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What We Could Accomplish in the USA with Interest-Free, Government-Issued Currency

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First a bit of history to let you see how we got to where we are:

The federal government has been paying ever more interest on its ever growing indebtedness for more than 200 years.   James Jackson, Congressman from Georgia, predicted in 1790 that this would happen in a speech he made to the First Congress.   Jackson warned that passing Alexander Hamilton's plan to base the country's money supply on the existing federal debt of $75 million would "settle upon our posterity a burden which they can neither bear nor relieve themselves from."   He further predicted that "in the course of a single century it would be multiplied to an extent we dare not think of."   More specifically he clearly saw that Hamilton's plan would put in place an exponential process of debt growth.   To support his warning he cited the experience of Florence, Genoa, Venice, Spain, France, and England.

Hamilton's clever (but unrealistic) plan was for Congress to commit the country to pay interest on the debt until the debt was paid off.   In the meantime the debt certificates would circulate as money.   He argued that this would turn the $75 million debt into a $75 million money supply.   The problem was that interest payments on this indebtedness would have to come out of the money supply.   And this would steadily reduce the quantity of money that remained in circulation -- and thereby cause recession -- unless ever more new borrowing forever returned the paid-out interest money back into circulation.   Thus the history of federal government finance revealed early-on the periodic swings that were in store for us -- swings between debt reduction-and-recession, . . and debt increase (further indebtedness) and temporary recovery, which have plagued us ever since.

The power to deal with this problem, which Congress has neglected all these years, is the power "to "coin' (create) money and regulate the value thereof," as stipulated in the U.S. Constitution

Congress has overused its power to borrow money on the credit of the United States.   According to the Federal Reserve, 98% of the U.S. money supply is borrowed, and only 2% is "coined,' i.e. created by the government.

Conclusion:   The First Congress got us off on the wrong track.   It should have simply created (coined) $75 million in currency and paid off the debt!  

So why did the First Congress borrow instead of "coin' (i.e. create) the money the country needed?

Newspapers at the time accused members of Congress of acting to serve their own interests.   And in retrospect, this does appear to be the case:   Congress sent agents into the countryside to buy up debt certificates that the general public thought were worthless or nearly so.   Once this was done, Congress cleverly passed the Funding Act, knowing that it would give themselves and their heirs a source of income that would grow exponentially with the debt.  

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For every debtor there is a creditor.   What the members of Congress understood, but which the gullible public did not, is that a $4 trillion debt for debtors, represents $4 trillion in claims for the creditors!   And the members of Congress were the creditors.

To get us out of this historically-set trap, today's Congress has a range of options

First, it could simply stop paying interest on the debt.   Keep in mind that interest is the fuel that is exploding the debt.   So cut off the fuel and stop the explosion.   Since 1790 over $3 trillion in interest-payment obligations have been added to the original $75 million debt.   So, cutting out interest payments would immediately cut the annual deficit (that taxpayers must pony up each year) by about $300 billion.   (Experience shows that all other conventional actions, no matter how painful, do no more than slightly slow the rate of debt growth.)   Then Congress could actually and realistically begin the process of paying off the debt, using newly created, government-issued (not borrowed) money.

One thing that will make it difficult to stop the payment of huge amounts of interest that cripples our economy


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As we all know, the monied elite control politics.   And with the cessation of interest payments to those who have loaned the country money (by buying its treasury bonds), many amongst this monied elite would have their incomes significantly reduced.   Insurance companies and pension funds, too, are invested in federal debt, i.e. they too own treasury bonds -- and foreign holders would also be upset, for they likewise are heavily invested in these status-quo financial arrangements, corrupt though these arrangements may be.     Economically, however, we as a country simply cannot for very much longer continue to add compounding interest payments to our existing and gargantuan indebtedness.  

Another set of problems

The biggest debtor is not the federal government.   It is business corporations, and it is impossible for them to forever increase the physical production of goods and services in order to keep up with the exponential debt growth that plagues them.   And yet, if they are to remain profitable, their production and sales must keep up with the debt growth.   Problem is, many of them will, in the long term, not be able to do this.   Why not?   Because the wages they pay their workers will never be enough to let them (the workers) buy all of the growing amounts of products and services the business owners must sell, in order pay the rising amounts of interest on their exponential debt growth.  

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Several years after receiving my M.A. in social science (interdisciplinary studies) I was an instructor at S.F. State University for a year, but then went back to designing automated machinery, and then tech writing, in Silicon Valley. I've (more...)

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How can governments recapture all this money tha... by Richard Clark on Thursday, Dec 6, 2012 at 3:28:06 PM
That you actually believe all this. And just to i... by BFalcon on Friday, Dec 7, 2012 at 9:28:41 PM
Are you suggesting that it would be difficult or i... by Richard Clark on Saturday, Dec 8, 2012 at 3:09:02 AM
Regulation of the value of the money is "impossibl... by BFalcon on Saturday, Dec 8, 2012 at 3:30:40 AM
  <<< Regulation of the value of th... by Richard Clark on Saturday, Dec 8, 2012 at 5:47:49 AM
. . though I would not necessarily rule out the po... by Richard Clark on Saturday, Dec 8, 2012 at 3:13:58 AM
... by Matthew Jacobs on Sunday, Dec 9, 2012 at 1:02:29 PM
we end up eating scarce rotten eggs.... by BFalcon on Sunday, Dec 9, 2012 at 8:14:06 PM
and lends great credibility, to what I've been rea... by Daniel Geery on Friday, Dec 7, 2012 at 2:41:51 PM
I don't see any 'Peacefull' resolution to this pro... by Paul Repstock on Friday, Dec 7, 2012 at 2:58:12 PM
Richard please encourge your readers to check out ... by Will Decker on Friday, Dec 7, 2012 at 3:26:57 PM
United States Congress - Is The Federal Reserve Sy... by Lance Ciepiela on Friday, Dec 7, 2012 at 5:21:58 PM
A great point!... by Richard Clark on Friday, Dec 7, 2012 at 6:58:20 PM
The real point is that politicians have no incenti... by Paul Repstock on Friday, Dec 7, 2012 at 8:50:36 PM
Not right now, no.  But wait a few years.&nbs... by Richard Clark on Saturday, Dec 8, 2012 at 3:20:26 AM
...with the possible exception of Russia, which is... by Scott Baker on Saturday, Dec 8, 2012 at 5:18:05 AM
Scott, You know that banks create our money b... by Derryl Hermanutz on Saturday, Dec 8, 2012 at 7:32:15 AM
The big snag in this plan is that the public will ... by Sam S on Monday, Dec 10, 2012 at 2:06:17 PM
. . . an ever more powerful and widespread Interne... by Richard Clark on Monday, Dec 10, 2012 at 2:44:58 PM
We must end our present monetary system for just t... by Patricia Gray on Saturday, Dec 8, 2012 at 10:35:37 AM
Excellent well documented article on what economy-... by jean labrek on Friday, Dec 7, 2012 at 10:05:31 PM
. .  we would all do well to read all of thos... by Richard Clark on Saturday, Dec 8, 2012 at 3:25:44 AM
Don't miss Bob Scheer's excellent article, now in ... by Richard Clark on Saturday, Dec 8, 2012 at 4:01:15 AM
This is a great philosophy, but let us not forget ... by Dennis Kaiser on Saturday, Dec 8, 2012 at 6:38:22 AM
We would all do well to reread this. There have be... by Hal O'Leary on Monday, Dec 10, 2012 at 9:20:41 AM
We have a crisis (global warming) that threatens t... by Philip Pease on Saturday, Dec 8, 2012 at 9:42:13 AM
We have a large portion of the workforce that is e... by Richard Clark on Saturday, Dec 8, 2012 at 10:38:34 AM
Is that concept anything like the interest-free "l... by Sister Begonia on Saturday, Dec 8, 2012 at 10:51:30 AM
The money I spoke about in the article would be sp... by Richard Clark on Saturday, Dec 8, 2012 at 1:38:57 PM
When Lincoln first introduced  the Greenbacks... by Scott Baker on Monday, Dec 10, 2012 at 2:38:37 AM
Money is never ever given without strings, for exa... by Matthew Jacobs on Sunday, Dec 9, 2012 at 11:22:04 AM
 The commentary to this article and indeed th... by Paul Repstock on Saturday, Dec 8, 2012 at 11:29:02 AM
There are two villains in this story. They are th... by Paul Repstock on Saturday, Dec 8, 2012 at 11:30:58 AM
...Our Government became one Truly Of, For and BY ... by Daniel Penisten on Saturday, Dec 8, 2012 at 5:11:23 PM
...has to start somewhere.  One place to star... by Scott Baker on Saturday, Dec 8, 2012 at 5:48:44 PM see that Our Very First Congress betrayed Us... by Daniel Penisten on Saturday, Dec 8, 2012 at 5:00:01 PM
Dollars here at a very low interest rate, then tak... by Matthew Jacobs on Saturday, Dec 8, 2012 at 6:10:28 PM
The Dollars created in this manner would only have... by Paul Repstock on Saturday, Dec 8, 2012 at 10:35:24 PM
Matthew,I suggest you get a copy of The Lost Scien... by Will Decker on Sunday, Dec 9, 2012 at 7:50:04 AM
the paperwork will be turned into hard currency. I... by Matthew Jacobs on Sunday, Dec 9, 2012 at 10:45:28 AM
What miraculous good did Iranian currency do for I... by BFalcon on Sunday, Dec 9, 2012 at 11:33:37 PM