A Silver Bullet for the Debt Crisis
May 12, 2011 - 1:42pm ET
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Yes, Mr. President There is a Silver Bullet for Our Debt Crisis.
“The Civil War quickly exposed the weakness of a money system based on banker’s promises: as almost any crisis does. That war also highlighted a system that functioned in or out of crisis – a money system controlled by government. The Greenback demonstrated that government-issued fiat money served the commercial, industrial and fiscal needs of the nation even in the midst of warfare. Moreover, our government limited the issue of interest free money to the authorized amounts, in contrast to bankers’ capricious issue of their paper notes.”(Zarlenga, p. 477)
Mr. President—Prosperity and Progress are Built upon the Foundation of Debt Free Currency
I highly recommend that your administration mount an educational campaign to inform Americans of the fact that they have an alternative to tax increases and spending cuts as policy choices for managing the deficit. That alternative is to issue sufficient debt free currency to fund debt and debt service as part of the budgets of the more than 55,000 political jurisdictions in America.
We’ve successfully done this in the past; 17th & 18 century Colonists used debt free Scrip for one hundred years much to the chagrin of London bankers who eventually forced gold into our system of legal tender. That singular act gave rise to the Revolutionary War. Our forefathers then issued their own currency...Continentals and won the War and our Independence from the Crown despite its criminal counterfieting of billions of this Colonial Currency.
Lincoln refused to accept offers by Eastern Bankers who wanted to charge 26% to 35% interest for a $150 million loan. In 1862 President Lincoln and the Congress issued a limited amount of debt free Greenbacks. Greenbacks were constitutionally valid as legal tender and served as a preferred medium of exchange. They were considered money by providers of goods and services who accepted them as payment from the government and offered them as payment for commercial bills. Greenbacks won the Civil War, reignited America's industrial revolution and served as interest free money through 1912. And, would be our currency today were it not for the Federal Reserve charging the Federal government interest on every dollar it needs to fund its budget.
The New American Dollar:
Americans need to understand that this nation owes approximately $80 trillion in principle and interest payments and unfunded liabilities to all creditors, domestic, foreign, intergovernmental, etc. That sum is represented by Federal Reserve Notes, Treasury Bills, Bonds, and subordinate debt instruments. This Treasury issued debt represents what the "Good Faith and Credit" of the United States is obligated to pay to creditors at some future point. The crushing national and individual costs of this enormous obligation can be entirely eliminated by restoring to government currency sovereignty managed by the Colonists and Lincoln.
With sovereignty restored your Administration can fund principle and interest owed to all of the above named creditors, you would require Treasury to issue debt free currency. The new legal authority would allow Treasury to create electronic credit and debit accounts denominated in the new currency. You would request and Congress would authorize $80 trillion New American Dollars, (NA$80Tr) interest free, provided as needed through Treasury and not the Federal Reserve. The costless availability of the new currency would eliminate concerns over when to replenish the unfunded liabilities of all political jurisdictions.
Inflation would be completely avoided,
1.Congress would instruct Treasury to redeem, upon presentation/verification, all debt instruments.
2.Treasury would, after making payments, immediately liquidate/void these representations of money/credit/debt
rather than rolling them over, as is current practice.
3.Accomplishing #2 above leaves the total supply of money unchanged, therefore, no inflation.
4.Federal taxation of corporations and individuals would be phased out since we would no longer need to borrow
and pay interest on our own "fiat" money.
5.State and local governments would purchase goods and services with the new currency which eliminates the need
to tax corporations and individuals. Unless those jurisdictions had citizen consent to enter into debt agreements
through the issuance of municipal bonds, etc.
6. Because the Federal government would be the sole issuer of money, commercial banks would move immediately
to a 100% reserve. Thus there would be an annual cap on the amount of currency the Federal Government prints
and distributes to the 54,000 plus political jurisdiction which comprise America and its territories.
Debt free currency is the “Silver Bullet Solution.” A debt free currency controlled by society not a handful of privileged individuals whose profit maximization principles exclude the general welfare and progress of all the people. Capitalism’s principles should not be applied to the public sector via the accretion of debt and debt service. There should be no interest charged on “fiat” funds provided to serve the Commons.
Moreover, the people should control the quantity of money supplied into this economy not the private banking cartel which, as we have seen throughout our history, capriciously manipulates the quantity of money in society whenever it wishes.
Educating America about the above alternative should be the most important function of your Administration during this “deficit crisis.” This "Silver Bullet Solution" for public control of the supply of money eliminates entirely the crushing burden of taxation and deprivation of needed services. It opens the door to funding the nation's priorities; maintaing social safety net programs, fully funding renewable energy alternatives, restoring national infrastructure, funding single payer health coverage, maintaining full employment, supporting unfettered medical research, developing new manufacturing industries, and deploying national security resources unconstrained by debt ceilings.
Why Pay Interest on Our Own "Fiat" Money?
Modern monetary policy requires income taxation for its acceptance and survival. A nation required to borrow must have a stream of revenue with which to pay service on its debt. Since governments are not profit making entities they must devise a ruse (income taxation) to assure creditors that payment of debt service will not be interrupted.
In the absence of interest charges (at all levels of political jurisdictions) on funds provided as payments for goods and services, there then would be little if any need for corporate or individual income taxation.
It cannot be repeated too often that the two major reforms of current monetary policy are driven by the fact that:
1. Government, is not a private-for-profit corporation, and should control the quantity/supply of money for the purpose of supporting societal objectives, not the objectives of profit maximization.
2. There should be no interest charged on funds created by the Federal Treasury and distributed to the 54,000 plus political jurisdictions and federal government agencies. Interest on these funds occurs only when they are deposited in private sector financial institutions by those who receive payment from the public in exchange for goods and services provided. These commercial banking institutions then earn income from lending operations and other financial services.
We, as a society, must develop priorities and constraints on funding seperate from conventional wisdom's budget deficit constraints and attendant mirror games.
Mr. President you’ve said on a number of occasions that we need, “…bold, imaginative approaches to confront the myriad challenges of this generation.” I believe the above recommendation and its benefits satisfy that dictum. We have witnessed the inadequacy of current policies. They leave us further constrained by debt here at home and abroad. Significantly, a continuation of current monetary policies would increase the multiple levels of pain suffered by most Americans.
A purposely limited amount of debt free currency was the perfect medium of exchange/legal tender to see the North through the successful conclusion of the Civil War, and reignite America's Industrial Revolution. We need this form of currency now to restore America's sovereignty, and our independence from the tyranny and capriciousness of a privately owned central bank.
How say you Mr. President??
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Views expressed on this page are those of the authors and not necessarily those of Campaign for America's Future or Institute for America's Future