Wednesday, October 01, 2008

The Time is Now for Monetary Reform

by Stephen Zarlenga
American Monetary Institute

The demand for immediate action to avoid a meltdown is misplaced. Immediate and wrong action will accelerate the meltdown. There is only one thing Congress can do to inspire confidence and avoid a meltdown - that is to take deliberate and careful and good workable action to help resolve the crisis. In other words to fulfill its Congressional duty to America...

At the heart of the problem is that our money system has been privatized. Naturally it’s being run for the benefit of the “privates” in control, with minimal concern for the public interest.

First, all the elements of the Monetary Transparency Act should be a stipulated part of the rescue in a section calling for greater transparency. A section can be added for an arm to investigate monetary crimes. But really, monetary transparency no longer does it. Real reform, not merely information, is desperately needed.

Second, rather than borrowing the $700 billion being demanded, and ending up paying back about 3 times that amount after interest charges, the US Government could issue the money the same way the banks do instead of borrowing it from them. But while the banks issue credit that substitutes for money, the U.S. would issue actual money. Our Government has the power to create the money in an account, or by simply printing it as “greenbacks.”

There would not be inflationary effects, because it was already believed that those moneys existed in the form of the real estate values and loans. In effect this would stop a deflation which would follow from writing down those assets and loans to their present market values. Some conditions would be needed to assure that the banking system did not use those greenback dollars for further credit creation, as that would be inflationary. In essence the greenbacks would not be “re-discountable” by the banking system to create more loans, but would be legal tender for all debts public and private.

Third, it's important for the bailout legislation to establish a new U.S. Monetary Commission to examine the advisability of making this and additional features a permanent feature of the American Monetary System and report back to congress in the 1st quarter of 2009. Participants must be carefully selected and not be limited to the kind of economists and market operators who have brought us into the present crisis. Also to be avoided are the internet agitators who don’t really know what they are doing. We know some of the people who should be there.

Legislation called the American Monetary Act has been in preparation for years. It’s based on well known monetary principles and actual experience from our own, and other countries', monetary history.

The Act incorporates the Federal Reserve System into the U.S. Treasury. It removes the banking systems privilege to create money, placing that firmly within government, and it establishes areas for governmentally created money to be introduced into the economy for infrastructure, including the human infrastructure of health care and education. Voila!

Should the situation deteriorate markedly, the American Monetary Act could be put into effect immediately with the reliable understanding that it would be a definite improvement over the current system. Refinements to this already advanced system will follow using Aristotle’s method; we “learn by doing.”

The monetary system will shift away from credit and debt, to real money. One difference between money and credit is that during uncertain times, credit evaporates, but money does not go out of existence, it is much more stable. A big part of the current problem is that while we have had loads of bank credit circulating, there has been very little “real money” issued by government in circulation, mainly our coins and bills.

The AMI has been ready and working on these provisions for years, while realizing that it unfortunately might require a crisis to bring real attention to it. We have the crisis. Let’s make this happen. Let’s get real reform that helps bring humanity forward, out of the ignorance and poverty and warfare, and darkness, and into the light.

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