Economic Stability

Beginning students of the monetary system should take an hour to watch the following five videos that we call Joe’s Monetary Literacy Course, but lately we have been liking the name: Monetary Reform Primer.

• Part 1: It’s our monetary system!
• Part 2: The debt money system: Money creation in the US since 1913.
• Part 3: Problems of the debt-money system
• Part 4: Debt Free Money
• Part 5: The Exit Strategy

First some definitions: money and monetary system.

What is money? It is a medium of exchange. It is a way of keeping track of exchanges of goods and services.

What is a monetary system (or money system)? A monetary system is the rules and regulations, agreements if you will, that govern a country’s money supply. How will it be denominated? Who gets to create the money and under what restrictions?

So, who own the monetary system, the US citizens or the banks?

The answer is clear that it is we, the people.

We fought the Revolutionary War for the right to create our own money, and the Constitution specifies it: (Article 1, The Congress shall have power to…coin money, regulate the value thereof,…”)

Why do we bring this up? Because the US Congress gave the money power away in 1913 to the Federal Reserve and private banks. Since then, we have borrowed our money supply from them, and pay it back with interest (what we call the debt-money system). And today we find ourselves in an escalating crisis of debt. These two facts are not unrelated.

If there is any remaining question as to who owns the monetary system, it should be answered by the fact that we the people, we the taxpayers of the United States are the ones who have to foot the bill when the monetary system breaks, which it is doing right now.

There are three levels of money creation in the US since the passage of the Federal Reserve Act of 1913:

1. the US Treasury/Federal Reserve level,
2. the “fractional reserve” or commercial bank level, and
3. the investment bank level.

It is essential to think about all three of these elements of the money CREATION part off the monetary system. When there is a problem with the system we have to think about the causes in terms of which element it originated from, and what we can do at different levels.

We have ceased to keep track of the “whole” money supply because of the opaqueness about money quality that exists due to near-banks and non-money money.

But when we use the term money-creation, we are really talking about nothing but debt-creation. So we have a complex and mostly unregulated group of bankers and non-bankers who are creating debt-based financial instruments, denominated as they are in $USD, and we have given up keeping track of these financial instruments,  due to their complexity, a.k.a. innovative qualities .

Right now, Bernanke and Geithner want us to believe that they are going to “regulate” our way out of this situation.  The problem is systemic, the result is our present debt pandemic.

In which Joe describes how the current financial/debt crisis was inevitable, given that we let banks create all of our money as debt.

It’s not a new-fangled idea. It is an old, proven, widely-supported method of democratizing the money system. Joe takes us from the success of the American colonies through Lincoln’s issue of the original Greenbacks, from the Chicago Plan for Monetary Reform (1933) to Milton Friedman.

Joe talks about the need to transition the money system from its present debt-based form to an equity-based system of government-issue, debt-free money -a move that has enormous potential to create true economic democracy. The concept of the Money System Common emerges from our cooperative ownership of this nation’s money system, as guaranteed by the Constitution.

Joe and Pete discuss where paper money gets its value and argue that the benefits of money creation should be shared democratically.