By Howard Switzer. 

There are many writers today analyzing our dire ecologic and economic circumstances that comprise an existential threat to civilization and perhaps even to life on this planet. Numerous aspects of the problem have been and continue to be discussed with few solutions presented as the capitalist economic system continues its assault on all life for profit. Even though to plant a field, drill an oil well or manufacture a widget requires money, just as any political or military campaign does, money is seldom discussed and is generally misunderstood.

The nascent monetary reform movement understands that the real cause of the extreme wealth inequality as well as the destruction of our resource base, is the monetary system. It is a systemic problem that affects human behavior as well as society and our planet. The movement understands, as did Aristotle, that money for most of civilization’s history, has played two roles: 

  1. An exchange medium for facilitating economic activity (it is just money)

  2. An instrument of power capable to dominating the market (the hidden hand)

So, the question is, how can we change the system to retain the first role and eliminate the latter? To do this we must understand the monetary system we have. There are 3 characteristics of the current monetary system that bestows power on the undeserving. 

  1. It systematically concentrates wealth to the wealthiest (plus compounding interest)

  2. It is capable of being hoarded (withheld from the economy for speculation)

  3. It has superior liquidity to goods and services 

Hoarding large amounts of money gives one the power to disrupt the economy for their own benefit, as Charles Koch, Bloomberg, Bill Gates and other politically active billionaires have done. This power to disrupt also enables hoarders of money to demand the payment of interest as a tribute to their allowing some money to circulate. Any discussion of changing the monetary system requires a discussion of governance, asking who rules? Such a change will require a political intervention to change the rules that allow the undeserving elite to rule. Setting aside the political intervention required for the moment, let us look at what rules need to be changed.

First, we need to recognize that our monetary system is privately controlled by the big banks and their largest capital holders. All our money is created by the commercial banks when individuals, businesses or governments borrow money. The loan amount is created simply by entering the amount into the bank’s electronic ledger plus interest. This electronic money, or checking account money, comprises about 97% of the money supply, the rest is in cash printed by the government but sold to the banks for cost of production. The government also mints coins, the smallest category of the money supply, and they are sold for face value for which the government gets seigniorage, the face value minus the production costs. The production cost of the coins is of course more than the production cost of the paper bills which is about 2 cents per bill regardless of its denomination.

The banking system does not lend existing money held on deposit as the folk-knowledge myth would have us believe, instead keystrokes create credit as new money in your bank account all of which you are required to pay back with interest in a set amount of time. The money, representing the principle of the loan is created this way but the money representing the interest, also part of the debt to be repaid, is not. Since this is how all our money is created system wide the money to pay the interest must come from the principle of another loan. This creates predatory competition and a constant imperative for economic growth, all of which is geared for making profits. While the de-growth movement discusses the problems of economic growth it does not seem to be aware of the growth imperative built in into the monetary system. Thus, any effort by government to provide healthcare, transportation, housing etc. is opposed by those representing the donors and owners of the profit-seeking private money system.

Further complicating matters, the money created by the loan is extinguished, eliminated as the principle of the loan is paid off leaving less money circulating in the competition to pay the interest. The interest money is not destroyed as it is the banks profit after paying its expenses. For the system to function more loans must continuously be made to pay the interest and keep ahead of the money being extinguished. When loan payments (money destroyed) exceed loans being made (money created) we have a recession or depression because there is not enough money circulating in the system and this happens reliably every 10 to 12 years. As you can see the system incentivizes a hyper competitiveness to pay debt and leaves a lot of losers in its wake not the least of which is the ecosystem that all life depends on from which all wealth is extracted.

Our nation’s Constitution articulated the purpose of the government established by We the People in the very first sentence, “…to form a more perfect Union, establish Justice, ensure domestic Tranquility, provide for the common defense, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity,.” The Constitution also provides the tools necessary to accomplished this, but Congress has consistently ignored its responsibility having turned over monetary authority to its privately owned central bank established in 1913 which is controlled by its large member banks. The Federal Reserve Act was justified and passed to stabilize the banking system and economy but was creating problems in less than 10 years and in 1929 caused the Great Depression. The Pecora Commission investigation proved this but again, while legislation was passed, it was inadequate to the task and did not change the monetary system to provide long-term economic stability. The world’s top economists proposed the solution in 1933 with the Chicago Plan which later became the 1939 Proposal for Monetary Reform but the forces of private Money Power had captured the allegiance of the majority in Congress and it was not passed. Like the Greenbacks, it was proposed that government issue the money and to protect the system the private banks were to be banned from creating deposits, returning monetary authority to elected government.

Congressman Dennis Kucinich, after years of trying to get good legislation passed, came to the realization that none of the needed legislation for healthcare, education, infrastructure and an effective response to climate change would ever pass until Congress took back the monetary authority to issue the money to fund it. In 2011, as a response to the 2008 crash and with the help of the American Monetary Institute (AMI), he wrote and introduced the National Emergency Employment Defense Act (The NEED Act) which contained the same three changes proposed in 1939. The very next year the private money funded political system gerrymandered him out of his seat.

AMI is a monetary think-tank that holds an international conference for monetary reform every year in Chicago and was instrumental in forming the International Movement for Monetary Reform (IMMR). In 2017 several AMI members decided the movement needed a more active American organization to educate about money and The Alliance For Just Money was born. Their mission is to educate the electorate about the money system and promote the idea of changing it. The three essential reforms are again:

  1. Return the nation’s monetary authority to government.

  2. Ban the private creation of money by the commercial banks.

  3. All money is created by government and issued for the general welfare.

These three reforms will empower elected government to do all the things for which they are elected by the people. However, there is still that one function of money they do not address and that is the trillions in privately hoarded money that can be used to buy government influence and dominate the economy. To address that government can simply apply a demurrage fee which is a parking fee for money that discourages hoarding and increases the circulation velocity allowing government to do more with less. This will drive the hoarded money being used against people and planet back into circulation.

However, as we have seen and experienced, a political intervention at the national level is nearly impossible due to the private money-controlled mass media and political system in place. Political intervention at the state level too may be difficult as well with the Koch Network funding campaigns and legislation through ALEC, an organization that gives corporate interests outsized influence. That leaves us with our local governance, county, town, or municipality. As communities did during the Great Depression, local governments can issue currency to allow the full utilization of local labor and material resources. The Federal Government (AKA the big banks who own the FED) will try to repress this activity and citizens must be prepared to resist efforts to keep them from their rightful prosperity.

The events of 1932-1933 in Wörgl, Austria demonstrated the power of a currency with a steadily declining value that is restored with a weekly demurrage fee. The local government issued only $6000 worth of the currency and accomplished $2.5 million in public projects in just 15 months. It was so successful hundreds of towns world-around wanted to duplicate it. Irving Fisher, one of the authors of the 1939 bill, even wrote a 1933 booklet titled Stamp Scrip which explained how to do it, saying it could end the depression in weeks. Unfortunately, the powerful central banks had governments ban it and Wörgl went back to 30% unemployment and depression.

We the People may not be desperate enough to change the monetary system yet but the longer we wait the worse our circumstances will be. People should understand the monetary alternatives to the status quo currently crushing all life in this world. With that knowledge we may be able to avoid total catastrophe. The Banking and Monetary Reform Committee of the Green Party has assembled a wealth of knowledge on monetary systems and invites Greens to contact them whenever they are preparing statements and want to coordinate it with the platform’s revolutionary monetary proposal to talk about funding.

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