In fact during our colonial days, our government did fund its operations by issuing colonial scrip. Our colonies were flourishing at this time and because the government was printing its own money, there was no need for income taxes. (By the way, it is not a coincidence that the Federal Income tax was instituted just before the Federal Reserve Act because the bankers know that the government would need the revenue to pay for the interest on its money supply and debt.) The colonial governments issued this colonial scrip to pay their debts and to facilitate economic activity. There were some colonies that printed too many and suffered inflation, but most were judicious in their creation. Once the British bankers became aware of this colonial prosperity and how their debt based money system was being bypassed, they petitioned King George to forbid the colonies to issue their own currency. Since the bankers controlled the monarchy then, much as they control our government today, their wishes were granted. This quickly resulted in not enough circulating money to facilitate economic activity and t he colonies quickly entered into a deep depression. It was this economic depression that was the driving force for the American Revolution. For a more detailed reading of our monetary history, Scott Baker wrote this excellent article.
Another time that the U.S. government printed its own money was during the civil war. The bankers tried to extort interest rates from Lincoln of 24% to 36% to finance the war.
"I
have two great enemies, the Southern Army in front of me and the bankers in the
rear. Of the two, the one at my rear is my greatest foe."
Abraham Lincoln
Instead of acquiescing to the bankers, Lincoln courageously started printing Greenbacks to finance the war saving the nation huge future interest payments. In fact the Greenbacks were so popular with the people that a political party formed called the Greenback Party. In the end, we all know what happened to Lincoln.
Not a Federal Reserve Note by Rudy Avizius
Another time the U.S. government printed its own money was in 1963 under Kennedy's Executive Order No. 11110 that returned to the U.S. government the power to issue currency, without going through the Federal Reserve. This order instructed the Treasury to print bills against any silver inventory held by the government. There were billions of these certificates printed and they were known as United States Notes and they were all interest free. Some of you may remember some of these bills as they had a red seal, rather than the more common green seal of the Federal Reserve Notes. These United States Notes represented a mortal threat to the Federal Reserve System, and we all know what happened to Kennedy 5 months later.
After the Kennedy assassination, no more interest free United States Notes were issued. The Executive Order was never repealed by any U.S. President, and this Executive Order is still valid. Yet no president since Kennedy, Republican or Democrat has ever utilized it!
Think about this, much of the $16 trillion in debt that was created since the Kennedy assassination has been because of the interest payments on the debt. If any subsequent president had found the courage to use Executive Order 1110, our current level of debt would be magnitudes smaller. We would not be in the same mess we are in now. So when you hear people talking about needing budget cuts in order to solve our problems and leaving a legacy of debt to our children, you are listening to people who do not understand our monetary system, or worse, they are supporters of the current system of debt that can never be paid off with the resulting perpetual interest payments to the private bankers. The better solution would be to have the government issuing its own money, debt free. Now that would be a great "gift" to our children and grandchildren!
One very valid point made by critics of having the government being able to issue its own money is that there will be nothing to restrain the government from simply overspending. In reality, banker issued debt money has also done little to limit government spending. The mechanism we have currently for that is the congressionally approved debt ceiling, however flawed that is. Any move towards government issued money could be met by congressionally mandated structures to prevent runaway spending. At the least, if we did not have to deal with the interest payments, our spending would be significantly less than it is currently and that would help cut the deficit significantly.
Value of dollar since 1913 by Ludwig VonMises Institute
When you hear all the propaganda on the corporate media ridiculing the $trillion coin idea (government printing its own debt free money) and saying how it will harm the economy and the markets, ask yourself, who is benefiting from the current arrangement and who is this person trying to persuade you? They will tell you that this is inflationary. The truth of the matter is that the current system is inflationary. The chart on the right shows how the value of the dollar has eroded since the creation of the Federal Reserve in 1913.
If the government wishes to build a bridge it has to pay those who supply the materials and those who supply the labor. This is expected and normal. However, the irony is that the government pays more to the financiers of the project than to those who supply the materials and the labor. Most people will recognize this with their home mortgages where the final cost of paying off a mortgage far exceeds the original sale price of the home because of interest charges. The unproductive bankers make far more money than the producers, the builders, and suppliers. What is wrong with this picture?
Money being spent on infrastructure projects creates wealth and since this wealth is balanced by the money being placed into circulation, there would be no inflationary effect. In fact by eliminating the financing costs of these infrastructure projects, you actually lower the price of every public project, reducing inflation.
The practical effects of the government printing its own money are not limited to the federal level. While states cannot explicitly print their currency, they can leverage the money they do have by utilizing the existing [deeply flawed] Fractional Reserve Lending system. States can create their own banks and use them to fund their projects at either no or very low interest rates. As discussed earlier, by eliminating the costs of obtaining money through the financiers, the cost of public projects is cut by almost half. Ellen Brown, in her book "Web of Debt" outlines how the bankers have a stranglehold on our economy and how one state has created its own bank, the Bank of North Dakota. If you have not read this book, then you probably do not understand our debt based monetary system. (Disclosure: I have no economic interest or benefit in promoting this book.)
This bank is popular with both Democratic and Republican legislators in the state of North Dakota. This idea is starting to catch fire and 20 states are now considering some form of state banking legislation. By having a state owned bank that uses the fractional reserve lending system to create its own money out of thin air, interest free, the state of North Dakota has a resource that is counter-cyclical, meaning it is capable of reducing the negative impact of recessions. They can make money available for local governments and businesses precisely when private banks decrease lending. This bank has existed for 90 years, remained stable during the financial crisis, and helped to insulate the state from the worst effects of crisis. The Bank of North Dakota is one key reason why the state has weathered the crisis better than most, has the lowest unemployment in the country, and has a current budget surplus.
Our current debt based money system is at the very heart of the poverty, debt, and economic problems facing our country and our world. The bankers have enriched themselves because we allowed them to both print our money and collect interest on it. The bankers have impoverished the people because they can print our money and collect interest on it. The bankers have usurped our government because they have accumulated such wealth at the expense of the rest us and essentially made the politicians their paid servants. They then use those politicians to rig the system against the working people. The result is a Congress with extremely low approval ratings. These facts are recognized by people across all political perspectives, from Democrat to Republican, from the Tea Party to Occupy. This not a Liberal cause, this is not a Conservative case, this is a Common Cause. We need to take back our government from the money masters and make it serve the people instead of the bankers.
Debt based money at root of many problems by Rudy Avizius
How can patriots allow such a system to exist? If we can print our own money by eliminating the banker middlemen, we will solve so many other problems that are symptoms of our debt based money system. Unemployment will drop, deficits will drop, poverty will drop, inflation will drop, and bank induced problems such as recessions and depressions will be alleviated. We all have our pet issues and they all have validity, but if we can unite together on this one issue, many of the other issues will be solved by themselves with a government that is responsive to the people, not the bankers and corporations, and a monetary system free of burden of debt so the needs of people and business can be met efficiently. Changing the monetary system is not an issue that tugs at most peoples' hearts, but if we could change it, so many of the other issues that do affect our emotions could be solved.
We need to start laying the foundations of a movement to change our monetary system BEFORE the inevitable next crisis. People need to become aware that there was once a better system in the past and that it is possible to have that again. This can be accomplished through education, independent media, social networks, and word of mouth. It is time to end the illusion that our current debt based money system works for the benefit of everyone. The discussion on the $trillion dollar coin provides us with a starting point to make that change possible.
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