MintTheCoin - Money for everyone

By On

[Our guest writer does not wish to make his identity known. I will refer to him as G, a retiree who moved to Bellingham over 15 years ago. He is a friend of many years whose wisdom and knowledge I respect. For that reason, I am reprinting here as an article, an interesting and informative email he sent to me several days ago. D. Conoboy]

Can America issue trillion dollar coins out of thin air and pay every American $2,000/month until the pandemic ends and the nation’s economy restarts, as a bill now before Congress proposes, and can it then pay $1,000/month to everyone for a year needed to fully restart the economy? And can such spending be continued to enable Medicare for All, an end to student debt and government paid lower and higher education for everyone? The answer is yes, but it needs a little background and explanation to be believed. Most of us believe that government spending must be budgeted just as household spending must be budgeted. But that is false, because households do not print or coin money, and governments do print and coin it. If a family earns $50,000 a year and spends $60,000, it’s playing financial roulette that may end in bankruptcy. A sovereign government that makes its own currency cannot go bankrupt. The U.S. is a sovereign nation - that is, one that makes its own decisions and policies for itself without any controls imposed by other nations.

This introduction to the issue (and the website linked below that explains it) is a personal story, not an economics lecture. It’s about something we once learned and profited greatly from that’s now largely forgotten and believed by most of us to be impossible.

In high school in the 1940s as WWII ravaged humanity, I was told that there was no limit to the amount of money America, or any other sovereign government, could print, spend for what was deemed necessary and be distributed among its citizens. I heard this from teachers and read about the claim in the newspaper that was delivered twice a day to where I lived. Few believed it was true. Many members of government thought it was pie-in-the-sky nonsense, as did many in the press and probably most citizens. My wealthy grandfather, in whose mansion I lived and was raised after early 1940, could not understand it and was certain it must be false. “Money does not grow on trees”, he said (as most of us still say).

Even then throughout the world most money was made of paper, and paper is made from trees. Drawings and so on that are difficult or impossible to perfectly counterfeit can be placed on paper, making it into what money is, which is anything whatsoever that is sufficiently difficult to counterfeit, including rare metals, greenbacks, bitcoins or you name it that people (and usually a nation or nations) believe and agree is exchangeable for goods and services. Some people believe that money must be made of something that has real value. But nothing has such value. Imagine a billion tons of pure gold atop a cropping on lifeless Planet X five thousand light years from Earth. What is its real value? Zero, nada, nothing. Why is that? Because there is no life form there that places value on it.

On Earth, the value of gold is made of our interest in and uses for it. Its value exists because we render it. We tend to most value what is rare or hard to come by, perhaps a U.S. steel penny made in 1944, which because of mistakes made in pressing it, or made because it was never supposed to be made, can sell at this time for one hundred thousand dollars or more. To my surprise, my grandfather, who from about 1835 to after 1960 bought and preserved a full sheet of every issued brand new and untouched U.S. postage stamp, and gathered a huge collection of franked envelopes, left the lot all to me when he died. It was the sum of my inheritance … I’d not believed he’d leave me anything. My sister boxed it all up and mailed it to me where I was then living, in Los Angeles. It was a fortune, but, lost in the mail, it never arrived. Since I’d expected nothing, the loss did not affect me much one way or another. It was just something I observed, not unlike seeing a Ford driven by a stranger run into and dent but not substantially harm a Chevrolet driven by another stranger.

WWII began in Europe in September 1939 when I was 7 years old. On December 7, 1941 when the Japanese Empire bombed the U.S. Navy station at Hawaii’s Pearl Harbor, I was 9, and Franklin Delano Roosevelt was president. As soon as he became president in 1932, Roosevelt formed a Brain Trust to advise him on how best to shape public policies when, because of the Great Depression, one-third of Americans were unemployed and the whole world’s economy was collapsed. The trust was made up of sociologists, social workers, lawyers, economists, business people, industrialists, agricultural experts and more, including the Black Brain Trust, negroes who served as advisors to the president and his activist wife, Eleanor. These Trusts, which changed as the 30s passed and more was learned from things that were tried, helped our forebears stay alive and fed, helped public education to continue and the young to learn artistic and manual trades, and much more, but the Trusts could not get the economy up and running again, largely because we did not know what was not proved true until a crisis brought about by total war forced us to just print paper money (and make coins of any kind of metal such as aluminum and steel) and use those pieces of paper and bits of metal to spend and buy our way to win the war and support our population; and, as it so happened and we also learned, buy our way out of the economic collapse called the Great Depression. America printed and coined money to pay to privately owned factories to supply military demand and pay wages to workers and employees in every other part of our economy, including wages for soldiers. The spending continued after the war, for, among other things, the GI Bill that enabled the military veterans with whom I went to college to become the most educated and prosperous generation in world history. The spending had promptly ended the depression and led in the
post-war period to the greatest economic growth America’s yet experienced.

Of course, the spending spree made necessary by the war had a potential and serious downside; namely, inflation. Inflation is an increase in the prices of goods and services that tends to accelerate. It occurs because the makers and sellers of everything and all services always want higher percentages of profit, and thus raise prices when the people who buy from them have money to freely spend. Our federal government’s war spending gave millions of us money to spend, raising the ogre - and it’s a real beast - of rapidly accelerating and disastrous inflation. During the first year of America’s participation in the war (specifically in January of 1942 during a surge of inflation necessitating both stopping and preventing further inflation), our government instituted food rationing as well as price ceilings for many things in addition to food, thus making inflation illegal and punishable. These price controls varied as did the goods and services to which they applied as the war years continued and shortages and so on arose and fell.

Below WWII poster -price gougers were breaking the law, and nobody could morally support black marketeers such as those on Amazon.com charging $300.00 + shipping for a previously less than $6 bottle of alcohol-based hand sanitizer.]

Since WWII, much has been learned about economies, what money is and how to tame the problem of inflation without extreme measures such as dictating price ceilings. There are other effective ways for governments to limit price gouging. For instance, most nations have public banks that compete directly with privately owned banks, making the criminality of operations such as Chase Bank, Welles-Fargo, the Bank of America and others much less probable. In America there is a public bank (a bank under government control) in North Dakota, where something admirable and in the public’s interest occurs. Globally, nations with public banks were the most able to weather the Great Recession of 2008. Public banks can, for instance, finance public housing at low cost. A state or city with a public bank quite simply has more money from its tax revenues that it can spend and borrow at low interest toward providing betterment to both citizen and commercial objectives, ends and lives. Such banks do not prohibit privately owned ones. Instead, private banks are free to invent and offer services that enable them to successfully compete.

One of the principles of capitalism is that competition is a good, not a bad thing. More capitalists might try it, and our government might as it did in the Roosevelt era and WWII support such attempts instead of doing what it now does, which is to constantly further enable unregulated monopolies managed far too often by persons of morally vacuous, rapacious character. For instance, a few years ago as the number of Lyme disease cases exploded in some American states, the manufacturer of Doxycycline, the antibiotic of choice for preventing the neurological horrors of Lyme if taken within about 2 days after being bitten by a particular species of tick, long out of its patent and costing drug stores about 10 cents per pill, raised the price so much that the owner of the drug store I then used chortled to me, “What a great day! Since last night the value of my inventory of Doxycycline increased from $500 to $5,000! Isn’t that great!”

I quit buying my prescriptions there.

If you open the FAQ page from MintTheCoin.org and read answers to the questions it names, I think most of you will be surprised, and when you come upon passages like these immediately below you may be pleased, but pleased only if - and really, it’s not a big if - you keep in mind that a lot of these answers were once upon a time proved to be true in America and the world.

As Thomas Edison observed in 1921:

“If our nation can issue a dollar bond, it can issue a dollar bill. The element that makes the bond good makes the bill good also…

It is absurd to say that our country can issue $30,000,000 in bonds and not $30,000,000 in currency. Both are promises to pay…If the currency issued by the Government were no good, then the bonds issued would be no good either…

If the Government issues bonds, the brokers will sell them. The bonds will be negotiable: they will be considered as gilt-edged paper. Why? Because the Government is behind them, but who is behind the Government? The people.

Therefore it is the people who constitute the basis of Government credit.”

Indeed, the Federal Reserve Bank of St. Louis made a similar observation in 2011:

“As the sole manufacturer of dollars, whose debt is denominated in dollars, the U.S. government can never become insolvent, i.e., unable to pay its bills.

In this sense, the government is not dependent on credit markets to remain operational.

Moreover, there will always be a market for U.S. government debt at home because the U.S. government has the only means of creating risk-free dollar-denominated assets.”

Furthermore, as [the New York Time’s Nobel laureate] economist Paul Krugman noted in 2013:

[When interest rates on short-term debt and money are identical,] issuing short-term debt and just ‘printing money’...are completely equivalent in their effect, so even huge increases in the monetary base…aren’t inflationary at all.”

About Guest Writer

Citizen Journalist • Member since Jun 15, 2008

Guest Writer is for over 100 articles by individuals who are not regular writers. Their actual name and brief info is listed at the top or bottom of their articles.

Comments by Readers

Tim Surratt

May 08, 2020

And…?  Thank you for your tour of your economic education.  Perhaps your point was too subtle for me to grasp.  It is?

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David MacLeod

May 08, 2020

This is essentially MMT (Modern Monetary Theory) as espoused by John Maynard Keynes, whose economic theories were effective in post-war U.S.A.  I agree that this is an effective tool, and the present situation calls for using it. Creation and use of money is different than biophysical resources. Biophysical resources ARE scarce. We live in a finite world. We need to drastically reduce our energy consumption and the human load on the biosphere, and as economist (and MMT proponent) Steve Keen has pointed out, there is no way that a monetary capitalist economy can do that unless government funding takes the lead.

It make sense to issue a debt jubilee, and then some continued use of MMT to finance planet repair activities and enterprises; but at some point to implement what heterodox economist Peter Pogany called “maximum reserve banking” (as opposed to current fractional reserve banking) as a means to put the brakes on the current system’s unsustainable dependence on unending growth.

Michel Bauwens of the P2P Foundation has concurred with me: “transitioning without major population deaths requires heavy investments in regeneration, hence the need for MMT in the transition period; however, once a ‘steady state’ is reached after a period of substantial degrowth in matter/energy usage, then maximum reserve banking makes eminent sense to keep a permanent balance; in other words, I don’t see these two approaches as contradictory but as complementary, but phased in differently.”

Hence the need for a combination of the insights from biophysical economics, MMT, P2P/the Commons, and the ideas of integral economist Peter Pogany. 

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Tim Surratt

May 08, 2020

I am not a student of economic or monetary theory.   However I thought later ideas had supplanted Keynesian economics.   Printing money, as I understand it,works if the country printing the money can be reasonably expected to make good on the extension of credit by a growing economy, at least some time in the future.  If the economy supporting the printing of money does not grow at some point, doesn’t the credit, and hence the currency collapse?  

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David MacLeod

May 08, 2020

“MMT theorists explain that the national debt is simply money the government put into the economy and didn’t tax back. They also argue that comparing a government’s budgets to that of an average household is a mistake.

While supporters of the theory acknowledge that inflation is theoretically a possible outcome from such spending, they say it is highly unlikely, and can be fought with policy decisions in the future if required. They often cite the example of Japan, which has much higher public debt than the U.S..

According to MMT, the only limit the government has when it comes to spending is the availability of real resources, like workers, construction supplies etc. When government spending is too great with respect to the resources available, inflation can surge if decision makers are not careful….”
https://www.investopedia.com/modern-monetary-theory-mmt-4588060
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Larry Horowitz

May 08, 2020

David, in a hypothetical world absent central banks (i.e. the [non]Federal Reserve), why would a nation have a national debt if it simply prints its own money?

Who would the nation owe its debt too?  And wouldn’t the printing of money by the nation itself eliminate the interest paid for debt servicing?

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David MacLeod

May 08, 2020

Larry, I’m no expert and won’t be able to answer all questions.  But there is a good recent article by Michael Hudson and Steve Keen. 

“Money is debt. Government money creation for public purposes – to pay for employment and output – spurs prosperity. But in its present form, private-sector debt creation has become largely extractive, and thus leads to the opposite effect: debt deflation.

Governments can pay public debt without defaulting, as long as this debt is denominated in their own domestic currency, because the governments can always print the money to pay. To the extent that public debt results from spending that supports output, employment and growth, this process is not inflationary. The government gives value to money by accepting it in payment of taxes. So the monetary system is inherently bound up with fiscal policy. The classical premise of such policy has been to minimize the economy’s cost structure by taxing mainly unearned income (economic rents), not wages and profits in the production-and-consumption sector.”
http://www.primeeconomics.org/articles/use-and-abuse-of-mmt

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Larry Horowitz

May 08, 2020

David, I’m having trouble understanding how government money creation is debt if the government is simply “printing” (i.e., creating out of thin air) its own money in the absence of a central bank.  In order for debt to be created, there would need to be an entity that owns the debt, which would not exist in this hypothetical.

“Money is debt” explains the expansion of the money supply in the private sector (for example, when we take on a mortgage to purchase a home base on fractional reserve banking), but it hardly describes the situation a nation faces when turning on its own printing press rather than borrowing from a central bank.

Understanding that you’re no expert, if you come across a reasonable answer to my initial question, I hope you’ll post it here.

Thanks David.  I hope you and your loved ones are healthy and safe.

 

 

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Kurt Sperry

May 08, 2020

Lovely to hear MMT discussed here. The US has operated to a greater or lesser degree under MMT principles since Breton Woods. QE, off-books military spending, stimulus trillions., it’s all MMT. We aren’t ready to admit it however, because the deficit hawks aim isn’t really to shrink the “debt”, but rather to disempower government, except as an accompice to capital. I’m a fan of Stephanie Kelton’s explanations of MMT, maybe worth a read or listen. The trillion dollar coin idea has been well discussed and vetted for years and appears to be possible within the current legal framework. Super short version of MMT: taxes do *not* pay for public spending, and private debts are the reciprocal of public debts. Oh, and the only real constraints are the physical ones. You can’t cheat those.

Thank you anonymous guest writer!

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Larry Horowitz

May 10, 2020

David, regarding our previous conversation, I highly recommend this video:

https://www.youtube.com/watch?v=BMOPZzz2_DY

The video itself is long (2 1/2 hours), but the first 15-20 minutes should get your attention.

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Dianne Foster

May 11, 2020

Thanks to all of your comments.   I have been a fan of Stephanie Kelton and MMT for a few years.   The problem we face now is that Trump has no idea what he’s doing,  and the money is being thrown out there for military and large corporate cronies,  his old friends.   He would of course prefer to bail out the hotel industry,  but at least some lamo Democrats stopped the worst of it.   I’m injoying this conversation.   (As a side note,  I’m working on Jason Call’s campaign to unseat Rep Rick Larsen,  a long-time military-industrial complex shill.   Inviting others to join.) 

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David MacLeod

May 11, 2020

 Larry, I watched that section in your link, and now I understand why you’re thinking about a hypothetical world without a central bank. I don’t want a totalitarian new world order, but I don’t think that is the current threat we are facing. I think the problem we have right now is that the private financial sector has too much power and has for many years been extracting wealth from the public sector. Private bank credit is being created to finance the transfer of property and financial assets to their balance sheets. The market is shifting monetary allocation away from governments to the financial centers.  

We need governments to take this power back. Rather than using every crisis (Disaster Capitalism, to use Naomi Klein’s term) as an opportunity to create more wealth for the 1% by bailing out the FIRE sector (Finance, Insurance, Real Estate), the power of the central banks needs to be used to provide a Universal Basic Income and to provide debt relief to the “Real” productive economy. 

Here is another good article:
https://ellenbrown.com/2020/04/19/a-universal-basic-income-is-essential-and-will-work/?fbclid=IwAR2zxpbUPzyaueWzGa0XXRUgf7tBas4aMkt3ctxm3wTueXDL4JKeXv0eFj8

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David MacLeod

May 11, 2020

Thanks for the comment Dianne.  I keep hearing good things about Stephanie Kelton.  Can you provide a recommended link? Either an article or a youtube presentation.

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Dianne Foster

May 12, 2020

David,

As I recall,  after the Wall Street takedown of our economy in ‘09,  the WPGN did a teach-in on the financialization of the economy;  this was a series beginning with former IMF director Dr. Simon Johnson,  author of “13 Bankers,  the Wall Street Takever and the Next Financial Meltdown”,  followed by the “Move Your Money” event with the ICU director who brought change kits so people could actually make the transition to credit unions from big banks.  (I believe you attended that event).     I was part of a smaller group within Transition Whatcom dealing with economic/financial resilience,  this prior to Occupy Bellingham, which began in 2011.   In a normal economy only 10% would be financial services,  but ours became financialized after offshoring manufacturing to slave labor countries.   At which point finance became 40% of the economy,  replacing the “real economy” with service sector jobs.    Where I became acquainted with Kelton’s work was with the Bernie Sanders campaign in 2016,  as she was on his economic team.   Prior to that time,  I had been part of the Washington Fair Trade Coalition fighting the TPP and got to know Vandana Whitney of 350.org.   She has been almost exclusively involved with MMT in the last few years,  and you could probably follow her on Facebook.   There is a great U-Tube of Kelton/MMT you can Google, but I can’t make it paste here.   For some reason,  I can’t seem to C and P to this site.   

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Dick Conoboy

May 12, 2020

Dianne, et.al.

To cut and paste to the comment windows here you can either use your browser’s cut and paste capability or revert to Ctrl +

 

  • X to cut
  • C to copy
  • V to paste

 

 

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Larry Horowitz

May 12, 2020

David, with all due respect, I disagree with every aspect of your last reply to me.

One of my favorite non-fiction authors likes to compare dogs and cats.  He writes, “One of the differences between dogs and cats is that cats focus on effects but dogs focus on causes. If you toss a pebble at a cat, it will look at the pebble. If you toss it at a dog, it will look at you.”

Your view that “the problem we have right now is that the private financial sector has too much power and has for many years been extracting wealth from the public sector” is a classic example of focusing on an effect, a symptom of the overarching problem.  And your socialist suggestion of using the power of a parasitic central bank (the Fed) to provide a Universal Basic Income would be laughable if it wasn’t so seriously disastrous.

The Federal Reserve, a privately owned bank founded by a few international bank families, is the root of our financial evils.  The debt owed to the Fed - for printing our money when the US Treasury could easily print it without the Fed - is the actual cause of wealth extraction.

Dont believe me?  Consider what those most intimate with the Fed and other central banks have said:

Franklin D. Roosevelt: “The real truth of the matter is that a financial element in the large centers has owned the government since the days of Andrew Jackson.”

Thomas Jefferson: “I believe that the banking institutions are more dangerous that standing armies… If the American people ever allow private banks to control the issue of currency… the banks and corporations that will grow up around them will deprive the people of their property until their children wake up homeless on the continent their fathers conquered.”

Sir Josiah Stamp: “If you want to remain slaves of the bankers and pay for the costs of your own slavery, let them continue to create money and control the nation’s credit.”

Woodrow Wilson: “[Our] great industrial nation is controlled by its system of credit.  Our system of credit is privately concentrated.  The growth of our nation, therefore, and all our activies are in the hands of a few men… who necessarily, by very reason of their own limitations, chill and check and destroy genuine economic freedom.”

Woodrow Wilson: “We have come to be one of the worst ruled, one of the most completely controlled and dominated governments in the civilized world - no government by free opinion, no longer a government by conviction and the vote of the majority, but a government by the opinion and the duress of small groups of dominant men.”

Louis McFadden: “A world banking system was being set up here… a superstate controlled by international bankers… acting together to enslave the world for their own pleasure.  The Fed has usurped the government.”

Louis McFadden: “It [the stock market crash] was a carefully contrived occurrence.  International bankers sought to bring about a condition of despair, so that they might emerge the rulers of us all.”

Mayer Amschel Rothschild: “Give me control of a nation’s money supply, and I care not who makes its laws.”

The debt imposed by the Fed’s printing of the US money supply has imposed slavery on US citizens.  That is the cause of the major financial problems we face as a nation.  The same problem faced by all nations with a privately-owned central bank.

In my opinion, many of my friends have been focused on a false enemy: Bad Orange Man.  The real enemy, as is often the case, is pulling the strings behind the curtain.  As an anti-establishment president, Bad Orange Man - with the support of a vast intelligence operation - is actually in a unique postion to raise that veil and expose those behind the curtain.

Of course, many are not interested in looking behind the curtain.

Another of my favorite non-fiction authors wrote, “Is it possible there is something you don’t know, the knowing of which would change everything?”

David, the film I suggested that you watch begins with the following warning:

“Do not watch this film if you rely on a rigid belief system to give your life a false sense of security and meaning.  The information presented in this film is potentially life-changing but must be watched with an open mind.  Unless you’re willing to put everything you think you know temporarily on hold, and open up to the possibility that you may been been systematically deceived and lied to your entire life, this film is not for you.”

I can see now that you were not ready to view this film, and I apologize for suggesting it.

Best,
Larry

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Dick Conoboy

May 13, 2020

I am posting this from G who authored the article and wishes to comment on the comments above.

“I want to thank everyone for getting involved in the issues raised in my essay. 

And a few more things. 

1) We might better be talking about post-Keynesians than Keynesians (as Tim Surratt suggests in his comment, & as is further implied by Kurt Sperry & Dianne Foster). Especially, the post-Keynesians who come from the avant-garde Kansas City school of economics, where it’s understood that the first principle of their work is that it has to with all human lives, not just numbers, phony psychological & sociological dogma, & the interests of the wealthy & powerful.  

2) I agree that Stephanie Kelton is very important & I hope everyone listens on YouTube to at least some of her explanations of what would be possible if the majority our politicians in both parties were not in what we’re compelled to believe is permanent mental lockdown. But economist & archaeologist Michael Hudson, who’s perhaps more difficult to listen to & read, is the genius, as you can experience for yourselves. Here is is just before we realized we were in a pandemic discussing “Economic Lessons for 2020”: https://www.youtube.com/watch?v=nluLNA30e8k&feature=emb_rel_end 

And here, in Macau, China, Dr. Hudson discusses “Dollar Recycling and Military Encirclement”:  20191124 Michael Hudson - Dollar Recycling and De-Dollarization 

3)  To Larry Horowitz: I suggest that you reread what David MacLeod wrote in the comment that appears to have somehow offended you. For instance, MacLeod said: “I think the problem we have right now is that the private financial sector has too much power and has for many years been extracting wealth from the public sector”.

How does that differ in principle or fact from what you wisely note President Jefferson said:  “I believe that the banking institutions are more dangerous than standing armies… If the American people ever allow private banks to control the issue of currency… the banks and corporations that will grow up around them will deprive the people of their property until their children wake up homeless on the continent their fathers conquered”. 

Perhaps like you, Mr. Horowitz, I came to philosophy, the sciences & political economics from a background filled with poetry, literature & the delights of other arts, such as cinema. But no one has to begin where I did - or maybe you did - to understand the complications & complexities of economics or other disciplines. Thanks, by the way, for that set of welcome, apt quotations! 

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Larry Horowitz

May 13, 2020

To Anonymous G:

Please re-read my comment.  When you do you’ll see that David’s comment did not offend me but proved to me that he was focused on the effect, or symptom, of the overarching problem: the issuance of US currency by the Federal Reserve, a private bank owned by a small group of international banking families.

David’s comment, “I think the problem we have right now is that the private financial sector has too much power and has for many years been extracting wealth from the public sector” differs in both principle and fact from Jefferson’s remarks because Jefferson’s primary concern (”if the American people ever allow private banks to control the issue of currency…”) was the issuance of US currency by private banks as opposed to the US Treasury.  David’s suggestion that “the power of the central banks needs to be used to provide a Universal Basic Income” proves that David was not concerned with the issuance of US currency by private central banks.  Perhaps David does not understand that the Federal Reserve (like most central banks) is owned privately and is not a public or governmental institution.

At the risk of continuing to repeat myself, the cause of our financial calamity is the issuance of US currency by the Federal Reserve that creates a debt burden that cannot be repaid without the Federal Reserve issuing even more currency, resulting in ever more debt, and so on.

I recognize I appear to be alone in my understanding of the primary cause, a lonely position I often find myself in.

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Larry Horowitz

May 14, 2020

Responding to David’s previous statement, “I don’t want a totalitarian new world order, but I don’t think that is the current threat we are facing,” you might want to watch this video of Chicago’s mayor Lori Lightfoot:

“... and you pick the people that run those agencies, and the deputies, that are pledging allegiance to the New World Order...

Is it time to wake up?

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