Therefore, the question that American holders of federal debt (treasury bonds) must ask themselves is this: Do we Americans, as a country, want to insist on ever more interest-payment obligations, which will add ever more debt to existing debt, until the only option is debt repudiation and our country suffers the terrible financial consequences? Or are we willing to stop where we are, while we may still be able to recover our original investment plus a reasonable profit?
The option of having Congress create the money necessary to fund a massive public works program
As a sovereign government, Congress' power is unique. It can, if it wants to, create money that is debt-free and interest-free. To do that, Congress needs to stop thinking of itself as the same as other organizations throughout the economy, which must borrow money before they can spend it. Instead, Congress must itself create the money the nation needs. The choice then is whether to have money created by way of loans, at interest, by and from private banks, OR . . to have it created by Congress, so that it is debt-free and interest-free.
How can Congress create money without causing inflation? The answer is simply that Congress must also regulate its value. Fortunately the Constitutionally-given power to create money includes this regulatory power. Here's how that regulatory power would work:
Congress could regulate the value of money by funding projects at the current national price level, which can be calculated by dividing the most recent gross domestic product by the number of hours of work that produced it. For example, in 1991 the total Gross Domestic Product was $5.6 trillion. The employed labor force produced that GDP with 237 billion hours of work. This means that the GDP was produced at the average rate of $23.95 per hour of work. By now the average price level per hour of work is probably somewhere around $25.00. Therefore let Congress fund projects at $25 per hour. How this amount is allocated among labor, land, and capital can be negotiated.
How much money should Congress create? How about enough for us to reach full employment? Right now we have about 9.5 million people actively looking for work. That includes a million managers and professionals; two and a quarter million technical, sales, and clerical people; a million and a quarter precision production, craft and repair people; over two million operators, fabricators and laborers; and 305,000 framers, foresters and fishermen. That's a skilled labor force as big as many nations -- all now idle.
Once they are employed at an average rate of $25 per hour, ($50,000 per year), these newly hired workers could add $475 billion to the nation's gross domestic product, and simultaneously reduce spending for unemployment compensation and prisons by a huge amount. The nation's economic pie would grow significantly as unemployment went down. Congress could start this process by creating, say, $50 billion ($200 per citizen) in debt-free interest-free money (i.e. "greenbacks"), then use it to fund $50 billion worth of public works projects, as President Obama has already proposed. Congress would then monitor the results, and make adjustments as needed. Meanwhile the Fed (newly merged with the Treasury Department) could raise bank reserve rates, not interest rates, to make checking and savings accounts more secure.
Guernsey's revolutionary discovery is instructive and its experience provides a guide-road to our own possible future
Guernsey is an island state located among the British Channel Islands about 75 miles south of Great Britain. In 1816 its sea walls were crumbling, its roads were muddy and only 4 1/2 feet wide. Guernsey's debt was 19,000 pounds. The island's annual income was 3,000 pounds of which 2,400 had to be used to pay interest on its debt. Not surprisingly, its residents were leaving Guernsey and there was little employment.
Then the government of Guernsey created and issued new, interest-free, government-issued currency worth 6,000 pounds. Some 4,000 pounds were immediately used to start the repairs of the sea walls. In 1820, another 4,500 pounds of interest-free government currency were issued and also put to work. In 1821, yet another 10,000; in 1824, 5,000; in 1826, 20,000. By 1837, 50,000 pounds of interest-free government notes ("greenbacks") had been issued, interest free, for the primary use of projects like sea walls, roads, the marketplace, churches, and colleges. This sum more than doubled the island's money supply during this thirteen year period, but there was no inflation. In the year 1914, as the British restricted the expansion of their money supply due to World War I, the people of Guernsey commenced to issue another 142,000 pounds of interest-free, government-created money, over the next four years, and never looked back. By 1958, over 542,000 pounds of this kind of money had been issued, all without inflation and without borrowing from private bankers.
In 1990 there were $13 million worth of interest-free government-issued notes in circulation. A visitor to the island that year later wrote:
"I returned from Guernsey last weekend. It is a fascinating little island. There are about 60,000 permanent residents on the island. The average family owns 3.3 cars, their unemployment rate is zero and their standard of living is very high. There is no public debt. Instead, there is a surplus of public funds which earn interest. The Guernsey Treasury increased the money supply of the island by 40% in the last three-year period, and this increase did not cause any inflation. The price for a gallon of gasoline in England translates to about $5US, whereas the price in Guernsey is about $2US. Contrary to the teachings of current economics in all higher institutions, inflation is not necessarily related to the volume of money in circulation but rather to the size of the commercial debt."
What you have just read is an edited, expanded and clarified excerpt from this article. None of its facts or statistics were changed in the process of rewriting this excerpt.
"I care not what puppet is placed on the throne of England to rule the Empire upon which the sun never sets. The man that controls Britain's money supply, controls the British Empire. And I control the money supply."
--said by a fabulously wealthy London financier who was one of the founders of an international and parasitic banking dynasty that has surreptitiously sucked our blood for a hundred years.
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