The U.S. economy is in serious trouble and no amount of monetary “stimulus” by the central bank—or the federal government is going to fix the problem. The problem is that everything – even our money – is created out of debt. The truth of the matter is that without the National Debt, under our current system, America would have no money. 

Politicians – with the exception of Rod Paul—rely on the Federal Reserve to chart a path out of this ever-increasing problem. All the Fed knows how to do is to create more money – out of more debt. This is no longer going to work, and so America will quickly spiral into hyperinflation. Don’t rely on the government inflation numbers. They have a political stake in hiding the truth. Rely on what you are paying for gas. It’s going to continue to rise no matter what – unless we see the light and make a change.

There is a simple solution – one which was partially employed successfully by Abraham Lincoln. Congress needs to take back the money creation power from the Fed and its member banks; and restore it to the U.S. Congress. That’s it. That’s all we have to do to break out of our economic death spiral.

Gold is NOT the Answer

The good news is we can fix this – in a single year – by reforming our monetary system. The bad news is comprehensive Monetary Reform is the only solution that will work. For example, one popular notion is that a return to a gold backed currency is the answer. That’s wrong. We were on gold-backed money during the Great Depression. That didn’t help us? And besides, despite government reassurances to the contrary, there is no “good-deposit” gold (.995 purity) left in Fort Knox.

The Root Cause

Over two centuries ago, Thomas Jefferson correctly identified the root cause of our problem:
“If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and the corporations which grow up around them will deprive the people of all property until their children wake up homeless on the continent their fathers conquered.”

The Monetary Reform Act fixes this defect in monetary legislation by putting the money creation power solely in the hands of Congress. Abraham Lincoln was the first American president to implement this solution. As Honest Abe put it:

“The Government should create, issue, and circulate all the currency and credit needed to satisfy the spending power of the Government and the buying power of consumers. . . The privilege of creating and issuing money is not only the supreme prerogative of Government, but it is the Government’s greatest creative opportunity. . .”

The problem is not what backs the U.S. dollar (gold backing or fiat money). That’s a diversionary, though popular issue. The problem is who controls its quantity. Will it be Congress, creating it equally for the benefit of all; or will it be the un-elected Federal Reserve Board operating strictly for the benefit of its member banks?

Milton Friedman, the Nobel-Prize-winning economist, believed it should be Congress:

“Any system which gives so much power and so much discretion to a few men, [so] that mistakes—excusable or not—can have such far reaching effects, is a bad system.  It is a bad system to believers in freedom just because it gives a few men such power without any effective check by the body politic—this is the key political argument against an independent central bank. . .”
Depressions don’t happen by accident. That’s a notion promoted by those who benefit from the current system in order to keep America confused. Dr. Friedman clearly believed the Fed deliberately caused the Great Depression of the 1930s. As he put it in a National Public Radio interview in January of 1996:

“The Federal Reserve definitely caused the Great Depression by contracting the amount of currency in circulation by one-third from 1929 to 1933.”

Over the years, many have doubted Dr. Friedman’s observations. Those doubts have finally been laid to rest, ironically by the current Federal Reserve Chairman, Ben Bernanke, speaking 2002 on the occasion of Dr. Friedman’s 90th birthday. After citing how Friedman and his coauthor of their book Monetary History, Anna J. Schwartz, had documented that it was the Federal Reserve that caused the Depression by deliberately contracting the American money supply, Bernake said the following:

“Let me end my talk by abusing slightly my status as an official representative of the Federal Reserve. I would like to say to Milton and Anna: Regarding the Great Depression. You’re right, we did it. We’re very sorry. But thanks to you, we won’t do it again.”

1996: Work on the Monetary Reform Act Begins

In 1996, my writing partner on The MoneyMasters documentary, Pat Carmack, Esq., began working with Dr. Friedman to craft a piece of legislation that would fix the problem. The Monetary Reform Act does the following:
1. Pays off the National Debt with non-debt-based U.S. Notes (as opposed to Federal Reserve Notes).
2. Eliminates the Fed’s ability to manipulate the quantity of the U.S. Money supply.
3. Moves the commercial banks to “full-reserve” banking.

Upon completion, Dr. Friedman wrote us the following:

“As you know, I am entirely sympathetic with the objectives of your Monetary Reform Act...You deserve a great deal of credit for carrying through so thoroughly on your own conception…I am impressed by your persistence and attention to detail in your successive revisions...“
Best wishes. Milton Friedman,” Nobel Laureate in Economics; Senior Fellow, Hoover Institution on War, Revolution and Peace.

Fractional Reserve Lending

But what is fractional reserve lending? Sounds complicated. When the Federal Reserve creates new money through interest rate cuts, etc., the banks get to take that new money and collectively lend out 10 times as much to their customers – that’s us. So banks get to create 90% of our money, free of charge. If they are a national bank (ones using the suffix “N.A.”, like Bank of America N.A.) they even enjoy tax-free status. That’s why bank buildings are always the biggest in town. They get to create most of our money for free, then charge us interest on it.

This system is quickly concentrating money into fewer and fewer hands – primarily the 5 biggest banks. That leaves less money for the rest of us, and moves the U.S. back toward serfdom – the very thing this nation was founded to eliminate. That’s what’s happening with the American economy today. That’s why both parents are working, and yet foreclosures are at record highs with gasoline headed for $4, $5, even $7 per gallon according to some prognosticators. And it’s going to get worse – a lot worse.

Privately Issued Money

When a sovereign nation grants private bankers a monopoly over the issuance of the nation’s money (as was done in 1913 with the Federal Reserve Act), it gives bankers the power to make money “scarce” or “plenty”. This is the root cause of the so-called “business cycle” as bankers manipulate the quantity of U.S. money for their own political and financial purposes.

Spinning out of Control

Unfortunately, the money creators are losing control. They have created too much money and they have no solution but create more and more. As a result, this nation is rapidly spinning into hyperinflation and dragging most other nations with it. Under our old monetary system, there is no way out.

The Solution

Fortunately, there is a solution. We can easily take back our ability to issue our own money for the common good, instead of the benefit of banks. This has been done 4 times throughout American history. The banks have fought it every time.

Over a one-year period we replace Federal Reserve Notes with government-issued U.S. Notes (Abraham Lincoln was the last President to issue U.S. Notes and he won the Civil War with them). Concurrently, bank reserve requirements would be gradually increased to 100%, thereby stemming any inflationary effect, thus ending the fractional reserve system and the unjust concentration of money.

The result: In one year, we would pay off our national debt with the new U.S. Notes and be forever free of the current debt-money, freedom-crushing, family-crushing system.

Without the sovereign power of government-issued money, a nation stands naked to the will of bankers who absolutely control the quantity of money, and thereby the national political destiny. But we can fix this. We can take back control of our money. Here’s how:

Monetary Reform Act - Summary

This proposed law would require banks to increase their reserves on deposits from the current 10%, to 100%, over a one-year period. This would abolish fractional reserve banking (i.e., money creation by private banks) which depends upon fractional (i.e., partial) reserve lending.  To provide the funds for this reserve increase, the US Treasury Department would be authorized to issue new United States Notes (and/or US Note accounts) sufficient in quantity to pay off the entire national debt (and replace all Federal Reserve Notes).

The funds required to pay off the national debt are always closely equivalent to the amount of money the banks have created by engaging in fractional lending because the Fed creates 10% of the money the government needs to finance deficit spending (and uses that newly created money to buy US bonds on the open market), then the banks create the other 90% (as is explained on our FAQ page).  Thus the national debt closely tracks the combined total of US Treasury debt held by the Fed (10%) and the amount of money created by private banks (90%).

Because this two-part action (increasing bank reserves to 100% and paying off the entire national debt) adds no net increase to the money supply (the two actions cancel each other in net effect on the money supply), it would cause neither inflation nor deflation, but would result in monetary stability and the end of the boom-bust pattern of US economic activity caused by our current, inherently unstable system.

Thus our entire national debt would be extinguished - thereby dramatically reducing or entirely eliminating the US budget deficit and the need for taxes to pay the $400+ billion interest per year on the national debt - and our economic system would be stabilized, while ending the terrible injustice of private banks being allowed to create over 90% of our money as loans on which they charge us interest. Wealth would cease to be concentrated in fewer and fewer hands as a result of private bank money creation. Thereafter, apart from a regular 3% annual increase (roughly matching population growth), only Congress would have the power to authorize changes in the US money supply - only for the public benefit - not the benefit of increasing the wealth of private banks.

Pat Carmack and Bill Still
http://www.themoneymasters.com/

Bill Still is a former newspaper editor and publisher who lives in Virginia. He has written for USA Today, The Saturday Evening Post, the Los Angeles Times Syndicate, OMNI magazine, and produced the syndicated radio program, Health News. He has written 22 books and two documentary videos and has spoken on over 1,000 TV and radio interviews and conferences.

Pat Carmack is an attorney, former administrative law Judge at the Oklahoma State Corporation Commission, member of the U.S. Supreme Court Bar, former Chairman of the International Caspian Society, and President of a non-profit educational foundation, He has been a speaker on educational topics at various conferences in the US and Europe.