Economists, Lawyers, Political Scientist – Help

In December of last year I bundled under the title “Two Proposals in the Form of Two Petitions Designed To Stabilize the Monetary System” a group of papers I had published at Mother Pelican and sent them to Dr. Janet Yellen, Chair of the Board of Governors of  the Federal Reserve System, our central bank. In a first response to me, Jean Durr, at their Public Affairs Office, inquired about the legal context within which this work ought to be analyzed. In a subsequent letter, Jean Durr pointed out: “Given your proposal, I suggest that you contact your state and federal representatives.”

This is a novel position for the Fed. Their traditional, formal or informal, position has constantly been to discourage the Congress from being involved in monetary policy.

This is an unprecedented condition that spurs my call for help from economists, lawyers, and political scientist. Everyone else is, of course, equally welcome. Business people in a special way.

This is the task: We need to draft legislation that stands a good chance of being acceptable to both the right and the left of the political spectrum on Capitol Hill. If the legislation is passed, preferably asking for official input from the Fed, the legislation appears to be in good standing for rather immediate implementation by the Fed.

The background within which the Fed and many other people are operating is the assumption of grave forces threatening a dangerous collapse of the dollar.

The ideal, therefore, is to design a parallel currency, which can be used while the dollar still stands tall—and certainly to be called into action the moment the dollar falls.

Coming out of a long train of thought that I have labelled Concordian economics, these are the recommendations which I would like to present to the Congress of the United States. We ought to concentrate our attention on how money is created and distributed by the Fed. These are the three rules I would like to see adopted:

1. The Fed ought to create money only to create real wealth, such as tables and chairs and services:
2. The Fed ought to create money as a loan at cost;
3. The Fed ought to create money to benefit everyone.

A bit on the background. The Congress would thus exercise its constitutional responsibility “To coin Money, regulate the Value thereof, and of foreign Coin“ (Article 1, Section 8). When the Fed creates money, the Fed taps into an entity that I like to call “national credit.” National credit is an economic entity created by the blood-sweat-and-tears of nearly all the people of a nation. Hence, since national credit belongs to the entire nation, new money ought to be created to benefit everyone in the nation, a goal that can be reached by extending loans only to individual entrepreneurs, co-operatives, corporations with Employee Stock Ownership Plans (ESOPs) and Consumer Stock Ownership Plans (CSOPs), and governmental units with taxing powers, so that loans can be repaid. Since national credit belongs to the nation as a whole, it cannot be given to any one person or group of persons as a grant. It has to be given as a loan, a loan to be paid back—thus reconstituting the integrity of the pool of national credit. As an added advantage, one thus establishes a close link between rights and responsibilities: We all have the right of access to national credit; we all have the responsibility to pay such loans back.

A bit on the consequences. Since loans will have to be vetted by local committees of knowledgeable people, the initiation of the loans rests with people who respond to local exigencies and local potentials. No government official will prevail over these decisions. Thus, on the whole we shall pass from a regimen in which money controls people to a regimen in which people control money.

We will Mend the Fed, not End the Fed. The day after we would end the Fed, we will have to recreate it—or chaos will ensue.   

 

 Carmine Gorga is president of The Somist Institute