The Flip Side of Debt Free Money

You can read the rest for yourself, but it is clear that money can be created by Treasury, specifically citing the example of Lincoln, and that we OUGHT to do so, to avoid unnecessary interest rate costs (let us also remember that private banks charge above the prime rate, and particularly so on long-term bonds needed to pay for highway projects, where interest may add up to 50% of the cost, as the bill says).

Now, the bill gets a bit mealy-mouthed here:

• (B) LOAN AGREEMENT- The money referred to in section 3(A) shall be created by having the Secretary of the Treasury and the Board of Governors of the Federal Reserve System enter into a Loan Agreement in accordance with the following requirements:

  • (1) The Board shall lend the United States Treasury an amount up to a total of $360,000,000,000 at the rate of not more than $72,000,000,000 per annum (on a cumulative basis) in each of the 5 years commencing 60 days after the date of the enactment of this "Act."

But, why is this loan even necessary?

President Lincoln didn't have a Central Bank (luckily!) but Treasury was able to issue money anyway. Why can't we do so now? It is because of the Federal Reserve Act and the outsourcing of our constitutional right to "coin Money" that's why.

Let's be accurate about monetary operations, but let's not overthink this either.

Debt-free money is easy to understand.

That's why it's become so popular, not only now, but also in the late 19^th century, when the Greenback Party flourished and fielded 3 presidential candidates, including Peter Cooper in 1876. The Party later splintered due to defections to the Democratic Party and lack of viable candidates, but the idea was sound, then and now. Debt-free money worked, and was in fact our country's longest-lasting currency. In contrast, Modern Monetary Theorists like Randall Wray have had an uphill struggle convincing anyone beyond some economists and academics that their system works.

The American Monetary Institute has a deeper critique of MMT than mine here: AMI's Evaluation of "Modern Monetary Theory" (MMT) but I'm content to let Thomas Edison have the last words:

If our nation can issue a dollar bond, it can issue a dollar bill. The element that makes the bond good makes the bill good.