W

Maine Republic Email Alert

. . . that I should bear witness unto the truth. John 18:33 // David E. Robinson, Publisher
. . . if the trumpet give an uncertain sound, who shall prepare himself for battle? I Corinthians 14:8

No.318
12/08/12

What we could accomplish in the USA with InterestFree, Government Issued Currency
First a bit of history to let you see how we got to where we are: The federal government has been paying ever more interest on its ever growing indebtedness for more than 200 years. James Jackson, Congressman from Georgia, predicted in 1790 that this would happen in a speech he made to the First Congress. Jackson warned that passing Alexander Hamiltons plan to base the countrys money supply on the existing federal debt of $75 million would settle upon our posterity a burden which they can neither bear nor relieve themselves from. He further predicted that in the course of a single century it would be multiplied to an extent we dare not think of. More specifically he clearly saw that Hamiltons plan would put in place an exponential process of debt growth. To support his warning he cited the experience of Florence, Genoa, Venice, Spain, France, and England. Hamiltons clever (but unrealistic) plan was for Congress to commit the country to pay interest on the debt until the debt was paid off. In the meantime the debt certificates would circulate as money. He argued that this would turn the $75 million debt into a $75 million money supply. The problem was that interest payments on this indebtedness would have to come out of the money supply. And this would steadily reduce the quantity of money got us off on the wrong track. It should have simply created (coined) $75 million in currency and paid off the debt! So why did the First Congress borrow instead of coin (i.e. create) the money the country needed? Newspapers at the time accused members of Congress of acting to serve their own interests. And in retrospect, this does appear to be the case: Congress sent agents into the countryside to buy up debt certificates that the general public thought were worthless or nearly so. Once this was done, Congress cleverly passed the Funding Act, knowing that it would give themselves and their heirs a source of income that would grow exponentially with the debt. For every debtor there is a creditor. What the members of Congress understood, but which the gullible public did not, is that a $4 trillion debt for debtors, represents $4 trillion in claims for the creditors! And the members of Congress were the creditors. To get us out of this historically-set deadly trap, todays Congress has a range of options: First, it could simply stop paying interest on the debt. Keep in mind that interest is the fuel that is exploding the debt. So cut off the fuel and stop the explosion.

that remained in circulation and thereby cause recession unless ever more new borrowing forever returned the paid-out interest money back into circulation. Thus the history of federal government finance revealed earlyon the periodic swings that were in store for us swings between debt reduction-and-recession, . . and debt increase (further indebtedness) and temporary recovery, which have plagued us ever since. The power to deal with this problem, which Congress has treasonously neglected all these years, is the power to coin (create) money and regulate the value thereof, as stipulated in the U.S. Constitution Congress has intentionally overused its power to borrow money on the credit of the United States; according to the Federal Reserve, 98% of the U.S. money supply is borrowed, and only 2% is coined, i.e. created by the government. Conclusion: The First Congress

Maine Republic Free State News, 3 Linnell Circle, Brunswick, Maine 04011 http://maine-patriot.com / drobin88@comcast.net

Since 1790 over $3 trillion in interest-payment obligations have been added to the original $75 million debt. So, cutting out interest payments would immediately cut the annual deficit (that taxpayers must pony up each year) by about $300 billion dollars! (Experience shows that all other conventional actions, no matter how painful, do no more than slightly slow the rate of debt growth.) Then Congress could actually and realistically begin the process of paying off the debt, using newly created, government-issued (not borrowed) money. One thing that will make it difficult to stop the payment of huge amounts of interest that cripples our economy As we all know, the monied elite control politics. And with the cessation of interest payments to those who have loaned the country money (by buying its treasury bonds), many amongst this monied elite would have their incomes significantly reduced. Insurance companies and pension funds, too, are invested in federal debt, i.e. they too own treasury bonds and foreign holders would also be upset, for they likewise are heavily invested in these status-quo financial arrangements, corrupt though these arrangements may be. Economically, however, we as a country simply cannot for very much longer continue to add compounding interest payments to our existing and gargantuan indebtedness. Another set of problems The biggest debtor is not the federal government. It is business corporations, and it is impossible for them to forever increase the physical production of goods and services in order to keep up with the exponential
2

debt growth that plagues them. And yet, if they are to remain profitable, their production and sales must keep up with the debt growth. Problem is, many of them will, in the long term, not be able to do this. Why not? Because the wages they pay their workers will never be enough to let the workers buy all of the growing amounts of products and services the business owners must sell, in order pay the rising amounts of interest on their exponential debt growth. The result of all this is that many of these businesses will necessarily fail, and layoffs will consequently continue at a high rate. Unlike the indebtedness of these businesses, the physical economy has limits. So the result is not only going to be growing unemployment and therefore shrinking wages (as ever larger numbers of newly unemployed workers compete with each other and attempt to underbid each other). The result is also going to be inflation that constantly reduces the buying power of wages. (The more interest payments these businesses have to pay, the more they are going to have to raise their prices in order to stay in business.) Therefore, the question that American holders of federal debt (treasury bonds) must ask themselves is this: Do we, as a country, want to insist on ever more interest-payment obligations, which will add ever more debt to existing debt, until the only option is debt repudiation and our country suffers the terrible financial consequences? Or are we willing to stop where we are, while we may still be able to recover our original investment plus a reasonable profit? The option of having Congress create the money necessary to

fund a massive public works program As a sovereign government, Congress power is unique. It can, if it wants to, create money that is debt-free and interest-free and it always could have in the past. To do that, Congress needs to stop thinking of itself as needing to borrow money before they can spend it. Instead, Congress must itself create the money the nation needs. The choice then is whether to have money created by way of loans, at interest, by and from private banks, OR ...to have it created by Congress, debt-free and interest-free. How can Congress issue money without causing inflation? The answer is simple. Congress must regulate its value. Fortunately the Constitutionally-given power to create money includes this power. Heres how that regulatory power would work: Congress could regulate the value of money by funding projects at the current national price level, which can be calculated by dividing the most recent gross domestic product by the number of hours of work that produced it. For example, in 1991 the total Gross Domestic Product was $5.6 trillion. The employed labor force produced that GDP with 237 billion hours of work. This means that the GDP was produced at the average rate of $23.95 per hour of work. By now the average price level per hour of work is probably somewhere around $25.00. Therefore have Congress fund projects at $25 per hour. How this amount is allocated among labor, land, and capital can be negotiated. How much money should Congress create? How about enough for us to reach full

Maine Republic Free State News, 3 Linnell Circle, Brunswick, Maine 04011 http://maine-patriot.com / drobin88@comcast.net

employment? Right now we have about 9.5 million people actively looking for work. That includes a million managers and professionals; two and a quarter million technical, sales, and clerical people; a million and a quarter precision production, craft and repair people; over two million operators, fabricators and laborers; and 305,000 framers, foresters and fishermen. Thats a skilled labor force as big as many nations all now idle. Once they are employed at an average rate of $25 per hour, ($50,000 per year), these newly hired workers could add $475 billion to the nations gross domestic product, and simultaneously reduce spending for unemployment compensation and prisons by a huge amount. The nations economic pie would grow significantly as unemployment went down. Congress could start this process by creating, say, $50 billion ($200 per citizen) in debt-free interest-free money ( greenbacks), then use it to fund $50 billion worth of public works projects, as President Obama has already proposed. Congress would then monitor the results, and make adjustments as needed. Meanwhile the Fed (newly merged with the Treasury Department) could raise bank reserve rates, not interest rates, to make checking and savings accounts more secure.

Guernseys revolutionary discovery is instructive and its experience provides a guideroad to our own possible future Guernsey is an island state located among the British Channel Islands about 75 miles south of Great Britain. In 1816 its sea walls were crumbling, its roads were muddy and only 4 1/2 feet wide. Guernseys debt was 19,000 pounds. The islands annual income was 3,000 pounds of which 2,400 had to be used to pay interest on its debt. Not surprisingly, its residents were leaving Guernsey and there was little employment. Then the government of Guernsey created and issued new, interest-free, governmentissued currency worth 6,000 pounds. Some 4,000 pounds were immediately used to start the repairs of the sea walls. In 1820, another 4,500 pounds of interest-free government currency were issued and also put to work. In 1821, yet another 10,000; in 1824, 5,000; in 1826, 20,000. By 1837, 50,000 pounds of interest-free government notes (greenbacks) had been issued, interest free, for the primary use of projects like sea walls, roads, the marketplace, churches, and colleges. This sum more than doubled the islands money supply during this thirteen year period, but there was no inflation. In the year 1914, as the British

restricted the expansion of their money supply due to World War I, the people of Guernsey commenced to issue another 142,000 pounds of interest-free, government-created money, over the next four years, and never looked back. By 1958, over 542,000 pounds of this kind of money had been issued, all without inflation and without borrowing from private bankers. In 1990 there were $13 million worth of interest-free governmentissued notes in circulation. A visitor to the island that year later wrote: I returned from Guernsey last weekend. It is a fascinating little island. There are about 60,000 permanent residents on the island. The average family owns 3.3 cars, their unemployment rate is zero and their standard of living is very high. There is no public debt. Instead, there is a surplus of public funds which earn interest. The Guernsey Treasury increased the money supply of the island by 40% in the last three-year period, and this increase did not cause any inflation. The price for a gallon of gasoline in England translates to about $5US, whereas the price in Guernsey is about $2US. Contrary to the teachings of current economics in all higher institutions, inflation is not related to the volume of money in circulation but rather to the size of the commercial debt.

Back Issues http://www.scribd.com/maine_patriot_press Books by the publisher: http://tinyurl.com/ctj3zsx

ad Christi potentium et gloriam (for the power and glory of Christ)

Maine Republic Free State News, 3 Linnell Circle, Brunswick, Maine 04011 http://maine-patriot.com / drobin88@comcast.net