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Noted monetary reformer, Stephen Zarlenga spoke to a standing-room only crowd at the New York City Henry George School on December 6th for two hours, followed by a well-attended dinner at our regular restaurant, Zana's, where we got to question him in more detail. You can read about the act on the American Monetary Institute's site here: http://monetary.org/. The actual act is here: http://www.monetary.org/amacolorpamphlet.pdf
Zarlenga spent about a third of the lecture quoting and elaborating on George's views of money, credit and monetary policy, which is based on his years of research both independently, and from a research grant provided by the Robert Schalkenbach Institute.
In addition to supporting Henry George's views - "he was right!" Zarlenga said, several times - Zarlenga has a workable alternative to the current debt-based money system. Just as importantly, it is fairer, removes the function of money-creation, but, critically, not banking, from the bankers, where it has led to bad judgment and outright fraud, usury, and economic booms and busts for centuries.
Would his 9-member Monetary Authority - to be appointed by the president and confirmed by the Senate - be immune from political manipulation, as well as the usual financial establishment influence? No, but if they are tasked by charter with maintaining neither inflation nor deflation, that is a good start, and an even better start is that they won't be creating money to bailout the TBTF friends - at least their is no legal reason for them to do so.
I do worry about this government being capable of watching over anything as essential as money-creation. In its limited way, the Fed is acting as a Greenbacker (like Zarlenga) and is currently providing money to a formerly weak area of the economy - the banking industry. The problem, of course, is that money isn't making it onto Main Street, but only to Wall Street for more gambling. We are seeing inflation in the FIRE sectors as a result, not real production in vital areas Zarlenga cites, like infrastructure, education (here in NYC, thousands of teachers are about to be laid off, which will raise the average public high school class size to 27), and health care for the uninsured. The Fed can't, by law, provide money for any of that, only Congress can, but would a newly empowered Congress, hampered only by a new Monetary Board, be any less constrained than it is now?
It is worth remembering that the Fed, and the Administration, will do
absolutely ANYTHING to boost the markets, in part because that is where 10s of
trillions of dollars in agency, state, municipal pension funds, and federal
money, are stored - as documented in Comprehensive Annual Financial Reports
(CAFRs), available online. According to some writers, and my own early
and limited analysis, there is enough money in these funds to make paying taxes
almost unnecessary, just from the interest alone. Governmental budgets
routinely look at current receipts
(mostly from taxes) and measure them against current and future
liabilities - a sure way to see red all the
time. These accumulated but dedicated monies are never considered part of
the pie, except in the CAFRs.
Zarlenga, along with other Greenbackers like Ellen Brown, make the case that money
is not a "thing" that a government can run out of, if it exercises its
sovereign right, already in the Constitution (Article
1, Section 8) to "coin money."
Still, given Congress's propensity to overspend, I view the proposed
9-member Monetary Board as an insufficient safeguard, particularly when that
same Congress gets to confirm the appointees. Zarlenga says we have to use our ballot power and "keep an
eye on them" to make sure they stay within their mandate to control inflation,
but if its constituents' own pet projects are those being funded by New Money,
who will vote against that?
This is why I cannot support the AMA without a commensurate passage of a land value tax (lvt), from which ALL natural resources could be taxed in their raw, undeveloped state, before speculators can take their cut (it is now clear the super-spike in oil in the summer of 2008 was mainly due to speculation, and we may be headed there again next year, as the market practices "price discovery," read: jacking up the prices until enough starving people openly revolt). The lvt, broadly applied, would take the wind out of the speculator-driven resource markets before it could get started, and also provide sufficient revenues for government, and even a citizen's dividend - a basic right since access to Land is a basic human right. Without that, I don't see how you can have a stable monetary system, even with better overseers who produce public money instead of private credit.
Dissention among Greenbackers
I also disagree with the American Monetary Institute's critique of Ellen Brown's Public Banking proposal, with one important caveat: it is hard to know exactly what Brown's proposal actually, or currently, is.
I know her proposal almost entirely from reading her dozens of articles (she is a prolific writer, writing about an article a week in Huffington Post, Yes! Magazine, Op Ed News etc. in the last year or so), email, and her postings on the Public Banking Group, where she invited me to become a member over a year ago, and where some 200 members keep up a lively and thought-provoking 50-100 message/day dialogue and preview her articles. I haven't read her book, Web of Debt , which by her own admission has changed considerably from the first to its, now, fourth edition, ranked #61,122 on Amazon.
She currently enjoys a bigger following than Zarlenga, perhaps because of the populist appeal of wresting control of the money function from the "shadow-banking elite" and putting it closer to the people at the state level.
As far as a model of conservative state banking, Brown cites the Bank of North Dakota (BND), making prudent non-securitized loans, only in the state, and funded by all the revenues of North Dakota. They haven't needed nor requested FDIC insurance since they opened their doors in 1919. In 2009, they transferred $15 million to the state's general fund.
This strikes me as a conservative and workable model, and I endorsed it in October when I presented to the New York State Trilevel jobs task force (see the Sept/Oct issue of GroundSwell, or here). It is also probably easier to achieve than Zarlenga's 3-point monetary reform model - a significant consideration in today's paralyzed political climate.