The most effective and efficient of these government-issued money systems was in Pennsylvania, where a publicly-owned bank issued paper notes and lent them to farmers. Since this money returned to the government, it did not inflate the money supply; and since the government issued and spent an additional sum of money on public works, enough money was kept in the system to pay the interest on the loans and prevent the debt spiral afflicting the private banking system. The Pennsylvania system worked so well that it completely funded the provincial government without taxes or inflation.
Benjamin Franklin and others maintained that the chief reason for the American Revolution was that Parliament forbade the colonies from issuing their own money. Paper money issued by the Revolutionary government got the colonists through the Revolutionary War, but the British heavily counterfeited this money as a deliberate war tactic, and by the end of the war it had been inflated so much that it was nearly worthless. Fear of inflation led the Continental Congress to completely omit paper money from the Constitution, which does not say who can issue paper money or under what circumstances. The private banks filled the breach, and by 1913 the United States had the same private central banking system that England had.
Today, the pyramid scheme of lending 10 dollars and requiring 11 back has resulted in the very inflationary spiral the Founding Fathers feared. The money supply is inflated with more and more debt, shrinking the value of the dollars paid to workers and propelling larger and larger portions of the population into debt peonage. If the government were to issue its own money rather than borrowing from banks that issued it, and if this money were used to pay for real goods and services (roads and bridges, sustainable energy development, health services, and the like), demand and supply would remain in balance and inflation would not result.
A government with a properly designed and monitored system of publicly-issued money could fund itself without taxes, inflation or debt.
Publicly-owned banks are also called "national" banks or "nationalized" banks – the very thing that threatens the private banking system in Ireland today. We have come full circle: a system of national banks is what used to be called "the American system." This may be what we actually need – a public banking system operating for the benefit of the public. The private European system of debt peonage has failed.
On this 2008 St. Patrick’s Day, we the modern-day Irish of all persuasions can raise a glass to the possibility of being freed from the debt peonage that has kept us wage-slaves for most of our national history.
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