A social network post got me to thinking about deceptive partisan politics. Politicians in leadership roles in a two-party system too often represent donors first regarding the monetization of our country, and that’s not good for the rest of us. I’ll start at the founding of our nation.
Table of Contents:
1. Constitution established, including 10 Amendments deemed our Bill Of Rights.
2. Article One of Constitution authorizes Congress to create currency and pay debts. First National Bank of the United States established to accommodate, similar to a central bank.
3. Gold Standard and national debt created.
4. US Senate vote compels First National Bank to close in the interests of private state banks.
5. State banks took over the obligation of redeeming currency for gold.
6. War of 1812 created new heightened demand for dollars representing gold to pay troops. The Second Bank of the United States established to accommodate.
7. Second Bank now regulates state banks and the speed of our national economy.
8. Andrew Jackson succeeds at eliminating the Second Bank.
9. From Second Bank to Civil War, banks are privately owned; regulated by Treasury and state auditors. Demands of war compel use of federally issued currency without official central bank. State banks prove unstable and unjust.
10. Progressives established, government compelled to favor public interests first starting with the Sherman Act.
11. Panic in 1907 prompts the formation of the National Monetary Commission. In 1913 president Wilson creates Federal Reserve.
12. US enters WWI; Congress creates Liberty Bonds and debt ceiling.
13. 1929 brings Great Depression. In 1933 FDR answers with New Deal by confiscating private property gold and paying just-compensation. Gold price and thus Treasury’s wealth then raised by 75%
14. US enters Bretton Woods agreement giving 44 nations interest in our currency, internationally legitimizing Treasury’s national debt of gold to be yielded for dollars.
15. Nixon Shock effectively decouples currency from gold invalidating the meaning of “national debt’. Money flow redirected. No longer a promise of gold, money is now a debt-neutral representation of exchange to distribute resources for goods and services.
16. Authority for dollars converts. Once a receipt for owed gold, now our current system where money gets its authority solely from Article 1 of Constitution. Value is dependent on deliberately manipulating dollar’s scarcity relative to the resources it’s meant to distribute.
17. Instead of a “national debt’, the now free-floating money supply is debt-neutral. Policy makers adjust money’s value via the laws they write. This is MMT, previously known as Chartalism.
18. Austerity deliberately creates both desperation and oligarchy.
19. Previous “national debt’ now our supply of 22 trillion dollars. Supply not sufficient under current circumstances to distribute best potential of goods and services, provide public safety, or American dream.
20. Mandatory federal spending programs must expand to meet current money supply needs until regular public safe, creating environment for opportunity and upward economic mobility.
ANALYSIS
1. After the Revolutionary War in 1776, our founders finally ratified our Constitution in 1788 to begin in 1789. It consists of three parts: the Preamble providing the spirit of our Constitution, the seven Articles of the Constitution creating the structure of our government, and the Amendments providing a way to improve this structure.
2. Just after the Preamble, in the very first Article they specified that Congress alone has the right to: create money, levy taxes, and the obligation to pay America’s debts. Inspired by the Bank of England, George Washington’s Treasury Secretary Alexander Hamilton used this authority two years later in 1791 to create a corporation called The Bank of the United States to pay the troops and cost of provisions from the Revolutionary War. This debt to our troops became the national debt. Congress agreed to a twenty year charter for Hamilton’s vision. Twenty percent of the bank was owned by the federal government, with the rest funded by selling shares of this bank to both domestic and foreign private investors. This bank would issue our money thereby funding the government and paying our troops.
3. In creating this bank they tied the value of currency to gold. This new money conflicted with previous English law and not everyone was convinced our new country would stand, so without paper dollars being redeemable for gold, on demand, it wouldn’t get broad acceptance. Gold backed currency could also be used when exchanging goods and resources with other countries so they too would honor our money. This was required since our domestic products were substantially limited to tobacco, cotton, and sugar. We needed foreign resources, and the gold secured our dollars. This pegging of dollars-to-gold is the Gold Standard. Our government set the price of gold at about $20 an ounce. Each of these dollars issued and given to our troops acted as a receipt for that person loaning the gold he had earned to the US Treasury; a dollar is an IOU from the government to us. It was an obligation for the gold these troops were promised; therefore these dollars represented our “national debt’ owed to us.
4. The Bank of The US’s charter expires twenty years later. By the smallest margin of one vote cast by then Vice President George Clinton, the US Senate said this corporate bank venture had served its purpose of paying for the war and was oppressive to state banks and private investors. People claimed this federal-level bank was no longer necessary, or that it was in conflict with the Constitution since Article One gives the authority to create currency specifically to Congress; not a privately owned corporation.
5. In 1811 the Bank of US’s charter expired ending this first federal bank. Privately-owned state banks took over, each issuing their own currency with the promise of redeeming dollars for gold. This meant these state banks paid down the nation’s total gold debt each time dollars were redeemed, but this debt was fractured into each state rather than being a centralized debt our federal government owed. If a state bank became insolvent, it legally “died’ and its depositors were simply out of luck.
6. A year later we were in the War of 1812 which again created debt to the troops and for their provisions. State banks suspended the redemption of currency for gold fearing higher demands due to veterans. In response to public outcry, in 1816 The Second Bank of The United States was chartered for another twenty years and brought state banks back to a national gold standard. These state bank’s gold debts, sometimes referred to as obligations and commonly known as dollars again became a federalized “national debt’ to facilitate paying our troops.
7. This Second Bank of the US held large enough amounts of each of the state currencies to allow regulation of these state banks. If any state bank were to over-issue dollars to people past its ability to redeem with gold, the Second Bank of the US could come in and demand that the state bank pay this federal bank, in gold, in full. This effectively slowed the issuing of loans by state banks to avoid the risk of not having enough gold to cover, thereby forcing a slow-down of the banking business. This threat would compel state banks to act fairly in the first place to avoid such federal measures.
8. President Andrew Jackson refused to reinstate The Second Bank of The US’s charter when it expired and then withdrew federal deposits. The corporation was dissolved at the end of its charter in 1836.
9. From 1837 to 1863 private corporations were free to operate their own banks in each state as long as they purchased national Treasury Bonds (promises of gold) and deposited them with their State Auditor as collateral. These bonds were the national gold debt that the Treasury owed to bond holders which also created more national debt from interest; this interest also owed to bond holders and ultimately payable in gold. Once the Civil War came about, payment was again demanded for troops and their suppliers. In 1863 the National Banking System was established effectively compelling these state banks to adopt a national charter and use federally issued currency. This was hit-and-miss because depositors would realize their bank might not meet all demands for withdrawal, which would compel runs on the banks where everyone would demand what they were owed all at once forcing banks to go belly up. Investors not wanting to lose everything would be compelled to foreclose on loans just as fast as they were able to finagle their mortgage contracts and the courts to rule in their favor.
10. Fast forward another four decades to the first progressive era. During Benjamin Harrison’s presidency in the 1890s, union workers and coal miners united in the fight to create laws which favored the public and the work environment before private interests. This was defining for future progressives, and it aimed labor unions towards future Democrats. These people assumed the mantle of fighting for favorable laws and economic justice for the public in opposition of oligarchy and any of its bought politicians. How a bank related to investors and with our government was in their scope. President Harrison enacted the Sherman Act in response, outlawing monopolistic business practices. It was a start for the progressives who needed the resources they could get from these paper promises of gold to survive; what was then still about 1/20th of an ounce of gold.
11. In 1907, there was a panic at the New York Stock Exchange. After one day, nearly half of total stocks dropped from the previous year’s high. In response Congress created the National Monetary Commission to study our economy compared to other countries. They found that several of Europe’s currencies seemed more efficient. This led to President Woodrow Wilson creating the Federal Reserve (the Fed), in 1913 to act as the US Treasury’s central bank in order to create and implement monetary policy at the federal level around things like interest rates and credit. The Fed also became an entity to buy debt instruments like Treasury bonds on the open market; these debts added to the national debt of gold owed by our Treasury. The Fed paying for these would increase the money supply that’s actually circulating. Or conversely, the Fed would sell a few types of these bonds and the payments taken from the public could be destroyed, removing dollars from circulation as a control on inflation. Purchasers redeemed bonds and claimed their interest after varying time periods dependent on the type of debt instrument, but the national debt would have that much more of a continual accumulation. The Fed is owned both by the government and private investors and has a board of governors which includes its chairman, appointed by the President of the US, and then confirmed by the US Senate. The Fed oversees twelve regional banks across the US.
12. In 1917, just after the decision of the US to enter a then-three-year-old WWI, Congress enacted the Emergency Loan Act appropriating the creation of money by compelling the Treasury to create Liberty Bonds as loans to the Treasury for a corresponding amount of promised gold measured in dollars to pay for the cause. Six months later, Congress and President Woodrow Wilson enacted the Second Liberty Bond Act which created a “debt ceiling’ where the Treasury, instead of Congressional appropriation, would create obligations representing gold that add to the national debt. It was an allowance where Congressional approval wasn’t necessary as long as the amount stayed under this debt ceiling. This inspired recent events around the debt ceiling.
13. In 1933 President Franklin Delano Roosevelt (FDR) was faced with a mandate by progressives and WWI veterans. They marched on the US Capital demanding repair of the damages caused by the oligarchy that sparked the Great Depression in 1929, and in response, FDR struck a deal — the New Deal. Under the authority of our Constitution’s Fifth Amendment empowering our government to appropriate anyone’s private property as long as just compensation is provided, he and Congress devised a scheme to create new money to pay for this New Deal by confiscating all gold owned by the Federal Reserve as well as hordes of gold from all private individuals with a few exceptions like gold found in jewelry and dentistry. He compensated everyone at the going rate, still approximately $1 for every 1/20th of an ounce of gold. He moved this gold to the US Treasury, and then he raised the value of gold by seventy-five percent to $35 an ounce via a new law, aka by fiat, thereby creating wealth for the government to pay for the new programs. This shows how the government exercised its power to change the value of our money by fiat.
14. During WWII we became one of forty-four allies to enter the Bretton Woods agreement. They decided to use our currency as the standard form of international exchange, pegged to an ounce of gold. At this time we were now a resource-rich sovereign country, as compared to when our domestic product was limited to just tobacco, cotton, and sugar.
15. In 1971, Nixon pulled us off the Gold Standard effectively terminating this agreement with our allies. This was known as the Nixon Shock. Our dollars’ previous peg to gold was no more.
I invite anyone to comprehensively explain to me why the literal meaning of a “national debt’ didn’t go out the window with the Nixon Shock. A repayment in gold to whoever held the obligations of each dollar as well as any interest our government may have owed to fulfill those dollar-obligations was what that “national debt’ described. It was a debt in gold owed TO us. These were IOUs our government gave to us, as opposed to some debt that we each owe to some ambiguous almighty which our children will have to find some way to pay.
Previously, the physical amount of gold in the Treasury was a constraint to a correlating and finite amount of dollars that could be created at 1/35th of an ounce per dollar until the Treasury runs out of gold. Now off the Gold Standard and with dollars untethered to anything, from 1971 forward the only constraint preventing Congress from creating an endless supply of dollars without unhealthy inflation is the amount of real resources we need to distribute to create our goods and services which result in our domestic product. Distributing things like labor, food, steel, energy, water, or anything else we require is the purpose for our dollars. Because of this, at the most basic level, supply and demand economics now dictate the values of our nation’s resources as well as our dollar supply. These two are reactive of each other and need to remain balanced.
Given that there is no longer an amount of gold as a constraint, the ratio calculated between dollars and domestic product produced should be aimed at benefiting public interests first via mandatory spending programs which provide a guaranteed way for us to provide the necessities of life. Both mandatory government spending and our domestic product should be increased in such a way that these products absorb the new money supply, while constrained by this dollars-to-product ratio, preventing inflation. Dollars are now a national wealth instead of a “national debt’ of gold, and the public should get the benefit first. Private interests influencing policy like Pay-Go and getting the benefit from an imbalance in this ratio in their favor, or benefiting from a lower level of both money supply and domestic product than our potential and willingness of labor and other resources, is unjust. It is austerity leading to desperation and oligarchy. It is an unequal protection of our law in favor of our policymakers’ donors.
If there is an excess of either dollars or resources without a sufficient supply of its counterpart to offset, as well as a demand for the resulting products, the value of any excess will go down; whether it’s excessive dollars losing value and creating inflation, or an excess of an unused real resource like labor or food creating harm and waste.
16. After 1971 the value of our money has been decoupled from the Gold Standard and now gets its validity from our Constitution’s Article 1, authorizing Congress to create our money and levy taxes payable only in these dollars. This makes US dollars our means of exchange rather than gold or anything else because we must attain this specific money to pay these taxes, as an ante to our system. Another purpose for taxes is to reduce the money supply from too much government spending, if necessary, in order to create a scarcity of dollars to control inflation. The circulation now travels in an inverted way from its previous path or other budgets like household or state budgets. Instead of the federal government needing an income from taxes and then spending (Pay-Go), it spends to create money first then the dollars circulate to achieve what should be a benevolent distribution of our resources including labor and physical assets for the creation of domestic product. After that, taxes can recover dollars. Federally it’s not “tax and spend, tax and spend” , from 1971 on it’s been spend then tax.
17. From Nixon Shock forward private interests have set out to capitalize on our nation’s naivety to the implications of ending the Gold Standard. Sadly, at that point in time an economist named James Buchanan and his minions thought the tactics described in the following article in favor of elite people would be a good course of action for our country. This has irresponsibly led to global and environmental hardship and the strife that too many of us face today. As of the Nixon Shock, telling us that the federal government must tax us to pay the national debt is disingenuous. Every person’s most basic needs and safety can and should be met. We can push the quality of mandatory government functions like green energy and its federal jobs guarantee up until we run out of resources like willing labor or materials. We can see that growing the domestic product this way would need a larger money supply for distribution purposes and creating this stronger economy for us all would be the responsible thing for Congress to do. This new free-floating monetary system since the Nixon Shock where the law gives our money its authority instead of gold was first called Chartalism a century ago, and today it’s often recognized by the somewhat disparaging term: “deficit spending’. Some call it Neo-Chartalism, and Bill Mitchell from the University of Newcastle in Australia coined this as Modern Monetary Theory (MMT).
18. Whatever you want to call it, it’s the way our monetary system is currently structured. America’s wealthy and controlling powers often don’t want the public to understand that as a nation we’ve been utilizing MMT since “71. By incorrectly telling us that we use taxes to pay for government spending and to pay the “national debt’ from this spending as well as interest on debt obligations like Treasury bonds, they have us over a barrel. If we want things like medical care for everyone or a green energy program etc., they tell us first we have to balance the budget to pay this “national debt’. By creating just enough austerity instead of a goal of efficiency and fairness in distributing resources amongst us, the rich private few can keep the vast majority including our labor force desperate and compliant to their demands. They tell us it would be irresponsible to spend money without finding a way to pay for it first. It’s untrue. Instead, it is irresponsible to create desperation and the resulting incarceration, wage slavery, torn families, and stress-influenced deaths.
19. The incorrectly named “national debt’ is no longer a debt that the government owes us for each 1/35th of an ounce of gold plus interest. It’s our nation’s tally of dollars we’ve created but have not yet eliminated. It’s a measurement to facilitate exchange, whether paper, coin, digital, or any other form. When dollars are appropriated by Congress the numbers in this national inventory go up, and when they’re eliminated by taxes the tally of dollars goes down. If it was instead a debt and this debt was somehow paid, once that last dollar was accepted nobody at all would have any money or any gold. Why would that be good? Since 1971 the depicted premise no longer makes sense. If we are to embrace the American dream of prosperity and opportunity for upward social mobility in exchange for hard work, then we can see that given our ever-growing population, both our money supply and domestic product must also grow.
20. TAXES DO NOT PAY FOR FEDERAL SPENDING as we can see in all mandatory appropriations by congress. For instance defense spending; our government marks up the bank accounts of our troops and defense contractors, and that money is then spent into existence. Yet the Pay-Go crowd would have us believe it would be irresponsible to “print money’ so benevolent programs aren’t provided here at home. What’s truly responsible would be a broad and fair reset of various policies to repair damages to the public interest, caused by private interests, who created rule changes since the Nixon Shock inspiring events like the ’07 Recession, the end of Fairness Doctrine, welfare reform, the loss of bankruptcy protections for families but not corporations etc. Now hardships continue for the public sector but “the recession is over’ for the private-sector corporations who exploited MMT via the “too big to fail’ bank bailouts while the public watched. Solution: bail out the too small to succeed public by resetting Fair Credit Reporting Act (FCRA) and any surviving Fannie Mae or Freddie Mac loans to represent people’s standing from before the recession (or just a hard reset to FCRA and the rest could work itself out). This would be free of upfront costs other than administrative type costs. Rethink Fairness Doctrine and Telecommunications Act which has now cloaked the above mentioned ill-thought courses of action, as well as Patriot Act which expires this December of 2019, and any other detrimental laws which put private interests before the public’s interest, public safety, and the well-being of our planet. Reverse any bad monetary policy that diminishes the national wealth facilitated by deceptive propaganda. Responsibly create new dollars to relieve the desperation and suffering here in the US, while getting an ulterior use for everyone by creating industries and thus more domestic product for us to spend this new money on. This way our money supply and domestic product will increase in tandem as to not upset the supply and demand of either, and our economy will thrive. If the supply and demand of dollars ever DOES threaten inflation due to an oversupply, then Congress can tax to create more scarcity in our supply of dollars or compel those with more to spend it so it isn’t taxed. Understanding this we can see that instead of taxes, only THE POLITICAL WILL OF CONGRESS PAYS FOR GOVERNMENT SPENDING.
Public Domain File image attributions for illustration via CreativeCommons (CC),
https://commons.wikimedia.org/wiki/File:Liberty_Bond_-_1.jpg
https://upload.wikimedia.org/wikipedia/commons/7/7a/Three_golden_bricks.jpg
https://upload.wikimedia.org/wikipedia/commons/d/da/UnitedStatesFirstBank.JPG
