Written by Carmine Gorga, The Somist Institute
William Jennings Bryan’s words are as true today as they were when first uttered more than one hundred years ago:
“When we have restored the money of the Constitution, all other necessary reforms will be possible, but until this is done there is no other reform that can be accomplished.”
The two petitions (Can You Petition for Monetary Reform?) that are now circulating on the Internet are designed to do just what Bryan sought. They are designed to restore the money to the Constitution, meaning that they are designed to reconnect with the best in the American-Christian-Judeo tradition, and they are designed to transform the present monetary system in such a way as to assure us all a future that is stable, lasting, and just. The mechanics are as simple as they can possibly be. They are simple, but not simplistic at all. A few of the expected results are given below. A much longer list, affecting many more aspects of our social, political, and cultural life, could easily be provided.
With the first petition, the Federal Reserve System (the Fed), the organization that performs the task of a central bank in the United States, is expected to create money by issuing loans in accordance with these procedural specifications:
a. Loans only to create real wealth;
b. Loans at cost;
c. Loans to benefit all members of society.
The content of the second petition is outlined below.
EXPECTED OVERALL EFFECT
Signing the two petitions and gradually implementing them will cause a deep cultural change: From the worship of power and money, we shall pass to the practice of love and justice. Deep cultural changes are organic; they gradually affect each and every nook and cranny in society; therefore, they are impossible to predict. But here are some of the most likely effects to occur. We shall focus on financial affairs.
On the Meaning of Money
Of course, we cannot even talk of justice in financial affairs unless we truly understand what money is. Technically, money is not wealth; it is a representation of wealth. But this technical definition barely scratches the surface of what money is for us.
Money is so powerful that, to create a new and better world, some want to do away with it altogether. They confuse the thing itself with some of the nefarious uses that are made of it, chief among them is the use of money to control people. This use is not inherent to money but a consequence of the scarcity of money, namely, inherent to the conditions under which money is created and distributed; and these are the conditions that we aim to change with the proposed changes in the procedures of the Fed.
Money, as my barber told me, is the best labor saving device. If you have money, you can pay people to do work for you—and people will find you even if you live in the North Pole. That is indeed important: Money is a store of value. It is this word “value” that gives us an opening into the true meaning and use of money,
Remember when we bought “pet rocks”? We did. And what did we exchange in the purchase of pet rocks? As Rudolph Steiner pointed out, in any exchange we exchange values. We gave our money in exchange for what? Rocks? No, we gave money away, because we loved pet rocks.
Money then is a representation of what we love—and not only that. Money is at the same time its converse. Money is a protection against what we fear most.
And what is that? We each have our personal fears, and money unifies us in that as well. Money allows us to purchase economic security. Its loss is what we fear most.
And here the issue gets tricky and technical. As individual persons, we can never purchase economic security. Economic security comes as a result of what we do for our community—and what our community does for us.
Money then is the most syncretic expression of our most varied relationships with other people.
Individually, we cannot either acquire or give economic security—to ourselves or to others. It is only an organized community that can give economic security to individual persons.
On to money in politics, then.
Expected Effects on Politics
Today, money controls politics. No, that is a wrong impression: Money attempts to control politics.
And we attempt to take money out of politics. As Dr. Peter J. Bearse points out, that is an impossible dream. Money will get out of politics only when people get into politics.
Hence, a citizenry always gets the government it deserves. If we think we deserve better than the government we have today, we have to get involved in politics.
To get involved in politics is the same as to learning how to live in concord. There we are then. That is our most difficult task. But if we do not get this goal into our range of expectations, we will never achieve it. Today, this seems to be an impossible task. Too many communities are broken; too many are in a state of war. And money, of course, is the source of much political grief. Love of money is the source of all evil. But there is another way to approach the issues.
Money is a common good. Once we truly understand it, money offers us our best last hope to live in harmonious relationship with each other.
The day in which the Fed transforms the privilege of access to national credit reserved for the few to a right available to citizens, that day many consequences will follow one from each other.
MANY MORE EFFECTS
First of all, that day we will give wings to our entrepreneurship and innovation.
Entrepreneurship and Innovation
Let us free the twin angels of entrepreneurship and innovation and, in a very short time, they will create an amount of new real wealth that will dwarf all the wealth created in the past.
On the Prevention of Accumulation of Wealth into a Few Hands
If new money created by the Fed will be spent only on the creation of new real wealth, many of the existing conditions that favor the Pac-Man Economy will be altered. The Pac-Man economy is that social organization in which money is used to purchase existing corporations, mostly to the detriment of present workers and future owners. If the public money created by the Fed will not be permitted to be used for this purpose, much stability will automatically be added to the economy. The right to the protection of one’s wealth will be enhanced. And liberty will be preserved because such operations can still be carried out with private money, but at greater interest costs.
Fair Distribution of Wealth
And the wealth will be fairly distributed, if we tie fresh loans to ESOPs and co-operatives.
The Work of Unions in the Future
What benefit does the worker receive, if the day after the minimum wage is raised by law the market raises the price of goods and services? While people on fixed income suffer immeasurably, room is made only for lower-priced regions and countries to enter the market. Unions, to be effective in the future, will have to learn to tie their dues, no longer to higher wages, but to a fair distribution of the profits—a distribution of equity, a distribution of shares of ownership stock.
And Inflation?
And Inflation? Will not there be inflation with the creation of new money by the Fed? There will not be any inflation with ESOPs and cooperatives in action. Wages are distributed ahead of market decisions; profits are distributed after the market has decided in favor of the product or service being provided.
Besides, under this proposal new money will be created only in correspondence with the creation of new real wealth. The balance between the two will be dynamic and continuous; hence, no inflation will be possible.
Finally, there are substantial differences between the present proposal and similar-looking ones such as the “printing money” of Milton Friedman, Ben Bernanke, Adair Turner, and the adherents to Modern Monetary Theory. These are all varieties of arbitrary grants issued by the monetary authority. The present proposal is based on citizens’ rights, it is initiated by citizens, and citizens assume the responsibility to repay the loans. To say the least, this proposal does not carry with it any danger of inflation, because as soon as the loan is repaid, the new money is destroyed. It has been absorbed into the economy.
More Technicalities
Continentals and Greenbacks created in the past as cash were effectively grants that the US Government awarded to itself; interest currently paid on bank reserves are effectively grants awarded to private interests.
Buying and selling bonds from and to the US Treasury and the public, the Fed creates—or destroys—money as debt. Cash on Federal Reserve books is accounted for as debt (borrowed from US Treasury).
The petition calls for the creation of money as an asset: The proposal is for the Fed to create a new facility, if need be, a facility preferably to be named National Credit Notes (NCNs); carrying these notes as assets on its books; these notes are to be exchanged at par with existing Federal Reserve notes, in the form of cash (or digits); and creating these notes exclusively as loans, as loans issued at cost, and as loans to benefit all inhabitants of the land.
No More Waste of Technological Innovations
To make our life easier we produce technological innovations. But of what use are they, if their ownership gets concentrated into the hands of existing owners of capital? The majority of us will have to work at two hard-to-get jobs, just to keep pace with the increasing cost of living. The solution to the problem of concentration of wealth into a few hands does not lie in overturning, violently or otherwise, the legal system of the country, but in using the existing laws to benefit the largest number of people possible.
How? It is at this juncture that the future work of unions comes into play: By gradually and legally transforming workers into owners (capitalists), the stage will be set for a broader distribution of the profits of innovation among as large a number of people as possible. Indeed, when more people, through a fair distribution of equity will obtain more income, there will be less need for more jobs. With a less frantic need to create jobs under pressure from nearly all sectors of society, less destruction of scarce resources can be expected—and, indeed, even less damage to the environment.
Also, if the frenzy of the Pac-Man economy is somewhat restrained due to the prohibition to use public money for the purchase of existing physical (and financial) assets, we are going to live a much quieter life.
From a fair distribution of wealth and income, another benefit of inestimable value will ensue: We will need less consumer credit.
Less Consumer Credit
If we earn a living out of our capital and our work, there will less need for consumer credit.
No more work to earn money to repay debts, but work to create the amount of wealth necessary for healthy and “rich” living; no more ecological waste; no more exploitation of human resources. As Emerson realized, from consumers we need to become producers.
The current insatiable need for consumer credit can be abated with a widespread use of Consumer Stock Ownership Plans (CSOPs).
Consumer Stock Ownership Plans (CSOPs)
Consumer Stock Ownership Plans (CSOPs) will be the cherry on top of our future social organization. As pointed out on another occasion, what is never realized in a modern economy is that the poor are an essential component of the economic process. The rich get richer with the increase of production and consumption of the Gross National Product.
The rich do not have the numbers to consume the Gross National Product; it is the poor who by their numbers perform this essential function.
Should the poor not be compensated for performing this essential function for the rich?
Certainly they should. But how? Certainly not with another demeaning hand-out program. Consumer Stock Ownership Plans are perhaps the best possible tools to be used in the near future. The Harvard University Cooperative Store has done this for years. With the development of computers today, it will be an easy task to administer such plans. Can you imagine the world in which McDonalds, Stop and Shop, and Macy’s at the end of the year distribute a fair portion of their profits among the consumers who have been keeping them alive all year long?
So far we have looked at private personal wealth. By allowing access to national credit to public institutions with taxing power, we will also positively affect our public communal wealth.
Public Money for Public Works
Of what benefit is personal wealth amidst public squalor? Of what benefit is private wealth amidst a crumbling infrastructure of roads and bridges and schools? Certainly, the door to national credit ought to be open to satisfy these needs as well: Public money for public works. Public money for public works should be a refrain to cascade harmoniously from the mouths of economists, financiers, politicians, and administrators of the public treasure.
And We Will Add Fiscal Stability to Cities, Towns, States, and the Nation as a Whole
With public money for public works we will be able to repair our crumbling infrastructure here in the United States of America, still one of the richest countries in the world. We will be able to do that because loans out of our national credit will be issued at cost. Let the private sector get rich in due course, out of executing these public works in the most efficient possible way.
Not only will we be able to refurbish our public infrastructure; not only will we be able to create all the jobs that we need and we want; we will also add fiscal stability to cities, towns, states, and the nation as a whole.
Lest the message be lost, opening the channels of national credit to satisfy personal and public needs is the way to gain a stable monetary system; more than that, that is the way to gain monetary stability for the nation as a whole. The difference is sectoral stability vs. overall stability. Systems cannot be cured part by part; their immune system rejects temporary and partial remedies. Systems have to be cured systematically as a whole complex entity.
This is Part 5 of a series on monetary reform. The next article will discuss the specific expectations for the second petition, “The Jubilee Solution“.
Part 1 of this series: The World of Economics Since 2008
Part 2: Two Proposals to Stabilize the Monetary System
Part 3: Can You Petition for Monetary Reform?
Part 4: Should We Curb the “Animal Spirits” of Mankind?
Part 5: This article.
This article was developed from an article posted at Mother Pelican, October 2015.
