Monetary reform would have prevented Los Angeles fires (and all other economic problems)

hyperlinks and video live at source: http://www.examiner.com/x-18425-LA-County-Nonpartisan-Examiner~y2009m9d3-Monetary-reform-would-have-prevented-Los-Angeles-...

AP reported that federal funding ran out before thousands of highly flammable brush from Los Angeles mountains was cleared to prevent catastrophic fire. Monetary reform would have fully funded all needed public services and programs and prevented this disaster.

"Monetary reform" is the most-used title to take the power of creating money away from banks and return it back to government, as authorized in the US Constitution under Article 1 Section 8 to "coin money and regulate the value thereof." With this monetary system, government can respond to market failure employment and be the employer of last resort. Those who are unemployed can work on government projects, such as brush clearance, with money created directly by the government. The cost-benefit analysis in this example of fire prevention is clearly positive for the public good.

In consideration of other public programs, as long as cost-positive goods and services are created, inflation decreases as the value of the goods and services exceeds the amount of wages to create them. And, the US Interagency Council on Homelessness has found that all cost-benefit analyses have found that even if we pay for the homeless to have minimal housing, food, and health care, that total is up to 100% less than public costs of their street life. In addition, these studies show ~90% of these participants find jobs and leave these programs.

When a government has unemployed workers, necessary work, and the resources to complete the work, policy that does not bring these three elements together for public benefit is really stupid.

The monetary system we now have only enables banks to create pseudo-money called “bank credit.” This comes into existence when someone asks the banks for a loan and is entered into a new deposit account. Banks do not lend out the deposits of others, as is imagined. For a full explanation, please read my brief. Our current system forces government to fund programs through taxing and borrowing. Every dollar we allow banks to create is one dollar less that government cannot create and has to tax us to receive. When the tax-burden becomes higher than government is willing to tax directly, they borrow the money. The interest on borrowing is currently $5 billion every year in California (about $15 million every day) and $500 billion for the federal government (~$10,000 per year for the average US household).

The total cost benefit of monetary reform in the US is about $1 trillion every year. Monetary reform includes paying off our national debt as it becomes due rather than merely paying the interest and rolling-over the existing debt.

I am an economics teacher; the above information is in any macroeconomics curriculum. What’s missing is the analysis to emphasize the meaning of our current monetary system that was crystallized in the era of American “Robber Barons” and hustled into law through the Federal Reserve Act of 1913.

What’s also missing is for us to collectively overcome our cognitive dissonance that such open facts are indeed the open facts, and the fluid intelligence to recognize and game-changing opportunities when clearly available for anyone to verify, like a trillion dollars of public benefits.

For consideration of what our brightest historical minds have said on the benefits of securing the power of money-creation for the public rather than for bank profits, see here and here.

Please forward this to all who claim to be a responsible citizen. Thank you for all you do to build a brighter future.

This link is covered in my brief, but I'll also put it here: the experience of my economic teacher colleagues and me is that most people cannot grasp the power of monetary reform without a visual walk-through. The following video, Money as Debt II: Promises Unleashed, is the best visual tool I've found. The creator is Paul Grignon, to whom all of us working for the public benefits of monetary reform are grateful.

My "two cents"

"Monetary reform' is the most-used title to take the power of creating money away from banks and return it back to government, as authorized in the US Constitution under Article 1 Section 8 to 'coin money and regulate the value thereof.'"

I beg to differ. The above quoted clause in the constitution does not allow the government to create money. On the contrary. It only allows the government to coin money, Money in that case refers to a commodity, gold and silver. The government has no right by this clause to create money, whiich it can't do, because money was created by the big bang, or the Heavenly Creator, or whoever, and we decided to use that commodity as money. The government may coin money, meaning to fashion it into a form that is convenient for the purposes of trade. That's it. As far as the value of the money is concerned, that is determined, not by the government, but by factors such as supply, demand and cost of production, all of which are related to each other in a complex way, but are not controlled by the government.

If the government wants to create a currency, it must justify doing so through some other clause or passage of the constitution. As far as "regulating the value thereof, and of foreign coin," that simply means that the government would determine how much gold should be in each coin, and what the unit of account would be, such as the dollar = 1/20oz of gold. The government could then determine the value of foreign coin relative to that standard. The government does not create anything, and should not. The monetary system should really have nothing to do with the government. It should be a standard beyond government dictate. Does that make sense?

open to our best call

Hi pduveen,
This part of the Constitution is open to interpretation. The Constitutional Convention punted to Congress, not wanting a Bank of England model, but not able to get the votes around Alexander Hamilton's pitch to create a bank that he would run. Connecting money to a commodity is creating a dangerous variable in stabalizing the value of money. I understand the reasoning of Dr. Paul, but with transparency in data and creating supply of money, we'd have the power of government-issued money. Details are in my brief, and I also have two good papers of historical (and sourced) quotes suggesting what our brightest historical minds have thought.

You need an anchor

Money is nothing more or less than a streamlined form of barter. Barter is done with goods or services. But money, in order to be convenient, must be a commodity, not a service. Any attempt to make money more or less than what it is leads to a bad result. I think Dr. Paul has a very good idea of what money is, and what is wrong with our economy. But my understanding does not come from Dr. Paul, and I have published on this subject as far back as the mid 80s. There seems to be this movement to demonize gold. In the real world, you will not ever have a "perfect" monetary system. There will be problems with any commodity standard one chooses. However, the idea of a perfect system comes from trying to idealize where it is not feasible. For example, the idea of price stability is nice, but unachieveabe, However, great stability can be achieved when a commodity is used. The price relative to other goods and services is allowed to float, and this floating actually promotes monetary stability. In other words, it is the fluctuations, and the resulting feedback that actually generates stability, not fixing prices. But idealizing, one imagines a "stable" currency and tries to achieve it by, say, using monetary policy. This will never work.

hopefully we'll have Congressional hearings one day...

With every idea for improvement there will be multiple interpretations of the data (which are objective) and multiple policy proposals of what to do about the facts through policy. Honest people are fine with this. Even if a mistake is made in policy, the new facts will show it. New hearings and a tweaked policy or different attempt can go forward. Of course, this is an ideal unimaginable from the manipulative control that currently dominates policy.