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
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