Debt-damned economics: either learn monetary reform, or kiss your assets goodbye (7 of 7)

The following is my high school teaching assignment for Advanced Placement Macroeconomics students (available as extra credit for other classes) on how money is created. I offer this for non-profit use; divided into seven sections:


6. Cost-Benefit Analysis for Monetary Reform

“That is to say, under the old way any time we wish to add to the national wealth we are compelled to add to the national debt. Now, that is what Henry Ford wants to prevent. He thinks it is stupid, and so do I, that for the loan of $30,000,000 of their own money the people of the United States should be compelled to pay $66,000,000 — that is what it amounts to, with interest. …But here is the point: If our nation can issue a dollar bond, it can issue a dollar bill. …It is absurd to say that our country can issue $30,000,000 in bonds and not $30,000,000 in currency. Both are promises to pay; but one promise fattens the usurer, and the other helps the people.”  – Thomas Edison and Henry Ford, interview with NY Times, 1921

“The art and mystery of banks… is established on the principle that ‘private debts are a public blessing.’ That the evidences of those private debts, called bank notes, become active capital, and aliment the whole commerce, manufactures, and agriculture of the United States. Here are a set of people, for instance, who have bestowed on us the great blessing of running in our debt about two hundred millions of dollars, without our knowing who they are, where they are, or what property they have to pay this debt when called on; nay, who have made us so sensible of the blessings of letting them run in our debt, that we have exempted them by law from the repayment of these debts beyond a given proportion (generally estimated at one-third). And to fill up the measure of blessing, instead of paying, they receive an interest on what they owe from those to whom they owe; for all the notes, or evidences of what they owe, which we see in circulation, have been lent to somebody on an interest which is levied again on us through the medium of commerce.” – Thomas Jefferson to John W. Eppes, 1813. ME 13:420

Monetary reform nationalizes the Federal Reserve (this name is deceptive so the public would perceive it as a government entity) and retain its use for bank administrative functions. Fractional reserve lending by private banks would be made illegal, with the US Treasury having sole legal authority to issue new money for the benefit of the American public rather than the benefit of the banking industry. About 30% of the national debt is intra-governmental holdings (47) and ~16% held by the Fed (48); this debt would be cancelled as it becomes a bookkeeping entry with nationalization. Of the publicly-held debt of various parties holding US Securities, the US Treasury would monetize (pay) the debt in proportion to fractional reserves being replaced with full reserves over a period of one to two years to monitor money supply and avoid inflation. This means the US government would create debt-free money to pay the debt as it’s due exactly to the extent that private banks’ ability to create credit is reduced. The purpose of this is to avoid inflation.

The American Monetary Institute has a proposal called the American Monetary Act (49) to do this. This proposal was also endorsed by America’s best-known economist, Milton Friedman, as the single most important action possible for US economic improvement (see footnote 14 on this monetary reform proposal [50]).

The governmental cost of this reform is negligible because it simply authorizes Congress to enter money into its own account to directly pay for public goods and services. In fact, Americans would save money from decreased reliance on managing taxes.

The benefits are astounding: the American public would no longer pay over $400 billion every year for national debt interest payments (because almost 50% of the debt is intra-governmental transfers, this is a savings of over $200 billion/year). If lending is run at a non-profit rate or at nominal interest returned to the American public (for infrastructure, schools, fire and police protection, etc.) rather than profiting the banks, the savings to the US public is conservatively $2 trillion (51). If the US Federal government increased the money supply by 3% a year to keep up with population increase and economic growth, we could spend an additional $500 billion yearly into public programs, or refund it as a public dividend (52). This savings would allow us to simplify or eliminate the income tax (53). The estimated savings of eliminating the income tax with all its complexity, loopholes, and evasion is $250 billion/year (54). The total benefits for monetary reform are conservatively over three trillion dollars every year to the American public. Three trillion is $3,000,000,000,000. This saves the ~100 million US households an average of $30,000 every year. Another way to calculate the savings is to figure those amounts per $50,000 annual household income (for example, if your household earns $100,000/year, you save ~$60,000 every year with these reforms). This savings represents a 60% raise for every US household’s income.

Those of us working on these solutions openly invite professional economists and committed citizens to analyze and comment on our observations of costs and benefits.

To give you an idea of this amount, imagine a new stack of $1 bills. New bills are about 200/inch. Imagine if you laminated bills in a horizontal stack; this would be the same size as a 2×4 board. Now imagine that this board of money was to travel on your nearest freeway. How far would the money-board go to equal $3 trillion? Make your guess, then check the footnote (55).

The private sector economic costs of monetary reform are transfers of wealth from the banking industry to the American public. The replacement would be either non-profit banks operating as needed with minimum public cost such as fire departments and the postal service, for-profit banks lending time-deposits in regulated free-market competition, or a hybrid of the two (perhaps with government mortgages at a non-profit rate of 1%). The Public Banking Institute works for the public to act now for at-cost credit (56) rather than waiting for federal reform.

Monetary reform stops the current built-in increases of the money supply through fractional reserve banking, and redirects it for direct payment of taxes for public goods and services. Each dollar transferred from bank creation to public benefit is one dollar less in public tax payment.

Opponents of monetary reform claim that even if government issued money with transparency, any oversight created would be defeated; government would issue too much money and cause inflation. Ron Paul believes that gold should be used as a physical-limit barrier to creating money. Some fear that any change will make things worse. Some also claim that competition for large profits in the banking industry spur innovation that wouldn’t occur in a non-profit design. Improvements such as ATMs, on-line banking, instant purchasing are worth the cost of giving monetary power to the private sector.

The statutory purposes of the Fed (57) are stable prices, maximum employment, and moderate interest rates. For prices, consider for yourself how well they’ve done since the Fed began in 1913. Ask parents and grandparents if prices have remained stable in their lifetimes or if they’ve increased just a teensy-weensy little bit. You could, of course, also check the data and confirm that the dollar has lost over 95% of its value since the Fed went to work for “stable prices.” Importantly, you haven’t been told that official measurements for inflation were redefined in 1980 and 1990 that lowers today’s inflation rate by ~8% (58). Examine the cumulative effect of accelerating prices (59) 30 times more expensive since the Fed began in 1913 (and here [60]), and feel free to play with the Fed’s Consumer Price Index (CPI) calculator to compare their claims of prices over time.

shadowstats inflation

For employment, consider that we have unemployed people in this country, resources to put to work, and infrastructure to improve; then judge the Fed’s effectiveness in creating money only as debt. Unemployment only occurs because money is debt in our current system; we would not have this problem if government restored this Constitutional power and issued money directly. If we were serious about achieving the goal of full employment, OBVIOUSLY the only way to achieve it is for government to be the employer of last resort. In market failure of what free-market capitalism cannot employ, we either put people to work on infrastructure/public service jobs, or we don’t achieve our goal of full employment. Please ponder that idea to full realization. If the public jobs provided to the unemployed and funded by government-created money provide greater economic benefit than their cost, then inflation will actually decrease from creating those jobs. That is conservative definition of how inflation/deflation works.

The official definition of “unemployment” is also a lie of omission. If someone works just one hour a week, they are considered “employed.” If adults want work, and are not currently applying for jobs because they have found their efforts in vain, they are not counted as “unemployed.” If we counted unemployment the same way we did in the Great Depression (61), the US has had that same level of unemployment since 2009: between 20% and 25% unemployment. You might consider the explanation of Paul Craig Roberts (62), former Assistant Secretary of the US Treasury, and Wall Street Journal editor.

shadowstats unemployment

Another angle of minimizing our costs for unemployment: consider that the US Government Interagency Council on Homelessness has compiled every known study on cost-benefits of housing the homeless, and providing food, medical care and job-employment services versus just leaving them on the streets. In every case study the costs are less to take action for their care (63). Ponder that.

For interest rates, the greatest effect to minimize this cost to the public is with public banking. For example, if we had a “Bank of California” with public credit issued mortgages and credit cards at ~5% (64), this form of taxation would abundantly pay for all California public goods and services while eliminating all need for taxation. It also releases CAFR funds back to the public worth TRILLIONS (65). These include “rainy day” funds no longer necessary if they had access to at-cost credit.

Remember: the Federal Reserve is a privately-owned corporation that exists to maximize its own profit. It is not in their profit-interests to disclose these options. In fact, Congressman Oscar Callaway demanded investigation into JP Morgan & Company in 1917 (66) for purchasing control over America’s leading 25 newspapers to propagandize US public opinion in favor of the Federal Reserve system and to push the US into World War 1.

Perhaps the fact that you’ve had to read this information here is evidence that corporate media is still owned today: just six US corporations control ~90% of what Americans get for news (67). Consider this: MIT’s Simon Johnson (and former Chief Economist of the International Monetary Fund) describes (68) our big banks being led by gambling oligarchs who have captured government as in “banana republics” (his words). He concludes fraud is the heart of Wall Street (69). His immediate best-selling book, 13 Bankers: The Wall Street takeover and the next financial meltdown, was discussed with President Johnson’s Press Secretary and journalist with over 30 Emmy Awards, Bill Moyers (70), to explain the US banking system, loss of trillions of American taxpayer dollars to oligarchs’ manipulation as a matter of definitive fact, the looting of America being protected by partners with political muscle, and all rational consideration of the facts proving massive financial crimes:

SIMON JOHNSON: The American democracy was not given to us on a platter. It is not ours for all time, irrespective of our efforts. Either people organize and they find political leadership to take this on, or we are going to be in big trouble, okay?… That’s absolutely the heart of the problem. I would also say and tell you, and emphasize, these people will not come out and debate with us. The heads of these companies or their representatives, they will not come out. They’re afraid. They don’t have the substance. They don’t have the arguments. We have the evidence. They have the lobbyists. And that’s all they have.

BILL MOYERS: They’ve got the power, the muscle, the money.

SIMON JOHNSON: They have money.

BILL MOYERS: You just have the arguments. You just have the facts. On your side.

SIMON JOHNSON: Absolutely. That’s exactly what it comes down to.

To conclude, if the performance of the Fed is acceptable to you along with its $3 trillion dollar annual cost compared to monetary reform and public banking, feel free to defend it.

Thank you for your attention to learn how “money” is created in the US so-called “monetary system.” After Benjamin Franklin discovered it was possible to manage colonial Pennsylvania’s government without taxes (71), similar to what we describe as public credit, he was so inspired by the idea that he wrote a pamphlet, commending people like you to understand this vital idea of what we create and use for money:

“There is no Science, the Study of which is more useful and commendable than the Knowledge of the true Interest of one’s Country; and perhaps there is no Kind of Learning more abstruse and intricate, more difficult to acquire in any Degree of Perfection than This, and therefore none more generally neglected.  – Benjamin Franklin, A Modest Enquiry into the Nature and Necessity of Paper Currency, 1729 (72).

For more history in support of monetary and banking reform, including Benjamin Franklin’s documentation of colonial Pennsylvania successfully using these methods to operate their government without taxes:

Critical thinking skills in action: economic analysis of ‘current events,’ past and present (73)


47 Treasury Direct. The debt to the penny and who holds it:

48 Federal Reserve Bank of St. Louis. Federal debt held by Federal Reserve banks. 2014: Q2:

49 American Monetary Institute. American Monetary Act. 2011:

50 The Money Masters. Monetary reform act:

51 Of $60 trillion total debt, a conservative current interest cost of 5% is $3 trillion every year. Two trillion dollars of savings if the profits are transferred to the American public rather than to the banking industry is probably low. St. Louis Federal Reserve Bank:

52 The US GDP is ~$17 trillion. Three percent growth is moderately conservative.

53 Of the US Federal government’s ~$4 trillion annual budget, about $1.7 trillion is received from income tax.

54 Tax Foundation. Hodge, S, Moody, J, Warcholik, W. The Rising Cost of Complying with the Federal Income Tax. Jan. 10, 2006:

55 About ten times around the world at the equator. Yes, that’s a lot. Earth’s circumference is ~25,000 miles. There are 63,360 inches in a mile.

56 Web of Debt. Brown, E. California dreamin’: how the state can beat its budget woes. July 8, 2009:

57 Federal Reserve. Monetary policy and the economy:

58 Shadow government statistics. Williams, J. Alternate inflation charts:

59 Liberty Blitzkrieg. Krieger, M. Chart of the day: inflation since the American Revolution. Jan. 7, 2013:

60 Is inflation the legacy of the Federal Reserve? Jan. 17, 2013:

61 Shadow government statistics. Williams, J. Alternated unemployment charts:

62 Roberts, P. John Williams ( on the December payroll jobs report and unemployment rate. Jan. 13, 2015:

63 Herman, C. Ending homelessness SAVES money; monetary reform and public banks should fund this now. Feb. 28, 2015:

64 Herman, C. Public banking conference good news: all solutions already here for deficits, debt, full-employment. June 3, 2013:

65 Herman, C. CAFR summary: if $600B ‘fund’ can’t fund $27B pension, $16B budget deficit, why have it? June 18, 2012:

66 Herman, C. 1917: J.P. Morgan bought US corporate media to be 1%’s lying sacks of spin? Jan. 28, 2012:

67 Business Insider. Lutz, A. These 6 corporations control 90% of the media in America. June 14, 2012:

68 The Atlantic. Johnson, S. The quiet coup. May, 2009:

69 Huff Post. Johnson, S. Goldman Sachs: too big to obey the law. June 19, 2010:

70 Bill Moyers Journal. Johnson & Kwak. April 16, 2010:

71 Herman, C. Benjamin Franklin, William Jennings Bryan on monetary reform. March 11, 2012:

72 Herman, C. Top 10 Americans for monetary reform: #7: Benjamin Franklin discovers government WITHOUT TAXES! Sept. 24, 2009:

73 Herman, C. Teaching critical thinking to high school students: Economics research/presentation (6.1 of 6). March 2, 2015:

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  • jadan

    A note on the claim that the Public Banking Institute advocates at-cost credit. The banking model most often referred to by Ellen Brown, founder of the PBI, is the model presented by the Bank of North Dakota. This is no true public bank. It does not issue at-cost credit. It uses proxy private banks and does not deal directly with the people who purportedly “own” it because it is their money that capitalizes it. If you want a home mortgage, you go to a private bank, which is supported and back stopped by the BND, and you get a market rate, created by the private banking market. It is a “banker’s bank”, not a public bank. Currently the only genuine model of public banking is seen in the American Monetary Act, which became legislation via Dennis Kucinich in the 113th Congress, known as HR2990. Ms. Brown’s public bank is bogus. She is a supporter of the Fed.

    • Carl_Herman

      Hi jadan,
      Ellen Brown is a friend and colleague of mine. She is forever in my human being “Hall of Fame.”

      Yes, she refers to the state-owned Bank of North Dakota as a possible model for the public benefits of at-cost credit. ND is the only state with increasing budget surpluses. She is also one of the very strongest voices to accurately explain and document the benefits of TAKING DOWN THE FED’S RACKET for debt-free money. Ellen points to the obvious benefits of both the American Monetary Act and, and encourages cities, counties, and states to explore the power of public banking for they can take for themselves without an act of Congress.

      Think for a moment, jaden: if given the choice, would the public take a 5% mortgage over paying any state tax?

      PBI, Ellen, and I want the facts to be widely known, and for the public to best respond in good-faith experimentation to maximize public benefits.

      • jadan

        That’s nice Ms Brown is your friend and colleague, and I would have to say I think of her as a friend, also, though I’ve never met her. However, she has given me bouts of cognitive dissonance occasionally through her advocacy of a public bank that is not a public bank but instead a capitulation to the private banking cartel, a terminal political compromise. She is a supporter of the Fed system by default. This is not “good faith experimentation”, it is a con that was put in place in 1919, that she actively sells today as a public bank. The BND is not going to eliminate state taxes, Carl. That’s where its capitalization comes from! That’s a pipe dream based on the currently bursting fracking bubble. I’m waiting for the failure of fracking investments to break lots of these private banks underwritten by the BND. These loans are guaranteed by the people’s assets, so let the bail outs begins, and then tell me this bank is dedicated to the public interest!

        • Carl_Herman

          We all go through cognitive dissonance to discern strictly mechanical models that can work (debt-free money for direct payment of public goods and services, public credit as one possible model to reduce how much money is in the system, etc.) versus how experiments that seem to have some aspects working can help our understanding, AND how experiments have been corrupted and compromised.

          Ellen is just pointing to the mechanics of how banking works, and how that power could be put into the hands of city, county, and state public servants. Honest people in those positions should jump on this power for at-cost credit rather than being “served” by banksters.

          • jadan

            She’s doing more than that, Carl. She’s actively promoting the BND as a model of public banking and making claims about the role and efficacy of that banking model that are not true on the face of it. The BND is a tool for the paternalistic oligarchs of ND who want to protect their patch from the bigger and more powerful oligarchs back east. But my objection to EB’s advocacy is not on the merits of this particular banking scheme, but on the fact that she is a de facto supporter of the Federal Reserve System through this advocacy. The BND is a member of the Minneapolis Federal Reserve and it does not challenge the private money monopoly; it supports this private monopoly and it uses public funds to do it! That’s a really neat trick! It’s an iteration of the clever con put in place in 1913.

            Public banking means public control over the creation of the money supply and nothing less. It means we use greenbacks as opposed to FRN’s. Ellen Brown, as the foremost voice of public banking because of her public relations skill, is actually undermining public banking very much like her hero, William Jennings Bryan, considered to be the foremost voice of Populism in the late 19th Century, actually destroyed the political future of Populism in 1896. That’s another story, Carl, but let’s get rid of cognitive dissonance around this issue by being clear about what public banking is and what it isn’t.

            Public banks use public money, not private money. The Federal Reserve Note is a privately issued fiat currency. Only the sovereign government can issue fiat money, as Lincoln did, when it was called the “greenback”. This is called the “money power” which was stolen from us by the lying bankster/oligarchs. The “Bank of California” EB talks about is a BND writ large, and not a public bank at all because it integrates into the private Federal Reserve System, just as the BND does.

            The Fed system has failed spectacularly throughout its history, most recently in 2008. Ellen Brown is promoting a scheme to save this failed privately held system through her advocacy of the BND banking model. If the privately held banking system can capitalize itself with public assets, voila! No worries! (Isn’t that what the bail outs mean, a capitalization via public debt?) Think about this, Carl, and you’ll have a case of cognitive dissonance that doesn’t respond to aspirin! Think about EB as a disinfo agent for the Federal Reserve System….

          • Carl_Herman

            jaden, you’re certainly welcome to your own analysis 🙂

            Ellen’s book attacking the Fed is probably the most-widely read: Web of Debt:

            I advocate not waiting for Congress, but for honest local government officials to learn the power of banking for themselves, use it, and IF THEY ARE HONEST, then it’s easy to see the value of creating debt-free money for the direct payment of public goods and services.

            jaden: the mechanics of creating credit through banking is a tool like a hammer or screwdriver. In good hands, it makes work easier. For your local governments, wouldn’t you prefer an at-cost line of credit, or to over-tax you as a “rainy day” fund?

          • jadan

            We’re not dealing with banking reform, Carl, when we talk about public banking. We’re talking about monetary reform, systemic reform. If we do not get rid of debt money itself and escape from the web of debt in which we are all currently entangled, nothing will change. The only way to get rid of debt money is to eliminate the Federal Reserve system. If you try to compromise with the Fed system, as Ellen Brown is doing, nothing will change, except your idealism. Do you see states clamoring to go into the banking business? I haven’t noticed it. It just won’t happen because nobody knows banking better than banksters. You want to compete with Jamie Dimon and Lloyd Blankfein, Carl? Good luck! 🙂

          • lobdillj

            You speak of “greenbacks” and “debt-free money”, terms that are popular with Scott Baker and his followers. Greenbacks were not debt-free. They were fully acknowledged obligations of the federal government…meaning that if a person wanted to deposit them in a bank, the US backed them with “full faith and credit”. I agree that the FR needs to be replaced, but there needs to be a full and open discussion of alternatives first, and that hasn’t yet happened. See my most recent OpEdNews articles and watch this video:

    • Bev

      Hey jadan, I agree with you so much about former Rep. Dennis Kucinich’s NEED Act HR2990 ( at ) being the real solution that what would turn this economy around fast and may be the only way to help our survival as a species by providing the enormous monies to pay engineers to try to reduce the terrible danger of Fukushima, WIPP, the 400 aging nuclear power plants and try to re-stabilize climate change for the many generations it will take. The bill, the legislation was introduced to Congress in different years, in 2011 the introduced bill was called HR HR 6550. It still needs to be re-introduced ever year until it is passed into law.

      And, the act does not create a a public bank, rather a public money system:
      Why Promoting States to do Banking is a Distraction and Diversion, and Reforms Nothing

      It’s the monetary system which must be changed to end the fiscal crisis, and State governments cannot do this – it’s a matter for the Federal Government.

      Under present constitutional and legal conventions, the only institutions that can create money without debt are national treasuries and/or central banks. State governments within a federal nation cannot do this – the problem can only be solved at the national level.

      Proposals promoting anything else would require a constitutional amendment, which is not necessary.


      Historical experience has taught us what we need to do:

      1. Put the Federal Reserve System into the U.S. Treasury.
      2. Stop the banking system creating any part of the money supply.
      3. Create new money as needed by spending it on public infrastructure, including human infrastructure, e.g. education and health care.

      These 3 elements must all be done together, and are all in draft legislative form as the proposed American Monetary Act
      Professor Kaoru Yamaguchi’s Model of HR 2990
      Professor Yamaguchi (Berkeley, Doshisha Universities) shows that Kucinich’s HR 2990 NEED Act:
      (1) Provides the funding for infrastructure repair (which solves the unemployment crisis)
      (2) Pays off the national debt as it comes due
      (3) Does this without inflation! Click here to watch a video of Professor Yamaguchi’s presentation to the 2010 AMI Conference. Wow!
      How the Economists Facilitated the Crisis and How HR 6550* Solves it
      by AMI
      Review of Ellen Brown’s “The Web of Debt”
      in Book Reviews, by AMI
      Time to End Reserve-Based Money, Coffee with Joe, March 27, 2012

      • Carl_Herman

        Hi Bev,
        Do you think the $3 trillion annual direct savings is an accurate estimate for monetary reform and at-cost credit? It’s probably double this with indirect savings, such as from the infrastructure investment increasing productivity.

        • Bev

          I cannot confirm amounts you are suggesting. However, at-cost credit is still debt. You have previously offered that a negative interest rate could reduce credit/debt. And, everyone is near debt-saturation. And, how does that begin to affect perhaps quadrillions of dollars of derivatives. I would guess that even double the amount as you suggest, cannot begin to pay huge engineering efforts to try to lessen the danger of radiation from Fukushima, WIPP, and the 400 aging nuclear power plants in addition to climate change instability, all of which will take generations to attempt. Keeping money as debt does not sound like a plan for the survival of the species.

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      • jadan

        Thanks for underlining the distinction between public banking and a public money system. There’s confusion about the meaning of public banking. Private banks currently create our money supply through their normal banking activities, and if states and localities do the same thing and play the same game, then we can call it public banking. This seems to be what Ellen Brown believes. But as Stephan Zarlenga & Co take pains to point out, the state does not go into the banking business; it merely issues the money supply, the debt-free currency, which the banks then use in their retail banking business. The banks will do what most people think they do right now: loan out money that depositors entrust with them. They will no longer loan money into existence through fractional reserve lending. They will be using public money created by the US Treasury, not the private banking system and the Fed. The “public” in public banking is the debt-free money created by the people’s sovereign government. It’s not who’s running the banks, private parties or government entities.

        Thanks also for the links. These guys are a little abstruse for the average Joe, however.

      • Bev

        I found more Joe Bongiovanni’s EconomicStability videos (Joe is a speaker at the American Monetary Institute Annual Conference ) which are 4 to 10 minutes each and organized them better than youtube where you had to hunt several pages that were out of order:

        1. Monetary Reform Talk, 4.09, Part 1: Introduction by EconomicStability

        2. Monetary Reform Talk, 4 09, Part 2: Early History by EconomicStability

        3. Monetary Reform Talk, 4 09, Part 3: Lincoln’s Greenbacks by EconomicStability

        4. Monetary Reform Talk, 4 09, Part 4: Post Civil War by EconomicStability

        5. Monetary Reform Talk, 4.09, Part 5: Federal Reserve Act by EconomicStability

        6. Monetary Reform Talk, 4.09, Part 6: Chicago Plan of 1933 by EconomicStability

        7. Monetary Reform Talk, 4.09, Part 7: Robert Hemphill quote by EconomicStability

        8. Monetary Reform Talk, 4.09, Part 8: Milton Friedman by EconomicStability

        9. Monetary Reform Talk, 4.09, Part 9: The Solution by EconomicStability

  • Bearly Magical

    As I read this article, a couple of red flags appeared in my non-economist mind. One is that not all the interest in intergovernmental transfers is going to the fed and the banksters. Much of it goes to public pensions and social security, well funded programs that look for interest to stay in the black, and invest in government bonds. I would hate to see that interest rate be dropped. Another red flag, from the intro to the article and not the body, speaks of a simpler income tax. Bill Bradley tried that and got nowhere. It would be easy to make income tax fairer and simpler, but the crooks who tinker with these things always screw the poor and middle class even more as they say they pretend to “fix” things.

    Our government is 99.99% corrupt and I cringe every time economists “reform” it. Beyond the supply and demand curves, it seems that the practice of economics is to steal while rationalizing that the system is being made to function better. I fear that economists would screw social security long before they took a penny from the banksters in the fed.

    • Carl_Herman

      1: You missed the section that states the ~$400 billion annual interest cost for the national debt has a savings of ~1/2 if the debt is paid BECAUSE ~$200 billion is paid back into government programs. So no red flag there.

      2: The fact that others have proposed changes in income tax is immaterial to the case for massive savings from monetary reform, and the ability to change that tax. No red flag there.

      3. The mechanics of debt-free money and at-cost credit stand, despite whatever corruptions have occurred in the past with lies and spin to maintain the current system of debt.

  • John_Steinsvold

    An Alternative to Capitalism (since we cannot legislate morality)

    Several decades ago, Margaret Thatcher claimed: “There is no alternative”.
    She was referring to capitalism. Today, this negative attitude still persists.

    I would like to offer an alternative to capitalism for the American people to
    consider. Please click on the following link. It will take you to my essay titled:
    “Home of the Brave?” which was published in the OPEDNEWS:

    John Steinsvold

    Perhaps in time the so-called dark ages will be thought of as including our own.
    Georg C. Lichtenberg

  • Rudya

    Excellent article and well documented. If only the masses would take a few hours off from watching celebrity worship and NFL gladiator distractions, this proposal could transform our system. It is amazing that people will spend all their lives working to make “money”, and yet have absolutely no idea of how it comes into existence or who benefits from the current system.

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  • Carl – in footnote 51, you say “Of $60 trillion total debt, a conservative current interest cost of 5%
    is $3 trillion every year. Two trillion dollars of savings if the
    profits are transferred to the American public rather than to the
    banking industry is probably low.”
    But, we don’t pay off a $60 trillion total debt, do we? I thought we only pay down on the amount currently due, which is about $18T according to the real-time debt clock: That same debt clock says the amount per citizen is a little over $56k, and 5% of that (which is a bit high, I think) is only $900B, not $3T.
    Please advise.

    • Carl_Herman

      The $60 trillion is total public and private debt calculated by the Fed and hyperlinked to its source. The $18 trillion is only US federal government debt. Therefore, the $2 trillion annual savings is calculated from the total debt’s interest, which indeed would not need an annual service charge of a trillion dollars.