Posted on November 12, 2011 by Ellen Brown
Henry Ford said, “It is well enough that the people of the
nation do not understand our banking and monetary system, for if they
did, I believe there would be a revolution before tomorrow morning.”
We are beginning to understand, and Occupy Wall Street looks like the beginning of the revolution.
We are beginning to understand that our money is created, not by the
government, but by banks. Many authorities have confirmed this,
including the
Federal Reserve itself.
The only money the government creates today are coins, which compose
less than one ten-thousandth of the money supply. Federal Reserve
Notes, or dollar bills, are issued by Federal Reserve Banks, all twelve
of which are owned by the private banks in their district. Most of our
money comes into circulation as bank loans, and it comes with an
interest charge attached.
According to Margrit Kennedy, a German researcher who has studied this issue extensively, interest now composes
40% of the cost of everything we buy.
We don’t see it on the sales slips, but interest is exacted at every
stage of production. Suppliers need to take out loans to pay for labor
and materials, before they have a product to sell.
For government projects, Kennedy found that the
average cost of interest is 50%.
If the government owned the banks, it could keep the interest and get
these projects at half price. That means governments—state and
federal—could double the number of projects they could afford, without
costing the taxpayers a single penny more than we are paying now.
This opens up exciting possibilities. Federal and state governments
could fund all sorts of things we think we can’t afford now, simply by
owning their own banks. They could fund something Franklin D. Roosevelt
and Martin Luther King dreamt of—an Economic Bill of Rights.
A Vision for Tomorrow
In his first inaugural address in 1933, Roosevelt criticized the sort
of near-sighted Wall Street greed that precipitated the Great
Depression. He said, “They only know the rules of a generation of
self-seekers. They have no vision, and where there is no vision the
people perish.”
Roosevelt’s own vision reached its sharpest focus in 1944, when he called for a Second Bill of Rights. He said:
This Republic had its beginning, and grew to its present
strength, under the protection of certain inalienable political rights .
. . . They were our rights to life and liberty.
As our nation has grown in size and stature, however—as our
industrial economy expanded—these political rights proved inadequate to
assure us equality in the pursuit of happiness.
He then enumerated the economic rights he thought needed to be added to the Bill of Rights. They included:
The right to a job;
The right to earn enough to pay for food and clothing;
The right of businessmen to be free of unfair competition and domination by monopolies;
The right to a decent home;
The right to adequate medical care and the opportunity to enjoy good health;
The right to adequate protection from the economic fears of old age, sickness, accident, and unemployment;
The right to a good education.
Times have changed since the first Bill of Rights was added to the
Constitution in 1791. When the country was founded, people could stake
out some land, build a house on it, farm it, and be self-sufficient.
The Great Depression saw people turned out of their homes and living in
the streets—a phenomenon we are seeing again today. Few people now own
their own homes. Even if you have signed a mortgage, you will be in
debt peonage to the bank for 30 years or so before you can claim the
home as your own.
Health needs have changed too. In 1791, foods were natural and
nutrient-rich, and outdoor exercise was built into the lifestyle.
Degenerative diseases such as cancer and heart disease were rare.
Today, health insurance for some people can cost as much as rent.
Then there are college loans, which collectively now exceed a
trillion dollars, more even than credit card debt. Students are coming
out of universities not just without jobs but carrying a debt of $20,000
or so on their backs. For medical students and other post-graduate
students, it can be $100,000 or more. Again, that’s as much as a
mortgage, with no house to show for it. The justification for incurring
these debts was supposed to be that the students would get better jobs
when they graduated, but now jobs are scarce.
After World War II, the G.I. Bill provided returning servicemen with
free college tuition, as well as cheap home loans and business loans.
It was called “the G.I. Bill of Rights.” Studies have shown that the
G.I. Bill paid for itself seven times over and is one of the most
lucrative investments the government ever made.
The government could do that again—without increasing taxes or the
federal debt. It could do it by recovering the power to create money
from Wall Street and the financial services industry, which now claim a
whopping 40% of everything we buy.
An Updated Constitution for a New Millennium
Banks acquired the power to create money by default, when Congress
declined to claim it at the Constitutional Convention in 1787. The
Constitution says only that “Congress shall have the power to coin
money [and] regulate the power thereof.” The Founders left out not
just paper money but checkbook money, credit card money, money market
funds, and other forms of exchange that make up the money supply today.
All of them are created by private financial institutions, and they all
come into the economy as loans with interest attached.
Governments—state and federal—could bypass the interest tab by
setting up their own publicly-owned banks. Banking would become a
public utility, a tool for promoting productivity and trade rather than
for extracting wealth from the debtor class.
Congress could go further: it could reclaim the power to issue money
from the banks and fund its budget directly. It could do this, in fact,
without changing any laws. Congress is empowered to “coin money,” and
the Constitution sets no limit on the face amount of the coins.
Congress could issue a few one-trillion dollar coins, deposit them in an
account, and start writing checks.
The Fed’s own figures show that the money supply has
shrunk by $3 trillion
since 2008. That sum could be spent into the economy without inflating
prices. Three trillion dollars could go a long way toward providing
the jobs and social services necessary to fulfill an Economic Bill of
Rights. Guaranteeing employment to anyone willing and able to work
would increase GDP, allowing the money supply to expand even further
without inflating prices, since supply and demand would increase
together.
Modernizing the Bill of Rights
As Bob Dylan said, “The times they are a’changin’.” Revolutionary
times call for revolutionary solutions and an updated social contract.
Apple and Microsoft update their programs every year. We are trying to
fit a highly complex modern monetary scheme into a constitutional
framework that is 200 years old.
After President Roosevelt died in 1945, his vision for an Economic
Bill of Rights was kept alive by Martin Luther King. “True compassion,”
King declared, “is more than flinging a coin to a beggar; it comes to
see that an edifice which produces beggars needs restructuring.”
MLK too has now passed away, but his vision has been carried on by a
variety of money reform groups. The government as “employer of last
resort,” guaranteeing a living wage to anyone who wants to work, is a
basic platform of Modern Monetary Theory (MMT). An
MMT website
declares that by “[e]nding the enormous unearned profits acquired by
the means of the privatization of our sovereign currency. . . [i]t is
possible to have truly full employment without causing inflation.”
What was sufficient for a simple agrarian economy does not provide an
adequate framework for freedom and democracy today. We need an
Economic Bill of Rights, and we need to end the privatization of the
national currency. Only when the privilege of creating the national
money supply is returned to the people can we have a government that is
truly of the people, by the people and for the people.
![[title]](http://neweconomyworkinggroup.org/sites/default/files/imagecache/feature_picture_med/feature_pics/books/Money_Reprot_cover.png)
