The Sovereign Monetary Alternative Whose Time has Come (Again)

March 20th, 2014
in Op Ed

by Scott Baker

It's no secret that We The People do not control the money supply. Whether it is banks issuing money as loans, or the Central Bank issuing money to the banks as reserves via QE, all of these "liquidity" measures have left many Americans asking, "Where's my bailout?" Even the Federal Government has had to borrow its own currency since the Federal Reserve Act of 1913 made a semi-private Central Bank the issuer of the currency - except for coins; those we still issue directly and charge the banks for sales to them, since the coinage act of 1792. This means the seigniorage (the face value of money minus the cost of its production) accrues directly to the Government's account with the Fed.

Follow up:

Less well-known is that we have had a sovereign paper currency in the past - United States Notes. These were first issued by president Lincoln in 1862, re-issued through 14 series until 1971, and not fully phased out by Treasury until 1996.

The recent and repeated Government's and Federal Reserve's statement that U.S. Notes and Federal Reserve Notes (FRBs) are equivalent, has been challenged in court:

One such lawsuit, Johnson v. Department of the Treasury of the United States, et al., case No. CV11 6684 (NJV), "alleges suppression of debate re great benefits that the government would automatically gain from replacing Federal Reserve notes with new issues of United States notes."

And a petition I started - which just passed 500 signatures - is exhibit B in this challenge. It reads:

Money should belong to the people, not the banks, and should be issued in sufficient quantity to meet the productive capacity of the nation, not withheld from circulation by banks that did nothing to deserve it.

Congress is empowered by Article 1, Section 8, of the United States Constitution to produce debt-free United States Notes at any time, for any reason, and actually DID create them under president Lincoln (the original "Greenbacks" - $450 million) to defeat the South during the Civil War, when New York City banks wanted 24-36% interest.

This is money that would not have to be borrowed (thereby avoiding any debt-ceiling issues), taxed to pay for, or backed by Gold. It is legal tender, acceptable for all payments, including taxes.

This new money need NOT be inflationary if dedicated towards those areas of society which are in deflation, such as infrastructure.

U.S. Notes would function as a "Public Option for Money."

A bill sponsored by Representative Dennis Kucinich and John Conyers, the N.E.E.D. Act, HR 2990 (formerly HR6550), would produce U.S. Notes, specifically for infrastructure, Social Security, and universal healthcare, and make the Federal Reserve a department under Treasury - for the first time, a true branch of government.

Even if you don't believe in the full measure of HR 2990, our current debt-ceiling crisis, which comes on the heels of the Federal Reserve pumping $16 trillion into the banking system, leaving most Americans struggling with over 9% unemployment, and asking "Where is my bailout?" points to the need for a real, meaningful - and immediate - solution that would provide jobs and opportunities.

United States Notes were our country's longest-living currency, lasting until the Mid-1990s. They were accepted everywhere and were widely embraced when they first came out in the late nineteenth century. It is time again for America to take back its sovereign right to "coin Money" - Article 1, Section 8 of the U.S. Constitution.

Support the True Greenback, United States Notes!

And it may be found here: End the Debt Crisis with debt-free United States Notes!

Similarly, we could end interest payments on our Treasuries sold to the Fed, by simply reclassifying the Fed's account to be a government account instead of one at a private bank. By reclassifying the Federal Reserve account - and by implication, the Federal Reserve Bank itself - as a public entity, subsumed under Treasury, we would eliminate 19% - and climbing - of the cost of interest on the debt that we owe to the Federal Reserve (Fed Now Largest Owner of U.S. Gov’t Debt—Surpassing China), taken from more than 40% of every dollar of income taxes (Taking the National Debt Seriously).

You can't owe money to yourself.

There is an e-petition to do that here:Reclassify the FED's account, from private to public

Finally, a more modest petition to commemorate the 150th anniversary of Lincoln's assassination with a billion $5 Lincoln U.S. Notes (I have two such old series notes I bought on eBay, where they sell for about twice face value) has been posted here:Commemorate President Lincoln's Assassination with 1 Billion Debt-Free Lincoln $5 Bills

It reads:

To honor President Lincoln on the 150th anniversary of his assassination, let's issue one billion $5 commemorative United States Notes. The original United States Notes were issued by president Lincoln in 1862-1863 and totaled $450 million, or 40% of the Northern currency at the peak of the Civil War. With Congress' cooperation, President Lincoln was able to take this emergency measure because the constitution's coinage clause in Article 1, Section 8 allowed Congress to "coin Money."

Why one billion in $5 U.S. Notes?

  1. $5 Billion is roughly consistent with the annual production of $5 currency currently:  Annual Production Figures of United States Currency
  2. $5 Billion is roughly consistent with other "Commemorative Money" Bills, such as HR2535 from Rep. Andy Barr calling for $3 Billion in commemorative coins:  H.R. 2535: American Liberty Coinage and Deficit Reduction Act of 2013

Today, $5 billion in new United States Notes would be immediately accretive to the Federal account through Seigniorage (the face value of money, minus its production cost). This money would go into general circulation for the benefit of We The People, just as Lincoln intended with the original issuance of the first Greenbacks. It would not effect the amount of $5 Federal Reserve Notes issued and the United States Notes would circulate on par with Federal Reserve Notes, fully usable for all domestic private and public debts and taxes (there are long-standing exceptions that disallow U.S. Notes to be used to pay foreign debts or to pay off the government's debt).

This is money that does not have to be raised through taxes or borrowed, just like coins. It is money that the Treasury is allowed to produce, and has produced from 1862 - 1971, as our nation's longest-lasting currency.

Monetary Sovereignty is at the heart of a functioning independent nation. Without that, we are not People of the United States, we are People of the Bank.

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