- SPECIFIC QUESTIONS ON BONDING -

NOTE:
The questions and answers below are given, not primarily as a series of bullet points on the topic, but more as exchanges in a conversational flow. We find this approach to be more conducive to communicating the highly integrated nature of any true understanding about money. To get the maximum benefit, the reader is advised to read these questions and answers as a whole statement.

Question: What is the immediate goal of this warrant article?

Answer: It is to find a way of funding public works projects at actual cost.

Question: How do you define "actual cost"?

Answer: The "actual cost" of any enterprise, including a public works project, is the actual time and energy expended in human effort to bring it into being. This "cost" should be reflected accurately in monetary terms in the financing associated with the project.

Question: How might this "actual cost" fail to be accurately reflected in the financing?

Answer: The common mode for raising the funds for a public works project is for the governmental body responsible for the task to print bonds, and then sell them on the bond market. This typically doubles or triples the "financial cost" of over what would be reflected as "actual cost" with respect to what is paid to those who actually do the work on the project.

Question: What is the alternative to the bond method

Answer: The alternative is to issuing money by creating and loaning it directly out of the US Treasury without interest charges attached. This eliminates the need for this extra “financial cost” associated with the bond method. Resorting to the bond method means that the people who do the actual work will receive only one-half to one-third of the money paid into the project, investors and their dealers who handle the bonds will receive the lion's share of the proceeds.

Question: Is there something wrong with investors getting a return on their investment?

Answer: For investment in private enterprises, it is not a problem. In the case of projects that are the property of the whole community, it is problematic for two reasons. One is that the community as a whole (in this case "whole" meaning the American social/political order) could issue money to itself without the so-called "cost of money" occasioned by the introduction of "interest" payments. The other relates to the fact that the American economy needs a money supply with which to facilitate its business. The only logically consistent way this can be issued is for the public body with monetizing authority (in this case the Federal government) to create money directly, and then spend or loan it into circulation.

Question: Why is issuing money through the public body with monetizing authority the "only logically consistent way"?

Answer: It is a way of providing the nation with a money supply without financial cost. If the nation's money is created and issued “at interest” through a private banking system, then, We the People as a whole become "in debt" to that system.

Question: What is the practical consequence to the economy of the nation borrowing its money supply from private banks?

Answer: The money that consumers have to spend in the aggregate comes from the wages and profits they have earned by bringing goods and services to market. If the money supply is stable (i.e. none of it is lost to "interest" payments for which nothing is received in the marketplace), there is a natural balance between the cost of bringing goods and services to the market, and the money available to buy them. The charging of interest against the money supply, however, creates a situation whereby the People can no longer "afford", illogically, to buy back the total of their own production in the marketplace.

Question: Can you say how this plays out more specifically?

Answer: Typically, the first thing that someone who earns an income will do with his or her paycheck is to pay their bills. Part of the money will be used to pay off loans from a bank, like, say, for a house mortgage, a car payment, or a credit card bill. A portion of these loan payments will be credited towards retiring the principle sum borrowed, which, when originally issued, was used to buy something. It represents real purchasing power, only delayed. The rest will be applied towards the "interest" on the loan. The consumer does not receive anything for this, and so it represents a net subtraction from his buying power. This means that by the time he pays his bills, plus spends the cash left over, the money he has available to buy back the value of what he has produced will, on average, be less than the cost of his contribution to production by the amount of the interest charge subtracted from his pay.

Question: What is the root of this problem?

Answer: It is the private bank loan transaction by which our money supply comes into existence. Within our present financial system (i.e. the Federal Reserve System) all money comes into circulation via loans from private banks. Such transactions take many forms. For example, one might go into a bank and borrow money to build a home, buy a car, or start a business. Under the present regime, even the Federal government gets its money by borrowing from the private banking system (which is where the "Federal debt" comes from). The principal proceeds of such loans are borrowed and spent into circulation, which is were we get our money supply. As these loans are paid off, the monetary credits applied to them are extinguished, and so go out of existence. The money supply is in this manner maintained by continuously issuing new loans.

Question: Is there a particular problem with this?

Answer: We believe there is. By the terms of such loan contracts, there is an "interest" charge attached. The problem is that the monetary credits required to cover the “interest” payments were never issued. Thus, the bank is effectively demanding to be repaid money that it never lent, and in fact does not exist. In a practical sense, this means that there is never enough money in circulation to retire all the loans that brought the money supply into existence. To make matters worse, the "interest" charge on money loaned into circulation continually compounds (i.e. increases exponentially). If one follows the math (and it isn't much math) one soon finds that, in order to maintain a money supply, while servicing old debts, the people in the economy as a whole are obliged to perpetually borrow increasing amounts of money into circulation.

Question: Can you be more specific as to how this plays out?

Answer: The resulting extra borrowing is a factor that snowballs into a massive indebtedness that becomes woven into the financial lives of all participants in the economy, both private and public. This sets up a circumstance whereby one is obliged to struggle to keep oneself from slipping into the position of having to go ever deeper into debt to help cover the net monetary shortfall in the economy as a whole.

Question: Why don't we commonly see this?

Answer: We don't see it because this "interest" burden creates a shortfall that applies to the economy as a whole, but becomes dispersed as a hidden factor in the financial affairs of its participants. Naturally, some people will do better than others, and the "winners" will be held up as examples to show that everyone can prosper. In their respective lives, people will generally aspire to emulate that image. To keep the system going, however, there will have to be "losers", i.e. those who will find it their lot to sink deeper into debt. This is a structural reality that is tied to the mathematics of the bank-loan transaction, and is not a function of the relative industriousness, frugality, and other character traits of the participants in the economy. Even if we were all financial saints, the economy would still be sinking ever deeper into debt. The excruciating stresses, noisy contentions and distortions of culture that arise out of the resultant socio/political/economic churning effectively obscure the flaw at the core of the bank loan transaction by which money itself comes into being.

Question: By selling bonds on the financial markets, Concord would not be going to a bank to borrow money into circulation. How, then, is the bond method of raising money related to the inability of the economy to pay the interest on the debt lien against its money supply?

Answer: There has to be a process somewhere in the economic matrix by which money is allowed to come into circulation without putting the economy as a whole into debt due to "interest" charges. This can be done in a number ways, but it is natural that one major avenue of introduction be the financing of public infrastructure. The social franchise to create and circulate money is thereby utilized for the common good. As it stands now, all currency is issued through private bank loans in one form or another. Any funds that would be used to purchase public bonds, therefore, are in actuality money that has been borrowed into existence for some other purpose, and are of necessity maintained in circulation by a debt burden somebody is carrying. If this money were issued directly, there would be no need for there to be in circulation an equivalent sum of surplus capital that someone was obliged to pay "interest" on. If this principle were expanded sufficiently to cover the entire money supply (whether by interest-free loans or by direct spending of money into circulation), then the “interest” burden, associated under the present system with the very existence of the money supply, would be eliminated. A host of transformative ramifications would unfold from this simple fact, including that public works could be commonly funded at actual cost.

Question: Is there not also a cost of money that needs to be covered by "interest" charges?

Answer: In actuality there is no "cost" that needs to be covered for money created in the public domain (i.e. directly by the US Treasury), except as reflected in the incidental cost associated with the real effort to print, circulate and otherwise handle the currency (which would come out of monies issued to cover that purpose). What sense would it make for the public to charge "interest" to itself? On the other hand, there is a "cost " associated with the loaning of money that is already in circulation, which it may be appropriate to cover with an interest charge. This is because, unlike the Treasury, private lenders need to pay for expenses out of income, plus make a profit in order to finance their own living expenses and stay in business.

Question: Can you supply a clear image of how the control of the money supply affects the economy?

Answer: If you were trying to start a market garden, you need water. If I'm standing at the spigot and control the water supply, I control your business. Imagine now that the market garden represents all businesses and that the spigot controls, not the water supply, but the money supply. That is what monetary authority is about: The flow of money controls our entire economy, our quality of life, and the very power to implement our visions and ideals. This is why our founding fathers stipulated that Congress, as the most direct representatives of the People, shall retain the monetary power.

Question: So is it the guy controlling the hose who is the source of our monetary woes?

Answer: Not exactly. A more refined image would be that the monetary spigot that the controller (the banker in our story) has available to do his job has, through no fault of his own, a design flaw such that it will not dispense enough water to supply the needs of the garden, regardless of how large or small the garden is. He wields the spigot and takes the blame, but there is nothing he can do unless the principle by which he is bound to exercise his fiduciary trust is reformed. This is, in a simple way, the monetary predicament in which our civilization finds itself at present. It behooves both the productive and financial sectors of the economy to open up a dialogue to explore how this dysfunction might be remedied. In the end, do they not both live off the proceeds of the same garden?

Question: Do you believe there are "good guys" and "bad guys" in this story of money?

Answer: We don't think anything is gained by such conclusions. The truth is that we are all economic creatures. Each of us represents a part of the problem, and, potentially, an agent for the solution. Impulses of judgment, blame and recrimination must be left behind, and a constructive dialogue opened up between all sectors of the society. The nurturing of such a dialogue is at the heart of the Concord Resolution. We know of no subject that is more germane to our welfare as a nation.

Question: Is there any American money in circulation that was not borrowed at interest through the Federal Reserve System?

Answer: Yes, but in relatively miniscule amounts. These include US currencies issued in years past in the form of Greenbacks, and gold and silver certificates. Whatever bills remain extant are almost surely to be found in collections of old money. More current and still-circulating mediums include local currencies, barter credits, commemorative coins, and the like. There are also some interesting ideas for circulating medium on the horizon, including private currencies and credit exchanges created and distributed over the internet. The potential of these innovations, however, has been suppressed due to pressures caused by the debt-based national currency.

Question: How can this process be turned around?

Answer: It begins, we believe, with citizens educating themselves on these matters and taking them up in their communities. Learning needs to be connected with doing, or the lessons gained won't come to life. That is the idea behind the "Concord Resolution".

Question: The voices in the media say that the answer to the debt problem is "economic growth", but the economy has been getting larger for decades and the problems with debt only seem to get worse. What is happening?

Answer: The expression "economic growth" is a euphemism for the practical necessity to borrow more money into existence on a continuing basis to service the interest on old debt. The fact is that we are growing into our debt, and have no hope whatsoever of growing out of it. That trend will not reverse until the unsound principle on which the monetary system is founded is changed.

Question: Are you effectively advocating a more socialistic approach?

Answer: No. Socialism, as we understand it, is social engineering exercised by a relatively small group of people. What we are talking about is the setting up of a monetary matrix such that society is enabled to evolve in an organic manner out of its own growth processes and inspirations, without resorting to social engineering devices and master plans. The issuance of money is founded in the law, and the law, properly understood, is society's way of addressing issues of equity. It has a fundamental role to play in the commonweal as related to monetary matters.

Question: You mentioned the interest-free Colonial script issued by the government of Massachusetts and, thereafter, by the rest of the colonies. Are there other historical examples of such debt-free money?

Answer: Yes. The two issuances most worthy of note are the Continental Currency issued by the Continental Congress of the Revolutionary War period, and the Greenback of the Civil War period.

Question: Didn't the Continental Currency collapse?

Answer: Yes, it did. In fact the phrase "not worth a Continental" stems from that period. What is rarely mentioned, however, is that the British launched an all-out war against the currency by counterfeiting it by a factor estimated at five to ten times its original issuance. That would destroy any currency. Thomas Paine wrote, "Every stone in the bridge that has carried us over (through the war), seems to have a claim upon our esteem. But this (Continental Currency) was a corner stone, and its usefulness cannot be forgotten."

Question: How did the Greenback fare?

Answer: Extremely well. It carried the nation through the Civil War, and emerged with the support of the majority of the People.

Question: If this is the case, why did not interest-free money continue to be issued?

Answer: There was a tremendous effort on the part of the People to insure that it would continue to be issued, but the monetary franchise was co-opted by private interests that favored other schemes. The result was that gold or bond-backed private money (as opposed to interest-free public money) came once again to dominate the system.

Question: How did this co-option take place?

Answer: It was the result of an ongoing historical struggle that commenced in 1690 when the Colony of Massachusetts first issued its own scrip, led to the American Revolution, and continues to this day. There have been many landmarks along the way, but the most significant turning point came with the passage under dubious circumstances of the Federal Reserve Act in 1913.

Question: How do you mean "dubious"?

Answer: A long list of outstanding issues had deadlocked the legislation for months, but they were suddenly resolved in mere hours, paving the way for the Act's passage late on December 23. The timing of the vote, two days before Christmas, was purposely chosen by the sponsors of the Act, knowing that many of its opponents would be home for the holidays.

Question: Is this another conspiracy theory?

Answer: We leave that for others to determine. We don't question that those who assured the passage of the Federal Reserve Act did what they felt was best. We ourselves believe it is important to look ahead constructively and ask how we can best address our current the monetary situation, which is an outgrowth of the Federal Reserve Act.

Question: How do you think that can be done?

Answer: If monetary matters are to serve the people, we must keep pace with them in our understanding. This is an important reason for bringing this article directly to town and city council meetings.

Question: Shouldn't monetary matters be left to bankers? This is, after all, their area of expertise.

Answer: In an administrative sense, yes. Indeed, their expertise will be needed, but the power to create and issue money is not, as stated in the Constitution, an administrative, but a legislative function. Accordingly, our Founding Fathers were very clear that it made no sense to parcel that authority out to banks, which cannot but be self-interested contractors.

Question: Are you suggesting that we do away with the private banking system?

Answer: Not at all. Private banks perform many functions, and they would still be essential as agents for the carrying out of whatever monetary policy was decided through our democratic process. They would even continue to participate in the money issuing process, but this time in a manner answerable to society as a whole according to fiduciary criteria designed to "promote the general welfare" (as opposed to private interests seeking speculative gain).

Question: What was the result of the Federal Reserve Act?

Answer: It established the Federal Reserve as the central banking system of the U.S. Its control was more firmly consolidated in the Banking Act of 1935, which sanctioned the Federal Open Market Committee. Through this committee, the money supply became controlled directly via bonds sales and purchases carried out by the Open Market Desk at the Federal Reserve Bank of New York.

Question: How exactly does the Open Market Desk work?

Answer: Simply put, when the Fed wants to increase the money supply, it purchases bonds through the Open Market Desk with money that it creates for that purpose. That money is by this process created and injected into circulation. When the Fed wants to decrease the money supply, it sells bonds through the same desk, and the money received from those sales is effectively withdrawn from circulation and extinguished.

Question: Why does one hear about the alleged dangers of "fiat money"?

Answer: The expression "fiat money" has been raised as a fearful specter by interests opposed to the public issuance of money. They play on a lack of understanding in the public mind about what fiat money is. It is money that is issued by declaration of the sovereign power. In previous times this often meant Caesar or the King. In the American case the sovereign power resides in We the People, through our accountable representatives. The issuance of money, then, becomes a fiat of the democratic will. Properly understood, fiat money does away with the fiction of money being backed by precious metals or interest-based financial instruments, which are always devices for private control and profit at the People's expense.

Question: How would the issuance of public money affect the Federal deficit that is so much talked about?

Answer: The phrase "Federal deficit" is, we suggest, a misnomer. A society cannot borrow money from itself. The idea that there is a "Federal deficit" which aggregates year-by-year into the "Federal debt" is a mental ruse created to give credence to the idea that the interest charge arbitrarily attached to the issuance of society's own currency is somehow justified.

Question: Are you saying that our government has handed our own money-creating authority over to the private banking system, from which it then proceeds to borrow back, at interest, the money it needs to run our government?

Answer: Exactly.

Question: And you are maintaining that we would have no Federal deficit if our government had retained its monetary authority?

Answer: Yes. If the public issued its own money supply through its government, it would not have to be borrowed from a private banking system, and the very possibility of debt to the Federal government or the economy as a whole would not arise. This may be a hard fact to believe given that the ostensible reality of the “Federal debt” is continually drummed into us. We as a society are subjected to many assumptions related to the monetary system that, upon close examination, do not make sense.

Question: For example?

Answer:We are told that every newborn child is already some $200,000 in debt. This is a figure arrived at by dividing the estimated total indebtedness of the nation, both public and private, by the number of people in the country (60 trillion/300 million = 200,000 (estimates vary)). Does this, by any stretch, make sense? How can a baby borrow money? Is "original debt" now a proxy for "original sin"? Also, it is reported, the total of all bank debt, public and private, is approximately equal to the net worth of all the physical property in the country. This begs the question, why are we not richer by all this actual wealth, instead of poorer by all this alleged "debt"? These anomalies will never be resolved until we are willing to suspend judgment and reexamine with a fresh mind the basis of our monetary system.

Question: If money were issued out of the Treasury starting today, how long would it take to retire the Federal debt still on the books?

Answer: The trillions of dollars worth of bonds already outstanding against the money supply would, upon reaching their date of maturity, be redeemed with newly created public currency, instead of being rolled over with even more borrowed money. This process would go on in an orderly way, without default or economic trauma, over the next three decades until all the outstanding bonds attached to the currency were retired.

Question: Wouldn't the introduction of too much money through the retirement of bonds lead to inflation?

Answer: No. These bonds will be retired in any case, and new currency issued for that purpose. The problem under the current system is that they will be retired with more "expensive" money; i.e. money with yet more interest-bearing bonds attached. We are suggesting that instead they be redeemed with interest-free United States Notes. Thus would a major part of the fuel stoking inflation be cut off.

Question: What, then, is the cause of inflation?

Answer: The cause of inflation is the ever-compounding "interest" charge attached to the maintainance the money supply. This can only be covered by increases in the prices of goods and services that businesses are obliged to pass on to us as consumers. We must recognize that the cause of inflation under the present system is not too much money chasing too few goods. Check the store selves; are they empty? Rather, are they not burgeoning?

Question: What is the key to controlling inflation?

Answer: It is to maintain the money supply at a level commensurate with the level of commerce it is intended to support.

Question: How, precisely, would that be done?

Answer: There would be two streams by which money would come into existence and be entered into circulation. One is by interest-free loans, and the other through direct government spending. The level introduced through loans would be controlled naturally through the criteria of the loan process (it would be let out only for bona fide economic activity), and the payback and retirement of those loans when their purpose had been satisfied. The level introduced via direct Federal spending would be controlled by taxing any excess buildup out of the monetary pool, and then extinguishing it. The issuance of new money to retire outstanding government bonds would be a third, but temporary stream, the buildup from which would be controlled by taxation.

Question: Is the process really that straight-forward?

Answer: Yes. In practice it depends, as always, on the task being carried out in a sound manner, but it is very transparent and understandable even to the layman. This, in a democratic system, would tend to keep the process on track.

Question: Couldn't this money collected from taxation be used to pay government expenses?

Answer: A government that can create money does not need a source of revenue. Within a public monetary system, taxes on the Federal level would not pay for anything. The authority to issue money does that. Taxes, then, become an overflow device to take excess money out of circulation, thereby regulating the level of the monetary pool. This is a transparent process whereby the quantity of currency in circulation can be maintained, as stated by Franklin "...in proper proportion to the demand of trade and industry." It is a straightforward mechanism for preventing "inflation" (we have no such mechanism now).

Question: Would such a practice apply to state and local governments also?

Answer: Potentially yes, as was the case during the Colonial period. For the present time, however, governments below the national level do not issue currency, and so must find ways to take in enough revenue to pay for their expenditures.

Question: Didn't President Clinton show us a way out of the deficit?

Answer: No. The money pumped into the private economy due to the record Reagan/Bush41 deficits gave people the confidence to greatly expand economic enterprise and, consequently, to borrow more money into circulation. This increased level of private borrowing allowed the Federal government under the Clinton administration to step down as the borrower-of-last-resort? That cycle, however, eventually played out as the ability and willingness of people in the economy to go deeper into debt was exhausted, and the government was obliged to get back into heavy borrowing to prevent a monetary meltdown. In truth, the Clinton administration was riding a wave of monetary expansion that it had little part in creating, but gave it the appearance of "bringing down the deficit".

Question: Why should I get involved if I am a banker?

Answer: To be a banker in this time is to find oneself caught in a moral bind. In order to render his essential service, he is bound by his fiduciary responsibilities to secure his customer's signature on a contract that, we suggest, cannot ultimately be satisfied. The reason we say this is that the interest burden created by a private bank loan is not really paid off, as it is merely passed on in snowballing fashion to succeeding generations of borrowers.

Question: What would happen if the rate at which the populace was taking on ever-more debt slowed down?

Answer: The same thing that would happen if the spigot referred to earlier was turned down. Depending on how much such borrowing decreased, the monetary system would go into a spiraling contraction, or even implode.

Question: What do you mean by "implode"?

Answer: We mean that people would start finding that there was not enough money in circulation to pay their bills. They would tend to slow down buying, stop borrowing, and cease to initiate new economic ventures, with the result that the money supply would contract still further. This is the vicious cycle that precipitated the Great Depression.

Question: Would banks go out of business if the money supply was issued by the Treasury?

Answer: No. They would stay open as before, and people would still go there for loans much as they do now. The lending process, however, would become two-tiered.

Question: What do you mean by "two-tiered"?

Answer: There would be two types of loaning processes. The first would relate to money that was created and loaned into existence in a manner similar to how banks operate now, except that there would be no interest charge attached. There would, typically, be a relatively small fixed fee to pay for the actual services performed in handling the account, but it would not be ballooned by interest charges payable to the privileged holders of debt paper. The second tier would relate to money that was borrowed out of money on deposit at the bank. This should seem familiar, as it is the basis upon which savings-and-loan associations and credit unions have traditionally operated. These loans might, in fact, include an interest charge, but it would tend to be much lower because the funds loaned would be out of a money supply which of itself did not have an interest charge associated with keeping it in circulation.

Question: What would determine who would be eligible for which loan?

Answer: The criteria which governed what loans would go to different borrowers would be determined thorough the legislative process, and be guided by what would be most equitable and expeditious for the commonweal. By this standard, presumably, projects that would benefit the people as a whole, like say public works projects, would receive priority for interest-free funding. Enterprises that were more privately oriented would more likely be obliged to enter the second-tier private lending process. Where to draw the line between these two is not fixed, but would be subject to democratically determined policy guidelines.

Question: Would the banking system become part of the government?

Answer: No. Banks would remain as private institutions. The many services they perform would continue as before, including the issuance of money. Their authority to issue money, and the criteria by which it is issued, would come directly from the public sector and serve the common good.

Question: What difference would it make to a banker whom he works for?

Answer: Bankers, like other professionals in their respective spheres, are typically fine people who are trying to help the clients they serve. As agents for public monetary policy, they would no longer be forced to work for a system that is inimical to their customers' interests. They would instead be freed to serve them with undivided heart and mind.

Question: What would that do for the banking profession?

Answer: It would largely free it from the onus which often taints the profession (in many people's eyes) as "greedy usurers". Bankers would come to be seen more and more as true financial partners to the enterprise of the people.

Question: What would a transformation of the monetary system mean in particular to politicians and other public servants?

Answer: It would open up the possibility for them to be the benefactors of the commonweal they profess, and, we trust, want to be. Within the present debt-money system our economy as a whole is not solvent. That is, it cannot pay its own expenses and has to resort continually to borrowing more money to conduct its operations. Within such a condition our political leaders have effectively become, not the executors of the democratic will, but the receivers in a never-ending bankruptcy reorganization of the economy as a whole. Their honest intention to serve, their ability to deliver on their promises, and their peace of mind cannot but be subverted by the impossible budgetary position they find themselves in.

Question: What are the implications of a debt-free monetary system for the private citizen?

Answer: Whether one is talking about direct personal, corporate or government debt, all burdens are ultimately passed on to and borne by the private citizen.

Question: Could you give an example to clarify how that would work for individuals?

Answer: Yes. Let us take the instance of someone borrowing, say, $200,000 to finance the construction of a home from a private bank. By the terms of a typical thirty-year mortgage, the borrower would be obliged to "pay back" triple that amount, or $600,000, over the duration of the contract. If the money were instead issued in a loan from the public Treasury, the borrower would only be obliged to pay back the principal and incidental fees.

Question: Are you saying that all money for home mortgages would come directly from the Treasury?

Answer: Possibly, but not necessarily. That would depend on public policy. Strictly speaking, it would be necessary to issue only enough money through the public monetization process (tiers 1 & 2) to fill out the money supply. There are many interrelated factors that that would need to be evaluated. For example, it could be determined that money for home mortgages would be financed out of the Treasury, but only to a level sufficient to insure adequate housing. The rest might come from borrowing from private banks at interest, or perhaps at a fee that covers the banks cost of doing business, plus a profit (much like for other businesses). There are many possibilities.

Question: Would there still be wealthy people?

Answer: Yes. People with a true gift for money management would tend to emerge as financial partners to productive enterprise in the economy. This is both a necessary and a vital role. It is only the speculators in currencies and debt-instruments who would have to find other work, but that should not be a problem in an economy that did not suffer from any structural unemployment because it had a stable and sufficient money supply.

Question: Wouldn't such a radical change upset the stability of the economy?

Answer: No. The effect would be precisely the opposite. The source of the chronic instability that the US economy, and indeed global order, exhibits right now is a structural problem derived form the constant pressure on every economic player to resist being one of those who is forced further into debt so that a money supply for the economy as a whole can be maintained.

Question: Returning to the resolution, would the availability of such loans at cost lead to lack of constraints on the part of towns getting money?

Answer: Why would we want to place artificial restraints on communities from securing the necessary funds to provide for their actual needs by doing work that they have the will and resources to carry out?

Question: Are you not concerned about the potential for abuses here?

Answer: Of course, any system can be abused, but the straightforwardness, transparency and inherent adequacy of a publicly issued money supply would tend strongly to lessen any such tendency. Funds would not be passed out willy-nilly, but attached to bona fide projects that are reviewed and voted on by all parties, from the treasurer, finance committee, and selectmen or council members to the citizens themselves.

Question: Wouldn't the availability of greater funds for public works bid up the price of labor and materials, thereby cutting down on the advantage?

Answer: While there are too many factors involved to give a definitive answer, we recognize that this is a concern that often arises in those who hear about this proposal. We, as a society, have created an economy that to a large extent relies on other nations both to do the work and provide the financing to meet our needs. This tends to draw down productive capacity that might otherwise exist. While a newly adequate money supply might contribute to a shortage that would cause a bidding-up of prices in the near term, the situation would rectify itself as the economy trended towards a new balance between our actual needs and the ability to meet them.

Question: Suppose there were an increase in prices. Would this not negate the savings realized by not having to pay interest on bonds?

Answer: This could happen in part, but not to the extent that it would double or triple the costs of the project, as is the case with the interest on bonds. It should be noted that there are countervailing factors that would tend to drive down the cost of the project.

Question: Can you give an example?

Answer: Yes. Contractors also have to go to the bank to borrow the funds to cash flow equipment, labor and project-related expenses. The interest charge issued against a money supply that is borrowed into circulation has the effect of driving up the cost of virtually all money issued in the private financial market, where most likely the contractor will have to go to get his funding. One reason for this is that private lenders themselves have to cover the interest on the existence of money they have to lend as a baseline from which to add on the extra margin they would need to make a profit. If this factor were removed the cost of virtually all financing would come dramatically down.

Question: What is the significance of the fact that our monetary system is becoming global?

Answer: Every national currency on the planet is modeled after the debt-based US dollar. Consequently, there is no economy in the world in which the people aren't short-changed as we've described. Effectively, there is no nation in the world that can in its own domestic marketplace buy the equivalent of what it produces, without, that is, running up more debt.

Question: What do you see as the significance of this fact?

Answer: Every nation tries to make up for its shortfall by obtaining extra money through a positive "balance of trade" with its neighbors. It is impossible, however, for everyone to have a positive balance with everyone else, but it does not stop them from trying. This generally plays out in demagoguery of each nation's political scene, as politicians promise to secure for their constituents their just due, and balance the books. This is, of course, impossible under current conditions, but the stresses engendered drive rivalries on all levels worldwide.

Question: How is this related to the fact that much of our debt is held by foreign individuals and nations?

Answer: Because monetary price for labor in its domestic market is generally higher than abroad, American products are at a great disadvantage in the global marketplace. This assures that the America will experience a "negative balance of trade" with respect to other nations. This is another way of saying that much of its money supply will be lost to foreign countries. The only way it can retain enough money to keep its domestic economy supplied is to sell its trading partners debt bonds, which brings the money lost to foreign countries back into the US monetary pool.

Question: Why do foreigners continue to buy these bonds in such great quantity?

Answer: The answer is complex, and, we suggest, largely psychological. Fundamentally it is rooted in the fact that in 1944 at a conference at Bretton Woods, New Hampshire (where the World Bank and International Monetary Fund were also established), the US dollar was declared to be the backing for all world currencies ("paper gold" they called it). Every nation has a vested interest in keeping the dollar propped up to secure the buying power of its own currency. This seeming imperative is further solidified by the fact that all trading in the world's oil markets can only be done in dollars.

Question: How does this relate to the instability experienced in the world today?

Answer: The debt-based nature of the dollar is the very engine of instability in the world, as all economies sink ever more deeply into debt. On the other hand, if the structural problem caused by the charging of interest by private banks on the issuance of money were rectified, it would be possible for the dynamics of the entire global order to be harmonized in a way that could hardly be imagined now. Even the enterprise of banking itself would experience new life.

Question: So the transference of the franchise for money creation back to the public sector, so that it can be exercised for the common good, instead of for private gain, is the crux of the matter?

Answer: Yes, it is. History has shown that when the sovereign power to define, create and control money is given over to private interests, the People as a whole wind up in debt to those interests. This invariably results in processes of political and social decay being initiated that will, in the long run, cause the society to collapse from within. This is the veritable "Roman road to ruin".

Question: How long can this continue?

Answer: Nobody knows, but what is certain is that the debt-based structure that supports the dollar itself is tottering, and cannot forever continue to be propped up with monetary gimmicks. We live in a time that has no precedent. Sinking into another world depression as the price for not getting our monetary system in order is no longer an option, except in the most horrific sense. Civilization as we know it has effectively lost its subsistence survival skills. Its only freedom then is to come together in brotherhood around the monetary question.