrastructure without adding to the debt. The details are contained in the National Emergency Employment Defense (NEED) Act (HR 6550 in the last Congress) by Rep. Dennis Kucinich (D-OH).
While the bill focuses on the unemployment crisis, it contains the 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 U.S. money under our constitutional system of checks and balances.
The three essential monetary measures of the NEED Act are:
1. Incorporate the mostly private Federal Reserve System into 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. End the banking systems "fractional reserve" accounting privilege in a gentle, elegant way. Fractional reserve lending allows banks to lend many times more than they possess, thereby issuing our money supply as interest bearing debt and dominating the financial system, taking wild risks as they did in creating the crisis. Instead, we should use our Government's Constitutional power (Art. 1 sec. 8) to provide the nation's money supply as interest free money, not interest bearing debt. This has immense benefits.
3. Use the US governments 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 advanced system dynamics computer model shows that basing the system on money instead of debt will allow the national debt to be repaid and the funding of infrastructure (thereby solving the unemployment crisis) without inflation! (see http://www.monetary.org)
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. And 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.