Let's take an actual bill to show how this would work. No, not HR2990 - the bill crafted by the American Monetary Institute and put forward by former Congressman Dennis Kucinich. That's too laden down with other things, like abolishing fractional reserve banking and making the FRB part of Treasury. There's a much simpler bill that slightly preceded it, but still came after the Treasury burned its last stock. In 1999, then Congressman Ray LaHood (later Obama's Transportation secretary) introduced HR 1452 (Text of the State and Local Government Economic Empowerment Act).
Section 1 reads:
To create United States money in the form of non-interest bearing credit in accordance with the 1st and 5th clauses of section 8 of Article I of the Constitution of the United States, to provide for non-interest bearing loans of the money so created to State and local governments solely for the purpose of funding capital projects.
...and in more detail:
The Congress hereby finds the following:
1. As of the date of the enactment of this Act, money is principally created in the domestic economy by banks through the process known as 'deposit expansion' under which credit is extended by banks to customers in exchange for the assumption of an obligation by each customer to repay the amount of any such credit with interest.
Now, the Bank of England and others have recently admitted that deposits do not create loans, rather loans create deposits, but in neither case, are loans interest-free, as this bill stipulates.
Continuing:
2. The creation of money through the extension of credit and creation of debt, a traditional banking function, preceded the establishment by the Congress of, first, the national banking system and, subsequently, the Federal Reserve System.
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