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The privilege of creating and issuing money is not only
the supreme prerogative of government, but is the
government's greatest creative opportunity. By the
adoption of these principles, the taxpayers will be
saved immense sums of interest. - Abraham Lincoln
[See Hidden Issues below]
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BOB BLAIN, PROGRESSIVE REVIEW, 1994 - By 1993 federal debt was $4.4
trillion. From 1790 to 1993, taxpayers were charged $3.2 trillion in
interest on federal debt. . . The present federal debt is arguably the
original debt enlarged by 204 years of compounding interest.
According to the Federal Reserve Bulletin, the total money supply
(currency, travelers checks, demand deposits, and savings accounts) in
the U.S. economy in March 1993 was $4 trillion. The total debt of the
federal government, state and local governments, corporations, farmers,
home buyers, and consumers was in excess of $15 trillion. If the total
money supply is $4 trillion, where is the other $11 trillion of borrowed
money?. . .
The federal government has been adding interest to its debt for 204
years. James Jackson, Congressman from Georgia, predicted that this
would happen in a speech he made to the First Congress on February 9,
1790. Jackson warned that passing Alexander Hamilton's plan to base the
country's money supply on the existing federal debt of $75 million would
"settle upon our posterity a burden which they can neither bear nor
relieve themselves from." He predicted: "In the course of a single
century it would be multiplied to an extent we dare not think of," . . .
The power to deal with this problem that Congress has neglected all
these years is the power "to coin money and regulate the value thereof."
It has overused its power "to borrow money on the credit of the United
States." According to the Federal Reserve, 98 percent of the U.S. money
supply is borrowed. Only 2 percent is coined.
The First Congress set the wrong precedent. It should have created $75
million in money and paid off the debt. With a population of 4 million
people and an economy starved for a medium of exchange, that would have
increased the money supply by $18.75 per person.
Why did the First Congress borrow instead of coin money? Newspapers at
the time accused members of Congress of acting to serve their own
interests. They sent agents into the countryside to buy up debt
certificates that the general public thought were worthless. They then
passed the Funding Act knowing that it would give themselves and their
heirs a source of income that would grow exponentially with the debt.
For every debtor there is a creditor. What is a $4 trillion debt for
debtors is $4 trillion in claims for creditors.
To get out of this trap Congress has a range of options:
First, it could stop paying interest on the debt. Interest is the fuel
that is exploding the debt. Cut off the fuel; stop the explosion. Since
1790 over $3 trillion in interest has been added to the original $75
million. Cutting interest would immediately cut the annual deficit by
about $300 billion. Experience shows that all other conventional
actions, no matter how painful, do no more than slow slightly the rate
of debt growth. Then Congress could begin the process of paying off the
debt.
A political problem with stopping the payment of interest is that people
with money control politics. And many of them would have their interest
income stopped. Insurance companies and pension funds are invested in
federal debt and foreign holders would also be upset. Economically,
however, we cannot continue to add compounding interest to existing
debt. . .
A second option is for Congress to create the money necessary to fund
public works. As a sovereign government, Congress' power is unique. It
can create money debt-free and interest-free. Congress needs to stop
thinking of itself as the same as other organizations that must take
money in before they can spend it. Money does not grow on trees. It must
be created. The only choice is whether to have it created as loans at
interest from private banks or to have it created by Congress debt-free
and interest-free. . .
A third more conservative option is being proposed by an organization
called Sovereignty, which believes that a country that borrows money
loses its sovereignty to its creditors. Their proposal is intended to
restore U.S. sovereignty by reducing our dependence on borrowed money.
Sovereignty proposes that Congress create money and lend it
interest-free on a per capita formula to tax-supported bodies for
capital projects and to convert existing debt to non-interest-bearing
debt. Since first proposed in January 1989, the Sovereignty loan plan
has been endorsed by over 1,814 city, town, and county governments and
school boards, as well as by the U.S. conference of Mayors, the Michigan
state legislature and the Community Bankers Association of Illinois,
which represents 515 banks.
As loans, the money would be repaid, so money injected into communities
would fund projects, then be removed. Of the three methods for putting
money into circulation available to Congress, giving, paying, and
lending, lending is the most cautious.
Benjamin Franklin attributed the economic success of the colonies to
their creation of all the money they needed. He said that the root cause
of the Revolution was the act of Parliament that prohibited the colonies
from continuing to issue their own money. The moneylenders of England
thought it more profitable that the colonies borrow their money. . .
Money is no more than an accounting device, a system of notes certifying
that the bearer has done a share of the work and deserves a share of the
wealth. Money's backing is the goods and services produced by the labor
force. By creating money Congress can activate the idle productive power
of our people. And what they produce will add real wealth to the U.S.
Treasury and add nothing to the federal debt.
FULL ARTICLE
http://sovereign.htm
SAM SMITH' GREAT AMERICAN POLITICAL REPAIR MANUAL, 1997 - In the early
19th century, the little British Channel island of Guernsey faced a
problem. Its sea walls were crumbling. its roads were too narrow, and it
was already heavily in debt. There was little employment and people were
leaving for elsewhere.
Instead of going still further into debt, the island government simply
issued 4,000 pounds in state notes to start repairs on the sea walls as
well as for other needed public works. More issues followed and twenty
years later the island had, in effect, printed nearly 50,000 pounds.
Guernsey had more than doubled its money supply without inflation.
A report of the island's States Office in June 1946 noted that island
leaders frequently commented that these public works could not have been
carried out without the issues, that they had been accomplished without
interest costs, and that as a result "the influx of visitors was
increased, commerce was stimulated, and the prosperity of the Island
vastly improved." By 1943, nearly a half million pounds worth of notes
belonged to the public and was so valued that much of it was being
hoarded in people's homes, awaiting the island's liberation from the
Germans.
About the same time that Guernsey started to fix its sea walls the town
of Glasgow, Scotland, borrowed 60,000 pounds to build a fruit market.
The Guernsey sea walls were repaid in ten years, the fruit market loan
took 139. In the first part of the 20th century, Glasgow paid over a
quarter million pounds in interest alone on this ancient project.
How did Guernsey avoid the fiscal disaster that conventional economics
prescribed for it? First and foremost by understanding that when you
build roads or sea walls or colleges or houses, you are not reducing
your society's wealth. In fact, if you do it right, you are creating
something that will add to its wealth. The money that was created was
simply backed by public works rather than gold or "full faith and
credit." It was, in fact, based on something more solid than the dollar
bills in our wallets today. In contrast, tacking on an interest charge
to public works -- as we do in the US -- creates no new wealth, but
merely transfers claims on existing wealth from debtors to creditors.
GREAT AMERICAN POLITICAL REPAIR MANUAL
http://prorev.com/order3.htm#repair
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