In our new money system, money creation is a three-step process:
Decide how much to create (or not) to keep the value of our money steady;
Enter the amount as income and an asset on our government books;
Distribute the new money into the economy by spending, lending, giving, or investing to promote the goals as stated in our Constitution. These steps can be achieved with a maximum degree of transparent and democratic participation – aggregating the wisdom of our citizenry and professionals, within the framework of our Constitution.
1. Decide how much new money can be created
Our monetary reform law requires that the amount of new money created keeps the value (i.e., purchasing power) of our money the same over generations. We want to create enough money to pay for programs that support a healthy and sustainable economy without devaluing our money (inflation). There is an amount that will do that, and that number will change from year to year. It will take some work and experimentation to figure out how best to arrive at that number. Most of the data we’ll need to do that is already collected.
We may not hit a zero change in value, but we can set a goal of keeping the value of our money genuinely steady. The supply will grow to accommodate increases in population, needed programs, with a little extra for mistakes and natural disasters. A steady money value means that if $5 buys a dozen organic eggs today, $5 will buy a dozen organic eggs when your great-grandchildren go shopping (assuming supply and demand ratios remain the same).
Avoid conflicts of interest
It is important to avoid conflicts of interest as much as possible in making the decision about how much new money to create. There must be checks and balances in the decision-making process established by law. We do not want lawmakers inflating the money supply too far so they can spend short-term to please their constituents and get re-elected, or to please special interests with unnecessary spending. Nor do we want the groupthink of professionals from a narrow sector of our society making the final call without broad input. We want the recommendation for how much new money can be created to have input from a diverse group of independent and informed thinkers – including professionals AND ordinary citizens. Everyone has a unique perspective on whether the value or purchasing power of our money is remaining steady, and taking all opinions into account will give us the best answer.
A steady-value money agency makes a recommendation
By law, we establish a steady-value money agency, whose job is to gather estimates from as broad a range of opinions as possible, to review supporting data for those opinions, and then to determine how much new money can be created. Selecting the right amount will be a challenge and require some experimentation. The decisions Congress makes about how to distribute new money will also have an impact, and this agency can collect estimates of these impacts, too. The best estimates are made with a variety of points of view. We can gather recommendations from the experts who currently assess inflation – the Bureau of Labor Statistics, State economic offices, our banking sector, currency market trackers, and others.
Experts, though they are crucial participants in good decision-making, can get stuck in their ways, their specialized questions, and their truths. To get the most reliable estimate, we can combine the wisdom of us all with the wisdom of our experts. For example, we can put a simple opinion scale on everyone’s ballot and tax return: how much do you think overall prices have changed over the past year for the nation?
Weighting the average opinions of experts and the average opinion of the broad population can be established with experimentation. Our new steady money agency decides how much new money we need and makes its recommendation to Congress.
This agency can be called the Steady Money Agency (or… convention, office, authority, bureau, or service…It is the who,what, how, and why of it that are important.) That is, it must be wholly public. Its purpose is to determine whether the existing money supply is appropriate for the needs of the economy in the coming year and, if not, how much new money Congress should create or (less likely in the near future) how much existing money Congress should extinguish. It’s decision-making must be widely-informed by experts and the general public. And its mandate is to keep the value, or purchasing power, of money steady over time through the generations. Be aware that the name Monetary Authority has a very specific meaning for some people, so ask what people mean when they use the term.
Congress approves the recommendation
Congress approves an amount of new money. It can accept the recommendations of the Steady Money Agency, or in extraordinary circumstances, and within limitations, it can override the amount. It cannot be easy to override, or we’ve lost the value of the check and balance.
2. Enter the new money in the U.S. accounts
Congress agrees on the amount of new money to be created and passes a bill to create this new money. When the president signs the bill, Treasury enters the amount of new money on the government’s accounts as income and a cash asset. These account entries are what happens with coins today – a legal, Constitutional precedent.
To give you some idea of how much money this would be, in 2018, our private commercial banks added $521 billion to the money supply (M2), according to the Federal Reserve Bank of St. Louis. In 2018, the private bankers decided how that $521 billion was entered into our economy, with their own profits their highest priority – and that amount was just the new additional money in the system.
In fiscal year 2018, our government operating fund revenue was $2,103 billion. After paying interest of $357 billion to the public, and $99 billion in interest to our government trust funds (total interest of $456 billion – 22% of our available revenue), we had a net of $1,647 to spend on government operations. Now imagine eliminating over time the total payment of $456 billion in interest, and add the $521 billion in newly created money. The money available to use for improving the foundation of our society and economy would increase from $1,647 billion to $2,624 billion. What would you want the government to do with an additional trillion dollars? And, there would be more…
In our current system, money is constantly being extinguished as debt is repaid, and recreated by the banks making new loans. So bankers are determining how enormous sums are entered into our economy every year. In a Just Money system, they will still be able to lend, but they will be lending with already existing money. We will have a balance between new money created by government for providing the foundation necessary for a healthy society and economy, and recycling of existing money through banks for use by private businesses and individuals within that healthy economy.
3. Distribute new money into the economy: Spend · Lend · Give · Invest
In the new system, all new money begins as a new asset of We the People. Then Congress decides how best to distribute these funds; Congress decides how to spend, lend, invest, or gift the new money into circulation. This is the same process used now to spend existing money acquired through taxation or borrowing. Currently in a year, our government chooses how about 20 percent of existing money is spent in the economy. Government spending is what we together decide to spend to build a foundation for a healthy and prosperous society. This percentage may go up in a Just Money system, but it will balance and support – not overwhelm – our vibrant private enterprise economy. And, whatever government spends ends up in the pockets of individual Americans, directly or indirectly. It is a win-win circulation of money.
In a Just Money system, the decisions about how to enter new money into the economy can be made by the people, with promoting the general welfare our highest priority. This will bring money creation into alignment with our Constitutional goals. When we really want good, issue-based decisions from our Congress, we will make publicly funded election campaigns a top priority. With Just Money, we’ll have the money to do this. Imagine having the most qualified candidates, instead of the one’s who can collect the most money from special interests!
Distributing new money (and existing money) in a wide variety of ways is important. Diversity strengthens the economy and balances individual choice spending with the public spending that builds a strong foundation for general prosperity.
Congress can experiment with various proportions allotted to decision-making at individual, local, state, and federal levels. For example, Congress could decide to distribute some of the new money through private enterprises like we do today through revolving loan banks, mortgage and loan brokers. Congress could decide to shift some of it into State accounts so decisions can be made at the state level about how to spend, lend, give or invest new money. Congress could give every citizen a dividend, a basic income, or fund a Citizen Equity Account, which would maximize the diversity of choices about how to enter new money into the economy. Or Congress could do some mixture of all of these distribution avenues. We will not know what proportions of distribution at a variety of levels will give us the healthiest economy and society until we experiment.
As these additional funds move into the economy in diverse ways, they create a business boom and rehabilitate our nation. We will need to be careful and gradual in implementation to avoid excess inflation, over-consumption of nonrenewable resources, or instability.
This change in the money system is not nationalizing the banking and financial sector. Banks can earn all the money they can by providing services at competitive prices. Basic bank services include storage, transfer, and intermediary services between savers/investors of existing money and borrowers/investment opportunities. Banks will compete for customers and make their livings, just as any other business does. They will no longer have to factor in the risks of system booms and busts. Their success or failure will be their own.
We cannot do it all, or do it all at once, but what can we choose to do?
We can repair, improve, and maintain our infrastructure
Congress can spend on repairing, improving and maintaining our infrastructure. We can spend on high-speed rail, on roads that save wear and tear on our cars and even create energy. We can provide high-speed broadband to everyone in the nation – as other nations already do. We can cleanup and update our water supply, soil fertility, and waste systems, reducing use and preserving sustainability. Improving this infrastructure cuts costs for business and creates a business boom as the money ripples out into the economy. Congress can do this directly at the federal level, or apportion money to the states for these purposes.
We can build strong communities
We can provide zero or very low interest loans for startup businesses or not-for-profits that provide a good or service that a community needs. We will not need to support polluting or destructive industries just because they provide jobs; we can demand that businesses receiving these public loans do more than create jobs. They must provide a constructive and valuable service in a clean, efficient, and sustainable way with employees who can make a living and a life for themselves and their families.
We can pay for more quality jobs in both the private and public sector. Communities can determine what needs doing and hire people to do it. We did this after the Great Depression, and have many public buildings, parks, wonderful monuments, and art as a result. We also did cleanup and restoration.
Communities can determine for themselves what needs doing, and it will no longer need to be something that makes a high profit. For example, many kinds of care and educational enterprises can provide comfortable livings for providers, and eliminate the cost of extracting Wall-Street satisfying profits for out-of-community owners. Caring for children, the sick, and the elderly will not have to scrimp on quality so someone can extract exorbitant CEO salaries and outsize profits.
We can provide healthcare for everyone
We can spend on healthcare for everyone, and on incentives to train enough doctors and nurses to meet our needs. The nations that already do this – not because they have a Just Money system, but because they achieved a stronger social contract between labor and capital and a more representative political system – find it greatly improves happiness and health outcomes, reduces stress, strengthens families, and improves business productivity. A healthy and stress-free labor force cuts costs for business and contributes to the business boom, family stability, and more thriving communities.
We can spend on a well-educated citizenry
Congress can invest in an education for every citizen to any level each desires and achieves. We can provide help for new parents and preschool for every child. We can build better schools and pay our teachers high enough wages to competitively draw the best and brightest to teaching. Finland has done this and they consistently have the best educated and happiest citizens. We can give all of our children their best possible future. This investment would pay off in a better educated workforce, working to their fullest potential, with time left over for family and community life.
We can fund education at all levels and join the other 24 or so countries that do so, giving their citizens a leg up in the world, instead of burdening them with debt.
We can spend on healthy ecosystems
We can invest more in removing toxins from our air, water, and life-styles. We can rehabilitate damaged ecosystems, preserving the diversity of life. We can invest in assuring that all life forms have sustainable habitats, supporting organizations like the 120+ year old Audubon Society that already do this work. This preserves business and recreational opportunities for the future. We can stop killing off species that may have answers to health and business problems yet undiscovered. And, we will enjoy the incredible variety of life on Earth.
Invest in new and beneficial technologies
Congress can invest more in technologies that may not create monetary incentives for private business in the short-term. For example, our government invested in sending a man to the moon, and through that publicly financed work hundreds of new products were discovered and made their way into our lives by entrepreneurs willing to push a new product into the marketplace. (For example, GPS, artificial limbs, satellite TV, memory foam, LASIK, invisible braces…the list is long.)
We can invest in converting businesses to all renewable, clean and sustainable energy. We can invest in innovation that makes this possible and earn returns on investment for the public coffers. We can offer interest free loans so that businesses can eliminate their waste – which protects the environment and saves the business and all of us money. We need to free up money to implement the 5 R’s:
Reuse, repair, recycle, regenerate, and renewables
Fund Citizen Equity Accounts
We can create citizen equity accounts for every woman, man, and child in the country as one mechanism for distributing newly-created money. Every person born or naturalized in the country could set up a tax-sheltered citizen equity account much like an Individual Retirement Account (IRA) at an approved local bank or financial institution. The U.S. Treasury would fund such accounts regularly with an allocation of newly-issued investment capital representing each citizen’s share of a portion of the non-inflationary growth in the money supply that is assigned for local economic development.
Working with their local financial institution, every person could then choose how to invest his or her funds in any local enterprise that could persuade a local commercial bank that it has a viable, income-generating capital project capable of generating a return on investment. Through such citizen equity accounts, all individual citizens would enjoy the right to spend new money into existence to finance local economic growth. At the same time they would acquire full-voting, dividend-paying ownership shares in productive local enterprises. Assuming the projects they choose make it, every person would enjoy a dividend stream to supplement wage income, and build up a capital estate over time to fund retirement. Local enterprises would gain access to near zero-cost growth capital. Banks would be providing growth capital to local businesses much as they always have, except they would be investing funds from the citizen equity accounts of people who have a vested interest in their local and regional community and the viability of its economy.
Such citizen equity accounts could bring profound benefits. Every individual would become literally invested in the health and economic future of their local economy, incentivized to become an engaged citizen. Broad-based private ownership of productive assets extends responsibility and privilege to all citizens, contributing to a stronger democracy and more prosperous economy. Over time, citizen equity accounts could reduce the enormous present-day inequalities in wealth and power without taking any property away from existing owners.12
Congress can set up many revolving loan funds, available to communities and to individuals at minimal interest. We make these kinds of loans and grants now, but we can do more. We could have a Cities Fund, a Small Farmers Fund, a New Business Fund, an Employee Stock Ownership Transition Fund, a New Home-Owners Fund, etc. These funds could strengthen communities and families. The funds could contract out the work of qualifying and loan maintenance to community banks, who would receive reasonable fees for their work. The funds would only need to charge enough interest or fees to cover their operating costs. They would not need to make a profit, though they could, and interest could be used to increase the size of the fund instead of going into the private pockets of a wealthy few.
Congress can give money to individuals or to states. We can choose to give everyone a dividend, or a basic income, so that everyone can buy adequate food and shelter, and be better customers, clients, consumers, family members, neighbors, citizens, readers, artists, musicians, athletes, etc. This could compensate for the decline in jobs as the Robotic Age develops. We can give newborns welcome packages as they do in many European countries. We could give recent graduates a year’s living stipend to apprentice, travel, or explore a variety of life options. We could give people a seventh-year sabbatical, so that we are rested, re-energized, and more productive employees.
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