Discussion of Monetary Policy
By Muriel Mobley
Article I, Section 8, clause 5 of the U. S. Constitution empowers Congress to coin money. Consequently, it has never been necessary for the federal government to borrow money; but the government has engaged in the specious practice of borrowing from its beginning.
The first government under the Constitution inherited a debt of $75 million that was borrowed by the government under the Articles of Confederation. Instead of coining money to pay off the debt, the Congress chartered the first central bank, sold the debt to private investors, and relied on taxes to pay the interest. In a little over 200 years, this practice has resulted in $5.9 trillion of Treasury debt.
In 1913 the Congress authorized the fourth central bank (officially, the third central bank) known as the Federal Reserve Banking System. The Fed is a privately owned banking cartel upon whom the Congress has bestowed monetary policy authority. Monetary policy is the creation and regulation of the nation's money supply.
As indicated on the INFORMATION page, the Fed creates money out of nothing to lend the government by purchasing government debt securities (such as bonds). This is how the Fed creates basic bank reserves. Commercial banks create the rest of the money supply by making loans to government and private sector entities. Nearly the entire money supply of the U. S. is debt. Hence, the U. S. has a debt-money system.
When banks create money as loans, they create no money to pay the interest. Consequently, banks create more debt than money. The result is an exponential increase in debt.
Not only is the federal government deep in debt; but also, local governments, corporations, and individuals are deep in debt. The total as measured by Total Credit Market Debt is more than $21 trillion as of March, 1998. At present rate of increase, it will double to $42 trillion in about twelve years.
The claim is often made that money is not backed by anything. This is misleading. Almost all debt is backed by collateral, but it is also backed by something more important: YOU! Yes, you. Money is backed by the government's lethal power to collect tax from YOU and enforce debt contracts.
Politicians keep talking about balancing the budget and paying off debt as if it could be done. Balancing the budget under the present system will have serious negative consequences of money contraction. Paying off the debt would be a disaster without monetary reform first.
With the power to make its own money, there is no reason for the government to tax for revenue. Taxes should be adjusted to cancel money as necessary to keep the economy running in a stable condition.
With such a rational money system, balanced budgets have no relevance. Health care, the end of poverty, space exploration, national defence, first class infrastructure, or anything that is physically possible and socially acceptable can be done as long as there is willingness to do it.
The solution to debt money is simple in principle, but difficult to achieve. The established power structure must be persuaded.
Failure to recognize the defects in the money system guarantees the continuing deterioration of society.
There are many parallels between the United States and Rome. Rotting on the inside and expending its blood and treasure for empire.
