We may conceptualize the "money power" in three aspects: the creation, issuance, and circulation of money. In this article, I discuss considerations pertinent to the issuance of money.
The Green Party platform plank titled Greening the Dollar calls for three fundamental changes to the United States monetary system:
- Nationalize the 12 Federal Reserve Banks and transfer administrative functions . . . to a Bureau of the U.S. Treasury. . . . The private creation of money will cease . . . .
- All new money will be issued as a debt-free, permanently circulating asset by the federal government. A new Public Monetary Authority will be established . . . to avoid inflation or deflation. . . . [refer to] H.R. 2990 112th Congress: National Emergency Employment Defense Act of 2011 (NEED Act).
- All new money will be spent into circulation by the U.S. Government as authorized by Congress for public purpose. . . . Newly-created money will also be distributed directly to state and local governments.
It must be remembered that Congress has the power to create and issue money and the power to prevent anyone else from doing so. The U. S. Constitution, Article 1, Section 8, provides: "The Congress shall have Power . . . To coin Money, regulate the Value thereof, and of foreign coin, and fix the Standard of Weights and Measures; . . ." Congress also has power "To provide for the Punishment of counterfeiting the Securities and current Coin of the United States; . . ."
The third point of Greening the Dollar refers to issuance of money saying it will be "spent into circulation," which is described with more detail in the NEED Act, Section 201, which calls for the Treasury to disburse United States Money to pay for federal appropriations, matured treasury debt, additions to the Revolving Fund, and other federal payments, including direct disbursements to the states.
The NEED Act is intended to accomplish a mostly seamless transition from the private Federal Reserve system to a public sovereign money system. Amounts in existing bank accounts are unchanged and cash withdrawals would be in United States Money. This replacement issuance would simply maintain the status quo.
While the payments and bank deposit system is largely unchanged, there are important changes to the credit system in the NEED Act. Banks are required to remit loan principal payments to the Revolving Fund instead of simply subtracting the amount from loan balances in their accounting system. For new loans, banks may acquire the loan principal from the Revolving Fund and return the principal payments to the fund. Banks are prohibited from inflating the money supply by creating deposits with new loans. Bank credit is an important avenue of money issuance and accessing the Revolving Fund for loan principal will provide (possibly more than) ample credit, with issuance being limited by bank credit standards. The requirement of returning principal to the Revolving Fund will also likely reduce speculative lending and the appeal of maintaining insolvent borrowers with additional loans.
The NEED Act provides for issuance of United States Money to pay for federal appropriations as needed, such as when appropriations exceed federal tax revenues. Proponents of the NEED Act are hopeful that Congress will appropriate funds for beneficial purposes instead of imperial warfare and corporate and fossil fuel subsidies, but I make no attempt to predict whether Congressional appropriations will become more progressive and public interest oriented. If, indeed, programs such as medicare for all, low cost college education, and modern infrastructure are funded, the economic benefits would flow through the economy, improving working and middle class economics.
The issuance of money is a process that is intensely political, with great advantages going to those with priority in the distribution process. The possession of money represents economic potential, which readily translates to economic and political power. For example, access to banking cartel credit enables Wall Street speculators to amass huge real estate portfolios. As another example, the provision of unemployment benefits during the Covid pandemic enabled many working class people to reduce debt and improve their financial circumstances.
Because the issuance of money is so intensely political, it is my opinion that the single most important objective for money issuance policies should be basic fairness to all members of society. We should avoid the economic class and ideological bias of the Federal Reserve system which favors the already wealthy, loans backed by inflating asset values, and wasteful consumption of resources. Instead, money should be issued so as to assure that all members of society have reasonable access to sufficient money to participate in the economy and, as the Constitution states, secure the blessings of liberty.
The Federal Reserve system confers ubiquitous and dominating economic and political power to the banking cartel through their control over the creation and issuance of money. The Federal Reserve system today uses interest rates set by the Federal Reserve Open Market Committee to moderate the amount of money created by the banking cartel. The banking cartel creates deposits and effectively issues money through mortgage loans, auto loans, student loans, credit card loans, corporate bonds, and loans to governments. The interest rate manipulations constitutes monetary policy under the Federal Reserve system and are meant to influence the amount of lending and deposit creation.
Under the NEED Act, monetary policy would address different concerns. A prime concern would be stability, or the prevention of inflation or deflation, and would likely be addressed through tax policies that removed and redistributed money. Avoiding over-issuance of money is a very important requirement which may be rather difficult due to the inflationary issuance under the Federal Reserve system. Economic development through government supported programs to develop new technologies and programs such as parity pricing for agriculture would provide a basis for an improved level of well-being without the requirement of inflation that characterizes the Federal Reserve system.
The contrast between the NEED Act monetary system and the Federal Reserve system goes beyond the methods of directly issuing money. The Federal Reserve system requires monetary inflation and government debt in order to maintain loan payment flows and financial securities markets. The NEED Act, on the other hand, presents the possibility that money issuance could be designed to improve society and the environment and also reduce the costs of business and commerce while maintaining wages, thus improving living standards without inflation.
It is apparent that the topic of money issuance under the NEED Act is broad and complicated, with numerous economic and political considerations. Hopefully, this brief article has raised some of the aspects of the topic and will lead people to view money creation and issuance as a key consideration in politics and government.
Regards