Summarized by Kevin Zeese
This is a session from the economic track of the Democracy Convention held on August 25, 2011 in Madison, WI. The session focused on democratizing money. The speaker was Greg Coleridge whose biography and contact information are at the bottom of the summary. I expanded on his comments and added some links to videos and websites that provide more information.
Many Americans mistakenly think we have a public monetary system when in fact we have a privatized system. People think they have money in their pockets created by government. These must be public dollars – they say “United States of America.” But in fact we have a private system, a corporatized system – there may be no more single odious example of privatization than our money system. It may be the most oppressive, as it keeps us dependent on Wall Street and the big banks. It is a modern form of servitude, created by the private corporation known as the Federal Reserve which is no more public than Federal Express.
Henry Ford said: “It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.”
Senator Wright Patman, a populist Texas senator said: “I have never yet had anyone who could, through the use of logic and reason, justify the Federal Government borrowing the use of its own money… I believe the time will come when people will demand that this be changed. I believe the time will come in this country when they will actually blame you and me and everyone else connected with this Congress for sitting idly by and permitting such an idiotic system to continue.”
And, Thomas Edison: “If our nation can issue a dollar bond, it can issue a dollar bill. The element that makes the bond good, makes the bill good . . . It is absurd to say our country can issue $30 million in bonds and not $30 million in currency. Both are promises to pay, but one promise fattens the usurers and the other helps the people.”
We should be moving to substituting the private creation of dollars to the public creation of dollars by government. It is clearly in the U.S. Constitution that the government has the power to create money; Article I, Section 8 says: “The Congress shall have power….to coin money, regulate the value thereof, and of foreign coin.” The creation of money is a public function, perhaps more important than any other part of the commons. In a true political and economic democracy you and I should have an authentic real role in deciding how money is created and for what purposes. The financial sphere drives so many other sectors of the economy with repercussions throughout the economy. Indeed, we have an economy dominated by big finance capital of Wall Street.
This is not a new battle. There is a long history of people battling to get democratic control of our money system. Since we shifted from monarchy to representative democracy there have been efforts to create public money. Right from the founding of the nation government created money, the “Continentals” – the currency issued by colonists – in order to fund the revolutionary army. The colonists needed more money to fight the most powerful empire in the world. During the Revolution, Congress issued $241,552,780 in Continental currency. At the time Crown corporations ran every colony for private purposes. The colonists realized they needed to create their own money, known as Continentals, in order to fund the revolution.
President Andrew Jackson fought the banks, indeed he campaigned for president opposing the Second National Bank. Jackson opposed the Second National Bank for reasons that sound very familiar to Wall Street today — they had become a monopoly, bribed and bought legislators throughout the country and were controlling the passage of laws and bills, using business to control what happened to the country, rather than allowing the citizens to determine what they wanted. The U.S. Treasurer was required to deposit U.S. funds in this bank. These effectively gave the bank a monopoly on the issuance of dollars and control the dollar as well as the economy. Jackson saw the bank as favoring the fortunes of an “elite circle” of commercial and industrial entrepreneurs at the expense of farmers and laborers. After a major struggle, Jackson succeeded in destroying the bank by vetoing its 1832 re-charter by Congress and by withdrawing U.S. funds in 1833. The bank’s money-lending functions were taken over by the legions of local and state banks that sprang up. The U.S. Senate censured Jackson on March 27, 1834 for his actions in defunding the Bank of the United States; the censure was later expunged when the Jacksonians had a majority in the Senate. In response, Nicholas Biddle, the head of Second National, created a depression in 1836 by calling in existing loans and refusing to issue new loans, but Jackson stood firm and in 1836 when the charter ran out, the Second Bank ceased to function
President Abraham Lincoln created money to pay for the Civil War. He went to New York bankers to borrow money for the war but found they were too expensive, charging interest rates of 24% to 36%. Lincoln created his own public money known as Greenbacks because of the green ink on the back. He printed $450 million worth of Greenbacks to pay for the war. The solution worked well and Lincoln was seriously considering adopting Greenbacks as a permanent policy. The bankers so the danger to them, writing in the London Times:
“If this mischievous financial policy, which has its origin in North America, shall become endurated down to a fixture, then that Government will furnish its own money without cost. It will pay off debts and be without debt. It will have all the money necessary to carry on its commerce. It will become prosperous without precedent in the history of the world. The brains, and wealth of all countries will go to North America. That country must be destroyed or it will destroy every monarchy on the globe.”
In 1863, the war was not yet won and Lincoln needed more money, knowing that the president could not get the Congress to approve issuing more Greenbacks, the bankers proposed passing the National Bank Act and from this point on the entire U.S. money supply would be created out of debt by bankers buying U.S. government bonds and issuing them from reserves for bank notes. There is evidence that Lincoln planned to end the National Bank Act in his second term, but he was assassinated 41 days after being re-elected and the National Bank Acts of 1863 and 1864 remained in effect until the Federal Reserve was created in 1913.
During the Depression of the 1930s economists put forward the Chicago Monetary Plan which was a plan to use the power to print money to fund the New Deal programs. Under the plan, only the government could create money. The Federal Reserve banks would be nationalized and the power to create money removed from private banks by abolishing fractional reserves. The Plan separated the loan-making function, which can belong in private banks, from the money-creation function, which belongs in government. The proposal recognized the distinction between money and credit, which had been confused through fractional reserves and what was called the “real bills doctrine.” Under the Chicago Plan public funds would fund the New Deal without going into debt and becoming more dependent on the bankers. FDR did not take the advice, which was been supported by 235 economists from 157 universities. He created the New Deal but in doing so he also created unnecessary debts to the banks.
Public money means we create our own money debt free rather than borrowing from banks and building up debt. Rather than the banker’s corporation, the Federal Reserve, creating money the Department of the Treasury would create money. When the International Monetary Fund moves into other countries, the first thing they do is get control of the money supply. The European Union has done the same, taken control of nation-state currencies so they can control the spigot of money.
There is good reason for governments to control the money supply as there are times when more money is needed in the economy and times when the money supply needs be slowed. When money is created by government it is an asset and not debt to banks. Public money is debt free money. We should be funding necessary projects and paying our debts with debt free money. Money should be made for the benefit of the entire economy, not for the benefit of bankers.
There is federal bill introduced by Rep. Dennis Kucinich to remake the monetary system. The federal bill, HR 6550, is known as the NEED Act – National Emergency Employment Defense Act, it does three things:
- No more will the United States money supply operate under the fiction of Federal Reserve being public. The Federal Reserve is private corporation, controlled by banks, and primarily run by bankers. The NEED Act puts the Federal Reserve in Department of Treasury, so it is public and accountable.
- The NEED Act gets rid of creating money out of thin air. Banks are the tallest building in the community because they have the power to create money. They are allowed to loan out funds they do not have (the fractional banking system essentially allows banks to create money), when abused this can be up to 30 to 40 times more than the actual money they have on deposit. The NEED Act ends fractional reserve banking and limits loans to what banks actually have.
- The NEED Act puts exclusive authority over the money supply in the public domain, government would have the power, not banks, so that money is used responsibly. Dollars should be invested in building useful things e.g. infrastructure requires $2.2 trillion in spending over five years according to the American Society of Civil Engineers just to stop the crumbling of our current infrastructure. Creating money for these types of useful purposes, as opposed to creating money to pay of the investment debts of Wall Street Banks, serves the public interest rather than private interests. If government produced money we would not owe any debt to the banks.
Advocates for democratizing the money supply need to create the political will for the NEED Act. We need to educate and organize people around the bill. Part of our job is to inject economic literacy into American political dialogue. Even elected officials are ignorant about the reality of banking. Getting control over money is an issue that brings together progressives, libertarians and tea bag followers. They all understand that the private money system is impoverishing us all. On this issue we are in agreement.
This is not to say the NEED Act is perfect, but it is a strong starting point for discussion Author, Bill Still has a critique of the proposal at the back of his book, No More National Debt. Another option, to separate money control from the politics of the moment but still keep it public is to have more than three branches of government, i.e. the monetary system could be a fourth branch of government, still a check and balance but not be completely beholden to the executive or congress. These issues need to be discussed, grappled with, but there is no question that a public system of controlling the money supply is better than a private system controlled by the banks.
The effort to rip away memory has been successful so we do not know what has gone on before. Americans need to get on the other side of the economic literacy curve, so they understand what is happening with our money supply. Use the NEED Act to help educate people and organize them.
Greg Coleridge is Director Northeast Ohio American Friends Service Committee (AFSC); member of the Program on Corporations, Law & Democracy (POCLAD) national collective; and original Move to Amend national steering committee member. He is author of Citizens over Corporations: A Brief History of Democracy in Ohio and Challenges to Freedom in the Future, writer of the documentary CorpOrNation – The Story of Citizens and Corporations in Ohio, and contributor of several articles to the anthology Defying Corporations, Defining Democracy – A Book of History and Strategy. Contact: GColeridge@afsc.org