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The American Monetary Institute is the world’s leading organization for understanding monetary history and how to reform monetary policy. These six articles reprint AMI’s principle information, available at AMI’s website, with their express permission to share widely: 

  1. Explaining the need for monetary reform: the heart of our economic crisis
  2. Monetary history: synopsis of Stephen Zarlenga’s The Lost Science of Money
  3. How to reform our monetary system: understanding the mechanics of creating money
  4. The American Monetary Act: monetary reform legislation for Congress (part a and part b)
  5. FAQ of monetary reform
  6. What can Americans do for monetary reform?

This article is part 4a. The other titles above will have live links as I add one each day. The following eight paragraphs are a common introduction that begins each article.

The Lost Science of Money (LSM) is a superlative accomplishment of historical analysis. It explains with academic professionalism how money has historically evolved and its capture by oligarchic corporate, political, and media “leaders” for their own use rather than public benefit. Stephen Zarlenga is an unsung hero for his years of work in reviewing nearly a thousand books on money, its creation, and its manipulation. LSM is the most historically authoritative, most comprehensively researched, and most important book on monetary reform available. It is clearly written for all readers to understand this topic of trillions of dollars of yearly benefits for the American public. 

As the founder and Director of AMI, Mr. Zarlenga draws on 35 years of experience in the world of finance, securities, insurance, mutual funds, real estate, and futures trading. He has published 20 books on money, banking, politics and philosophy (including The Anglo American Establishment, by Prof. Carrol Quigley). While in his mid 20s he incorporated the Athenian branch of an English life insurance company, earlier opening several European markets for the parent firm, IOS. He built the U.S. distribution network of the then leading American mutual fund concentrating in gold shares. As a member of the New York Futures Exchange (a subsidiary of the New York Stock Exchange) he specialized in trading the complex CRB futures index for several years.
Our “modern” banking system is a Robber Baron-era cartel, expert only in creating price bubbles, bursting them, consolidating power, using political control for taxpayer subsidization of trillions of our dollars (so-called “bailout”), and then repeating the process. It is an Orwellian comic-tragedy of economic management; fraud to consolidate money and power to an elite group of families and organizations.
My summary of leading economic professionals alert to these facts and communicating them to the American public, along with the obvious solutions, is here. The background paper I have for students to understand monetary reform is here. A summary of many of America’s brightest historical minds who have argued for monetary reform, here. The evidence that corporate media doesn’t report these obvious solutions because they are in collusion with the current power structure of government and money, here. Evidence that professional economic journals are controlled by the Federal Reserve to censor any information that would provide an alternative monetary system, here. A simple example is censoring the obvious alternative of paying the national debt rather than increasing it; that is, shifting from a government-created “debt supply” to an actual “money supply.” Corporate media near-absolute silence on these issues is revealing and stunning in its implications.
I also work with Ellen Brown, author of the outstanding Web of Debt, and other colleagues for states’ legislatures’ understanding of monetary reform, and in particular their legislative option to create state-owned banks. Under existing bank laws, states could issue their own credit to purchase their outstanding debt. If California were to do this, they would save $5 billion every year on their state debt interest cost. To put that number in perspective, California could rehire their 20,000 laid-off teachers (I am one) and still have $3.4 billion left.
The power of a two-pronged strategy to work for national monetary reform while educating state legislators of the advantage to their state of creating their own credit rather than going to banks is the education of over a thousand powerful law-making partners all across the US. As a professional educator, I can tell you that research agrees with our observation that education is greatly helped by linking what students (state legislators) already understand (their state economic crisis) to their interests (solving their state crises), and then to the broadest curricular objectives (national monetary reform).
A weakness in any monetary reform strategy is its “Catch-22” nature. The nation’s money supply (not the current debt supply) needs to be managed at a centralized national level. However, the current central national management are the criminal frauds keeping Americans as debt peons. The structural answer is simple, but requires honest management: transparency and public accountability. A probable scenario for Americans to achieve an honest and accountable monetary system is a Truth and Reconciliation process to uncover all the facts keeping our systemic fraud in place.
Mr. Zarlenga and I have discussed this political strategy; he currently disagrees. His view is that investing time for state use of the current non-public-serving system is a distraction from the real reforms required at the national level. His views are expressed in the following and on AMI’s website. I observe the lack of movement in Congress, the sterling example of North Dakota being one of only two currently solvent states in the US with their state-owned bank, and prefer the benefits of unleashing thousands of state lawmakers for national monetary reform step-by-step from seeing their state benefits first.

An Act to restore the Constitutional power to create Money to the Congress of the United States
Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,
This Act may be cited as the American Monetary Act
The Congress finds that –
(1) The Federal Reserve Act of 1913 effectively ceded the sovereign power to create Money delegated to Congress by the Constitution to the private financial industry.
(2) This cession of Constitutional power has resulted in a multitude of monetary and financial afflictions, including a growing and unreasonable concentration of wealth, an uncontrollable national debt, excessive taxation of citizens, inflation of the currency, drastic increases in the cost of public infrastructure investments, excessive un- and under-employment, and erosion of the ability of Congress to exercise its Constitutional responsibilities to provide for the common defense and general welfare.
(3) The issue of means of exchange by private financial institutions as interest-bearing debts should cease once and for all.
(4) The power of Government to create Money and spend or loan it into circulation as needed is similar but different in nature from the power to create and market instruments of indebtedness; it eliminates the need to pay interest charges on the nation’s money supply to financial
institutions and removes their undue influence over public policy.
(5) The unprecedented 2008 breakdown of the US banking and monetary system has brought severe and unacceptable effects on employment and the economies of the United States and every major country.
(6) Under Federal Reserve administration of the US monetary power, mandates, directives, and common sense goals have not been met regarding: *full employment; *a relatively stable currency value; *avoiding excessive debt; *a destructive concentration of wealth; *operating in the public interest; *proper funding to maintain our vital infrastructure, which the American Society of Engineers informs us is $2.2 trillion behind in keeping it safe.
(7) An examination of the historical record demonstrates that U.S. Government control over our money system, in providing the nation’s money supply has been superior to private control. The current crisis is the latest most glaring demonstration of that fact.
(8) As our money system is a key pillar in maintaining our society and as the Federal Reserve System and the financial establishment have failed to operate to promote the general welfare, the US must directly re- assume the powers granted in Article I, section 8 of our Constitution.
The Purpose and Short Title of the Act are given. The “Findings” summarize the problem – that Society’s monetary power has been privatized in the hands of the financial industry (1), especially the ambiguous but essentially privately controlled Federal Reserve System. This privatization has led to a multitude of afflictions (2) through the mechanism of allowing financial institutions to issue money in the form of interest-bearing debt (3). The “Findings” point out (4) how this differs from government
creating money, not debt, and spending it into circulation interest free. That removes the interest burden on our money supply and allows public control rather than private influence to determine how money is introduced into the economy. For example, whether it is largely directed as at present into real estate speculation and various Wall Street games, or into crucially needed infrastructure, such as levees protecting major American cities, and the nation’s bridges and dams. A solution is described (5 & 6) and its objectives are outlined (7), in a general form taken from the U.S. Constitution that all reasonable Americans can support in order “to promote the general welfare.”
Background: The Fed is a private organization, not a part of our government.
The Federal Reserve System consists of 12 regional Federal Reserve banks, with boards of directors, under an umbrella direction of the seven member Federal Reserve Board in Washington, which has the power to determine major aspects of banking activity, such as setting interest rates, and the reserve and other operational requirements. There are no shares of the Washington Fed Board organization; the only “ownership” of the Fed is in shares of each of the 12 regional banks. They are entirely owned by the private member banks within their respective districts, according to a formula based on member bank size. The ownership is highly restricted in that such ownership is mandatory; the shares can’t be sold; and they pay a guaranteed 6% annual dividend.
Thus the stories that the Federal Reserve is “owned” by foreign bankers (the Rothschild’s and other prominent banker names usually come up) are not accurate and these types of rumors have mainly served to discredit wholesome criticism of the banking system.
It will be clear from the following facts that the Fed is definitely not part of the US Government.
*The Fed is not organized within the Executive, Legislative or Judicial branches of our government.
*Who pays the Fed’s bills and determines its budget? Not any part of our government. The Fed gets its funding from its own specially privileged operations. The Fed Board determines Fed budgets.
*Who monitors and oversees Fed activities? Again the Fed itself. While some important elements of proper auditing have taken place, there has not yet been a comprehensive independent audit, by the Government Accountability Office as proposed in a recent letter from Ralph Nader to new Fed Chairman Ben Bernanke, calling for greater monetary transparency.
*Federal Reserve employees are not part of the US Civil Service System and are not covered by government employees’ health insurance or pension programs. Who does the hiring and firing? Except for the highly publicized Chairman and seven member Washington Board, this is in private, unelected hands.
*Federal Reserve Banks are not listed as government organizations by the telephone companies, a small but telling fact.
The ambiguity surrounding the Fed arises because the U.S. President appoints the Fed Chairman to four year terms, and the seven member board to 14 year terms. Also the Fed is supposed to implement government fiscal policy, but it has not really done so. (see Is the Federal Reserve System Part of the U.S. Government, at our website:
Several structural problems arise from private control: The system tends to be run to benefit those in control rather than the whole society. This concentrates wealth into fewer and fewer hands. The interest received by the banking system for money creation flows into their hands. The control over where the money goes determines the direction the society moves in. Privately controlled money tends to go into speculation to make a quick buck. Infrastructure, health and education get ignored or short changed.
The private banking system, not government, now creates our money in the form of debt.
Most Americans think our money is issued and controlled by our government. They are surprised to learn that most of our money is created when people and businesses have to borrow from banks, since this is the main way that money now enters the system. The banks make loans by crediting the borrowers account. This is fiat money, or “purchasing media” created out of thin air, thanks to a special legal privilege granted to them called “fractional reserve banking.” They write a computer credit in the account of those whose needs have driven them to the banking system to borrow money.
This concentrates great power and transfers tremendous wealth to the financial sector.
Under this privately controlled monetary system, it’s not surprising that wealth and power have become concentrated to obscene levels never before seen in our society, where less than 1% of the population is now claiming ownership of nearly 50% of the nation’s wealth!
This money creation prerogative, often referred to as “THE MONEY POWER,” (President Martin Van Buren always capitalized it!) has traditionally been associated with national sovereignty. Alienating the power from government into private hands has inevitably served to concentrate elements of what should remain national sovereign power into those private hands, where predictably it has been used to promote the interests of the few in control rather than the society as a whole. That is clearly unacceptable in both a democracy and a republic. It establishes plutocracy – the rule by wealth.
Not later than 90 days after the effective date of this section, all United States Government disbursements shall be denominated in United States Money, the nominal unit being the U.S. Dollar.
United States Money shall enter into general domestic circulation as full legal tender in payment of all debts public and private.
The Secretary of the Treasury shall directly issue United States Money to account for any differences between Government appropriations authorized by Congress under law and available
Government receipts.
Note: The fact that the Treasury will be able to make disbursements based on direct issuance of United States Money for negative fund balances reflects Congress’s Constitutional authority to “coin Money”, because Congress will then have the ability to adjust the amount of Money so created by regulating both appropriations as well as revenues from taxation and other sources. The focal point of power will be the House of Representatives as the initiator of revenue bills.
Restoring to Congress its Constitutional authority will shift the ability to create Money and enter it into circulation from the private banking industry to our elected representatives, as the Constitution mandates.
The Secretary shall:
(1) forecast disbursement requirements on a daily, monthly, and
annual basis;
(2) provide such forecasts to Congress and the public;
(3) integrate forecasts with the Federal budget process;
(4) maintain a sufficient research capability to continuously and effectively assess the impact of disbursement of United States Money on all aspects of the domestic and international economies;
(5) report to Congress and the public regularly on the economic impact of disbursements of United States Money and the status of the monetary supply.
Sections 101 & 102 specify the U.S. Dollar as our currency unit and make it “legal tender” – meaning all debts can be legally paid with it; creditors must accept it in payment.
It does not prescribe a value for the dollar in terms of commodities, or labor or any other thing. The value of the currency unit is already known in the market in terms of its relation to assets and goods and services and existing obligations.
This value is not fixed but adjusts to continuous changes in supplies and desirability of goods and services and is also influenced by the existing supply of money. This is a valid use of the market mechanism.
If the money supply and economy are reasonably guided, such changes should be gradual and gentle and are a normal part of life. They help assure that the forces of production and consumption are rooted in economic realities, not frozen or dictated ideologically.
Sec 103: “Negative Fund Balances” is the Treasury term for how much money the government needs to come up with to balance its available funds with its immediate expense needs. At present this balance has to be obtained through taxation or borrowing. This process in effect allows the private banking system to create the money and loan it to the U.S. at interest. But under this Act, our government will create such money directly, and interest free.
Sec. 104 requires the Secretary of the Treasury to forecast these disbursements in a timely and effective way; and maintain enough research muscle to analyze and understand the impact of these disbursements both in the U.S. and internationally.
(1) The Monetary Authority and the Secretary shall pursue the policy that the money supply should not become inflationary nor deflationary in itself but will be sufficient to allow goods and services to move freely in trade, in a balanced manner.
(2) Monetary supply targets shall be established by a Monetary Authority consisting of a Board of nine public members appointed for staggered six-year terms by the President with the advice and consent of the Senate. The Board reports periodically to the U.S. Congress.
(3) Administrative responsibility to regulate the monetary supply in reasonable accordance with targets established by the Monetary Authority shall rest with the Secretary of the Treasury.
(4) The Secretary shall report to Congress any discrepancies between targets and supply in excess of one percent at the end of each quarter.
(1) Disbursement of United States Money under this Act shall be made in lieu of borrowing through Treasury instruments.
(2) Such borrowing shall cease as of the date stated in Section 101 of this title, unless otherwise authorized by Congress;
(3) Nothing in this Act shall prevent Congress from exercising its Constitutional authority to borrow on the full faith and credit of the United States.
The Secretary shall account for the disbursement of United States Money and of current fund balances through accounting reports maintained and published by the Secretary and by departments and agencies of the Government. The General Accountability Office shall conduct an independent audit every second year.
Not later than one 120 days from the effective date of this section, the Secretary shall commence to retire all outstanding instruments of indebtedness of the United States by payment in full of the amount legally due the bearer in United States Money, as such amounts become due.
Background: Publicly created money - the key ingredient needed to achieve human progress
Two Important effects will result from our Government creating money directly instead of borrowing money the banks have created. First we’ll begin saving the interest costs which in 2007 was $465 billion; which was 17% of the U.S. federal budget that year. At present, the interest cost that is paid on infrastructure construction generally doubles to triples the cost of construction. Saving the interest will make it much easier to bring our crucial infrastructure up to acceptable 21st century safety levels. The American Society of Civil Engineers gives our present infrastructure an embarrassing grade of “D” and estimates that $2.2 trillion is needed to make it safe once again.
More importantly, private lenders will have far less influence over public policy decisions. The power to determine the fiscal course of our society will be in the hands of the Congress, where our Constitution places it. The difference is that a more reasonable and independent method of funding will be used. With Congress in charge, society’s blood – its monetary circulation – is much more likely to go into vital infrastructure – for example building and repairing levees that protect major cities – instead of going into real estate speculation and destructive Wall Street games as banker control over money creation has traditionally misdirected society’s money power.
Section105 instructs the Secretary to pursue a stable monetary policy and neither cause inflation nor deflation through monetary policy.
To oversee and assure that this policy is carried out, a 9 member Monetary Authority, is appointed by the President and confirmed by the Senate, to establish the monetary targets to accomplish this policy and any substantial discrepancies between the targets and actual results are quickly reported.
Section 106 specifies that instead of borrowing money created by the banking system, the U.S. will create the money directly. However, the Congress continues to have the power to borrow money on behalf of the United States, should the Congress consider that advisable in a given situation.
Section 107 provides thorough, independent and timely accounting of this money creation process.
Section 201 provides that as U.S. debt instruments (bonds and notes) become due, they are to be paid with U.S. Money, not by rolling over more debt. This will be a gradual process as the debts extend decades into the future. Such payments will then be available for many other productive investments, and will tend to lower interest rates.