Simply stopping banks from creating our money is not enough. The federal government has to step up to the plate and create new US money, in non-inflation/deflationary amounts, and spend it into existence for the needs of the nation as determined by Congress - think infrastructure, clean sustainable environment, healthcare, education, repayment of national debt. Critics will predict rampant inflation, yet creating money for programs that create infrastructure (physical - roads, bridges, etc., human - healthcare, education, child care, etc.) have never been inflationary in the past and there is no reason to believe that it will be now.
Step 3The Constitution gives "Congress the Power to coin (create) Money." But a century ago in 1913 our Congress made a fatal mistake and gave the money-creation power away to the Federal Reserve System and the private banks that own and control the Federal Reserve banks. All 12 Federal Reserve banks are owned and controlled by the private banks in their districts. Blatantly unconstitutional, the Federal Reserve Act has never been ruled on by the U.S. Supreme Court. The third step of monetary reform is to nationalize the Federal Reserve System. Make the Federal Reserve System federal - again exactly what most of us mistakenly think it is now, a part of our government.
In addition to the obvious financial and quality-of-life benefits to the poor and working class that monetary reform would bring, the new system of just money is also easy to understand. Simply make the monetary system conform to what we think it is now: federal government creates all our money, banks loan money already in existence and the Federal Reserve becomes a part of our government.
1. Our federal government will create all US money for the needs of the nation, as determined by Congress, and spent into existence, debt-free in non-inflation/deflationary amounts.
2. Banks will stop creating what we use for money and only loan money that is already in existence.
3. The Federal Reserve System will be nationalized and put into the Treasury Department. A monetary authority, somewhat similar to the Supreme Court, will be created and charged with determining the amount of new money to be created, maintaining a non-inflation/deflationary money supply. Congress will continue to determine what we spend our money for.
This system of just, public or sovereign money was put into Congress in 2011 as the NEED Act (National Emergency Employment Defense Act) by Dennis Kucinich.
In addition to repayment of the national debt, infrastructure and other spending deemed appropriate by Congress, the NEED Act specifically calls for a citizens' dividend to be paid to each citizen. The intention of the writers of the NEED Act was that it should be a substantial amount. $10,000 each was discussed and would be appropriate considering the financial damage done to individuals and families during the Great Recession and continuing to the present day, while at the same time banks were bailed out of bad loans and received trillions of dollars to inflate their owners' wealth, while the poor and middle class sit upon a financial bubble.
The citizens' dividend will transform the lives of hundreds of millions of Americans. It is also monetarily necessary to pump money into the system initially to prevent deflation, not enough money to go around, as we transition from bank-money creation. Most of us actually live in a deflationary system with not enough money to go around for us and fabulous wealth sitting in the vaults of an elite few.
Evidently content to stick with the status quo of a rapidly disappearing middle class, Federal Reserve economists have avoided critiquing the NEED Act. Fortunately Michael Kumhof and Jaromir Benes at the International Monetary Fund were not content to sit around and do nothing. They embedded a comprehensive and carefully calibrated model of the banking system in a DSGE (dynamic stochastic general equilibrium) model of the U.S. economy, similar to the models used by the Federal Reserve. They concluded that monetary reforms that are in the NEED Act would produce:
1. "Much better control of a major source of business cycle fluctuations, sudden increases and contractions of bank credit and of the supply of bank-created money.
2. Complete elimination of bank runs.
3. Dramatic reduction of the (net) public debt.
4. Dramatic reduction of private debt, as money creation no longer requires simultaneous debt creation "while inflation drops to zero" (IMF Working Paper, "Chicago Plan Revisited").
Monetary reform is not a progressive/conservative wedge issue. It is a win/win issue for both sides of the political spectrum: repaying the federal debt as it comes due (impossible under the present system), allowing people and government alike to get on solid financial footing; while creating jobs, prosperity, infrastructure, education and healthcare in a clean sustainable environment.
The NEED Act is readable, understandable and available to be reintroduced into Congress. It can be found with a simple online search. Current Congress members might want to contact Dennis Kucinich for assistance. Conservatives and progressives are urged to contact monetary reformers at the Alliance for Just Money to get started.
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