Monday, June 17, 2013

Nationalize the Federal Reserve!

Photo: In our current economic depression, proposals for monetary reform and money creation abound. Ranging from the serious (ie State Banking) to the dangerous (an international Gold Standard) to the absurd (the OWS rolling debt jubilee), these ideas all miss the biggest, lowest-hanging fruit of all: the Federal Reserve System.

The first major act of the US Congress was to establish the First Bank of the United States. On the design of Alexander Hamilton, the bank created credit out of thin air, and issued it for matters of the "general welfare" – mostly public infrastructure.

This system was highly successful, taking our fledgling country from an international basket-case after the American Revolution to an international powerhouse in innovation, industry and agriculture. America's rise was no accident of nature, but the conscious plan of the founders, built on the power of credit-creation. While Europe had to borrow their own money from private bankers, we created it.

National banking was a source of great political turmoil throughout the 19th century. Destroyed by Andrew Jackson (resulting in a deflationary crash and long depression), and resurrected by Abraham Lincoln (resulting in the Union's great advantages in technology and productive capabilities over the Confederate slave economy), 1913 was a great defeat for the nation when central banking was seized by Wall Street through the imposition of the Federal Reserve System.

The problem with the Fed is not that it's a "central bank" nor that it creates credit without reserves – but that the credit is issued only for the purposes of Wall Street! The Fed buys $85 billion every month in toxic bank debt, and lends emergency credit to Wall Street (~$27 trillion in the 2008 bailout) while offering NOTHING to the real economy.

This huge "magic money machine" that can create tens of trillions out of thin air musn't be shut down, but SEIZED by the US Congress, to whom it rightly belongs, as written in the Constitution.

As Ellen Brown wrote in a recent article for Counterpunch, 

"The funds can be provided interest-free; and because they represent an investment in productive capital, the debt itself can be repaid with the fruits of the investment – the jobs that create the salaries that generate taxes and consumer demand."

What we want the Fed to do, starting NOW, and what any honest political candidate or legislator must demand:

• An improved version of Elizabeth Warren's Bank On Students Loan Fairness Act, which would compel the Fed to refinance ALL $1 trillion in student loans at 0.75%, and make this financing available in the years ahead.

• $3.6 trillion in public infrastructure bonds (the recommendation of the ASCE), issued by states and regional authorities, and bought by the Fed, with 100 year maturities, and ZERO interest.

• Closing the windows for bankrupt zombie banks, and opening new windows for US manufacturers, family farms, certain small businesses and distressed mortgages.

When it comes to monetary reform, there are too many smart, well-intentioned individuals chasing ideas that are either inadequate, misguided or just plain stupid. We challenge all persons of good will to make Taking Back the Fed (#TakeBackTheFed on twitter) their top priority for economic recovery!

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