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The largest of the two parties, Democrats for Social Credit, was founded in 1953. The model they extol is a brief period under President Andrew Jackson where the US government issued debt-free money, instead of borrowing it from investment banks. The Social Credit Party had their heyday in the 1981 election, when they received 21% of the popular vote.
The second party, the New Economics Party, was founded earlier this year by members of the charitable trust Living Economies (http://www.le.org.nz/), founded in 2002. Evolving out of New Zealand's local currency movement, Living Economies has several published writers among its members, including Deirdre Kent, author of the bestselling Healthy Money, Health Planet. The trust itself has just published a New Zealand edition of Fleeing Vesuvius. Originally published in Ireland, Fleeing Vesuvius is a collection of essays about confronting economic and environmental collapse.
The Link Between War and Hyperinflation
Both the Social Credit Party and the New Economics Party challenge the conventional wisdom that allowing the government to create "fiat" money (money not back by gold) creates hyperinflation. Global currency hasn't been redeemable for gold since 1971, when Nixon ended the trading of gold at the fixed price of $35 an ounce. However as Carroll Quigley points out in Tragedy and Hope (which I reviewed in October -- see http://www.opednews.com/articles/The-Real-Vampires-An-Insi-by-Dr-Stuart-Jeanne-B-111020-821.html ), only a small fraction of the money issued by investment banks was ever backed by gold. Prior to 1971, the main function of large government gold reserves was to cover large trade deficits. When a country's imports exceeded their exports, other governments often forced them to make up the difference with gold transfers.
Why would hyperinflation occur when the government creates money out of thin air, but not when Goldman Sachs does it? No hyperinflation occurred when Andrew Jackson issued fiat money. Nor under Roosevelt, who also spent massive amounts of government money directly into the economy to address massive unemployment during the Great Depression. Historically hyperinflation occurs when governments have issue "fiat" the money they borrow from investment banks to finance wars (Lyndon Johnson's aggressive monetization during the Vietnam War is the most commonly cited example). Even classical economists agree that spending billions of dollars on bombs, jets and tanks is inherently inflationary. It injects millions of dollars into the economy in the absence of real products and services the public can purchase with these dollars.
Using Taxation to Control Deficits and Debt
As Ellen Brown, Steve Keen, Thomas Greco and other latter day economists argue, allowing the government to spend new debt-free money directly into the economy through high quality public expenditure has the ability to stimulate real economy activity, while simultaneously reducing income and wealth inequality. This is the good kind of monetization. The closest example we have is Roosevelt's massive jobs creation program under the New Deal. Technically this wasn't true monetization, as Roosevelt borrowed this money from investment banks. Given that Congress authorized him to have the US Treasury issue fiat money, this may have been his biggest mistake. Although the New Deal significantly improved jobless rates, most economists agree that it failed to produce full recovery. This only occurred with World War II and massive government expenditure for troop mobilization and armaments.
This contrasts with the other kind of monetization (that Obama and the Federal Reserve are secretly engaged in), in which the government creates new money pay off debt they owe investment banks. While theoretically this should enable banks to generate new loans, in practice it's used for obscenely large CEO bonuses and stockholder dividends.
Roosevelt's New Deal spending failed to create hyperinflation because Roosevelt refused to incur deficits and indebtedness (to investment banks) to finance it. He paid for his massive jobs and social welfare programs (which included Social Security and Aid to Families with Dependent Children) through substantial tax increases on the wealthy. Between 1936 and 1941 the upper tax rate (on people earning more than $5 million a year) went from 79 to 81 percent. After the war started, the upper income bracket covered everyone making $200,000 a year or more. The rate went up to 88% in 1942 and 94% in 1944.
At present the highest tax rate wealthy individuals and corporations pay in the US is 35% (reduced from 39% by the Bush administration).
*Contrary to popular misconception, the government doesn't issue money. Nearly all new money is created by private banks when they generate new loans. On average, most banks only have 7% of a new loan on deposit. The rest is generated out of thin air. This system started in 1694 when the Bank of England was created.
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