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This is the sixth and final article on Ellen Brown's superb 2007 book titled "Web of Debt," now updated in a December 2008 third edition. It tells "the shocking truth about our money system, (how it) trapped us in debt, and how we can break free." This article focuses on establishing a people-oriented banking system. It's high time we had one and reclaimed what's rightfully ours.
Restoring National Sovereignty with A Truly National Banking System
One serving everyone, not powerful moneychangers alone, the so-called Money Trust cartel of Wall Street bankers looting the national wealth for themselves and heading the country for bankruptcy, tyranny and ruin. Stopping them is Job One, and only mass activist outrage can do it.
At the Chicago Democratic National Convention, William Jennings Bryan won the nomination saying:
"(W)e believe that the right to coin money and issue money is a function of government....I stand with Jefferson (and say), as he did, that the issue of money is a function of the government and that banks should go out of the governing business....(W)hen we have restored the money of the Constitution, all other necessary reforms will be possible, and....until that is done there is no reform that can be accomplished."
No Fed existed at that time. If one did and operated like today, Bryan would have said abolish it or make it truly federal. As a US government agency, money created would go directly to the Treasury. But that's only 3% of the money supply. What about the other 97% in the form of commercial loans? Would that put government in the commercial lending business?
"Perhaps, but why not. As Bryan said, banking is the government's business, by Constitutional mandate" - at least the part of it involved in creating new money. The rest could be in private hands, like today - through banks and other financial institutions, such as finance companies, pension and mutual funds, insurance companies, and securities dealers. "These institutions do not create the money they lend but merely recycle pre-existing funds." With government printing money, banks would become more equitable recyclers - "borrowing money at a low rate and lending it at a higher one," except for one downside. Some would go bankrupt, but start-ups would replace them under a more stable and equitable system.
In 1946, the Bank of England was nationalized in name only and retained its (privately-controlled) money printing power. In 2003, James Robertson and John Bunzl proposed changing it their book titled: "Monetary Reform: Making It Happen." They advocated making it illegal for banks to create new money as loans. Only a central bank should do it with commercial banks having to borrow it for relending.
Government officials, however, balked at the idea saying the nation would be harmed as banks would go broke having been stripped of their "credit multiplier" capacity - the British version of fractional reserve lending. London banks are second only to Wall Street so rather than risk this fate they'd likely relocate "en masse to the Continent" and force the British economy to collapse.
In the 1940s, Representative Jerry Voorhis proposed a similar plan to Congress called "the 100 Percent Reserve Solution," his idea being "to require banks to establish 100 percent reserve backing for their deposits" - done by borrowing from the Treasury to supply what they needed.
In "The Lost Science of Money," Stephen Zarlenga wrote:
"With this elegant plan, all the bank credit money the banks have created out of thin air, through fractional reserve banking, would be transformed into US government legal tender - real, honest money." True enough but at a cost so great that (in 1946) it launched Richard Nixon's political career with a vicious red-baiting campaign accusing Voorhis of Communist Party links.
His plan was later revived but never enacted into law. One of its advocates is Zarlenga's American Monetary Institute. It drafted an American Monetary Act to eliminate fractional reserve banking and impose a 100% reserve requirement on all demand deposits, making them unavailable to loan and only for "a (fee-based) warehousing and transferring service." The Fed would be incorporated into the Treasury with the government solely authorized to create new money - to be circulated inflation and deflation-free for purposes such as: infrastructure development, education, health care, job creation, financing local economies, and funding government at all levels. For their part, banks would function traditionally - as intermediaries for deposits loaned out to borrowers.
A Monetary Reform Act goes further by requiring:
-- 100% reserve requirement on all bank deposits, including savings; deposits wouldn't be counted as reserves against which to make loans; they'd be held in trust solely for their depositors' use;
-- banks servicing depositors could only lend their own money; and
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