- FINER POINTS -

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: If our monetary system is unconstitutional, why has the Supreme Court not overturned it?

Answer: The privatization of the monetary system has been the most controversial issue in this country's history, yet the question of its legality has never come before the Supreme Court. There are many theories as to why this is so, but it is widely attributed to the ability of money to control the organs of the body public.

Question: Was all money issued by Colonial governments interest-free?

Answer: Technically speaking, no. Some was issued at interest, or attached to land, precious metals or commodities. The critical distinction to be made is that it was publicly issued, so whatever interest or other profit accrued to these funds was remitted to the Treasury and used to defray taxes.

Question: What was the effect?

Answer: The net effect was that the economy that was served by the money was not burdened by a net indebtedness, hence the appropriateness of calling these issues "debt-free money", even if some of it was loaned out of the Treasury at interest.

Question: Is it possible that money could be issued via loans with interest attached, as long as the proceeds are returned to the Treasury?

Answer: Yes it is, but it is not advisable. Direct issuance without such complications (i.e. via interest-free loans or direct spending) is by far the simplest and most straightforward way to monetize the economy. When gimmicks are attached, the monetary regime tends to lose its transparency and become politicized.

Question: With this flood of interest-free money coming into circulation, wouldn't that cause inflation?

Answer: Not likely. We find that this is the most persistently worrisome concern that people express. "Interest-free money" is not "free money"; it is "accountable money". It is not merely passed out to all comers.

Question: How is "interest-free money" accountable?

Answer: It is accountable in that the money is issued directly through a transparent democratic process that assures its issuance in proportion to the requirements of commerce and industry, according to criteria that are established through legislation enacted by our elected representatives.

Question: What would this process look like?

Answer: Essentially, the process would involve a public assessment of the actual material and human resources that exist in the nation and are available to implement the social and economic vision expressed by the people.

Question: How would this public assessment be performed?

Answer: It would be performed through the same democratic processes that we have now; e.g. town meetings, referendum, the media, political campaigns, letter writing, Congressional testimony, legislative deliberation, and individual efforts to become aware of the issues. The difference is that these processes would, we suggest, become much more effective as people come to understand how the creation, circulation, and retirement of money can implement the vision that emerges.

Question: What would happen next?

Answer: This assessment would then become the basis upon which the Congress would enact the legislation necessary to implement it.

Question: How specifically would this implementation be done?

Answer: The portion of the economic vision that is executed or paid for directly by the government would be funded by the creation and issuance of public money. Some of this money would be injected into circulation via interest-free loans, the rest by direct government spending. The amount of money in circulation which was excess to the economy's need for adequate currency would be taxed out of circulation and retired. This process would be carried out within the functions of the executive branch of government; more specifically the Treasury Department.

Question: What would keep spending from spinning out of control in this process?

Answer: Considerations of spending in a financial sense would not be a concern. This is because the real limitation of the process is what level of economic activity we as a people are able and willing to actually carry out, given the true physical and human (as opposed to abstract financial) resources and costs. The economy would be provided with whatever quantity of currency matched the anticipated level of economic activity. There would be a natural orderliness and transparency to this process that should serve to keep it from spinning out of control in any way.

Question: How is the present system not accountable?

Answer: Within the present system, money is issued through a convoluted scheme that is virtually impossible for the public (or even bankers) to penetrate. Indeed, it is logically inconsistent from the get go (i.e. from the basic private bank loan transaction from which it springs), so there is no way to even make sense of it, and therefore no way to make it accountable. Unlike accountable government institutions, the Federal Reserve is effectively a private corporation with enough political clout to insure that it is never audited. Its obscure practices effectively constitute the institutionalization of the dubious notion that there is such a thing as "free money."

Question: How do you mean that?

Answer: By the terms of the loan contract, the banking system demands repayment, not only of the loan itself, but also of an interest charge attached to the loan. The money to pay the interest was, however, not issued, and therefore does not exist. The very notion that the bank can demand "repayment" of something that it never lent and does not actually exist is the epitome of the notion of "free money". It behooves us to think things through on matters of money, and not get confused by the specious use of words like "free".

Question: But bank loans are paid off all the time. Doesn't that mean that the interest money must exist?

Answer: Bank loan contracts are indeed paid off, but only on individual basis. The interest payments on individual loans are subtracted from the money supply. This, in turn, creates a net shortage of money in circulation available to people holding debts still outstanding to pay back their loans when their payments come due. The net effect is that individual loans are not in actuality fully retired, as the burden of the interest payments are passed into the future. The accumulation of these unpaid charges leads to the existence of a virtually unpayable national debt, both public and private.

Question: What is the track record of the Federal Reserve System as related to inflation?

Answer: The Federal Reserve was presented to the public by its original proponents as the institution that was needed to insure a stable currency of constant buying power. In 1913, the value of the dollar was approximately the same as it had been a century earlier. Immediately after the establishment of the Fed, prices began to inflate on a more-or-less continuous basis until the dollar today is worth only about 1/20 of its original value. This is because the monetary scheme implemented by the Fed is based on issuing money through loans on which interest is charged, and these compounding charges for the use of money must be covered as a cost of doing business; ergo inflation.

Question: What system was used to back the money before the Fed?

Answer: For the most part the dollar was backed by precious metals (gold mostly), or issued directly as a public fiat currency (mainly the Greenbacks).

Question: Is gold backing of the dollar a possible answer?

Answer: No. The history of gold-backed money is a litany of monetary corruption and oppression. We have lost our memory of the problems caused by gold, but the post Civil War public had not, which is why there emerged between that conflict and the passage of the Federal Reserve Act a host of third parties. Some of these became very prominent and scored electoral victories, and virtually all were founded for the expressed purpose of reclaiming the monetary franchise from bankers (mainly by the reestablishment of the Greenback) who wanted a gold-dependent currency.

Question: Isn't there merit to the argument that we need a gold-backed currency because gold has intrinsic value?

Answer: Gold is a marvelous metal that has intrinsic value according to how it is used to serve life. The so-called "intrinsic value" of gold that attracts forces opposed to public money is rooted in the fact that it is a compact and portable substance whose ownership has tended to be concentrated in the hands of an elite segment of society. In this frame of mind, metal becomes a means to serve private interests at the expense of life in the larger sense. The gold standard constitutes an effective reversal of the Golden Rule; i.e. "He who has the gold rules". History shows that societies that have come under the control of the "gold standard" have suffered and fallen under its effects.

Question: Doesn't this all get a bit too complicated for the average person?

Answer: The details do indeed become complex, but much of this seeming complexity arises from the need to deconstruct economic notions that we in this culture have been exposed to all our lives. We are a society that prides itself on its financial sophistication, but we would find at length that what we have assumed to be our education about money is in crucial ways mis-education.

Question: Is the situation hopeless?

Answer: No, it is not. The truth about our predicament is difficult to come to terms with, but once the essential nature of a true monetization process is grasped, the fog of mind clears and the thinking on all matters economic becomes vastly more transparent and straightforward than for the present system. Indeed, transparency and common sense returns to the realm of finance. One day we will wake up to a new morning, and wonder at how we could have believed in the debt-money phantom for so long. To arrive at a true realization about money is a life-transformative experience. It consists of far more that coming up with a clever way to save some dollars for an item of infrastructure in a town that is wealthy enough to afford the cost in any case. Ultimately, it is about the redemption of our communities, our nation, the world, and ourselves. The Founding Fathers understood this, and that is why they fought.