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By Richard C. Cook

The debt-ceiling crisis that recently played out in Washington between budget-cutting Republicans and the further explosion of debt under the Biden administration highlights again the failure of the US monetary system to provide effective liquidity for the world’s largest economy.

After a brief period of balanced federal budgets during the last years of the Clinton administration, debt again began to skyrocket under the dual regime of war expenditures and tax cuts under George W. Bush and Dick Cheney.

Then came the 2007-2008 financial crisis and the Great Recession. President Barack Obama approved trillions of dollars in bailouts for the financial industry, while over six million American families lost their homes, and 1.8 million businesses went under.

The crisis was largely caused by the deregulation of the banks, starting with the Depository Institutions Deregulation and Monetary Control Act of 1980 which repealed usury laws, authorized interest on checking accounts, and abolished interest rate ceilings. Later came the repeal of Glass-Steagall, allowing commercial banks with their credit-creation privileges to enter the world of stock market speculation.

The catastrophe was completed with action by the Federal Reserve under chairman Alan Greenspan to allow bank lending to explode when it was backed by millions of “liars’ loans” and tranches of fraudulent mortgage security packages sold worldwide.

The Obama-era “recovery” that followed came about only when the Federal Reserve cut interest rates to zero under the regime of “Quantitative Easing.” But the cheap loans from the Fed to banks eroded the savings of retirees and people on fixed incomes and made Treasury bonds purchased by investors practically worthless.

Then came the COVID lockdown, throwing almost 10 million people out of work, according to the Bureau of Labor Statistics, with 22 percent of businesses closing their doors permanently. Even the $2 trillion intended for individual and family relief and loans to small businesses were inadequate. But big corporations that received billions during the pandemic cut thousands of jobs and gave their CEOs millions of dollars in bonuses. 

As the pandemic eased, with supply chains devastated, inflation and corporate profiteering now began to soar. The Federal Reserve was unable to respond except to raise interest rates, which added higher costs of borrowing to already accelerating business expenses. This has increased the risk of a serious recession. 

We need to stop putting band-aids on band-aids and realize that we have a failed financial system.

With over $100 billion now being spent on the Biden administration’s war in Ukraine, the federal deficit has climbed even higher, with federal debt now at $32.6 trillion, over 123 percent of GDP and growing, and no relief in sight.

The Federal Reserve interest rate policy makes servicing this debt more expensive with every rate increase.

If the purpose is to reduce inflation, as the Federal Reserve claims, it only does so by making every financial transaction more costly and penalizing those least able to pay to put food on the table and support the skyrocketing cost of buying or renting a home.

The Federal Reserve claims to have several purposes. One is to eliminate or mitigate the damage from business cycles, but historically it has never succeeded in doing this, with the Great Recession and today’s continuing crisis with a new round of bank failures as examples.

Another claim has been to keep inflation under control, but again the Federal Reserve has failed. Since the Federal Reserve was established a century ago, the US dollar has steadily lost value to the point where in terms of purchasing power today it is almost worthless.

Another has been to reduce unemployment, but while employment levels have gone up or down according to general economic conditions, even when unemployment is relatively low, as it has been in recent months, the Fed always maintains sufficient unemployment to keep wages down. And what happens when the cost of living is going through the roof while wages continue to be insufficient for people and families to lead decent lives?

Finally, there’s the fact that in order to sell the Treasury bonds required to fuel the out-of-control deficit, the US must market them to foreign nations on a gigantic scale simply for our government to stay afloat.

Selling these bonds becomes more difficult by the day, with foreign holdings of Treasury debt now falling sharply, particularly as the dollar becomes ever less attractive as a world reserve currency.

In fact, the Biden administration’s war in Ukraine is causing significant erosion in the value of the dollar abroad as countries like Russia, China, India, Brazil, and many others, turn to their own national currencies in trade. According to the Responsible Statecraft think tank, the share of global reserves held in US dollars has declined from seventy-three percent in 2001 to fifty-eight percent in 2023.

One reason the US is so overextended in our commitments abroad, with over 800 foreign military bases and facilities and a compulsion to meddle in every conflict that presents itself, is our need to force every other nation, not just friends and allies, to purchase our debt. To enforce this need, the US has imposed financial sanctions on almost thirty percent of all nations.

The government is afraid that if our ability to coerce other nations into buying our debt collapses, so will our public finances and our domestic economy. But this is only because we have bought into a system overseen by the Federal Reserve where constantly growing debt is the only way to create a circulating currency.

There were times in our nation’s history when the government was not totally reliant on taxes and borrowing to pay its bills.

The most notable example was during the Civil War when Congress passed legislation to implement the Greenbacks. These were United States notes introduced as direct payments to individuals and businesses to meet government obligations at a time of war.

President Lincoln called the Greenbacks “the peoples’ currency.” They stayed in circulation into the 20th century, until legislation for a Federal Reserve system was enacted, turning public finance over to the private banking industry. The Federal Reserve is the instrument of its member banks, not accountable to the American public.

When the Federal Reserve took over in 1913, except for distribution by the Treasury of silver dollars and other coinage, our money derived almost entirely from loans issued by the banks. This is what is meant by a debt-based currency. The Federal Reserve is owned by its member banks, led by the giant Wall Street banking institutions of New York.

Thus, while credit should be a public utility, as provided by our Constitution which gives Congress the right to create money and regulate its value, the Federal Reserve system makes credit a money-making instrument of the private banking system.

We entered the Great Depression in 1929 when the Federal Reserve stood by and watched the banks raise interest rates to allow much of our gold to be shipped to Europe. After the economy crashed due to a shortage of a circulating medium of exchange, Congress again authorized the executive branch to issue Greenbacks, though it never did. Dozens of communities introduced scrip currency to survive.

But World War II was used to bring the economy and employment back again.

The economy weakened again late in the 1950s, causing President John F. Kennedy to take a number of significant steps to restore prosperity, including applying pressure to the Federal Reserve to keep interest rates low, along with other measures to stimulate the economy to a higher level of productivity.

Kennedy also sought to engender similar measures in Latin America through the Alliance for Progress.

After President Kennedy’s assassination, both the federal budget and trade deficits began to take off in a fatal trajectory that continues today. Both skyrocketed under the Reagan and Bush I administrations, slowed a bit under Clinton, but soared again with the Bush II-Cheney wars and the Obama bailouts mentioned previously.

Meanwhile, people are starting to take matters into their own hands with the creation of citizens’ currencies like Bitcoin, and the growth of barter networks, as with the International Reciprocal Payments Association. But while these efforts are laudable, they are not nearly enough.

So, what do we do today?

It is time for the government to end the Federal Reserve and take control of the nation’s monetary future by the creation of a new Greenback mechanism for direct payment of government obligations. There are a number of groups that are doing the theoretical work.

I would refer you to the American Monetary Institute, founded by the pioneer monetary reformer, the late Stephen Zarlenga.

I would refer you to the Alliance For Just Money, which has a petition in circulation for a “Resolution on the Establishment of a National Commission of Inquiry Into the Monetary System of the United States of America.”

I would refer you to the work being done by Christine Desan of Harvard University, who has started an academic movement described at for the distribution of “direct-issue dollars.”

I would refer you to Ellen Brown and the Public Banking Institute on the need to create a national infrastructure bank to utilize public funds as a base for infrastructure development.

Finally, I would refer you to The National Emergency Employment Defense—NEED—Act introduced in Congress in 2011 by Congressman Dennis Kucinich. It was and remains the most important piece of monetary legislation since the Federal Reserve Act of 1913 and the most comprehensive piece of monetary reform legislation in US history.

The NEED Act would abolish the Federal Reserve and replace it with a Monetary Authority within the US Department of Treasury. The Monetary Authority would serve as a depository for federal funds and a point of origin for direct issuance of US currency—a government-owned central bank. The accounting functions of the Federal Reserve system could be redesigned to provide needed services to the financial industry. But the Federal Reserve itself would no longer be allowed to manipulate systemwide discount rates as a usury-based mechanism whose main purpose is to prop up Wall Street.

The NEED Act would restore to Constitutional government the sovereign power to create money. The private banking system could only lend money beyond its deposit base by borrowing it first from the Monetary Authority according to established guidelines. Bank loans would be in US currency, not Federal Reserve notes.

The NEED Act is not socialism. Instead, it would remove the burden of excessive debt on free enterprise, allowing it to thrive.

Through the NEED Act, the federal government would provide direct funding for infrastructure projects, for paying down the national debt, and for interest-free loans to state governments. Eventually, the national debt could be retired, removing the need to coerce other nations to purchase Treasury bonds to keep our government solvent.

The NEED Act has achieved political recognition. It is now part of the platform of the Green Party. Kucinich himself is now campaign manager for presidential candidate Robert F. Kennedy, Jr.

Reform in this vital area of public policy is urgent. Our country has wandered into a morass of conflict with countries around the world due to our stubborn insistence on propping up a system of public finance that long ago betrayed its ostensible purposes. We cannot continue to rely on other countries to prop up our own indebtedness, and we certainly cannot continue to try to force dollar hegemony down their throats in a world where so much else is changing.

We must learn to live in harmony with other nations, other power centers, and other regional blocs. We can’t do that as long as we feel compelled to be the world’s bully in order to prop up our failed financial system.

We owe it to our own citizens to have a monetary system that is fair, equitable, and rewarding of hard work and spiritual values.

Reclaiming the people’s monetary system should be at the top of our political agenda.

Copyright 2023 by Richard C. Cook. Howard Switzer and Fadi Lama contributed to this article. Updated July 24, 2023, from the original published piece on ScheerPost.

Richard C. Cook is a retired US government analyst and a former whistleblower. His new book, Our Country, Then and Now will soon be published by Clarity Press. He may be reached at

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Angelia Milanovic
Angelia Milanovic
5 months ago

“The NEED Act would restore to Constitutional government the sovereign power to create money.” May God help and protect you all in your efforts to achieve that revolutionary goal (the only hope of survival for humanity), because it needs miracles to happen and last: so far, all those who opposed the will and power of private bankers have been assassinated, and you know it. But “it’s now or never” as Elvis Presley would say. Respect and admiration for your bravery!

Nicolas Marconi
Nicolas Marconi
6 months ago

Dear Mr. Cook, You’re summary below of our relatively recent monetary history is, clear, well written, concise and( as my brother would say) spot on! It summarizes for me what I have come to in my understanding of the current “money” problem”. The problem I see, however, is in the realistic and practical means to get from here to that just monetary system you and The Alliance For Just Money advocate. I’m not sure, given the kind of political system we now have in place which, to me, is a de facto plutocracy and a radical one at that, how this can be done. It might need another major crisis for… Read more »

Govert Schuller
Govert Schuller
6 months ago

This article by Richard Cook is a wonderfully clear and succinct statement of the monetary problems plaguing the US.  But, after some research, I would not agree with the suggestion, as if it were a good thing for the cause of just monetary reform, that Kucinich is now campaign manager of RFK Jr.’s presidential bid.  The NEED Act has achieved political recognition. It is now part of the platform of the Green Party. Kucinich himself is now campaign manager for presidential candidate Robert F. Kennedy, Jr. To me it seems to suggest that Kucinich will carry over his great monetary reform… Read more »

6 months ago

This article reveals the intelligent approach to money and the integrity we must have instilled in our monetary system in order to build and to maintain a more equitable and fair society without private interests controlling it! If this does not happen soon, then, the Central Digital Banking Currencies, they are trying to implement will destroy our lives by seizing the total control over our finances so invasively, that, every dollar we save or spend will be known! This will make our monetary system conditional on what those who control the CDBC’s= the private elite few, dictate how we use… Read more »

Nicolas Marconi
Nicolas Marconi
6 months ago
Reply to  L.

I agree, CDBC’s are a bad idea and for the reasons you point out. Again, the problem is not really money, even though monetary reform along the lines that Richard Cook and the “Alliance” advocate is major step in the right direction. The problem as I see it is a deeply political and social one: money today organizes our societies worldwide and that means it functions primarily as a political instrument and secondarily as an economic one; but, we can’t separate the two domains either in any realistic or practical way. We want do this theoretically, but it can’t be… Read more »

Edd Twohig
Edd Twohig
6 months ago

Absolutely the best summary of the monetary system, its present problems and the solutions. It should be read by every American, Canadian and citizen of other countries suffering under similar monetary policies. Edd Twohig, Kentville, NS Canada