Fed Chair: Creating debt-free money to directly pay for public goods/services is power to ‘legitimately consider.’ Data and history: $1,000,000 benefits for every US household upon our demand to end .01% oligarchy

hat tip: PositiveMoney

Federal Reserve Chair Janet Yellen affirmed last Wednesday in a press conference that the power to create debt-free money for direct payment of public goods and services is a legitimate consideration.

In a statement parsed with eleven references that this action is “unusual,” “rare,” and claimed fears of hyperinflation, Yellen’s admission of this game-changing power is poisoned with lies of omission and commission. The top three lies, with more below:

  1. The current “monetary” system only and always creates debt for what we use for money. This is taught in every economics course, and is like adding negative numbers forever. These mechanics directly connect to escalating debt totals of $19 trillion for the federal government debt with annual gross interest cost of over $400 billion, total debt of all US sectors of over $60 trillion with over $5 trillion in states’ government debt. Yellen lies in omission to disclose that the Fed “monetary” system’s mechanics can only create increasing and unpayable debt. To call “debt” its Orwellian opposite (“money”) is literal criminal fraud in her legal fiduciary responsibility to fully disclose our most important monetary information. The so-called “developed” nations with this debt-based system total $50 trillion of central government debt.
  2. Yellen lies that this is an “academic” debate only as an “all-out attempt” in a “very abnormal” situation without reminding us that Benjamin Franklin helped “invent” operating government without taxes when colonial Pennsylvania directly created currency to pay for its public goods and services. He was so excited about this breakthrough, he wrote a pamphlet on this topic. Yellen lies about “academic debate” when 86% of US economics professors agreed that debt-free money to directly pay for goods and services is superior mechanics than our current debt and tax model when asked directly. Yellen lies in omission to not remind us that debt-free money was tried on a national scale after the most tragic-comic hyperinflation imaginable to rebound that nation to the most powerful economy of Europe: Nazi Germany. This was only a partial experiment, with caveat that monetary power is amoral, as are other powerful tools like hammers, cars, and computers. Yellen won’t remind us that Thomas Edison and Henry Ford dedicated a media tour on the “invention” of debt-free money to pay directly for infrastructure.
  3. Yellen lies by not telling us that America’s infrastructure produces more economic output than investment cost, and therefore debt-free money to buy it produces game-changing triple benefits: employment, upgraded infrastructure, and overall falling prices. With a history of monetary reform extending to the founding of the US (British agents counterfeited colonial script to make it worthless), Lincoln’s Greenbacks, the Greenback political party and monetary reform being the US 2nd-most debated topic after slavery, and most currently in Congressman Kucinich’s NEED Act in 2011, this subject is not a mystery to any professional in this area.

The motivation for Yellen’s lies are to preserve the privately-owned banking system she represents that has unique power and profit to create what is used for money (debt/credit) out of nothing, then “lend” credit to the public at interest payable to them.

Yellen:

“In normal times I think it is very important that there be a separation between monetary and fiscal policy, and it is a primary reason for independence of the central bank. We’ve seen all too many examples of countries that end up with high or even hyperinflation because of those in charge of fiscal policy direct their central bank to help them finance it by printing money and maintaining price stability and low and stable inflation is very much aided by having central bank independence.

Now that said, in unusual times where the concern is with very weak growth or possibly deflation — rather rare circumstances — first of all, fiscal policy can be a very important tool. And it is natural that if it can be employed that just as monetary policy is doing a lot to try to stimulate growth that fiscal policy should play a role. And normally you would hope in an economy with those severe downside risks, monetary and fiscal policy would not be working at cross-purposes, but together.

Now whether or not in such extreme circumstances there might be a case for close coordination where the central bank playing a role in financing fiscal policy. This is something that academics are debating. And it is something that one might legitimately consider. I would see this as a very abnormal, extreme situation where — I warn you it’s an all-out attempt — and even then it’s a matter that academics are debating — but only in an unusual situation.”

Link to Yellen explaining in two minutes of video.

In greater detail and with further data:

The top three benefits each of monetary reform and public banking total ~$1,000,000 for the average American household, and would be received nearly instantly.

Monetary reform is the creation of debt-free money by government for the direct payment of public goods and services. Creating money as a positive number is an obvious move from our existing Robber Baron-era system of only creating debt owed to privately-owned banks (a negative number) as what we use for money. Our Orwellian “non-monetary supply” of adding negative numbers forever causes today’s tragic-comic increasing and unpayable total debt. You learned these mechanics of positive and negative numbers in middle school, and already have the education and life experience to conclude with Emperor’s New Clothes absolute certainty that accelerating total debt is the opposite of having money. As a National Board Certified and Advanced Placement Macroeconomics teacher, I affirm this is also exactly what is taught to all economics students.

The public benefits of reversing this creature of Robber Barons are game-changing and near-instant. We the People must demand these, as .01% oligarchs have no safe way to do so without admission of literal criminal fraud by claiming that debt is its opposite of money.

The top 3 game-changing benefits of monetary reform:

  1. We pay the national debt in proportion to removing private banks’ ability to create what we use for money as debt in order to prevent inflation. We retire national debt forever.
  2. We fully fund infrastructure that returns more economic output than investment cost for triple upgrades: the best infrastructure we can imagine, up to full-employment, and lower overall costs.
  3. We stop the ongoing Robber Barons who McKinsey’s Chief Economist documents having ~$30 TRILLION in tax havens, and the Fed finding the US top seven banks creating shell companies to hide $10 trillion. This amount is about 30 times needed to end all global poverty, which has killed more people since 1995 than all wars and violence in all human history.

Public banking creates at-cost and in-house credit to pay for public goods and services without the expense and for-profit interest of selling debt-securities. North Dakota has a public bank for at-cost credit that results in it being the only state with annual increasing surpluses rather than deficits.

Top 3 game-changing benefits of public banking:

  1. a state-owned bank could abundantly fund all state programs and eliminate all taxes with just a 5% mortgage and credit card.
  2. a state-owned bank could create in-house and at-cost credit to fund infrastructure. This cuts nominal costs in half because, as you know, selling debt securities typically doubles the cost. For example, where I live we’re still dismantling the old Bay Bridge in NoCal from the upgrade that cost $6 billion, but the debt-service costs will add another $6 billion when it’s all paid.
  3. CAFRs (Comprehensive Annual Financial Reports) stash “rainy day” funds no longer required with a credit line from a public bank. In addition, the so-called “retirement funds” currently deliver net returns of just a few percent on good years, and negative returns on bad years (herehere). California’s ~14,000 various government entities’ CAFRs have a sampled-data total estimate of $8 trillion in surplus taxpayer assets ($650,000 non-disclosed assets per household, among California’s ~12.5 million households).

$1,000,000 of benefits per US household:

  • California’s CAFR data of ~$650,000 of assets per household is evidence of huge cash assets of similar magnitude in every state.
  • Paying the US national debt of ~$18 trillion saves ~$180,000 per household.
  • Ending state taxes in California to pay a budget of ~$170 billion saves each household ~$15,000, with similar savings in every state.
  • ~$30,000 per household savings annually: the American public would no longer pay over $400 billion every year for national debt interest payments (because almost 30% of the debt is intra-governmental transfers, this is a savings of ~$300 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 (1). 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 (2). This savings would allow us to simplify or eliminate the income tax (3). The estimated savings of eliminating the income tax with all its complexity, loopholes, and evasion is $250 billion/year (4). 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.
  • Related, if the ~$30 trillion hidden in tax havens by the .01% have $10-$15 trillion from Americans, and we count the Federal Reserve report that the US top seven banks have over $10 trillion stored, then the average US household could clawback ~$200,000 to ~$250,000.

Famous Americans already on record for these reforms:

Please understand that I represent likely hundreds of thousands of professionals making factual claims with objective evidence anyone with a high school-level of education can verify.

The Emperor’s New Clothes obvious pathway out of these mechanics of our “debt system” is to start creating debt-free money (a positive number) for the direct payment of public goods and services, and create public credit for at-cost loans (a negative number). I have three academic papers to walk any reader through these facts; an assignment for high school economics students, one for Advanced Placement Macroeconomics students, and a paper for the Claremont Colleges’ recent academic conference:

Teaching critical thinking to high school students: Economics research/presentation

Debt-damned economics: either learn monetary reform, or kiss your assets goodbye

Seizing an alternative: Bankster looting: fundamental fraud that “debt” is “money”

Let’s examine just some of the facts of the current US economy that demonstrates its criminal status:

For Americans still zombiefied to “believe” in America, please embrace the reality that 40% of US children live at least one year of their lives in under-measured poverty, while oligarchs most responsible literally laugh in grandiose glee of the poverty they euphemise as “income inequality.” Please absorb this 1-minute reality check:

More game-changing economic data that confirm what we receive for economic leadership is literal criminal fraud:

15-minute video of obvious solutions: Mark Anielski and Ellen Brown’s powerful 15-minute response to an interview at the Seizing an Alternative conference (and here, with videos here) with former World Bank economist Herman Daly and co-author John B. Cobb of For the Common Good (video should start at 1:04:43):

Endnotes:

1) 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: https://research.stlouisfed.org/fred2/series/TCMDO

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

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

4) Tax Foundation. Hodge, S, Moody, J, Warcholik, W. The Rising Cost of Complying with the Federal Income Tax. Jan. 10, 2006: http://www.taxfoundation.org/research/show/1281.html

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Note: I make all factual assertions as a National Board Certified Teacher of US Government, Economics, and History, with all economics factual claims receiving zero refutation since I began writing in 2008 among Advanced Placement Macroeconomics teachers on our discussion board, public audiences of these articles, and international conferences. I invite readers to empower their civic voices with the strongest comprehensive facts most important to building a brighter future. I challenge professionals, academics, and citizens to add their voices for the benefit of all Earth’s inhabitants.

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Carl Herman is a National Board Certified Teacher of US Government, Economics, and History; also credentialed in Mathematics. He worked with both US political parties over 18 years and two UN Summits with the citizen’s lobby, RESULTS, for US domestic and foreign policy to end poverty. He can be reached at Carl_Herman@post.harvard.edu

Note: Examiner.com has blocked public access to my articles on their site (and from other whistleblowers), so some links in my previous work are blocked. If you’d like to search for those articles other sites may have republished, use words from the article title within the blocked link. Or, go to http://archive.org/web/, paste the expired link into the box, click “Browse history,” then click onto the screenshots of that page for each time it was screen-shot and uploaded to webarchive. I’ll update as “hobby time” allows; including my earliest work from 2009 to 2011 (blocked author pages: herehere).

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  • diogenes

    This kind of public finance has been around and seriously considered before, and blocked by the same powers that block it and lie about it now.
    In 1939 California Congressman Jerry Voorhis introduced a bill (H.R. 4931)
    proposing to buy out the private owners of the Federal Reserve with
    Treasury-issued money and liquidate the national debt by purchasing the
    Reserve’s holdings of Treasury bonds as they mature “in the same manner in
    which the banks bought the bonds originally — namely with newly created
    money. 150 congressmen were pledged to vote for it, but the powers
    controlling the House referred it to committee and left to die there when
    the term of the 76th Congress expired. The bill “specifically proposed:
    (1) that the capital stock of the twelve Federal Reserve Banks be purchased
    by the government, thus making the central banks the property of the people;
    (2) that a new Federal Reserve Board be appointed, directly responsible to
    Congress; (3) that whatever amount of money was called for according to
    economic circumstances be paid into circulation through such programs as
    old-age pensions, wages on public works, loans to agriculture and industry
    (this would mean controlled issue of new debt-free money); (4) that money in
    circulation be kept at the level established in 1926 (this would stop
    Congress from wild expansion in printing money); (5) that banks be required
    to maintian dollar-for-dollar reserves behind demand deposits (this follows
    the direct proposals of Fisher); (6) that government controls over banking
    be simplified to guarantee compliance and safety of deposits.”

    The fact that 150 congressmen supported the proposal is a strong indication of its reasonability and workability.

    Voorhis was defeated for re-election in 1946 by Richard Nixon in a dirty-tricks commie-smear campaign heavily backed by Wall Street, including the father and grandfather of President Bush I and II.

  • jadan

    Carl, to speak of monetary policy and not mention the latest development in this domain, the NEED Act, HR2990, the National Emergency Employment & Development Act proposed by Dennis Kucinich not so long ago, is a serious oversight. This comprehensive overhaul of the private monetary system that would create a true public monetary system is the closest we have come to real monetary revolution probably since 1939 and Jerry Voorhis, as Diogenes’ post describes.

    • Carl_Herman

      Hi jadan,
      I’m friends with Kucinich’s former Chief Domestic Policy Advisor and Chief Economic Advisor, and worked closely with AMI for years, even presenting at two of their annual conferences on monetary reform.

      I’ve mentioned Dennis’ NEED act in previous articles, likely among the links in this one. Ellen Brown’s book, “Web of Debt” is all about monetary reform. I’ve worked with Ellen since 2007, and along with her book to abolish the Fed can give you my first-hand work with her that we are in agreement of advocating both tools of monetary and banking reforms.

      Why both?

      Creating what we use for money both as a positive number (debt-free money directly created) and as a negative number (debt/credit BUT by public-owned banks to return interest as public funds) allows greater flexibility to manage money supply/inflation/deflation.

      AMI’s founder is Stephen Zarlenga. In two private conversations, I’ve gotten Stephen to agree that both tracks is more powerful in order to unleash literally thousands of state legislators to stop feeding Wall Street banking by creating state-owned banks. The math after that allows the best balance between monetary reform and public-created credit.

      So, if/when we win and have transparent data on money supply, that will tell us best to the degree we might need positive and negative number creative power for money supply.

      • jadan

        I don’t question your scholarship or good intent, Carl. Guess I’m just annoyed with Ellen Brown for her advocacy of this faux public bank, BND. She seems to think she can compromise with the Fed. That is a fatal error, IMHO. This always happens…the co-optation of the public interest by the private parasites ( a definition of the Fed ).

        • diogenes

          It’s my impression that Ellen Brown’s interest in the Bank of North Dakota is partly because it represents a (partial) solution that can be taken at the state level and partly because it represents a public bank which has a long successful history and makes a good example therefore. And her book, Web of Debt, is extremely valuable and needs more readers more than detailed critiquing, at this point, in my opinion.

        • Carl_Herman

          Again, and with all respect, as someone who has read all of Ellen’s work and as someone working closely with her, she has no illusions of compromise within the current slave-debt system. What you might perceive is her offer for the Fed to split between those who will stand for maximum public benefits, and those who insist on keeping the people mired as debt slaves.

          As you may know, I make it a point to offer Truth & Reconciliation rather than prosecution for the .01% “masters” and minions. This also is not compromise, but a genuine strategy to affect choice, factual disclosure, and finally truthful public policy consideration with transparent data.

          With respect, you might want to reconsider the data I provide in this article of how public officials can see and access the power of public banking, then take the short step to see monetary reform. They already know banking.

    • Carl_Herman

      I amended the article to include Dennis’ work; thank you, jadan 🙂

  • Scott

    Carl, I have suggested to Obama that he issue United States Notes and stop the manufacture and distribution of Federal Reserve Notes. United States Notes are issued debt-free.

    • Carl_Herman

      Awesome; let me know if you get a response. He’s about as likely to give a non-bullshit answer as previous presidents.

      Because the “leadership” of both parties are owned, this is why we’re more likely for success working at state and local levels with public banking 🙂