Paying for the Green New Deal

Author Govert SchullerPosted on February 9, 2019February 5, 2023Categories Monetary ReformTags Monetary Reform, Politics

Open Letter by Nick Egnatz to US Congresswoman Alexandria Ocasio-Cortez (NY-14).

Dear Congresswoman Ocasio-Cortez,

You have proposed an individual income tax rate of 70% on earnings in access of $10 million per year. This to fund a proposed progressive agenda of transitioning to clean renewable energy, expanded Medicare for All and tuition free public university education. You correctly reference that we had a 90% top tax rate in the 1950s and did just fine with it. Critics are quick to point out that even increasing the top tax rate won’t fund the Green New Deal, as the reforms are called.

Whether of not there is success in raising the top tax rate I support the Green New Deal, while calling for reform of our monetary system to provide the additional funding that makes it all possible, doing so debt-free and without inflation/deflation.

If you would just rather watch a video before you read my thoughts, please do. Reverend Delman Coates is pastor at Mount Ennon Baptist Church in Clinton, MD. His presentation is titled The New Abolitionism — Monetary Reform and the Future of Social Justice.

70% of Americans live paycheck to paycheck, 40% can’t cover a $400 emergency (new tires on the car, a trip to the dentist or a couple of missed workdays due to the flu).

The American people, almost half of whom have virtually no net worth, would overwhelmingly support monetary reform that would fund, debt-free, a massive rebuilding of both our crumbling physical infrastructure and our human infrastructure via education, healthcare and a clean, sustainable environment. Monetary reform will create millions upon millions of new good-paying jobs and bring about the drastic reduction of both private and government debt. All the American people need is a little knowledge about unjust and just systems of money — what our money system is now and what it could be with simple monetary reform legislation that is already written and in Congress.

Aristotle’s statement “Money exists not by nature, but by law” is the soul of the monetary reform movement. Aristotle did not spout theories and then use his intellect to try and justify them. He observed nature and society, what worked, what didn’t and what conformed to nature. Both ancient Sparta and ancient Rome had legal systems of public money, with no intrinsic commodity value, that allowed them to grow and prosper for about 400 years each. Rome eschewed gold and silver (commodity money) for bronze coins (fiat legal money). Sparta used iron coins that were dipped in vinegar after smelting to take away any future commodity use. Both Rome and Sparta thrived with fiat legal money and then sadly after 400 years each, got away from it and began their decline (See Stephen Zarlenga, The Lost Science of Money, Chapters 1 & 2).

In the American colonies three examples of money by law systems (fiat legal money) like the NEED Act represents were responsible for the growth of the colonies, the Revolution that gave us our country, and the eventual abolition of slavery and the continuation of the Union. Colonial Currency allowed the colonies to grow and build infrastructure when the Mother Country made possession of its own currency illegal in the colonies. Continental Currency enabled the colonists to fight the Revolution, debt-free. Greenbacks financed the Civil War, allowing the Union and country to continue (Idem, Chapters 14, 15, 16 & 17).

In contrast the present debt money system is responsible for the huge unmanageable levels of debt that people and governments presently have and must continue to have for there to be money in the system for society to function. The debt money system is a fraud that fails the people in actual practice in the real world. The debt money system is quite simply incapable of functioning for the betterment of society and the environment. Abolition of this cancerous system is imperative.

Both theory and actual practice give the NEED Act the solid foundation that should be required of our nation’s monetary system. The NEED Act is based on the premise, reiterated in our Constitution, that the power to create our money belongs to the people collectively, through our elected government. It is further supported by the successful historical examples cited above and in Stephen Zarlenga’s book The Lost Science of Money.

Money is not a commodity, as often represented by gold or silver in ancient times, or the modern banking system’s representation of money as credit or debt. Money is an abstract legal power of the state that acts as is a final means of payment, facilitates commerce and “promotes the general welfare” of society as called for by the preamble to our Constitution.

Monetary reform is the only vehicle that can get both people and government out of debt. Why? Unknown to almost all of us, virtually all of what we use for money is created out of thin air as debt by private banks when they make loans. As the loans are repaid the money is extinguished from the bank’s books, it exists only while we are in debt. Only money for the principal amount of the loan is created by the bank, no money is created for the huge amounts of interest we must pay over the life of the loan. Therefore within the debt money system there is never enough money to repay both loan principal and interest. And even if there were exactly the amount of money in the system to repay the debts, once repaid the money no longer exists and there would be no money in the system for society to function. We are consigned by the debt money system to endless and ever increasing debt. This applies to both government and individuals.

“In the modern economy, most money takes the form of bank deposits. But how those bank deposits are created is often misunderstood: the principal way is through commercial banks making loans. Whenever a bank makes a loan, it simultaneously creates a matching deposit in the borrower’s bank account, thereby creating new money. The reality of how money is created today differs from the description found in some economics textbooks: Rather than banks receiving deposits when households save and then lending them out, bank lending creates deposits…” (Bank of England, Quarterly Bulletin 2014 Q1, “Money Creation in the Modern Economy“).

How does monetary reform get us out of debt?

Step 1

Monetary reform decisively stops all bank creation of what we use for money as debt. Under monetary reform banks will only loan money that already exists, exactly what most of us mistakenly think is going on now.

Without getting too complicated, the present debt money representing loans is a liability to the banks. This money, on the banks books as a liability, under the NEED Act instantly become US Money and is no longer a liability to the banks, but the banks are charged with transferring this money to the US Treasury as soon as it is repaid. The banks are allowed to keep the interest part of the repayments and immediately transfer the principal to the Treasury as it is repaid. Future lending will use funds invested with the bank in which the investors (us) will receive a negotiated portion of the interest that is charged. Banks will also have safekeeping accounts (savings and checking) in which the banks will not be allowed to touch this money. Banks will be allowed to charge for this service.

Step 2

Simply stopping banks from creating our money is not enough. The federal government has to step up to the plate and create new US Money, in non inflation/deflationary amounts, and spend it into existence for the needs of the nation as determined by Congress — think infrastructure, clean sustainable environment, healthcare, education, repayment of national debt. Critics will predict rampant inflation, yet creating money for programs that create infrastructure (physical — roads, bridges, etc., human — healthcare, education, child care, etc.) have never been inflationary in the past and there is no reason to believe that it will be now.

Step 3

The Constitution gives “Congress the Power to coin (create) Money.” But a century ago in 1913 our Congress made a fatal mistake and gave the Money Creation Power away to the Federal Reserve System and the private banks that own and control the Federal Reserve Banks. All 12 Federal Reserve Banks are owned and controlled by the private banks in their districts. Blatantly unconstitutional, the Federal Reserve Act has never been ruled on by the U.S. Supreme Court. The third step of monetary reform is to nationalize the Federal Reserve System. Make the Federal Reserve System federal — again exactly what most of us mistakenly think it is now, a part of our government.

In addition to the obvious financial and quality of life benefits to the poor and working class that monetary reform would bring, the new system of just money is also easy to understand. Simply make the monetary system conform to what we think it is now: federal government creates all our money, banks loan money already in existence and the Federal Reserve becomes a part of our government.

1. Our federal government will create all US Money for the needs of the nation, as determined by Congress, and spent into existence, debt-free in non inflation/deflationary amounts.

2. Banks will stop creating what we use for money and only loan money that is already in existence.

3. The Federal Reserve System will be nationalized and put into the Treasury Department. A Monetary Authority, somewhat similar to the Supreme Court, will be created and charged with determining the amount of new money to be created, maintaining a non inflation/deflationary money supply. Congress will continue to determine what we spend our money for.

This system of just, public or sovereign money was put into Congress in 2011 as the NEED Act (National Emergency Employment Defense Act) by Dennis Kucinich.

In addition to repayment of the national debt, infrastructure and other spending deemed appropriate by Congress, the NEED Act specifically calls for a Citizens Dividend to be paid to each citizen. The intention of the writers of the NEED Act was that it should be a substantial amount. $10,000 each was discussed and would be appropriate considering the financial damage done to individuals and families during the Great Recession and continuing to the present day, while at the same time banks were bailed out of bad loans and received trillions of dollars to inflate their owners’ wealth, while the poor and middle class sit upon a financial bubble.

The Citizens Dividend will transform the lives of hundreds of millions of Americans. It is also monetarily necessary to pump money into the system initially to prevent deflation, not enough money to go around, as we transition from bank money creation. Most of us actually live in a deflationary system with not enough money to go around for us and fabulous wealth sitting in the vaults of an elite few.

Evidently content to stick with the status quo of a rapidly disappearing middle class, Federal Reserve economists have avoided critiquing the NEED Act. Fortunately Michael Kumhof and Jaromir Benes at the International Monetary Fund were not content to sit around and do nothing. They embedded a comprehensive and carefully calibrated model of the banking system in a DSGE (dynamic stochastic general equilibrium) model of the U.S. economy, similar to the models used by the Federal Reserve. They concluded that monetary reforms that are in the NEED Act would:

1. “Much better control of a major source of business cycle fluctuations, sudden increases and contractions of bank credit and of the supply of bank-created money.

2. Complete elimination of bank runs.

3. Dramatic reduction of the (net) public debt.

4. Dramatic reduction of private debt, as money creation no longer requires simultaneous debt creation…While inflation drops to zero.” (IMF Working Paper, “Chicago Plan Revisited“)

Monetary reform is not a progressive/conservative wedge issue. It is a win/win issue for both sides of the political spectrum: repaying the federal debt as it comes due (impossible under the present system), allowing people and government alike to get on solid financial footing; while creating jobs, prosperity, infrastructure, education and healthcare in a clean sustainable environment.

The NEED Act is readable, understandable and available to be reintroduced into Congress. It can be found with a simple online search. Current Congress Members might want to contact Dennis Kucinich for assistance. Conservatives and progressives are urged to contact monetary reformers at the Alliance for Just Money to get started.

The American Monetary Institute, under founding Director Stephen Zarlenga and his successor Robert Poteat, has been the leader in the quest for monetary reform and a system of just money. Zarlenga wrote his magnum opus Lost Science of Money and the American Monetary Institute drafted the American Monetary Act that became the NEED Act when Kucinich put it into Congress in 2011. Unfortunately Zarlenga died in 2017 and Poteat in 2018.

Neither Stephen Zarlenga nor Robert Poteat had formal education in economics, yet they both achieved tremendous insight on the nature of money. Stephen Zarlenga’s 2002 book The Lost Science of Money was reviewed by former Deputy Director of Modeling for the International Monetary Fund, now with the Bank of England, Michael Kumhof as “a masterful work”. Kumhof read it 3 times (750 pages) and was inspired by it to model the 1930s Chicago Plan in his IMF Working Paper “The Chicago Plan Revisited“.

The Alliance for Just Money is a fledgling organization composed primarily of supporters of the American Monetary Institute trying to move the monetary reform agenda forward in a more public manner.

A word of caution, there are two U.S. organizations (Modern Monetary Theory & Public Banking Institute) that claim to support monetary reform, but do not support the NEED Act and have refused to critique it. They prefer to ignore a vigorous debate on the comprehensive reforms of the NEED Act and instead call for continuing the present debt money system, albeit with minor changes.

Monetary Reform has gone international with groups springing up across Europe and elsewhere. Many of these monetary reformers have attended annual conferences held by the American Monetary Institute each fall in Chicago.

The Swiss had a recent citizens referendum to change to a just money system. While the majority of Swiss supported the change in a poll before the referendum, the power of the Swiss banking industry was able to cloud the issue and carry the day. Still 26% of the Swiss people voted to change their money system.

I have written extensively online on monetary reform. “Linking Social Justice to Monetary Reform” was written 5 years ago and put into a zine that friends of mine published. They send it to prisoners across the country along with hundreds of others. I usually pass them out when I give a talk.

I had guest commentary op-eds published in my local paper the Northwest Indiana Times, Indiana’s 3rd largest newspaper. I cannot find any other op-eds on monetary reform published in our entire country. I bring this up not to boast about anything I have done, but to illustrate the complete avoidance to the issue of monetary reform by the corporate media (See appendix).

Our corporate newspapers have allowed a total of 4 op-eds in the last couple of decades on the issue of comprehensive monetary reform. These op-eds were not written by a learned economist, but by a college drop-out who participated in the Vietnam War through ignorance and for the last 14 years stands vigil every Saturday in front of the Highway of the Flags War Memorial, Highland, Indiana in protest of our government’s imperialism, wars overseas and war at home on the poor and working class.

The economics profession has been equally negligent in educating the American people about the nature of our money. The Federal Reserve System employs many hundreds of monetary economists. These current, past and future Federal Reserve economists are on the editorial boards of the academic economics journals and control what gets published. They have completely ignored the NEED Act, as if it didn’t exist. It is career suicide for a monetary economist to support monetary reform.

Incredibly the Federal Reserve is unable to tell us where our money comes from and how it is created. The Chicago Federal Reserve has 11 monetary economists listed on their webpage. I wrote all of them asking how our money is created. Ten ignored my letter, but one replied. A gracious letter, acknowledging how important the subject was but that the public affairs department would have to provide an answer to my question. Still no answer. I’ll save a discussion for another time of how the economics textbooks incorrectly portray how our money is created.

Kaoru Yamaguchi received his doctorate from University of California, Berkeley and was a department head at the prestigious Doshisha University, Japan. He lost his job at Doshisha for modeling and writing about the NEED Act before it was put into Congress. A member of the System Dynamics Society, Dr. Yamaguchi has written several academic papers concluding that the reforms of the American Monetary Act (NEED Act) allow us to repay our federal debt as it comes due and completely rebuild our crumbling infrastructure, $2.3 trillion then, now $3.6 trillion per American Society of Civil Engineers Infrastructure Report Cards, with zero inflation, creating 7-10 million new good-paying full time jobs. Dr. Yamaguchi’s life and research is devoted to sustainability and his system dynamic modeling reflects environmental sustainability. As a reward to Dr. Yamaguchi’s pioneering work on monetary reform and a sustainable future, his department at Doshisha University was eliminated.

I am at your service to assist you in any way that I can to bring about true monetary reform and a system of just money. I will gladly put you in touch with other monetary reformers, including New York City.

Sincerely,

Nick Egnatz
occupynick@yahoo.com

 

Appendix: Guest commentaries by Nick Egnatz for the Northwest Indiana Times:

Gary could fulfill development needs with the NEED Act

The NEED Act Erases Big Steel’s Claimed Need for Worker Concessions

Fund Infrastructure Work with the NEED Act

Monetary reform needed for smart infrastructure investment