Guest Post: Take the Power to Create Credit Away from the Giant Banks and Give It Back to the People

By George Washington of Washington’s Blog

Many people – including former analyst for the U.S. Treasury Richard Cook – argue that credit is too important a function to be left to the private banks.

Indeed, even after taxpayers have given trillions in bailouts, backstops, guarantees, and other gifts, the giant banks are still not lending out much credit to individuals or small businesses.

The talking heads say that real reform of this nature is not “politically feasible”. But not politically feasible doesn’t actually mean anything except that the powers-that-be don’t want it.

We have been throwing ourselves against a brick wall trying to force the giant banks into doing the right thing, but as Buckminster Fuller said:

You never change things by fighting the existing reality. To change something, build a new model that makes the existing model obsolete.

A Better Model

So what is a better model?

Gold advocates argue for a return to a gold-backed standard. This would, in fact, be a vast improvement over the fiat currency system we have now, as it would help to stabilize the currency, add discipline and consistency, and reign in the funding of unnecessary wars and other imperial mischief which are funded by the unlimited printing of new fiat dollars.

But Ellen Brown argues that a gold standard restricts credit for the little guy, not just Uncle Sam. If Brown is right – and given that the too big to fails are refusing to lend to most little guys – public banking might be the only way to restore a healthy economy and ease the pain for the average American. (Brown also argues that it was actually the bankers – and not the populists – who forced the adoption of a gold standard in the 1890s, and that the true meaning of the “Cross of Gold” speech has been forgotten).

National Public Bank

AFL-CIO president Richard Trumka told Congress last week:

If the Federal Reserve were made a fully public body, it would be an acceptable alternative.

The American Monetary Institute proposes the following alternative:

Incorporate the Federal Reserve System into the U.S. Treasury where all new money would be created by government as money, not interest-bearing debt; and be spent into circulation to promote the general welfare. The monetary system would be monitored to be neither inflationary nor deflationary.
Second, halt the bank’s privilege to create money by ending the fractional reserve system in a gentle and elegant way.

All the past monetized private credit would be converted into U.S. government money. Banks would then act as intermediaries accepting savings deposits and loaning them out to borrowers. They would do what people think they do now. This Act nationalizes the money system, not the banking system.

Bloomberg News columnist Matthew Lynn writes:

The U.K. government needs to start thinking about what it will do with all the banks it now owns. The answer is simple: Hand them to the people…

Instead of selling the stakes it acquired in the financial system to other banks, or listing the shares on the stock market, it could create mutually owned societies. Royal Bank of Scotland Group Plc could be a people’s bank, owned by everyone.That would ensure more diversity, competition and stability, all goals just as worthy as getting back the money Prime Minister Gordon Brown’s government spent on bank rescues…

Sovereign nations such as the U.S. and England have the power to create credit and money (and see this, this and this). Taking the credit-creation power away from the banks and giving it back to the nation would ensure that credit is freed up for people’s use, and the stranglehold over the economy is taken away from the too big to fails.

State Public Banks

Many people argue that – given its actions – people don’t trust the federal government to create money.

Fair enough. Why not let the states do it?

Michael Moore recommends that the American people demand:

Each of the 50 states must create a state-owned public bank like they have in North Dakota. Then congress MUST reinstate all the strict pre-Reagan regulations on all commercial banks, investment firms, insurance companies — and all the other industries that have been savaged by deregulation: Airlines, the food industry, pharmaceutical companies — you name it. If a company’s primary motive to exist is to make a profit, then it needs a set of stringent rules to live by — and the first rule is “Do no harm.” The second rule: The question must always be asked — “Is this for the common good?” (Click here for some info about the state-owned Bank of North Dakota.)

As Moore notes, the state of North Dakota already has such a bank, and – because of that – North Dakota is just about the only state which is not running a huge deficit.

PhD economist and candidate for Florida governor Farid Khavari wants to create a Bank of the State of Florida, to create credit without burdening the state and its citizens with high interest charges by private banks.

See this for details.

Local Public Banks

An alternative to federal or state public banking is local public banks, as proposed by Edward Kellogg and others.

As summarized by Adrian Kuzminski:

During this time of financial and economic crisis, it is worth recalling that credible alternatives to our current financial system exist, if largely unrecognized, and deserve serious consideration…

The now-neglected 19th-century American proto-populist, Edward Kellogg … was a kind of godfather to the later populist movement on monetary issues. Perhaps the most profound of American writers on monetary issues, Kellogg advocated a decentralized but nationally regulated monetary system based on non-usurious, low-interest public loans to individuals. His vision inspired 19th-century century mutualists, greenbackers, populists, and others who sought to restructure the monetary system to redistribute wealth.

In our own day, when usurious credit in the form of private finance capital remains the dominant force in economic life, and is largely taken for granted even by educated people, the alternative Kellogg offers is more important than ever. Indeed, I suggest that Kellogg’s theory of money is the best monetary alternative we have to the baleful system under which we suffer…

Edward Kellogg (1790-1858) was a New York City businessman whose losses in the crash of 1837 led him to examine the business cycle, monetary policy, and debt. In a series of writings, Kellogg developed the idea of … having the government provide very-low-interest loans to the general public. These loans would have a uniform, fixed interest rate, established by law. They would be issued locally through a system of public credit banks he called the Safety Fund. Once issued, these low-interest loan notes would circulate as currency, replacing the privately issued banking notes of his day (which today take the form of Federal Reserve Notes)…

In his day Kellogg seems to have influenced even Abraham Lincoln who, according to historian Mark A. Lause, ” . . . had his own copy of Kellogg’s book, Labor and Capital [sic] advocating the government issuance of paper currency as a just means of redistributing wealth, and he corresponded with the author’s son-in-law.” Kellogg’s public currency was intended to end the monopoly over the discretionary issuance of money at interest, which was held then (and now) by the private banking and investment system…

Kellogg proposed to establish local public credit banks, and we might imagine one in each community. These local public credit banks would be part of the Safety Fund. Instead of money being issued (as it is now) through a privatized and centralized money-management system on a top-down basis, primarily as loans at increasing rates of interest from a central bank to major commercial banks, and then to regional and local banks, and then to the public, money in his system would be issued by local federal banks as loans directly to citizens at nominal interest on the basis of their economic prospects. Once lent out, Kellogg’s public credit notes would flow into circulation, providing the basis for a new currency backed by the assets of individual borrowers…

A centralized national currency would be replaced, in Kellogg’s system, by a locally issued currency. But that currency would everywhere be subject to common national standards, ensuring that each local public credit bank reliably issued equivalent units of currency. A dollar issued by one local public credit bank of the Safety Fund, Kellogg intended, would be worth the same as, and be freely interchangeable with, one issued by any other. The independence of local branches would be guaranteed by the discretionary power reserved to them as a local monopoly actually to loan money; the compatibility of their monies would be ensured under federal law by fixing the value of the dollar by law at 1.1 percent/year – that is, by lending money everywhere to citizens at that rate…

The goal is to establish and preserve economic decentralization. Amounts of money lent in Kellogg’s system would vary considerably from place to place, with some areas needing and creating more currency than others. The solvency of local federal public credit banks would be guaranteed by collateral put up by borrowers, and the money supply would be stabilized by repayment of loans as they came due. The interchangeability of public credit bank notes would ensure a wide circulation for the new money…

To achieve a stable currency, Kellogg insisted that this rate be fixed by law; perhaps today it would take a constitutional amendment.

What’s the Best Option?

People of good faith debate whether the gold standard, or national, state or local public banking is the best solution.

But they agree that the current fiat currency system where the creation of credit is controlled by the private banks has pushed us into an economic crisis and a credit crunch, with little hope of stability for the future.

Changing to a public banking system would clearly be a large change. But remember – as Buckminster Fuller pointed out – building a new model is often easier than fighting the existing one.

The time is right for a new model.

Afterword:  Is a Gold Standard Incompatible with Public Banking?

Many people assume that a gold standard is incompatible with public banking.   But that might not necessarily be true.

An analysis of ways in which a gold standard might possibly complement public banking is beyond the scope of this essay, and I have not yet even thought it through myself.   But before ruling out the possibility, I invite financial experts to brainstorm on this issue to see if we can have the best of both worlds.

After all, when currency speculation is removed from the equation, money simply acts as  a yardstick to measure the exchange of goods and services so that barter is not necessary.  People may be able to create a money system which has the stability and discipline created by a gold backed system. with the credit availability of a public banking system.

Admittedly, the gold standard may at first blush be seen as more conservative than public banking, as the former limits money expansion while the latter encourages it. But as with all liberal-conservative dichotomies, it is important to get beyond labels and to determine what is actually best.  Indeed, public banking – especially if it is on the state or local level – would not create easy credit for the government to launch new imperial adventures.


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  1. Fed Up

    “But Ellen Brown argues that a gold standard restricts credit for the little guy, not just Uncle Sam. If Brown is right – and given that the too big to fails are refusing to lend to most little guys – public banking might be the only way to restore a healthy economy and ease the pain for the average American.”

    UTTER NONSENSE! The solution to too much lower and middle class debt is NOT more debt. The lower and middle class need a way to pay down debt NOT access to more credit/debt.

    1. Timbo614

      Affordable Credit – that is what is being suggested – How fast would you be to the door of your local bank that was offering to lend you money at 5% rather than the usurious 25% of your credit card co.?

      Think again. Affordable credit is NOT a bad thing – it lets people build business and lives!

  2. Jon Claerbout

    The government should set up a computer that automatically offers loans to all tax payers both individual and business based on the taxes they have already paid. Adjust the interest rate to control the heat of the economy. Think about it! Even negative interest rates can make sense!

  3. winterwarlock

    we have already proven that we live in a world of abundance, not scarcity. we can create more housing, food, and clothing than we need. the problem is one of distribution, knowing where things need to go by priority.

    why shouldn’t people agree to form groups to create money themselves, and why should those groups align along the same artificial geographic borders that currently allow the multi-nationals to arbitrage labor, but not the other way around?

      1. winterwarlock

        before planetary saturation and global communication, very few people knew where stuff was and where it had to go.

        now we know. so why are we working twice as hard to get half as much done to pay people for money, and to tell us what needs to be done, in an asymmetric situation, that encourages them to lie to us.

        1. winterwarlock

          the multinationals have effectively created a self-liquidating nation/state government cartel, to raise people like cattle, and the kids have cut them of at the knees by not participating. No circulation, no life.

          Once the volume sufficiently decreases, and the pressure sufficiently increases, that cartel will break up and individual governments will begin to work for people again.

          the political males kept their jobs, and the others were laid off. now, the political females are going to keep their jobs, and the others are going to be laid off.

          the new economy is creating a financial incentive to collect and condense maladaptive behavior. the states and municipalities are the next crisis and stimulus package.

          be patient, and follow the kids lead if you want to accelerate the process. stop using money, stop seeking physical property, stop getting married, and do get mobile.

          otherwise, get yourself in a position to watch the show.

          the fireworks are about to start again.

          Buffet wanted to retire, and made a big point of it. Now the market-makers are making a big point of funding the market on low volume with a short squeeze.

          the kids are playing the market like a video game.

          1. winterwarlock

            the market-makers are no match for 10-12 yr old, third generation enterprise architects, who were raised from birth to track sharks … and sharks are hard-wired cannibals. The multi-nationals are way too big and way too slow.

  4. charles

    Forbid banks, or any highly leveraged entity such as GE, to perform maturity mismatch. Once individuals and private companies refinance at equal (or longer) maturity that they lend, bank runs and “financial meltdowns” are no more possible. The system is stable.
    Of course long term resources are much more expensive than short term , so banking would become a more difficult and less profitable (I am tempted to say : welcome to the real world !).

    As the guardian of the currency, the government would keep the ability to finance long term assets with short term debt and currency, the mix between the two being determined to match a long term cumulated inflation target. Considering the need for the population for short term investment, the reduction of the Government Debt average maturity would bring considerable budgetary benefits (that before accrued to the banking system).

    Regarding the Gold Standard :
    The first problem is that a group of determined individual/companies can collude to corner its market (as in any commodity). Fiat currency remove the hoarding risk.
    The second problem is that it diverts physical resources (material, labor, energy) to mine an otherwise useless metal. These resources would be better employed mining oil, gas, phosphate or uranium. It is much less effort to breed Central Bankers with Integrity (a la Volker or Pohl, not a la Greenspan).

  5. ScottB

    I’m fine with public banks, but I don’t see what they have to do with state government deficits as Michael Moore (or you?) claim.

    The deficits (which are in reality budget cuts) have to do with inadequate rainy-day funds.

  6. mmckinl

    Great Post !

    Finally someone talks about nationalizing the privately owned and operated Fed …

    Public banks without fractional reserve banking are the way to go … The American Monetary Institute has it right …

    The question is: Why should we pay interest on our own money?

    The answer: We shouldn’t … as long as the money creation is handled responsibly there is no problem and it benefits the people. Should the process be abused the people suffer … rewards and benefits align. Abuse can be dealt with by throwing out the officials that caused the problem.

    What we have now is a bankster , Federal Reserve, monopoly on money and credit creation. The profit accrues to the banksters. When they abuse the system the tax payer gets the bill for the damage either directly through borrowings and an impaired economy or indirectly through inflation.

    Indeed it is past time for a Public Bank that responsibly prints our money in order that the public benefit from their Constitutional right to that benefit.

  7. joseph

    The socialisation of the banks will encounter a ferocity of resistance that will make the recent debacle over the partial socialisation of healthcare look like fun.

    Washington…you do not know it but you are on the road to revolution

    1. The Real Deal

      LOL. Partial “socialization” of the healthcare market? Eh, what? The “Healthcare” market has already been plutarchied by the Oligarch because “competition” has been such a horrible thing over the last 100 years, they just have given up.

      Either learn history Joseph or don’t post. Ignorance like yourself is amazing.

  8. RPB

    Makes sense, we’ve only had 3 other Banks of the United States and we’ve seen what kinds of stupidity they’ve enacted.

  9. Mansoor H. Khan

    A Radical Solution for America’s Insolvent Financial System
    The core problem of the United States’ banking system (and maybe the world’s banking system) is not liquidity but insolvency. The liabilities of the United States’ banking system exceed the value of its assets. The issue is not only the toxic assets (toxic mortgage backed securities, toxic commercial real estate loans, sub-prime mortgages, alt-A loans, adjustable loans likely to go bust, increase in prime mortgage default rates, etc) but also off-balance sheet liabilities (such as expected huge unaccounted for future derivatives losses).
    This means that bailouts are just beginning and will require bigger and bigger sums of taxpayer money as time goes on. The government will resort to borrowing more and more and eventually to printing money when treasury debt auctions start failing. The end result of this path is a currency collapse and probably total chaos as expected by gold bugs.
    One other way to deal with this issue is to stop the bailouts and let the dominoes fall. Defaults and cross-defaults will cause many, many depository institutions (even very large ones) to collapse leading to extreme decrease in money supply as bank deposits are destroyed. Deposits of failed banks cannot be used to pay bills, make purchases and/or service debts.
    Which will probably lead to even more defaults as unemployment increases and debtor’s are unable to service their debts. This process will probably cause extreme deflation as businesses lower prices in a bid to survive. This will also lead to wage cuts, increased unemployment and a deflation spiral and much chaos. But probably less chaos than a currency collapse.
    Is there a better way?
    Here is my idea:
    1) We essentially need an orderly bankruptcy and liquidation of the United States’ financial system.
    2) I suggest we create a government owned bank and transfer all deposits of the private commercial banking system to the new government owned bank. This “transfer” is really just new money creation. This new money will be digital cash (electronic version of physical paper cash). Very much like reserves at the FED.
    3) Note that the plan will not create net new money since we will be destroying all deposits of the commercial banking system in the process.
    4) All assets of the commercial banking system will be transferred to the government and auctioned off in an orderly manner over the next 10 years. The proceeds from the sale would go the United States treasury and not the commercial banks. The assumption here is that commercial banks deserve nothing since the entire industry would have been most likely destroyed any way. Even good banks would have been destroyed due to bank runs and defaults if the government had allowed the dominoes to fall. Of course bank shareholders, bank bond holders and counter parties of bank derivatives would not receive anything.
    5) After the transfer FDIC protection will be removed for any private bank which wishes to remain in business or any new private depository institution or bank. From that point on the government should make it absolutely clear that there will be no more bailouts and no more conversions. This will discourage (but not completely eliminate) fractional reserve deposit banking and private money creation that results from pyramiding of government created money. This will also limit debasement of the currency that results from fractional reserve deposit banking. In fact, we can have “free banking” from that point on and not even have reserve requirements or capital requirements. All depositors who use private banks will be fully at-risk. The industry will have to set the interest rate high enough to attract depositors.
    6) The new government bank will act as an electronic “piggy bank” only. All deposits will be 100% reserve and it will not make any loans. Loan making will be left to the private banking system (with no deposit insurance or a possibility of a future bailout). The new government owned bank exists only as a “safe” money storage and a payment clearing system so the public does not have to carry around physical paper cash to make purchases and pay bills.
    7) Of course this plan is not without pain or cost. Cost of funds for banks and borrowers will probably rise as bank deposits are a source of very low cost money for the banks. Nothing is free. We are just exchanging higher cost of funds for removal of systemic failure risk. Economically we are recognizing that when money is loaned there is always credit risk.
    8) We are just separating the payment and clearing transaction system which is absolutely necessary for day-to-day commerce (no credit risk) from the loan banking and investment system (has credit risk).

    Mansoor H. Khan

    1. gordon

      Well, though I’m a supporter of the idea of a Govt. bank, I would never have proposed a scheme like this. My idea was always that a Govt. bank would be a new commercial bank which would trade alongside private banks, which could carry on much as before. The existance of a Govt. bank would, IMHO, have considerably reduced the pressure on Govt. to bail out existing troubled banks, because an alternative would be available. See my proposal here:

  10. eh

    How about people just live within their means — not take out so much credit, a lot of which is to buy stuff of the ‘keep up with the Joneses’ variety which they don’t really need.

  11. The Real Deal

    The “Gold Standard” wouldn’t “stabilize” anything. It would artificially raise the currency to such heights, it would destroy what is left of America. Literally. The European gold merchants would create private gold banks and take back control of the monetary system and that would as they say, be that. Discipline? Bogus. They would destroy the governments ability react to its peoples need and essentially give up all control to the international plutarchy to make the moves by stealing the wealth of nations.
    Deflation kills the poor. I love the Libertarian/Austrian dopes that follow the Jewish intellectuals who mutter the nonsense it kills the rich. Pure Propoganda and internationalism. Deflation would destroy what is left of American manufacturing, it would destroy what it is left of the middle class. Please. Those morons are on the same intellectual level of Marx and his followers who are the other side of the same coin. It is a fraud people. The Gold Standard should never see the light of day again.

    We have had deflation since the 1980’s and we have now come to the point where we can’t hide it anymore. Raising asset prices(which the government has done since…….1825-27) isn’t going to work anymore as real investment in the west can’t even register anymore and that was always the real key to recovery before asset prices raised growth. But that is what the gold lovers really want, so they can bow to their masters, the mammon god when gold crushes us all.

    1. john newman

      Whew, thanks Real Deal: all this gold buggery scare the crap out of me. It is financial Maoism. When the majority of the population lived off the land it was OK if the wheels occasionally fell off of commerce. A gold standard last September would have induced mass starvation as the credit squeeze sucked all currency out of circulation. We redundant urban masses would have self liquidated and the Maoists with the gold could institute their agrarian utopia.

  12. Siggy

    Dear The Real Deal,

    Deflation since the 1980’s? Please tell me how you support that assertion. As I recall, from the date of the Plaza Accord, the Dollar fell 50 plus percent by 1988. That’s a huge loss in purchasing power; or as some might prefer, an increase in the rate of inflation.

    This piece, and its thread is about credit and its creation. You should consider what happens when credit is extended. After it is booked by the borrower it becomes money in the economy. Subsequent receivers of credit money see only money.

    Now if the government issues credit, it is debasing the outstanding currency. The first recipients of credit money benefit, the latter ones get screwed.

    Our current distress is based on excess credit money that was greatly facilitated by a fiat currency and a fractional reserve banking system coupled with massive unprosecuted financial fraud.

    Please get to thinking about what lies before you and stop farting up this space with the stench of your putrid rants.

  13. joebhed

    Thanks George Washington.
    Your namesake and his brothers in arms and diplomacy were more supportive of the concept of public money.
    Notice I said public money and not public banks.
    Banks should remain private, but there’s nothing wrong with state banks to keep them honest.
    The American Monetary Institute’s proposal is the only one that goes to actually solving today’s debt crisis, a crisis directly caused by the debt-money system.
    The debt-money system is insolvent.
    It has run its course, and therefore the fractional-reserve banking system, the tool of the debt-industrialists, must end in an orderly transition to full-reserve banking.
    Besides the revolutionary colonists who fought for their right to issue thir own money, the economists of the ’30s presented the Chicago Plan for Monetary Reform to FDR.
    I make a motion for reconsideration.
    The Money System Common.

  14. david

    Giving the Treasury discretionary money printing power is a very bad idea. Government spending should be subject to Congressional, not Treasury, control.

    I concur with Charles.

    Consider the following which would be phased in:

    Prohibit borrowing short and lending long. This is the essence of fractional reserve banking and the principal generator of debt and asset bubbles. The prohibition must extend to all financial institutions not just banks.

    The central bank would be subject to a fixed money rule and would be prohibited from interfering with market interest rates. Cash/base money could either be fixed or would expand by an announced rate such as population growth plus 1-2%.

    Minimum lending standards would be imposed for real estate loans – just as the Fed has minimum standards for stock market margin loans. For example, minimum of 20% down, without credit guarantees, for commercial and residential real estate, and standard residential borrower income coverage, e.g. 28/36.

    Once the phase-in is completed:

    Repeal legal tender laws.

    Allow private commodity-backed money, subject to prohibition of fractional reserve (borrowing short lending long) and minimum lending standards.

    1. joebhed

      Of course government spending should be under Congressional control. The creation of money by spending it into existence, debt-free, is not the same blank check that the bankers, especially the shadow bankers, have at this moment.

      The monetary authorities would determine the increase needed and the execution will be through the government’s budgeting process. The entire money-creation process would be transparent, and all decision makers, the Congress and the monetary authority, would be fully accountable to the people.
      Far superior to either Fed independence, or a free market in money.

  15. abprosper

    Even if we do away with the banking issue (fat chance of that) it still won’t deal with the issue of wages. In 20-30 years most of the entry level and low paid jobs will simply be automated.

    Just as software has gotten rid of the need for many accountants, video store clerks, production people for media and so on its beady little eyes are fixed on the lower tier jobs too, drivers, shop clerks, manufacturing and so on.

    A bank fix might get stability but it won’t gain jobs and no you can’t give everyone a skilled trade through education.

    In the long run more than likely we’ll still be in a state of crises only with no middle class, a smaller upper class and a vast decline in consumption at every level. As the Soviets learned, production of goods is easy, distribution, well thats hard.

    Thats no recipe for the stability people crave.

  16. emca

    Your link to Mother Jones article on the North Dakota State Bank was worth while reading. One quote:

    “It all gets down to management and management philosophy. We’re a fairly conservative lot up here in the upper Midwest and we didn’t do any subprime lending and we have the ability to get into the derivatives markets and put on swaps and callers and caps and credit default swaps and just chose not to do it, really chose a Warren Buffett mentality—if we don’t understand it, we’re not going to jump into it.”

    The establishment of the State Bank of North Dakota in 1919 was an a populace, nonpartisan effort to subvert the flow of wealth away form the state to the coffers of “Eastern” banks via credit and to retain control of their (Midwest) markets dependent on that credit.

    It was not; a Bolshevik invention to usurp Capitalism, a means of replacing private local banks with public enterprise. As Mr. Hardmeyer of the State Bank of North Dakota points out, the bank exists as a cooperative effort and intermediary between private banks and the State. It backstops banks, provides needed liquidity and in general stabilizes the day-to-day operations of the smaller private banks. Its shareholders are people of North Dakota, not speculators from New York, London, Berlin or Beijing, the international banking cartel and other would-be parasites of productive wealth.

    Of course none of this eliminates the need for proper conservative management of money or equally, the need for transparency in a financial institution. But, as Ellen Brown points out in her reference to the State of Michigan, why should taxpayers be required to finance the antics of Wall Street’s “innovative” risk to the tune of one billion dollars in interest payments (moreover this would not include any bailout funds or other props now going on the Federal taxpayer tab)when those monies could and should stay local? The credit and its management should be kept in-state. If this can be done in other ways, fine, offer concrete examples, but North Dakota has shown that a state bank is a workable and proven concept, while maybe not completely transferable to every state or locality, needs to be seriously considered to avoid the dark route we’re following.

  17. Pete Young

    Thanks for writing about monetary reform, George, and Yves, thanks for posting it.

    I’m more of a fan of price stability than I am a fan of gold, and state banks can only do so much trafficking in the debt-based dollar, so of the three ideas you float here monetary reform along the lines of the American Monetary Act (or the Chicago Plan of 1933) looks to me like the best way to not only stop digging the hole of debt deeper, but actually start filling it back in.

    The way it works now, of course, if we start to fill the hole back in (pay down debt, be it consumer, government or business) we crash the money supply and go into debt-deflation, so the only action we can take is to dig deeper.

    For more thoughts on the subject please see my post “The Mother of all Free Lunches” at

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