The long awaited Six Part Video Series by Richard C. Cook
Credit As A Public Utility: The Solution to the Economic Crisis
http://dandelionsalad.wordpress.com/2009/03/26/credit-as-a-public-utility-the-solution-to-the-economic-crisis-by-richard-c-cook-videos/
Please bookmark this page and watch these videos!
Part One “Our Early Political Leaders Warned Us Against the Banking Interests”
Summary: Early U.S. statesmen, such as Benjamin Franklin, Thomas Jefferson, James Madison, and Andrew Jackson worked to free the nation from control by the bankers who had been behind the establishment of the First and Second Banks of the United States. During the Civil War, President Abraham Lincoln implemented a true democratic currency by spending Greenbacks directly into circulation without borrowing from the banks. These measures allowed the U.S. to develop for much of the 19th century largely free from bankers’ control. By the end of the century, this had changed, and the bankers were taking over.
Part Two “The Federal Reserve System: The Bankers Take Over”
Summary: President Lincoln’s Greenback system worked but was undermined and replaced by the financiers who got Congress to pass the National Banking Acts of 1863 and 1864, then the Federal Reserve Act of 1913. The United States now became a nation dominated by the financial elite, the banks, and a debt-based monetary system. Consequently, the 20th Century was one of constant cycles of inflation and deflation resulting in the economic chaos we see today.
Part Three “The Collapse of the Financial System”
Summary: The collapse we are seeing today began in the financial system, not the producing economy. The crisis started with the housing bubble which the Federal Reserve created by cutting interest rates and then brought own by raising them. The trigger of the 2008 bank meltdown was refusal by European banks to purchase any more “toxic” U.S. debt based on mortgages and sold as securities. Now, with the decline in equity values, the burden of debt in our economy has grown even larger. Thus a renewal of bank lending will not solve the problem, while the economic stimulus program of the Obama administration is likewise insufficient to restore economic health.
Part Four “What is Credit and Who Should Control It?”
Summary: Fractional reserve banking is the process by which banks create credit out of thin air. But despite abuses of the system, credit is still a crucial part of modern economics. An enlightened concept of governance would view credit as a public utility. This means that government must take back the control of credit from the private financiers.
Part Five “The Gap Between Prices and Income”
Summary: One of the most important and least understood concepts in modern economics is the existence of a gap between prices and purchasing power. This gap results when a portion of prices must be set aside as business and private savings. The money is then used by the financial system for lending and speculation. Keynesian economics takes control of some of the savings through government deficit spending but is still a compromise with control of the economy by the financiers. In fact Keynesian economics has helped cause the collapsing debt pyramid. A better system would be to provide consumers with a National Dividend as a way to monetize the continuous appreciation of the producing economy.
Part Six “The Greenback and National Dividend Solutions”
Summary: The U.S. should convert to a system where the money supply is created by the federal government by being spent into circulation without government borrowing or taxation as was done with the Greenbacks. The Federal Reserve should no longer be a bank of issue. Additionally, a National Dividend should be paid directly to the people. The “Cook Plan” calls for the initial distribution of vouchers in the amount of $1,000 a month plus a new system of community savings banks. Greenbacks combined with a National Dividend will create a non-inflationary democratic currency and transform the economy of the United States.
Richard C. Cook is a former U.S Treasury analyst who also worked in the Carter White House and for NASA and writes on public policy issues. His new book is We Hold These Truths: The Hope of Monetary Reform (Tendril Press 2009). His website is www.richardccook.com. He is a member of the U.S. Basic Income Guarantee Network and has been an adviser to Congressman Dennis Kucinich and the American Monetary Institute. Purchase the DVD at Richard C. Cook’s website.
www.richardccook.com
Showing posts with label richard c. cook. Show all posts
Showing posts with label richard c. cook. Show all posts
11 February, 2009
We Hold These Truths by Richard C. Cook
Just wondering who might have the impetus to level a death threat against an economist? Someone who's got a stake in business as usual there in Washington?
You betcha.
"Cook’s observations are particularly relevant today, now that many of the same people who pushed for deregulation during the Clinton and Bush administrations have been appointed as key members of Obama’s economics team."
Book Review
We Hold These Truths by Richard C. Cook
http://dandelionsalad.wordpress.com/2009/02/10/richard-cook-its-time-to-fix-the-monetary-system-by-mike-whitney/
Richard Cook’s new book, We Hold These Truths: The Hope of Monetary Reform, cuts through the nonsense and reveals the root cause of today’s economic crisis; a privatized credit system gone haywire. This is first-class analysis from a prescient reformer whose message is just now catching fire. While the pundits are still hung up on subprime mortgages and toxic assets, Cook has peeled the cover off our deeply-flawed monetary system and exposed the rot within. This is where the change needs to begin.
We Hold These Truths is a timely book that challenges conventional thinking about credit and the role of banks. As the author points out, “In a system where the banks have a monopoly on the issuance of credit, they inevitably become the most powerful entity in the economy and therefore the most powerful politically as well.” Cook’s observations are particularly relevant today, now that many of the same people who pushed for deregulation during the Clinton and Bush administrations have been appointed as key members of Obama’s economics team. It’s clear that Wall Street has further tightened its grip on Washington even while it continues to wreak havoc on the financial system. It’s no wonder Thomas Jefferson concluded that, “Banking establishments are more dangerous than standing armies.”
Cook’s strong suit is taking complex economic ideas and breaking them down for his readers. He devotes a fair amount of time to explaining the fundamental mismatch between what the country produces and its net earnings. This gap between GDP and purchasing power can only be filled through the issuance of credit. The problem is, that as borrowing increases, the ballooning debt becomes more unmanageable and the system begins to teeter. Wall Street’s reckless expansion of credit simulated prosperity for nearly a decade, but when the bubble burst, the financial system collapsed, creating the present downturn.
Cook believes that a National Dividend–which would come in the form of a check from the government to every man, woman and child in America–could make up for the loss in purchasing power and maintain economic stability. This is not “pie-in-the-sky” liberalism, but a reasonable proposal designed to stimulate business activity and avoid disruptive recessions. He also advocates public control of credit: community-run investment banks which operate as public utilities and provide low interest loans to consumers and businesses. These ideas were implemented during the Great Depression via the Reconstruction Finance Corporation (RFC) and the Home Owners Loan Corporation (HOLC) They were successful programs that helped build America’s middle class while seizing control of the mortgage industry from Wall Street speculators.
Cook also supports a basic income guarantee for every American regardless of whether they work or not. This is a defining issue that should be debated in terms of the value we place on human dignity. Everyone deserves a minimal standard of living. The last time Congress considered such an initiative was Nixon’s Family Assistance Act of 1970. The “reverse income tax” was voted down by a coalition of southern Democrats who opposed it mainly on racial grounds. Senator George McGovern who supported the bill said that “it would have provided a basic underpinning of income for all Americans.” Income guarantees are stimulative and help maintain demand. They are good for the economy and demonstrate the nation’s commitment to provide for those who are most in need.
We Hold These Truths is a book for people who want to understand the current crisis without getting bogged down in hand-wringing and negativity. It’s a blueprint for removing the gangrenous parts of the financial system and for establishing a dividend-based system that better serves the public interest. Richard Cook has presented the ideas that are likely to shape the national debate on monetary reform for years to come. They are certainly worth our consideration. It’s a great read.
You betcha.
"Cook’s observations are particularly relevant today, now that many of the same people who pushed for deregulation during the Clinton and Bush administrations have been appointed as key members of Obama’s economics team."
Book Review
We Hold These Truths by Richard C. Cook
http://dandelionsalad.wordpress.com/2009/02/10/richard-cook-its-time-to-fix-the-monetary-system-by-mike-whitney/
Richard Cook’s new book, We Hold These Truths: The Hope of Monetary Reform, cuts through the nonsense and reveals the root cause of today’s economic crisis; a privatized credit system gone haywire. This is first-class analysis from a prescient reformer whose message is just now catching fire. While the pundits are still hung up on subprime mortgages and toxic assets, Cook has peeled the cover off our deeply-flawed monetary system and exposed the rot within. This is where the change needs to begin.
We Hold These Truths is a timely book that challenges conventional thinking about credit and the role of banks. As the author points out, “In a system where the banks have a monopoly on the issuance of credit, they inevitably become the most powerful entity in the economy and therefore the most powerful politically as well.” Cook’s observations are particularly relevant today, now that many of the same people who pushed for deregulation during the Clinton and Bush administrations have been appointed as key members of Obama’s economics team. It’s clear that Wall Street has further tightened its grip on Washington even while it continues to wreak havoc on the financial system. It’s no wonder Thomas Jefferson concluded that, “Banking establishments are more dangerous than standing armies.”
Cook’s strong suit is taking complex economic ideas and breaking them down for his readers. He devotes a fair amount of time to explaining the fundamental mismatch between what the country produces and its net earnings. This gap between GDP and purchasing power can only be filled through the issuance of credit. The problem is, that as borrowing increases, the ballooning debt becomes more unmanageable and the system begins to teeter. Wall Street’s reckless expansion of credit simulated prosperity for nearly a decade, but when the bubble burst, the financial system collapsed, creating the present downturn.
Cook believes that a National Dividend–which would come in the form of a check from the government to every man, woman and child in America–could make up for the loss in purchasing power and maintain economic stability. This is not “pie-in-the-sky” liberalism, but a reasonable proposal designed to stimulate business activity and avoid disruptive recessions. He also advocates public control of credit: community-run investment banks which operate as public utilities and provide low interest loans to consumers and businesses. These ideas were implemented during the Great Depression via the Reconstruction Finance Corporation (RFC) and the Home Owners Loan Corporation (HOLC) They were successful programs that helped build America’s middle class while seizing control of the mortgage industry from Wall Street speculators.
Cook also supports a basic income guarantee for every American regardless of whether they work or not. This is a defining issue that should be debated in terms of the value we place on human dignity. Everyone deserves a minimal standard of living. The last time Congress considered such an initiative was Nixon’s Family Assistance Act of 1970. The “reverse income tax” was voted down by a coalition of southern Democrats who opposed it mainly on racial grounds. Senator George McGovern who supported the bill said that “it would have provided a basic underpinning of income for all Americans.” Income guarantees are stimulative and help maintain demand. They are good for the economy and demonstrate the nation’s commitment to provide for those who are most in need.
We Hold These Truths is a book for people who want to understand the current crisis without getting bogged down in hand-wringing and negativity. It’s a blueprint for removing the gangrenous parts of the financial system and for establishing a dividend-based system that better serves the public interest. Richard Cook has presented the ideas that are likely to shape the national debate on monetary reform for years to come. They are certainly worth our consideration. It’s a great read.
07 February, 2009
Death Threat Against Richard C. Cook
Town Hall Meeting in New York Canceled Due to Death Threat Against Monetary Reform Advocate Richard C. Cook
February 7, 2009
www.richardccook.com
Due to a death threat against monetary reform advocate Richard C. Cook, a Town Hall meeting scheduled to be held on February 27, 2009, as part of President Barack Obama’s “Organizing for Change” initiative, has been canceled. Cook had been asked to speak at the meeting and present his program called “Bailout for the People” that he has been advocating as a solution to the economic crisis.
The meeting had been organized by New York City activists to provide Cook a forum at a time when the Obama/Biden administration is soliciting ideas to address the deepening recession where over 1,500,000 people have lost their jobs in the last three months. Over the next several weeks, hundreds of Economic Recovery Meetings will be held around the country leading up to public hearings by Vice President Joe Biden’s economic recovery task force.
Cook has written prolifically on economic and monetary reform since retiring from the federal government as a Treasury Department analyst in 2007. During his 32-year government career he also worked for NASA and the Carter White House. Upon retirement he published a book on the space shuttle Challenger disaster entitled Challenger Revealed. More recently, Tendril Press has published his book, We Hold These Truths: The Hope of Monetary Reform.
February 7, 2009
www.richardccook.com
Due to a death threat against monetary reform advocate Richard C. Cook, a Town Hall meeting scheduled to be held on February 27, 2009, as part of President Barack Obama’s “Organizing for Change” initiative, has been canceled. Cook had been asked to speak at the meeting and present his program called “Bailout for the People” that he has been advocating as a solution to the economic crisis.
The meeting had been organized by New York City activists to provide Cook a forum at a time when the Obama/Biden administration is soliciting ideas to address the deepening recession where over 1,500,000 people have lost their jobs in the last three months. Over the next several weeks, hundreds of Economic Recovery Meetings will be held around the country leading up to public hearings by Vice President Joe Biden’s economic recovery task force.
Cook has written prolifically on economic and monetary reform since retiring from the federal government as a Treasury Department analyst in 2007. During his 32-year government career he also worked for NASA and the Carter White House. Upon retirement he published a book on the space shuttle Challenger disaster entitled Challenger Revealed. More recently, Tendril Press has published his book, We Hold These Truths: The Hope of Monetary Reform.
---------------------------------
Click the titles of the books to view them at Amazon.com.
Both are available at the Paranoids On-Line store, under Politics.
---------------------------------
Cook’s proposals are based on what he calls “Dividend Economics.” He cites as an example the annual citizens’ stipend under the Alaska Permanent Fund. Through what he is calling the “Cook Plan,” he is advocating a tax-free per capita payment of $1,000 per month through vouchers to be used for the necessities of life such as housing, food, and transportation. The vouchers, once redeemed, would be used to capitalize a new national network of community savings banks that would lend at low interest rates to revitalize local and regional economies.
Despite the threat, Cook spoke at another Organizing for Change meeting in Takoma Park, Maryland, on Saturday February 7. On February 27th, when the Town Hall meeting in New York had been scheduled, he plans to keep his appointment that afternoon to speak at the 8thCongress of the U.S. Basic Income Guarantee Network/Annual Conference of the Eastern Economic Association. At this conference he will present a paper entitled: “Bailout for the People: Dividend Economics and the Basic Income Guarantee.” Further details, along with a downloadable version of the paper, are available at his new website at www.richardccook.com.
Regarding the cancellation of the Town Hall meeting, a decision made jointly with the organizers, Cook said: “I have worked in the public eye my whole life for the government, as a whistleblower after the Challenger disaster, and as a writer. These things don’t frighten me. But in this instance, I cannot in good conscience expose my supporters and members of the public to the slight chance of harm in a relatively non-secure venue.” Cook also pointed out that the perpetrator of the threat has been identified and reported. He said the person used "vicious language" and called him a "traitor."
Cook’s proposals are based on what he calls “Dividend Economics.” He cites as an example the annual citizens’ stipend under the Alaska Permanent Fund. Through what he is calling the “Cook Plan,” he is advocating a tax-free per capita payment of $1,000 per month through vouchers to be used for the necessities of life such as housing, food, and transportation. The vouchers, once redeemed, would be used to capitalize a new national network of community savings banks that would lend at low interest rates to revitalize local and regional economies.
Despite the threat, Cook spoke at another Organizing for Change meeting in Takoma Park, Maryland, on Saturday February 7. On February 27th, when the Town Hall meeting in New York had been scheduled, he plans to keep his appointment that afternoon to speak at the 8thCongress of the U.S. Basic Income Guarantee Network/Annual Conference of the Eastern Economic Association. At this conference he will present a paper entitled: “Bailout for the People: Dividend Economics and the Basic Income Guarantee.” Further details, along with a downloadable version of the paper, are available at his new website at www.richardccook.com.
Regarding the cancellation of the Town Hall meeting, a decision made jointly with the organizers, Cook said: “I have worked in the public eye my whole life for the government, as a whistleblower after the Challenger disaster, and as a writer. These things don’t frighten me. But in this instance, I cannot in good conscience expose my supporters and members of the public to the slight chance of harm in a relatively non-secure venue.” Cook also pointed out that the perpetrator of the threat has been identified and reported. He said the person used "vicious language" and called him a "traitor."
25 November, 2008
Stop Paying Credit Card Debt
I am posting this for Richard C. Cook. He recommends:
Credit card debt is starting to be viewed as the next bubble to burst. So until real relief is forthcoming, citizens who are in distress should simply destroy their credit cards and stop paying the monthly bills.
The “Cook Plan” would bring real reform to a system that has collapsed. The plan would begin to correct the primary cause of the recession, which is the steep decline of consumer purchasing power.
Citizens’ Economic Stimulus Plan: Stop Paying Credit Card Debt
by Richard C. Cook
Now to the Wall Street bailouts, the plan for the government to purchase preferred shares in banks, and the takeovers of Fannie Mae, Freddie Mac, and AIG, may be added the intention announced last night that the government will throw another $20 billion at Citibank, the nation’s largest financial institution.
The announcement came after Citibank’s stock fell 60 percent last week to $3.77 a share. Of course it won’t help the 50,000 people Citibank is laying off, but, what the hey, no plan is perfect.
Meanwhile, almost nothing has been done to help the consumers within the producing economy who have lost trillions of dollars in the stock market crash, seen the value of their homes fall in many cases below what they owe on their mortgages, and lost jobs or health benefits through the escalating recession. Fannie Mae, which over the weekend sponsored a Walk for the Homeless in Washington, D.C., an event that drew thousands of participants, had announced the previous day that it was placing a moratorium on further home foreclosures until after the Christmas and New Year’s holidays. Wow, thanks.
But what then? Everyone agrees that the recession will be long and deep, not only in the U.S. but in nations that export to us. The Federal Reserve can only go so far in cutting interest rates, because at a certain point nations such as China which have floated the Federal deficit will no longer lend.
Besides, what good are low interest rates if borrowers can’t even afford to repay the principle, which is the situation so many of us find ourselves in today? Japan found that out in the 1990s, leading to a recession that lasted a decade.
So what are ordinary people to do who have families to feed, rent or mortgages to pay that are still inflated from the collapsed housing bubble, unmet medical or insurance expenses, or may be trying to get their kids through college? Should we go deeper into debt when U.S. households, businesses, and government already owe in the neighborhood of $60 trillion (excluding federal unfunded debt liabilities), almost five times the GDP? Banks have cut back on lending anyway.
Then there are the jobs programs. The Senators who bowed down to Secretary of the Treasury Henry Paulson when he came to extort $700 billion for Wall Street scolded the Big Three automakers who came seeking help in salvaging an industry that still employees millions. But maybe by cutting worker wages and benefits the carmakers will be able to limp along a while longer.
Or maybe we should wait to see if president-elect Barack Obama gets his economic stimulus plan through Congress after he is inaugurated. Granted the plan may result in some new jobs a few years down the road once the additional federal borrowing to pay for it works its way through the economy. But will America still be alive by then?
Ladies and gentlemen, the financial system has destroyed America. And really and honestly, the folks in Washington, both those arriving and those departing, don’t know what to do.
I have argued in recent articles that the government should implement what I have modestly called the “Cook Plan,” whereby a dividend similar to the Alaska Permanent Fund would be paid to every U.S. citizen at the rate of $1,000 per month in vouchers for food, housing, and other necessities of life.
This dividend would be paid out of the U.S. Treasury, where I used to work, from an emergency self-financed account without recourse to taxes or government debt. The dividend would constitute each citizen’s fair share of the producing potential of the economy, as advocated by Social Credit reformers in the British Commonwealth nations for decades. The vouchers could then be deposited in a new network of community savings banks that would revitalize local economies through lending at zero-percent interest, charging only administrative fees and a small amount of lending insurance for access to capital.
Such a system would provide recompense for the vast amounts of money stolen from citizens’ pockets due to a lifetime of borrowing from financial institutions which are now looting our children’s and grandchildren’s heritage to pay for generations of abuse. This abuse has taken place under a debt-based monetary system by which banks create money out of thin air, then charge the rest of us interest to utilize it for survival. This system has operated for almost a century under the auspices of a Federal Reserve System accountable to no one.
The “Cook Plan” would bring real reform to a system that has collapsed. The plan would begin to correct the primary cause of the recession, which is the steep decline of consumer purchasing power.
Of course I am not so deluded as to believe Congress or the incoming Obama administration would implement it. Why would the politicians turn against a financial system which paid their way into office? As indicated by the announcement that Obama will appoint Timothy Geithner, president of the Federal Reserve Bank of New York, as his treasury secretary, it’s the banking system that will continue to oversee the government, not the other way around. Even so, I would be happy to explain the "Cook Plan" to Mr. Geithner - for free.
But the citizens must do something. How can we just sit and wait while the financial monopolists smother the economy to death in order to protect their wealth and privileges? The least they could do is declare a moratorium on debt payment until the economy is functioning again or cancel the most egregious types of debt-abuse, such as credit card or student debt.
But they are not likely to do this either. So citizens’ can be forgiven if they simply stop paying. Many home purchasers are already doing this—turning in the keys to their homes and driving away. Who can blame them?
But the worst of the debt may be credit card debt, where the controls on interest rates and penalty charges were lifted long ago and the government stopped providing a tax deduction for interest paid. In many cases, interest on credit cards is 28 percent or more, which means that even by making the minimum required payment, consumers see their balances grow each month. That the politicians could continue to allow such evil to exist is astounding but proves who their masters are.
So until real relief is forthcoming, citizens who are in distress should simply destroy their credit cards and stop paying the monthly bills. People are already doing this. Arrearages and defaults are climbing, and credit card debt is starting to be viewed as the next bubble to burst. But so what? If people have to use a credit card, that means they can’t really afford to buy whatever it is they think they want. If they can afford it, they should use a debit card instead.
Then tell the credit card company you cannot pay. Ask them to write off some or all of the debt, and if they want to take you to court, go on your own and defend yourself. You don’t need a lawyer, and you don’t need anyone’s permission. You also don’t need to go through the horrendous “reformed” bankruptcy system the credit card companies got Congress to pass in 2005. Failure to pay credit card debt is not, thank God, a crime in this country, and there are no debtors’ prisons—yet.
Besides, if people do not pay credit card debt, that money remains in circulation. So default is actually a form of patriotism in today’s trying circumstances. And the credit card companies really don’t lose anything, since the money didn’t exist before they lent it to people who are now broke.
Where I used to live in the country in rural Virginia, the story was going around about a farmer who fell down in the pen where he was feeding his pigs, and the pigs ate him. That is what has been happening in this country. The financial industry which is now swilling at the public trough has been eating alive a nation that was once “the land of the free and the home of the brave.”
Copyright 2008 by Richard C. Cook
Richard C. Cook is a former federal government analyst who writes on economic issues. His new book, We Hold These Truths: The Hope of Monetary Reform, is now available and may be ordered at www.tendrilpress.com (303-696-9227). His contact email is EconomicSanity@gmail.com.
Credit card debt is starting to be viewed as the next bubble to burst. So until real relief is forthcoming, citizens who are in distress should simply destroy their credit cards and stop paying the monthly bills.
The “Cook Plan” would bring real reform to a system that has collapsed. The plan would begin to correct the primary cause of the recession, which is the steep decline of consumer purchasing power.
Citizens’ Economic Stimulus Plan: Stop Paying Credit Card Debt
by Richard C. Cook
Now to the Wall Street bailouts, the plan for the government to purchase preferred shares in banks, and the takeovers of Fannie Mae, Freddie Mac, and AIG, may be added the intention announced last night that the government will throw another $20 billion at Citibank, the nation’s largest financial institution.
The announcement came after Citibank’s stock fell 60 percent last week to $3.77 a share. Of course it won’t help the 50,000 people Citibank is laying off, but, what the hey, no plan is perfect.
Meanwhile, almost nothing has been done to help the consumers within the producing economy who have lost trillions of dollars in the stock market crash, seen the value of their homes fall in many cases below what they owe on their mortgages, and lost jobs or health benefits through the escalating recession. Fannie Mae, which over the weekend sponsored a Walk for the Homeless in Washington, D.C., an event that drew thousands of participants, had announced the previous day that it was placing a moratorium on further home foreclosures until after the Christmas and New Year’s holidays. Wow, thanks.
But what then? Everyone agrees that the recession will be long and deep, not only in the U.S. but in nations that export to us. The Federal Reserve can only go so far in cutting interest rates, because at a certain point nations such as China which have floated the Federal deficit will no longer lend.
Besides, what good are low interest rates if borrowers can’t even afford to repay the principle, which is the situation so many of us find ourselves in today? Japan found that out in the 1990s, leading to a recession that lasted a decade.
So what are ordinary people to do who have families to feed, rent or mortgages to pay that are still inflated from the collapsed housing bubble, unmet medical or insurance expenses, or may be trying to get their kids through college? Should we go deeper into debt when U.S. households, businesses, and government already owe in the neighborhood of $60 trillion (excluding federal unfunded debt liabilities), almost five times the GDP? Banks have cut back on lending anyway.
Then there are the jobs programs. The Senators who bowed down to Secretary of the Treasury Henry Paulson when he came to extort $700 billion for Wall Street scolded the Big Three automakers who came seeking help in salvaging an industry that still employees millions. But maybe by cutting worker wages and benefits the carmakers will be able to limp along a while longer.
Or maybe we should wait to see if president-elect Barack Obama gets his economic stimulus plan through Congress after he is inaugurated. Granted the plan may result in some new jobs a few years down the road once the additional federal borrowing to pay for it works its way through the economy. But will America still be alive by then?
Ladies and gentlemen, the financial system has destroyed America. And really and honestly, the folks in Washington, both those arriving and those departing, don’t know what to do.
I have argued in recent articles that the government should implement what I have modestly called the “Cook Plan,” whereby a dividend similar to the Alaska Permanent Fund would be paid to every U.S. citizen at the rate of $1,000 per month in vouchers for food, housing, and other necessities of life.
This dividend would be paid out of the U.S. Treasury, where I used to work, from an emergency self-financed account without recourse to taxes or government debt. The dividend would constitute each citizen’s fair share of the producing potential of the economy, as advocated by Social Credit reformers in the British Commonwealth nations for decades. The vouchers could then be deposited in a new network of community savings banks that would revitalize local economies through lending at zero-percent interest, charging only administrative fees and a small amount of lending insurance for access to capital.
Such a system would provide recompense for the vast amounts of money stolen from citizens’ pockets due to a lifetime of borrowing from financial institutions which are now looting our children’s and grandchildren’s heritage to pay for generations of abuse. This abuse has taken place under a debt-based monetary system by which banks create money out of thin air, then charge the rest of us interest to utilize it for survival. This system has operated for almost a century under the auspices of a Federal Reserve System accountable to no one.
The “Cook Plan” would bring real reform to a system that has collapsed. The plan would begin to correct the primary cause of the recession, which is the steep decline of consumer purchasing power.
Of course I am not so deluded as to believe Congress or the incoming Obama administration would implement it. Why would the politicians turn against a financial system which paid their way into office? As indicated by the announcement that Obama will appoint Timothy Geithner, president of the Federal Reserve Bank of New York, as his treasury secretary, it’s the banking system that will continue to oversee the government, not the other way around. Even so, I would be happy to explain the "Cook Plan" to Mr. Geithner - for free.
But the citizens must do something. How can we just sit and wait while the financial monopolists smother the economy to death in order to protect their wealth and privileges? The least they could do is declare a moratorium on debt payment until the economy is functioning again or cancel the most egregious types of debt-abuse, such as credit card or student debt.
But they are not likely to do this either. So citizens’ can be forgiven if they simply stop paying. Many home purchasers are already doing this—turning in the keys to their homes and driving away. Who can blame them?
But the worst of the debt may be credit card debt, where the controls on interest rates and penalty charges were lifted long ago and the government stopped providing a tax deduction for interest paid. In many cases, interest on credit cards is 28 percent or more, which means that even by making the minimum required payment, consumers see their balances grow each month. That the politicians could continue to allow such evil to exist is astounding but proves who their masters are.
So until real relief is forthcoming, citizens who are in distress should simply destroy their credit cards and stop paying the monthly bills. People are already doing this. Arrearages and defaults are climbing, and credit card debt is starting to be viewed as the next bubble to burst. But so what? If people have to use a credit card, that means they can’t really afford to buy whatever it is they think they want. If they can afford it, they should use a debit card instead.
Then tell the credit card company you cannot pay. Ask them to write off some or all of the debt, and if they want to take you to court, go on your own and defend yourself. You don’t need a lawyer, and you don’t need anyone’s permission. You also don’t need to go through the horrendous “reformed” bankruptcy system the credit card companies got Congress to pass in 2005. Failure to pay credit card debt is not, thank God, a crime in this country, and there are no debtors’ prisons—yet.
Besides, if people do not pay credit card debt, that money remains in circulation. So default is actually a form of patriotism in today’s trying circumstances. And the credit card companies really don’t lose anything, since the money didn’t exist before they lent it to people who are now broke.
Where I used to live in the country in rural Virginia, the story was going around about a farmer who fell down in the pen where he was feeding his pigs, and the pigs ate him. That is what has been happening in this country. The financial industry which is now swilling at the public trough has been eating alive a nation that was once “the land of the free and the home of the brave.”
Copyright 2008 by Richard C. Cook
Richard C. Cook is a former federal government analyst who writes on economic issues. His new book, We Hold These Truths: The Hope of Monetary Reform, is now available and may be ordered at www.tendrilpress.com (303-696-9227). His contact email is EconomicSanity@gmail.com.
16 November, 2008
G20 Won't Change This Financial Crime Scene
G20 Won't Change This Financial Crime Scene
By Richard C. Cook
Author of the forthcoming book, We Hold These Truths: The Hope of Monetary Reform
Please order the book at:
http://www.tendrilpress.com/
Remarks by Richard C. Cook
George Mason University, Fairfax, Virginia
November 15, 2008
The G20 is meeting today in Washington, D.C., to discuss the world financial crisis, its causes, and what can be done about it. But this won’t help the people of the U.S. who have been victimized by their own financial system.
The stated objectives are to find ways to stabilize and reduce speculation in the financial markets and make financial transactions more transparent, more efficient, and more international in scope. But this is also a revolt by the nations of the world against over-reliance on the U.S. dollar as the world’s reserve currency. What we are likely to see over time is a multi-currency regime that includes the Euro and one or more Asian currencies as well.
But the conference will not address the real causes of why the world is heading into a global recession or why the U.S. economy in particular is in such dire straits. Nor will the meeting result in redress of the staggering level of bankers’ criminality abetted by the U.S. government in the creation of the financial bubbles whose collapse is underway.
The real problem is that the world is locked into a debt-based financial system run by the world’s banks, where the only way currency can be entered into circulation is through lending. It’s been massive amounts of completely irresponsible lending which have leveraged the bubbles against much smaller amounts of tangible value.
The GDP of the entire world is $55 trillion. This is dwarfed by speculative lending in the derivatives markets of ten times that amount--$525-$550 trillion. No nation has clean hands in this travesty. The governments of the world and the central banks have allowed it to come into being.
Within the U.S., reliance on money-creation through bank lending has been the problem since the creation of the Federal Reserve System in 1913. At that point the U.S. monetary system was privatized. The case has been the same with all the other nations which have private banking systems that control their central banks. The granddaddy is the Bank of England which dates from 1694.
The creation of the Federal Reserve System marked the start of a century of world war. This is hardly a coincidence. Indeed, the central banking system encourages wars and lives off them, because it is war and the threat of war that is most profitable to a system where the more money governments borrow the more profits the banks make.
All this started with World War I, which was largely financed by the British, French, German, and the U.S. banks. Events have continued in that vein through today, where the nations of the world are armed to the teeth and global finance capitalism tries to increase its control everywhere to the detriment of workers, national economies, and the environment.
To try to fix the crisis through bailing out the system, we are now seeing in the U.S. and Europe levels of government borrowing that have not been experienced since World War II. The purpose is to recapitalize a financial system that has destroyed itself through its own greed and folly. But all this does is defer the bill to future generations who have to pay the enormous compounded interest charges this borrowing entails. Interest on the national debt in the 2009 federal budget is over $500 billion. Every man, woman, and child in the nation is a victim of this crime.
The situation is so bad that many people believe the U.S. may even be in danger of defaulting on its gigantic national debt sometime in 2009.
Meanwhile, the failed financial system is dragging down the world’s producing economy with it, and the bailouts won’t change that situation. Combined with the financial crash has been a collapse in consumer “demand.” In other words, consumers, who are maxed out on their credit, no longer can borrow enough to keep the wheels of the economy turning.
But the reason they must borrow for consumption is that earnings are not sufficient for people to buy what they need to live. This is why in the U.S. there has been an outcry, including with the Obama campaign, for new government job-creation programs. Every day there is another proposal by progressives for new government spending, which, of course, will have to be financed by even more government debt.
So when are we going to learn how to introduce purchasing power without debt? How did we ever come to believe that the only way to create money is through a bank inventing it out of thin air? In the past few weeks we have had a number of Nobel-prize winning economists chip in with their suggestions of what to do, but none have addressed the obvious question of what the alternatives may be to bankers’ debt-based currency.
If we look at history, we see other ways governments have used their powers to create money. Indeed, until the Federal Reserve Act of 1913, the U.S. was a kind of laboratory of alternative methods of money-creation.
If we go back to colonial days, the American colonies used a variety of means to introduce currency into circulation. In Virginia, plantation owners received tobacco certificates when they deposited their product at public warehouses. The certificates then circulated as currency.
In Pennsylvania the government ran a land bank which paid cash to land-owners for liens on property. The interest paid for the costs of government without any taxation of citizens.
In Massachusetts, Pennsylvania, and elsewhere, governments spent paper money directly into circulation. The money received value by then being accepted by those governments, after it circulated within the economy, in payment of taxes.
Other forms of currency were Spanish dollars, Indian wampum, and IOUs. There was also a flourishing barter trade.
The system worked. By 1764, the American colonies formed one of the most prosperous trading regions on the planet. When asked why, Benjamin Franklin said it was because of colonial scrip—i.e., their paper money. When the British Parliament outlawed it through the Currency Act of 1764, an economic depression followed. It was the underlying cause of the Revolutionary War.
During that war, the Continental Congress issued the famous Continental Currency. What likely caused that money to inflate was extensive British counterfeiting, not being used to excess by our national government.
Once the nation became independent, a U.S. mint was founded so individuals could bring in gold or silver and have it stamped into coinage free of charge. New discoveries as with the California and Yukon gold rushes or better methods of extraction from ores resulted in economic booms. From then until coinage lost its value after the Federal Reserve System was established, precious metals were a major part of the U.S. monetary system that included not only coinage but also gold and silver certificates.
In 1791 and again in 1816 Congress passed legislation for the First and Second Banks of the United States. These banks were dupicates of the Bank of England whose purposes were to fasten on the U.S. the same type of debt-based monetary system that was the driving force for the British Empire. Presidents Thomas Jefferson, James Madison, Andrew Jackson, and Martin van Buren were among those who saw these banks as a Trojan Horse for financier tyranny. The split between pro- and anti-bank forces was the origin of the two-party system within the United States.
When Jefferson became president in 1800 he refused to borrow from the bank and balanced the federal budget for eight consecutive years by cutting military expenditures. Andrew Jackson took similar action in 1833 when he withdrew federal funds from the bank and paid off the entire national debt. It was recognized back then that fiscal responsibility was an effective means for keeping the government out of the control of the bankers and their political friends.
When the Civil War broke out in 1861, President Abraham Lincoln refused to borrow from the banks. Instead he financed the war through income and excise taxes, sale of war bonds directly to citizens, and issuance of the famous Greenbacks. This came about in 1862 when Congress authorized the government to spend $450 million in paper Greenbacks directly into circulation. Congress also introduced tangible value into the economy by what was then the very wise policy of transferring huge amounts of public land to the railroads and to citizens under the Homestead Act.
During the late 19th century, ordinary citizens were not so stunningly ignorant of the politics of money as they are today. People recognized the Greenbacks for having saved the union. A Greenback Party was formed that elected representatives to Congress and ran candidates for president.
Greenbacks remained in circulation, and as late as 1900 still made up a third of the nation’s monetary supply, along with coinage, gold and silver certificates, and national bank notes. Also, many other business entities, including the “company stores” owned by mining companies, issued their own paper scrip that was part of the circulating currency. For example, in a pamphlet on monetary reform written by American poet Ezra Pound in the 1930s was an illustration of paper money his grandfather issued from his lumberyard in Michigan in the late 1800s backed by board-feet of lumber payable on demand! Of course barter trade continued and still exists today among industrial firms.
But the bankers were on the move. In 1863 and 1864 Congress passed the National Banking Acts which drove the extensive system of state-chartered banks, including some owned by state governments, out of existence. By the early 1900s, the power of the bankers had coalesced under the New York banking trust led by the J.P. Morgan and Rockefeller financial interests.
The bakers struck in 1913 just before the Christmas recess when many Congressmen had already left Washington for the holidays. The Federal Reserve Act had actually been written by bankers from Europe who were allied with the Rothschild interests. Congressman Charles Lindbergh, Sr., father of the aviator, called the Act “the legislative crime of the ages.” Later President Woodrow Wilson, who signed the Act, said he had “unwittingly ruined my nation.”
But the deed was done. The Federal Reserve System created the first major financial bubble through World War I spending, followed by a depression, then created and burst the stock market bubble whose collapse started the Great Depression in 1929. President Franklin D. Roosevelt took over credit creation through low-cost government lending in the 1930s but had to use World War II to achieve full employment because by then the government was totally locked into the Keynesian tax-and-borrow credo of public finance.
The bankers began their comeback in the 1950s and consolidated their power in the 1970s under the heading of “monetarism,” which is the philosophy of trying to control the economy through raising and lowering of interest rates. This travesty—which is really institutionalized usury—is as familiar to us today as the water a fish swims in. We don’t even notice it. Yet it’s this system that has ruined the world. Ever since the 1970s, every period of economic growth in the U.S. has been a bank-created bubble followed by a crash and a recession.
We had the inflation of the 1970s created by the government-induced oil prices shocks, followed by the Paul Volcker crash of 1979-83 when the Federal Reserve raised interest rates above twenty percent and caused the biggest downturn since the Great Depression.
During the later Reagan years we had the merger-acquisition bubble followed by the recession that brought Bill Clinton to office in 1992. Then we had the dot.com bubble of the mid- to late-1990s that ended with the crash of 2000-2001.
Next, instead, of rebuilding an economy that had been devastated by export of our best manufacturing jobs to China and other cheap-labor countries, the Federal Reserve under chairman Alan Greenspan, with assistance from the George W. Bush administration, created the biggest bubble economy in history, with the housing, commercial real estate, equity, hedge fund, derivatives, and commodities bubbles all blowing up at the same time and leaving us with the mess we are in today.
What has happened during the Bush administration has been the greatest crime against the public interest in U.S. history. Its effects are only starting to be evident.
Of course in the face of so many disasters, the credit markets have imploded, and governments don’t know what to do except recapitalize and restructure them but without taking action to address the deep systemic problems with the producing economy. And while the Europeans may have blown the whistle on U.S. excesses through the G20 meeting, this country still faces disaster.
Yes, Wall Street is killing Main Street, and no one has come up with an answer except suggestions for the bailouts and some New Deal-type programs in an environment that is much worse even than in the 1930s. For one thing, most of what we consume today is produced abroad. For another, family farming has been ruined. In a pinch, our nation could no longer even feed itself.
But the amazing thing is how easy it would be to salvage the situation if the government took the simple step of treating credit as what it really is—a public utility like clean air, water, or electricity, not the private property of the banking system. In fact the banking system and the politicians they own have stolen and abused this fundamental piece of the social commons.
Banks have no legal right to work against the public interest. Every single bank that has ever existed has operated under a public charter. The Constitution gives Congress—i.e., the people’s representative government—authority to regulate interstate commerce. It also gives Congress the right and responsibility to control the monetary system.
So why doesn’t Congress do it? Why does Congress sit passively and stare when Federal Reserve chairmen such as Alan Greenspan or Ben Bernanke sit before them and mumble nonsense about markets and interest rates and inflation and the rest of a made-up system whose main result is to funnel the wealth of the economy upwards into the hands of the financial elite?
In my writings I have advocated several measures Congress could take immediately to remedy the catastrophe we are facing:
1. Congress could authorize direct expenditure of government funds for legitimate public expenses, as was done with the Civil War-era Greenbacks. Contrary to bankers’ propaganda, the Greenbacks were not inflationary then and would not be inflationary now, because they would be backed by tangible economic production of goods and services. What has been inflationary has been the debt-based currency which, since it was introduced in 1913, has caused the dollar to lose 95 percent of its value. Greenback-type spending is contained in the proposed American Monetary Act, developed by the American Monetary Institute.
2. Congress could authorize a national infrastructure bank that would be self-capitalized and would lend money into existence to state and local governments at zero percent interest. Legislation for such a bank has been introduced by Congressman Dennis Kucinich.
3. Congress could authorize dividend payments to citizens as advocated by the Social Credit movement founded by Major C.H. Douglas of Great Britain decades ago as a means of monetizing the net appreciation of the producing economy. Dividends exceeding $1,000 a month could be issued from a national dividend account without recourse to taxation or borrowing. Such a concept is related to the Alaska Permanent Fund which paid over $3,200 to each state resident in 2008 and to the concept of a basic income guarantee advocated by proponents of the negative income tax in years past.
4. Congress could utilize dividend payments once they were spent, possibly in the form of vouchers for necessities of life like food and housing, to capitalize a new network of community savings banks that would provide low-cost credit to home purchasers, students, small business people, and local farms.
I worked in the U.S. Treasury Department for 21 years and learned first-hand the history and operations of public finance in the U.S. I have seen the disastrous results of the debt-based financial system and how it has driven our nation, government, and people into bankruptcy. I have also seen how these simple measures of monetary reform would be easy to implement and would begin to turn the situation around within weeks or months.
All it takes is political will and a determination to challenge the death-grip the financial elite has had on our economy for a century.
We can be quite certain that these vital issues will not be addressed by the summit of the G20 meeting in Washington today. If anything, these meetings are likely to render the grip of private finance on the peoples of the world even tighter than before.
But sooner or later change must come. For the immediate future people could fight back by doing everything possible to get out of debt, convert their cash reserves to tangible holdings, and start their own local currency and barter systems. But for real change, a monetary revolution is required.
Copyright © 2008 by Richard C. Cook
Richard C. Cook is a former U.S. federal government analyst and an advocate for economic democracy and sustainability. His new book, We Hold These Truths: The Hope of Monetary Reform, can now be ordered for $19.95 from www.tendrilpress.com.
By Richard C. Cook
Author of the forthcoming book, We Hold These Truths: The Hope of Monetary Reform
Please order the book at:
http://www.tendrilpress.com/
Remarks by Richard C. Cook
George Mason University, Fairfax, Virginia
November 15, 2008
The G20 is meeting today in Washington, D.C., to discuss the world financial crisis, its causes, and what can be done about it. But this won’t help the people of the U.S. who have been victimized by their own financial system.
The stated objectives are to find ways to stabilize and reduce speculation in the financial markets and make financial transactions more transparent, more efficient, and more international in scope. But this is also a revolt by the nations of the world against over-reliance on the U.S. dollar as the world’s reserve currency. What we are likely to see over time is a multi-currency regime that includes the Euro and one or more Asian currencies as well.
But the conference will not address the real causes of why the world is heading into a global recession or why the U.S. economy in particular is in such dire straits. Nor will the meeting result in redress of the staggering level of bankers’ criminality abetted by the U.S. government in the creation of the financial bubbles whose collapse is underway.
The real problem is that the world is locked into a debt-based financial system run by the world’s banks, where the only way currency can be entered into circulation is through lending. It’s been massive amounts of completely irresponsible lending which have leveraged the bubbles against much smaller amounts of tangible value.
The GDP of the entire world is $55 trillion. This is dwarfed by speculative lending in the derivatives markets of ten times that amount--$525-$550 trillion. No nation has clean hands in this travesty. The governments of the world and the central banks have allowed it to come into being.
Within the U.S., reliance on money-creation through bank lending has been the problem since the creation of the Federal Reserve System in 1913. At that point the U.S. monetary system was privatized. The case has been the same with all the other nations which have private banking systems that control their central banks. The granddaddy is the Bank of England which dates from 1694.
The creation of the Federal Reserve System marked the start of a century of world war. This is hardly a coincidence. Indeed, the central banking system encourages wars and lives off them, because it is war and the threat of war that is most profitable to a system where the more money governments borrow the more profits the banks make.
All this started with World War I, which was largely financed by the British, French, German, and the U.S. banks. Events have continued in that vein through today, where the nations of the world are armed to the teeth and global finance capitalism tries to increase its control everywhere to the detriment of workers, national economies, and the environment.
To try to fix the crisis through bailing out the system, we are now seeing in the U.S. and Europe levels of government borrowing that have not been experienced since World War II. The purpose is to recapitalize a financial system that has destroyed itself through its own greed and folly. But all this does is defer the bill to future generations who have to pay the enormous compounded interest charges this borrowing entails. Interest on the national debt in the 2009 federal budget is over $500 billion. Every man, woman, and child in the nation is a victim of this crime.
The situation is so bad that many people believe the U.S. may even be in danger of defaulting on its gigantic national debt sometime in 2009.
Meanwhile, the failed financial system is dragging down the world’s producing economy with it, and the bailouts won’t change that situation. Combined with the financial crash has been a collapse in consumer “demand.” In other words, consumers, who are maxed out on their credit, no longer can borrow enough to keep the wheels of the economy turning.
But the reason they must borrow for consumption is that earnings are not sufficient for people to buy what they need to live. This is why in the U.S. there has been an outcry, including with the Obama campaign, for new government job-creation programs. Every day there is another proposal by progressives for new government spending, which, of course, will have to be financed by even more government debt.
So when are we going to learn how to introduce purchasing power without debt? How did we ever come to believe that the only way to create money is through a bank inventing it out of thin air? In the past few weeks we have had a number of Nobel-prize winning economists chip in with their suggestions of what to do, but none have addressed the obvious question of what the alternatives may be to bankers’ debt-based currency.
If we look at history, we see other ways governments have used their powers to create money. Indeed, until the Federal Reserve Act of 1913, the U.S. was a kind of laboratory of alternative methods of money-creation.
If we go back to colonial days, the American colonies used a variety of means to introduce currency into circulation. In Virginia, plantation owners received tobacco certificates when they deposited their product at public warehouses. The certificates then circulated as currency.
In Pennsylvania the government ran a land bank which paid cash to land-owners for liens on property. The interest paid for the costs of government without any taxation of citizens.
In Massachusetts, Pennsylvania, and elsewhere, governments spent paper money directly into circulation. The money received value by then being accepted by those governments, after it circulated within the economy, in payment of taxes.
Other forms of currency were Spanish dollars, Indian wampum, and IOUs. There was also a flourishing barter trade.
The system worked. By 1764, the American colonies formed one of the most prosperous trading regions on the planet. When asked why, Benjamin Franklin said it was because of colonial scrip—i.e., their paper money. When the British Parliament outlawed it through the Currency Act of 1764, an economic depression followed. It was the underlying cause of the Revolutionary War.
During that war, the Continental Congress issued the famous Continental Currency. What likely caused that money to inflate was extensive British counterfeiting, not being used to excess by our national government.
Once the nation became independent, a U.S. mint was founded so individuals could bring in gold or silver and have it stamped into coinage free of charge. New discoveries as with the California and Yukon gold rushes or better methods of extraction from ores resulted in economic booms. From then until coinage lost its value after the Federal Reserve System was established, precious metals were a major part of the U.S. monetary system that included not only coinage but also gold and silver certificates.
In 1791 and again in 1816 Congress passed legislation for the First and Second Banks of the United States. These banks were dupicates of the Bank of England whose purposes were to fasten on the U.S. the same type of debt-based monetary system that was the driving force for the British Empire. Presidents Thomas Jefferson, James Madison, Andrew Jackson, and Martin van Buren were among those who saw these banks as a Trojan Horse for financier tyranny. The split between pro- and anti-bank forces was the origin of the two-party system within the United States.
When Jefferson became president in 1800 he refused to borrow from the bank and balanced the federal budget for eight consecutive years by cutting military expenditures. Andrew Jackson took similar action in 1833 when he withdrew federal funds from the bank and paid off the entire national debt. It was recognized back then that fiscal responsibility was an effective means for keeping the government out of the control of the bankers and their political friends.
When the Civil War broke out in 1861, President Abraham Lincoln refused to borrow from the banks. Instead he financed the war through income and excise taxes, sale of war bonds directly to citizens, and issuance of the famous Greenbacks. This came about in 1862 when Congress authorized the government to spend $450 million in paper Greenbacks directly into circulation. Congress also introduced tangible value into the economy by what was then the very wise policy of transferring huge amounts of public land to the railroads and to citizens under the Homestead Act.
During the late 19th century, ordinary citizens were not so stunningly ignorant of the politics of money as they are today. People recognized the Greenbacks for having saved the union. A Greenback Party was formed that elected representatives to Congress and ran candidates for president.
Greenbacks remained in circulation, and as late as 1900 still made up a third of the nation’s monetary supply, along with coinage, gold and silver certificates, and national bank notes. Also, many other business entities, including the “company stores” owned by mining companies, issued their own paper scrip that was part of the circulating currency. For example, in a pamphlet on monetary reform written by American poet Ezra Pound in the 1930s was an illustration of paper money his grandfather issued from his lumberyard in Michigan in the late 1800s backed by board-feet of lumber payable on demand! Of course barter trade continued and still exists today among industrial firms.
But the bankers were on the move. In 1863 and 1864 Congress passed the National Banking Acts which drove the extensive system of state-chartered banks, including some owned by state governments, out of existence. By the early 1900s, the power of the bankers had coalesced under the New York banking trust led by the J.P. Morgan and Rockefeller financial interests.
The bakers struck in 1913 just before the Christmas recess when many Congressmen had already left Washington for the holidays. The Federal Reserve Act had actually been written by bankers from Europe who were allied with the Rothschild interests. Congressman Charles Lindbergh, Sr., father of the aviator, called the Act “the legislative crime of the ages.” Later President Woodrow Wilson, who signed the Act, said he had “unwittingly ruined my nation.”
But the deed was done. The Federal Reserve System created the first major financial bubble through World War I spending, followed by a depression, then created and burst the stock market bubble whose collapse started the Great Depression in 1929. President Franklin D. Roosevelt took over credit creation through low-cost government lending in the 1930s but had to use World War II to achieve full employment because by then the government was totally locked into the Keynesian tax-and-borrow credo of public finance.
The bankers began their comeback in the 1950s and consolidated their power in the 1970s under the heading of “monetarism,” which is the philosophy of trying to control the economy through raising and lowering of interest rates. This travesty—which is really institutionalized usury—is as familiar to us today as the water a fish swims in. We don’t even notice it. Yet it’s this system that has ruined the world. Ever since the 1970s, every period of economic growth in the U.S. has been a bank-created bubble followed by a crash and a recession.
We had the inflation of the 1970s created by the government-induced oil prices shocks, followed by the Paul Volcker crash of 1979-83 when the Federal Reserve raised interest rates above twenty percent and caused the biggest downturn since the Great Depression.
During the later Reagan years we had the merger-acquisition bubble followed by the recession that brought Bill Clinton to office in 1992. Then we had the dot.com bubble of the mid- to late-1990s that ended with the crash of 2000-2001.
Next, instead, of rebuilding an economy that had been devastated by export of our best manufacturing jobs to China and other cheap-labor countries, the Federal Reserve under chairman Alan Greenspan, with assistance from the George W. Bush administration, created the biggest bubble economy in history, with the housing, commercial real estate, equity, hedge fund, derivatives, and commodities bubbles all blowing up at the same time and leaving us with the mess we are in today.
What has happened during the Bush administration has been the greatest crime against the public interest in U.S. history. Its effects are only starting to be evident.
Of course in the face of so many disasters, the credit markets have imploded, and governments don’t know what to do except recapitalize and restructure them but without taking action to address the deep systemic problems with the producing economy. And while the Europeans may have blown the whistle on U.S. excesses through the G20 meeting, this country still faces disaster.
Yes, Wall Street is killing Main Street, and no one has come up with an answer except suggestions for the bailouts and some New Deal-type programs in an environment that is much worse even than in the 1930s. For one thing, most of what we consume today is produced abroad. For another, family farming has been ruined. In a pinch, our nation could no longer even feed itself.
But the amazing thing is how easy it would be to salvage the situation if the government took the simple step of treating credit as what it really is—a public utility like clean air, water, or electricity, not the private property of the banking system. In fact the banking system and the politicians they own have stolen and abused this fundamental piece of the social commons.
Banks have no legal right to work against the public interest. Every single bank that has ever existed has operated under a public charter. The Constitution gives Congress—i.e., the people’s representative government—authority to regulate interstate commerce. It also gives Congress the right and responsibility to control the monetary system.
So why doesn’t Congress do it? Why does Congress sit passively and stare when Federal Reserve chairmen such as Alan Greenspan or Ben Bernanke sit before them and mumble nonsense about markets and interest rates and inflation and the rest of a made-up system whose main result is to funnel the wealth of the economy upwards into the hands of the financial elite?
In my writings I have advocated several measures Congress could take immediately to remedy the catastrophe we are facing:
1. Congress could authorize direct expenditure of government funds for legitimate public expenses, as was done with the Civil War-era Greenbacks. Contrary to bankers’ propaganda, the Greenbacks were not inflationary then and would not be inflationary now, because they would be backed by tangible economic production of goods and services. What has been inflationary has been the debt-based currency which, since it was introduced in 1913, has caused the dollar to lose 95 percent of its value. Greenback-type spending is contained in the proposed American Monetary Act, developed by the American Monetary Institute.
2. Congress could authorize a national infrastructure bank that would be self-capitalized and would lend money into existence to state and local governments at zero percent interest. Legislation for such a bank has been introduced by Congressman Dennis Kucinich.
3. Congress could authorize dividend payments to citizens as advocated by the Social Credit movement founded by Major C.H. Douglas of Great Britain decades ago as a means of monetizing the net appreciation of the producing economy. Dividends exceeding $1,000 a month could be issued from a national dividend account without recourse to taxation or borrowing. Such a concept is related to the Alaska Permanent Fund which paid over $3,200 to each state resident in 2008 and to the concept of a basic income guarantee advocated by proponents of the negative income tax in years past.
4. Congress could utilize dividend payments once they were spent, possibly in the form of vouchers for necessities of life like food and housing, to capitalize a new network of community savings banks that would provide low-cost credit to home purchasers, students, small business people, and local farms.
I worked in the U.S. Treasury Department for 21 years and learned first-hand the history and operations of public finance in the U.S. I have seen the disastrous results of the debt-based financial system and how it has driven our nation, government, and people into bankruptcy. I have also seen how these simple measures of monetary reform would be easy to implement and would begin to turn the situation around within weeks or months.
All it takes is political will and a determination to challenge the death-grip the financial elite has had on our economy for a century.
We can be quite certain that these vital issues will not be addressed by the summit of the G20 meeting in Washington today. If anything, these meetings are likely to render the grip of private finance on the peoples of the world even tighter than before.
But sooner or later change must come. For the immediate future people could fight back by doing everything possible to get out of debt, convert their cash reserves to tangible holdings, and start their own local currency and barter systems. But for real change, a monetary revolution is required.
Copyright © 2008 by Richard C. Cook
Richard C. Cook is a former U.S. federal government analyst and an advocate for economic democracy and sustainability. His new book, We Hold These Truths: The Hope of Monetary Reform, can now be ordered for $19.95 from www.tendrilpress.com.
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