naked capitalism

Lidia says:

“The economy” can never catch up with an interest-based money supply. It’s mathematically impossible at any stage of the game.

Bev says:

Taxes and other frequently asked questions to consider about DEBT FREE PUBLIC Money which our country has turned to six times in our past to benefit all people (therefore, it is not unconventional). Support and protect all brave politicians who support us with DEBT FREE Money via Representative Dennis Kucinich’s NEED Act (National Emergency Employment Defense Act) HR 2990.

http://www.monetary.org/wp-content/uploads/2011/11/HR-2990.pdf

http://www.monetary.org/intro-to-monetary-reform/faqs

11) Is there any chance the AMA (American Monetary Institute) could eliminate the federal income tax?

It “could,” and though that’s not likely in the near future, it is the direction the AMA goes in. Thanks to the immense savings our government will experience through control over its money system, taxation should decline substantially for middle and lower income groups. It should be raised for the super rich.

In addition the AMA should directly lead to substantial reductions in interest rates, because as the US pays off its national debt in money rather than rolling it over, those receiving those payments will be looking for places to loan and invest those funds. Interest rates should drop substantially.

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9) If banks are no longer allowed to create money, where will banks get enough money to fill client’s needs for money under the American Monetary Act?

We devote substantial space to this question because economists so used to confusing credit and money have to get used to the idea of money instead of credit. Usually they want to know how the AMA creates money within the present bank accounting framework. Well it does not! The AMA will change the accounting rules to deal with money not credit.

There will be several substantial sources of money for banks to satisfy their clients money needs:

a) Title III of the AMA converts through an accounting procedure, the existing credit the banks have circulated through loans (about $6 to 7 trillion, roughly the existing “money” supply) into US money, no longer bank credit. That process will indebt the banks to the government for the amount converted over and above their capital. At present when bank loans are repaid to the banks by their customers, those credits/debts go out of circulation/out of existence and the credit money supply contracts as loans are repaid, until they make new loans. But under the American Monetary Act, since it’s now money, those monies will not go out of circulation the way the credits did. They are repaid to the government in satisfaction of the debt the banks incurred in converting them from credit to money. That goes into a pool which can be used by Congress for the items in Title V of the AMA (as described on pages 8 and 9), or it can even be re-lent to the banks at an adjusted interest rate. Note: this action de-leverages the banks, but does not reduce the money supply.

b) Probably the most important source of funds for bank lending will be the continuing government expenditures, over and above tax receipts, such as social security and other payments by government on the items in Title V of the American Monetary Act. Also the engineers tell us that $2.2 trillion is now necessary to make our infrastructure safe over the next 5 years. That’s $440 billion new money per year. Also the health care and education provisions, and grants to states in Title V can be introduced as new money. ALL these will eventually be deposited into various types of bank accounts where provisions of the Act will allow this money to be lent or invested. The banks will be lending and placing this money that has been deposited with them; not lending credit they create, masquerading as money. They will have to compete to attract such deposits from citizens and companies.

c) Title II of the AMA specifies the repayment of US instruments of indebtedness (bonds/notes/etc). Instead of being rolled over as at present, new US monies will be paid to the bondholders as they become due. Those people/institutions will be looking for places to invest that money. One place would be in bank stock, which is a source of lending funds for banks. Of the $5 to 7 trillion in US bonds and notes privately held, about 3.5 trillion is due within 1 to 5 years; .72 trillion is due in 5 to 10 years; .35 trillion is due in 10 to 20 years. All these amounts will represent newly created US money and will eventually find their way to becoming new lend-able or investable bank deposits and even investments in banks.

d) Finally the AMA does not allow the banks to decide their own leverage situations. The Act essentially eliminates most leverage from the banking system in a healthy, non deflationary way. That will be good. They will no longer be able to pretend they were “banking” when they made bad loans overextending their positions and creating bubbles, in order to grab huge bonuses on imaginary profits. In other words banks will no longer be able to make loans in a bubble creation process. That will be a big improvement!

10) How will the U.S. Treasury create the money?

The same way the Federal Reserve does now, as simple account entries, but as income, without the accompanying debt obligations. It’s described in the AMA, Sec. 103 NEGATIVE FUND BALANCES: The Secretary of the Treasury shall directly issue United States Money to account for any differences between Government appropriations authorized by Congress under law and available Government receipts.

11) Is there any chance the AMA could eliminate the federal income tax?

It “could,” and though that’s not likely in the near future, it is the direction the AMA goes in. Thanks to the immense savings our government will experience through control over its money system, taxation should decline substantially for middle and lower income groups. It should be raised for the super rich.

In addition the AMA should directly lead to substantial reductions in interest rates, because as the US pays off its national debt in money rather than rolling it over, those receiving those payments will be looking for places to loan and invest those funds. Interest rates should drop substantially.

12) Why does the American Monetary Act have an 8% maximum interest rate, including all fees?

Because before 1980/1981, forty nine States had “anti-usury” laws which limited normal interest rates to a maximum of between 6% and 10% p.a. (one state had 12%). The American Monetary Act takes the middle of this range to represent a restoration of the interest rate limits prevailing across the country prior to 1980/1981. See page 9 of the AMA.

13) Won’t you be breaking the sanctity of contracts when you convert the existing bank credit already in circulation, into U.S. Money?

No. First of all a contract requires understanding of the terms by all parties to it, and that certainly did not exist. But more likely it will be viewed as very acceptable by the banks, considering the security it confers on banking, especially when the alternative is going broke. There would be no reason to extend the legal tender privilege (acceptance for taxes) to the credits of any disagreeing banks.

14) How would the ACT affect our position with China?

The ACT would have a number of positive effects on Chinese – American Trade. Particularly it would encourage the Chinese to use more of their dollar earnings to really trade with us rather than just sell to us, and then invest their earnings in US bonds as at present. More details forthcoming!

15) What about other countries, and international systems such as the IMF (International Monetary Fund) and the BIS (Bank for International Settlements)?

We’d expect other countries to follow quickly in our footsteps to each obtain the advantages of issuing their own national monies. The United Nations is already putting forward suggestions that member states shift now to nationally created, debt free; interest free moneys. They are way ahead of the US Congress just now. A much reformed IMF, already organized under United Nations Article 57; #3, will see a greatly expanded role for the SDR and more responsibility for international accounts clearing as well as real assistance to member states, rather than acting as a destructive collection agent for the big banks. The role and importance of the BIS should be rapidly reduced, and perhaps eliminated. Just look at the mess created under their guidance and rules. Some job they did!

16) The latest craze “question” making the rounds in the organized disinformation campaign that is attacking our national psychology, is not a question at all, but a vicious assertion:

“Government is so corrupt and so much in the hands of the worst people and they won’t ever let you do this reform! Or any good thing”

This popped up simultaneously from LA to Seattle. I’ve told friends to put that stupidity out of their minds. This assertion, designed to discourage, is a variant of the Sun Tzu method of winning the battle by convincing the opposition not to fight because they can’t win. It reminds me of the cyborg “Borg Wars” line “Resistance is futile” from the Star Trek New Generation series. Don’t fall for it!

As our people suffer more deeply from the unfortunate monetary/banking system, any remaining bad elements in government can and must be cleansed. That’s what we’ll do instead of whining about it. Become a part of the solution not a cry-baby! Get up and fight for your family and nation!

lambert strether says:

Here’s the typo. The sentence that reads:

A core tenet of the theory is that taxes serve to fund government [sic] but to prevent aggregate demand — or total spending — from getting too high and causing inflation…

should read:

A core tenet of the theory is that taxes serve not to fund government but to prevent aggregate demand — or total spending — from getting too high and causing inflation…

How can we tell? Because as the sentence appears, it makes no sense. It’s not grammatical. The reporter surely wrote “not to fund… but to prevent” as parallel construction. So an somebody, perhaps an editor, broke it by striking out the “not.” And if only that sentence hadn’t been the key takeaway for policy makers…

And back to the gardening for me…

F. Beard says:

Also, since you think that taxes fund social spending you mistakenly accuse me of wanting to cut social spending because I might be in favor of cutting taxes. The two have no necessary connection.