By Nick Egnatz. 

A human population of 7.7 billion people has put a tremendous stress on Mother Earth. Our need for energy has caused us to indiscriminately pump carbon into the atmosphere, heating the Earth and wrecking havoc with the climate. We have polluted fresh water, oceans and the air that we breathe with equal impunity. The diversity of life on Earth is what allows for the very existence of life and yet our continued actions are causing the extinction of that diversity upon which we depend.

On a warming and shrinking Earth, with 7.7 billion fellow travelers, there is one absolute necessity for survival. I remember being taught that food, shelter and clothing were the necessities. Clean air and water were a given. So how do we insure that 7.7 billion people have sufficient clean air, water, food, shelter and clothing? Is there one common denominator to rally around that will allow humanity to survive going forward without completely destroying our Mother Earth?

There is not enough wilderness to sustain our vanishing animal populations, let alone to allow more than a handful of us to trek into the wilderness and sustain ourselves in nature. So independent living off the land is not an option. Some 2,700 years ago a social power developed independently in ancient Sparta and soon thereafter in Rome that has the ability, if re-implemented by our Congress and other nations governments, to allow billions of people to peacefully coexist with a fragile planet.

That power is money, but not just any system of money. Sparta, in the 8th Century BC, and Rome, in the 7th Century BC, developed money systems based on the duty of the state to create and spend abstract or fiat money into existence for the needs of the state and its people. This abstract legal money system was in stark contrast to other money systems based on money as a commodity such as gold or silver. Sparta used iron discs called Pelanors that were dipped in vinegar after smelting to nullify any commodity value of the money. Rome used bronze bars and then coins which also had no commodity value compared to gold and silver. This concept of abstract legal money, now referred to as sovereign money creation (SMC), enabled the two sleepy city-states to thrive and prosper for about 400 years each. Unfortunately they were eventually lured back into using gold and silver for money, eventually precipitating their declines (i).

In the 4th Century BC, Aristotle observed what worked and didn’t work in society and advocated for a just system of money, “Money exists not by nature [commodity money], but by law.” (Nicomachean Ethics: 1133)

If the premise is correct that money is the absolute necessity for survival on Mother Earth, does it not follow that we must have a just or fair system of money? Does any reasonable person believe that an unjust system of money can insure that the needs, of both billions of people and the fragile planet they inhabit, are met? That is the mission of the Alliance for Just Money. The monetary reforms, put into the U.S. Congress in 2011 by then Congressman Dennis Kucinich called the NEED Act (National Emergency Employment Defense Act), would give us the system of just money that we so desperately need.

Economists have been remiss in describing our present monetary system to such a degree that the Federal Reserve System is either unable or unwilling to simply explain how our system works to us.  Think about that.  Money is the one absolute necessity for survival on an Earth inhabited by 7.7 billion people and those that have been put in charge of our money system either can not or will not tell us how it functions.  

I remember sitting in an Econ101 college classroom in the 1960s when our instructor told us that we would skip the upcoming textbook chapter on the Federal Reserve System because only a handful of people in the entire country were capable of understanding how it works.  Full disclosure, as a young college student I was not unhappy that we were skipping studying the Fed. Now as someone who understands that a fair and legal system of money is absolutely critical to the survival of poor and working class people, I wish that I would have challenged my teacher on the need for understanding all those decades ago. We need to be able to understand our money system.  

Several months ago I wrote to eleven Federal Reserve monetary economists, asking them ‘who creates our money?’ Only one of the eleven Fed economists I wrote to bothered to answer. He assured me that the subject I was broaching was vitally important, but that the answer would have to come from the Fed public relations department and he would submit my query to them. So far no answer.

Google “Federal Reserve money creation”. You will find many articles in which people attempt to explain how the system works, with varying degrees of accuracy. But none of them are authored by the Federal Reserve.

Our money system is not hard to understand. Most of us think:

  1. Our federal government creates our money.
  2. Banks loan money already in existence that has been created by our government.
  3. The Federal Reserve System is a part of our federal government.

We think the above is true, because it intuitively makes sense. This is what the system should be. Unfortunately none of the above is true. Monetary reform is making the present money system conform to what we intuitively think it should be.

Under our present debt-based money system

  1. Less than 10% of the US money supply consists of paper money and coins, while the remaining 90% is money (credit) created by private banks when they make loans. The coin and currency is then shipped to the Federal Reserve Banks. The US Treasury is paid the full face value of all coins, but only the cost of printing the paper money or currency, 5.5 cents for each $1 bill and 14.2 cents for every $100 bill (ii). Full disclosure — the Federal Reserve credits our Treasury for all profits. The Federal Reserve paid US Treasury $65.3 billion in 2018 (iii), but the same private banks that own the Federal Reserve Banks are allowed to keep all profits made from their role in money creation.
  1. We have always been led to believe that banks loan money that already exists. False, banks only loan money that they create right on the spot out of thin air. Banks have asset and liability columns in their bookkeeping that must always balance. When you take out a loan for $100,000 your promissory note to repay $100,000 is an asset to the bank and is entered into the asset column. Immediately an equal $100,000 ‘demand deposit’ is entered into your checking account which resides in the liability column. No money was transferred from the bank’s assets, it was just created. The bank’s books now balance and the bank has created $100,000 out of thin air. As the loan is repaid, the ‘demand deposit’ in your account is reduced by a like amount. When the entire balance of the loan has been repaid, the $100,000 demand deposit is entirely extinguished. The money exists only while we the people and or our government are in debt to the banks. Therefore, we must forever be in debt or there is simply no money in the system and society will grind to a halt. Endless debt for us and endless profit for the banks.
  1. All 12 Federal Reserve Banks are owned by the private banks in their districts. The Federal Reserve System was created by Congress and signed into law by President Woodrow Wilson in 1913. The Federal Reserve was conceived to support the present debt-money system. Moving forward under monetary reform and the NEED Act, the Federal Reserve would be stripped down, put into the Treasury Department where it would champion, not the ossified, opaque system of money as debt, but the concept of money as an abstract legal power of the state that acts as a final means of payment, facilitates commerce, and “promotes the general welfare” of society as called for by the preamble to our Constitution.

Transitioning to clean sustainable energy, a real national healthcare plan such as Expanded Medicare for All, sustainably rebuilding our nation’s crumbling infrastructure, forgiveness of student debt and free public university education are all possible if we reform our present debt-based money system into the just money system of the NEED Act. The present debt-money system says that to achieve any of the above needed programs we must indebt ourselves to private banks. The Sovereign Money Creation power in the NEED Act allows our government to create the money for these programs and spend it into existence, debt-free, putting millions of us to work at good-paying jobs to do so.

Yes we can, indeed yes we must, understand money, to allow humanity to continue its journey on our fragile planet.


This blog is dedicated to the first two directors of the American Monetary Institute, Stephen Zarlenga and Robert Poteat. Stephen was my mentor who nurtured my monetary education when I came to him a decade ago as an anti war/social justice activist. Bob was a fellow military veteran who had come to the same conclusion that I subsequently did with his help, that real peace and prosperity is only possible with a system of just money.


i.  Zarlenga, Stephen. 2002. The Lost Science of Money. The Mythology of Money – the Story of Power. Valatie, NY: American Monetary Institute. Chapters 1 & 2.

ii.  “How much does it cost to produce currency and coin?“. Board of Governors of the Federal Reserve System, 27 Dec 2018.

iii.  “Fed sent $65.3 billion to Treasury in 2018, paid $38.5 billion to banks“. Reuters – Business News, 22 March 2019.

Additional Sources

Congressional Research Service. 2012. Summary of H.R. 2990 (NEED Act).

H.R.2990 National Emergency Employment Defense Act of 2011 (NEED Act). 112th US Congress (2011-2012).

Howell, John. 2019. “Guide to the NEED Act“. Article – Alliance for Just Money, 9 June 2019.

Yamaguchi, Kaoru. 2012. “On the Monetary and Financial Stability under A Public Money System (Revised): Modeling the American Monetary Act Simplified”. Paper presented at the 8th Annual AMI Monetary Reform Conference in Chicago, USA, Sept. 20 – 23, 2012. Originally presented at the 30th International Conference of the System Dynamics Society, St. Gallen, Switzerland, July 22 – 26, 2012.

Zarlenga, Stephen. 2009 (2006). Presenting the American Monetary Act”. Valatie, NY: American Monetary Institute.


Nick Egnatz is a Vietnam veteran. He has been actively protesting our government’s crimes of empire in both person and print for some years now and was named “Citizen of the Year” for Northwest Indiana in 2006 for his peace activism by the National Association of Social Workers. For the last few years he has passionately fought for monetary reform.

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