1

The Mystery of Money and Banking – An Alternative Money

System95% or more of our money is account money

5% or less of our money is coins and bills

2

Monetary reform at the national level

Chicago Plan, 1930s American Monetary Act by AMI HR 2990 (aka the NEED Act) sponsored by

Representative Dennis Kucinich (OH), cosponsored by Representative John Conyers (MI)

all three are essentially the same proposal

3

thomas.gov

A Library of Congress website with all national legislation (both bills passed and bills in process) past and present

Type in “national emergency employment act” and click search to see the proposed legislation and its current status

Click “Text of Legislation”

4

HR 2990aka

National Emergency Employment Defense Act

Introduced December, 2010(111th Congress)

Re-introduced December, 2011(112th Congress)

Essentially the Chicago Plan of the 1930s with refinements

5

Article I, Section 8of the United States Constitution Enumerates the powers of Congress

Clause 2: To borrow Money Clause 5: To coin Money, regulate the

Value thereof Clause 18: To make all Laws which shall

be necessary and proper for carrying into Execution the foregoing Powers, ...

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“The mistake … lies in fearing money and trusting debt.”

– Professor Henry Simons

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The Chicago Plan Circulated among a group of academic economists in

the 1930s

Advocates included

Henry Simons (U of Chicago)

Irving Fisher (Yale U)

Willford King (New York U)

Frank Knight (U of Chicago)

Paul Douglas (U of Chicago)

Instead of this thoroughgoing reform, Congress enacted a beneficial, but partial measure known as the Glass-Steagall Act (1933)

8

US MONETARY HISTORYPUBLIC PRIVATE

Colonial scrip Commodity money

all 13 colonies tobacco, beaver skins, ...

Continental currency First Bank of the US

1775 – 81 1791 – 1811

United States Mint Second Bank of the US

1792 – present 1816 – 36

Legal Tender Acts (“greenbacks”)

Federal Reserve System

1762, 1764 1913 – present

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Colonial currenciesThere were three general types of money in the colonies of British America: commodity money, specie (coins), and paper money. Commodity money was used when cash (coins and paper money) was scarce. Commodities such as tobacco, beaver skins, and wampum served as money at various times and places.

As in Great Britain, cash in the colonies was denominated in pounds, shillings, and pence. ... The coins in circulation in the colonies were most often of Spanish and Portuguese origin. The prevalence of the Spanish dollar in the colonies led to the money of the United States being denominated in dollars rather than pounds.

One by one, colonies began to issue their own paper money to serve as a convenient medium of exchange. In 1690, the Province of Massachusetts Bay created "the first authorized paper money issued by any government in the Western World".

The paper bills issued by the colonies were known as "bills of credit". Bills of credit were usually fiat money; that is, they could not be exchanged for a fixed amount of gold or silver coins upon demand.

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Continental currencyAfter the American Revolutionary War began in 1775, the Continental Congress began issuing paper money known as Continental currency, or Continentals. ... During the Revolution, Congress issued $241,552,780 in Continental currency.[9]

Continental currency depreciated badly during the war, giving rise to the famous phrase "not worth a continental".[10] A primary problem was that monetary policy was not coordinated between Congress and the states, which continued to issue bills of credit.[11]

Another problem was that the British successfully waged economic warfare by counterfeiting Continentals on a large scale. Benjamin Franklin later wrote:

The artists they employed performed so well that immense quantities of these counterfeits which issued from the British government in New York, were circulated among the inhabitants of all the states, before the fraud was detected. This operated significantly in depreciating the whole mass....

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United States Mint

Created with the Coinage Act of 1792 First Mint building was in Philadelphia Today: Philadelphia (headquarters),

Denver, San Francisco, West Point, and a bullion depository at Fort Knox

Functions include: Producing domestic, bullion and foreign coins;

Manufacturing and selling national commemorative medals;

...

12

Legal Tender Act (1862)Legal Tender Act of 1862 and ensuing litigation

The Legal Tender Cases primarily involved the constitutionality of the Legal Tender Act of 1862, ... enacted during the American Civil War. This act authorized issuance of paper money, United States Notes, to finance the war without raising taxes. The paper money depreciated in terms of gold and became the subject of controversy, particularly because debts contracted earlier could be paid in this cheaper currency.

In Hepburn, Chief Justice Salmon P. Chase held for a 4-3 majority of the Court that the Act was an unconstitutional violation of the Fifth Amendment. Ironically, Chief Justice Chase had played a role in formulating the Legal Tender Act of 1862, in his previous position as Secretary of the Treasury. On the same day that Hepburn was decided, President Ulysses Grant nominated two new justices to the Court, Joseph Bradley and William Strong, although Grant later denied that he had known about the decision in Hepburn when the nominations were made.[6] Bradley and Strong subsequently voted to reverse the Hepburn decision, in Knox v. Lee and Parker v. Davis, by votes of 5-4. The constitutionality of the Act was more broadly upheld thirteen years later in Juilliard v. Greenman.

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Bank of England nationalized, 1946

“The banks should be limited in their lending power to the amount deposited by their clients … But the system has become anomalous, and … the result is to make into the master what ought to be the servant.”

Reverend William TempleThe Archbishop of CanterburyLondon, September 26, 1942

paved the way for the nationalization of the BoE in 1946,

which temporarily had beneficial results.

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The Mystery of Money and Banking – The Origins of the

Current System

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“When plunder becomes a way of life for a group of men living together in society, they create for themselves in the course of time a legal system that authorizes it and a moral code that glorifies it.”

– Frederic Bastiat, 1801 – 1850 political economist

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If you give somebody a gun, they can rob a bank.If you give somebody a bank, they can rob a nation.

:-O

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thief: “Give me your money or your life.”

other guy: “Take the life. I need the money for old age.”

:-(

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bank: “We can lend you the money to pay off your debt.”

:-}

1. The Origins of Money Systems 13. The Usury Debate Continues

2. Rome's Bronze Nomisma: Better

Than Gold

14. U.S. Colonial Moneys

3. A Monetary View Of Rome's Decline 15. The Money Power vs. The Constitution

4. Re-Instituting Money In The West 16. U.S. Government Money vs Private Money

5. Crusades End Byzantium's Monetary

Control

17. The Greenbacks: Real American Money

6. Renaissance Struggles For Monetary

Dominance

18. Nineteenth Century Monetary Crimes -       The Great Deflations

7. The Scholastics - The Moral

Economists

19. Establishment Of The Federal Reserve

8. 1500 - History's Pivot: Power Shifts From The Mediterranean To The North Sea

20. Federal Reserve System Wrecks America

9. The Rise Of Capitalism In Amsterdam 21. Germany's 1923 Hyper-Inflation Under A

Private Central Bank

10. Transferring Capitalism To England 22. International Monetary Organizations

11. Hatching The Bank Of England 23. The European Monetary Union

12. Political Economists: Priesthood Of

The Bankers Theology

24. Proposals For U.S. Monetary Reform

LSM Chapters

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What many people think exists now

Who controls the Federal Reserve System? what folks think: government

Where does our money come from? what folks think: government

Where does the money for bank loans come from? what folks think: people's savings deposits

21

“Only puny secrets need protection.Big secrets are protected by public incredulity.”

– Marshall McLuhan, Take Today, The Executive as Dropout (1972)

22

Under the NEED Act: who would control the Bureau of the

Federal Reserve? Answer: government

where would our money come from? Answer: government

where would the money for bank loans come from? Answer: people's savings accounts

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radical |ˈradikəl|adjective1 (esp. of change or action) relating to or affecting the fundamental nature of something; far-reaching or thorough : a radical overhaul of the existing regulatory framework.2 advocating thorough or complete political or social reform3 of or relating to the root of something, in particular• Mathematics of the root of a number or quantity.• denoting or relating to the roots of a word.• denoting the semantic or functional class of a Chinese character.• Music belonging to the root of a chord.• Botany of, or springing direct from, the root or stem base of a plant.

ORIGIN late Middle English (in the senses [forming the root] and [inherent] ): from late Latin radicalis, from Latin radix, radic- ‘root.’

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Rep. Dennis Kucinich (OH)since 1997

Sponsor of HR 2990 (NEED Act)

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Rep. John Conyers, Jr. (MI)since 1965

Cosponsor of HR 2990 (NEED Act)

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What the NEED Act does: Purchases the Federal Reserve members'

assets, and returns their reserves. The federal government originates money as authorized by the US Constitution Article I Section 8

Changes accounting rules so that banks no longer originate money

Encourages Congress to spend new money into circulation

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NEED Act

A) Nationalizes the Federal Reserve

B) Ends fractional reserve banking

C) Congress encouraged to spend new money into circulation

A) alone is not enough e.g. Bank of England nationalized 1946

A) and B) alone are not enough e.g. Jackson and Van Buren caused a deflation

All three parts must be enacted to get the real benefit we need and deserve

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Most frequent knee-jerk objection:

“But that would cause inflation.”

Answer:The NEED Act would not cause inflation. Spending new money into circulation for real, physical goods and services does not cause inflation, because corresponding to the new money, you have the new stuff.

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Founded 1996Stephen Zarlenga, Director

Annual Conference in Chicago in Septembermonetary.org

American Monetary Institute

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