Leading Journalist Confirms that Government Could Take Over the Power of Money-Creation for the Public Good

William Greider is a former Washington Post and Rolling Stone editor, and now writes for the Nation. Greider has written numerous books and articles on the economy over the course of many decades, including the leading book on the Federal Reserve, Secrets of the Temple.

In an important new article in the Nation, Greider confirms Ellen Brown’s argument that the government could solve the economic crisis by taking back the power of money creation:

For the first time in generations, [the Fed is] now threatened with popular rebellion.

During the past year, the Fed has flooded the streets with money–distributing trillions of dollars to banks, financial markets and commercial interests …

Where did the central bank get all the money it is handing out? Basically, the Fed printed it, out of thin air. That is what central banks do. Who told the Fed governors they could do this? Nobody, really–not Congress or the president. The Federal Reserve Board, alone among government agencies, does not submit its budgets to Congress for authorization and appropriation. It raises its own money, sets its own priorities.

Representative Wright Patman, the Texas populist who was a scourge of central bankers, once described the Federal Reserve as “a pretty queer duck.” Congress created the Fed in 1913 with the presumption that it would be “independent” from the rest of government, aloof from regular politics and deliberately shielded from the hot breath of voters or the grasping appetites of private interests–with one powerful exception: the bankers…

Banks are the “shareholders” who ostensibly own the twelve regional Federal Reserve banks…

The Federal Reserve is the black hole of our democracy–the crucial contradiction that keeps the people and their representatives from having any voice in these most important public policies. That’s why the central bankers have always operated in secrecy, avoiding public controversy and inevitable accusations of special deal-making. The current crisis has blown the central bank’s cover…

Altering the central bank would also give Congress an opening to reclaim its primacy in this most important matter. That sounds farfetched to modern sensibilities, and traditionalists will scream that it is a recipe for inflationary disaster. But this is what the Constitution prescribes: “The Congress shall have the power to coin money [and] regulate the value thereof.” It does not grant the president or the treasury secretary this power. Nor does it envision a secretive central bank that interacts murkily with the executive branch…

If Ben Bernanke can create trillions of dollars at will and spread them around the financial system, could government do the same thing to finance important public projects the people want and need? Daring as it sounds, the answer is, Yes, we can.

The central bank’s most mysterious power–to create money with a few computer keystrokes–is dauntingly complicated, and the mechanics are not widely understood. But the essential thing to understand is that this power relies on democratic consent–the people’s trust, their willingness to accept the currency and use it in exchange. This is not entirely voluntary, since the government also requires people to pay their taxes in dollars, not euros or yen. But citizens conferred the power on government through their elected representatives. Newly created money is often called the “pure credit” of the nation. In principle, it exists for the benefit of all];

In this emergency, Bernanke essentially used the Fed’s money-creation power in a way that resembles the “greenbacks” Abraham Lincoln printed to fight the Civil War. Lincoln was faced with rising costs and shrinking revenues (because the Confederate states had left the Union). The president authorized issuance of a novel national currency–the “greenback”–that had no backing in gold reserves and therefore outraged orthodox thinking. But the greenbacks worked. The expanded money supply helped pay for war mobilization and kept the economy booming. In a sense, Lincoln won the war by relying on the “full faith and credit” of the people, much as Bernanke is printing money freely to fight off financial collapse and deflation.

If Congress chooses to take charge of its constitutional duty, it could similarly use greenback currency created by the Federal Reserve as a legitimate channel for financing important public projects–like sorely needed improvements to the nation’s infrastructure. Obviously, this has to be done carefully and responsibly, limited to normal expansion of the money supply and used only for projects that truly benefit the entire nation (lest it lead to inflation). But here is an example of how it would work…

Instead, Congress should create a stand-alone development fund for long-term capital investment projects (this would require the long-sought reform of the federal budget, which makes no distinction between current operating spending and long-term investment). The Fed would continue to create money only as needed by the economy; but instead of injecting this money into the banking system, a portion of it would go directly to the capital investment fund, earmarked by Congress for specific projects of great urgency. The idea of direct financing for infrastructure has been proposed periodically for many years by groups from right and left…

This approach speaks to the contradiction House Speaker Pelosi pointed out when she asked why the Fed has limitless money to spend however it sees fit. Instead of borrowing the money to pay for the new rail system, the government financing would draw on the public’s money-creation process–just as Lincoln did and Bernanke is now doing.

The bankers would howl, for good reason. They profit enormously from the present system and share in the money-creation process. When the Fed injects more reserves into the banking system, it automatically multiplies the banks’ capacity to create money by increasing their lending (and banks, in turn, collect interest on their new loans). The direct-financing approach would not halt the banking industry’s role in allocating new credit, since the newly created money would still wind up in the banks as deposits. But the government would now decide how to allocate new credit to preferred public projects rather than let private banks make all the decisions for us.

Greider correctly points out that the Constitution gives Congress the power to create money, that the Fed creates money “out of thin air”, and that the government could take over that power to use it for the public good.

The one nuance which Greider fails to address is that the government can bypass the Fed to create new money and credit. Congress can take over the money-creation power itself.

The benefit?

The government wouldn’t have to pay interest to the banks on the money created. This would save trillions of dollars.

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  • http://classlink.lcusd.net/classlink/viewfiles.php?pid=4096 Carl Hermn

    We would save about a trillion dollars every year, according to my best understanding of an objective cost-benefit analysis. For a 7-page brief on the money-creation process that I wrote for economics students, click on my name and read "The Heart of Economics." This also has 13 pages of sourced historical quotes. I also have a one-page brief for your use.Bottom line: we as humanity have a choice to move forward with love as a whole community. To do so we must simultaneously expose the history of corruption/control/manipulation that characterizes what political and economic "leaders" have done, while moving ideas forward of how to build this brighter future. BTW, I strongly recommend a "truth and reconciliation" process for the criminals involved in our wars, torture, financial domination, etc. It's in our mutual benefit to exchange their cooperation in getting to the TRUTH and their surrender for they being able to live the rest of their lives in peace. If the Illuminati accept this deal, the benefit is that they will not fight to the death with all the destruction that will cause, and we will move constructively forward in the greatest pace.

  • http://Anonymousnoreply@blogger.com Anonymous

    Ah, but government never does anything for the public good. Their sole role is to impoverish the public, steal their hard earned pensions, and reduce everyone to a 'serf' who's got absolutely 'zero' worth or prospects of self-sufficiency. They want everyone dependent on their soup lines and their handouts for control reasons. The government has no benevolent agenda for the citizens, only wishes to further enslave all of us for their rich european oligarch handlers and owners.Going down a dirt road where the government is the 'good guy' is a very hard and unlikely pill to swallow. I prefer truth to fantasy land shit like this. Don't be hawking this "government could do this if it were GOOD" b.s. because there is no such thing as GOOD GOVERNMENT unless it's NON-EXISTENT. Government always is an enslaver and usurper.

  • http://Anonymousnoreply@blogger.com Anonymous

    "The Federal Reserve Board, alone among government agencies" – em, the Federal Reserve is NOT a government agency, it is a private bank run for profit, that's the whole deception, there's nothing federal about it.

  • http://withglee.com Todd Marshall

    The equation for managing any medium of exchange is:DEFAULT = INTEREST + INFLATIONIt's not the job of the manager to guess what demand for exchange media is. Exchange media is simply a token of intention to complete a trade and the manager supplies those tokens with a discipline. When the trade is complete, the media is returned. The job of the manager is to monitor the trades and identify those that DEFAULT. The media from these DEFAULTS must be "mopped up" with INTEREST collections. To the extent that they are not, INFLATION exists. It's just that simple.

  • http://www.blogger.com/profile/09686537981270597025 Brasileirão

    That's exactly how Hitler solved the problem with Germany debt (reparations) by issuing certificates. The Germany has flourished, yes and built the strongest economy in Europe in few years without any gold reserves whatsoever. Only then came the war. So, proceed but carefully…

  • http://Anonymousnoreply@blogger.com Anonymous

    In expanding the fiat (debt based) currency, the Fed (sic) effectively reduces the purchasing power of the dollar. Congress should absolutely perform its Constitutional DUTY to create the money supply, using the principals of Kitson and C. H. Douglas– Social Credit. It is the only equitable solution to the problem of multinational leeches sucking the lifeblood out of the population. Income taxes were originally levied against the profits of corporations, NOT the labor of individuals. People better wake up, get informed and stop spreading nonsense about the Fed being a government agency…

  • http://Anonymousnoreply@blogger.com Anonymous

    Don't forget Kennedy also issued an executive order to print government bills. And we know what happened to him.

  • http://Alan8noreply@blogger.com Alan8

    The Fed is a racket, saddling us with a phony debt that can never be paid off. The Fed gets the interest we pay on the national debt, when all they do is print money. It's a ripoff!Anything we can do to eliminate this scam would be good. Unfortunately, the Fed is quite powerful after taking our money for almost a century.

  • http://Anonymousnoreply@blogger.com Anonymous

    At any rate, they'll have to change the name of the "fed" to the Chinese Reserve pretty soon. They'll have the full faith and credit of the Renimbi.

  • http://www.blogger.com/profile/12445876932247713605 Rusty Mason

    Kill the Fed — *at any cost* — before they kill us. It's self-defense. Don't do it for the money, do it because it's the right thing to do.

 

 

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