President Obama: Nationalize the
Fed and Create Our Own Money
by Doug Page
We are all full of anxiety these days.
How bad will the depression be? Will the bailout work? How will
we (and our children and grandchildren) be able to pay for the
massive bailout of the Banks and our massive public debt?
The new book, The Web of Debt, by Ellen
Hodgson Brown, Stephen J. Zerlanga's proposed American Monetary
Act, and Paul Grignon's 47 minute video Money and Debt present
a persuasive case for the United States to exercise its sovereignty
by creating its own currency, and for the nationalization of the
Federal Reserve System. The fact that Wall Street banks are "too
big to fail," is a compelling reason, among many others,
why they should be nationalized. These authors present interesting
solutions for our current anxiety. They propose a way to abolish
our Ponzi-like private banking system and to curb banker fraud.
Here are some shocking little-known facts
from the sources here reviewed:
The Federal Reserve Bank is a private
institution owned and controlled by private banks. It is a private
bank that enriches its private owners.
The US Mint does not create our money.
It creates about 3% of it in the form of dollar bills and coins.
The rest is generated through computerized bookkeeping entries
by the private banks.
Banks do not make loans only from money
they have on deposit Through what is called "fractional reserve
banking," They loan well over ten times the amount they have
on deposit. This is how our money is created. It is created out
of thin air.
All debt of the US, all corporate debt,
and all individual debt are owed to private banks.
All money is debt.
Over 20% of our taxes are used just to
pay the interest on our government debt
Banks are no longer limited to loaning
money to make their profit. The 1999 abolition of the Glass-Steagall
Act allows them to gamble in the stock market, the commodity exchanges,
the foreign currency exchanges, collateralized debt obligations,
and to buy and sell other banks and businesses.
AN ILLUSTRATION OF THE WAY THE PRIVATE
BANKING SYSTEM MAKES HUGE PROFITS OUT OF THIN AIR
Let's use $10,000 as an example to understand
The Federal Reserve Bank buys $10,000
of US debts called Treasury Bills from the US. Where does the
Fed get the money? The Fed creates it out of thin air. This is
the first bit of magic. This is authorized by the Federal Reserve
Act of 1913, and is a questionable delegation by Congress of its
own power to "coin money and regulate the value thereof.
It is the ultimate in privatization. It is an authorization for
the Fed and the banks to counterfeit actual hard money. Other
federal laws make this counterfeit money legal tender for the
payment of all debts and taxes.
The Fed then loans this $10,000 to a bank
and requires the bank to pay the current federal funds rate as
interest. This $10,000 becomes a "liability" of the
bank, but the bank immediately loans this money to a borrower,
but in double entry bookkeeping, this $10,000 loan becomes an
"asset" of the bank from which the bank can make further
loans. Here is where the second bit of magic occurs called "fractional
reserve banking." The reserve is not gold or any other hard
asset. The "reserve" is debt.
The bank is permitted by the Fed to loan
90% (or more) of that $10,000 loan to make a second loan of $9,000
which also becomes an "asset" of the bank from which
the bank can make a third loan of 90% or $8100 and continuing
to a maximum of 10 times the first $10,000 or $100,000.
The bank "earns" interest on
this magic $100,000 created out of thin air which is the source
of the bank's immense Ponzi-like profit. A bank can earn more
profit by borrowing more from the Fed and loaning it. This explains
why the banks are so eager to give us credit cards.
By federal law, this money created out
of thin air is "legal tender" and must be accepted in
the payment of debts and taxes. The backup security is not gold,
but "the full faith and credit" of the United States.
All of this is made clear and understandable
by the video "Money and Debt."
WHAT IS WRONG WITH THIS PRIVATE PONZI-LIKE
SYSTEM OF CREATING OUR MONEY?
The power to create money is immense private
power that exists parallel to our governmental power. This private
power generates tremendous private wealth that is then used to
control, dominate, and thwart our government and our right to
The power to create money gives the private
banking system the power to control our money supply. By curtailing
the money supply, the banks can cause a deflation. By increasing
the money supply the banks can cause inflation. As we now see,
they can also cause a depression.
This private power is used solely to make
a profit for the owners of the private banks. There is no public
control. There is no enforceable obligation of the banks to serve
the public interest or to meet public needs. We have allowed our
entire existence to be dominated and controlled by those few individuals
who control the banks that create our money.
It makes short term profit making the
dominant influence on all of us and negates 2200 years of the
moral wisdom of our civilization: "When gold argues the cause,
eloquence is impotent;" "One cannot love both God and
Mammon;" "Money is the mother's milk of politics;"
"Follow the money."
More than 20% of our taxes is used to
pay the interest owed to private bankers on the U.S. debt.
OUR GOVERNMENT SHOULD CREATE OUR MONEY
Professor Michael Hudson on January 30
in Counterpunch gave us a hint of what we could do:
"Bank credit is created freely. Governments
could do the same. Indeed, this is what the U.S. Treasury did
during America's Civil War, when it issued greenback credit."
There are many successful historical and
current instances where sovereign governments have created their
King Henry I in England in 1100 A.D. created
England's money by simply dictating that England's currency was
to be solely wooden sticks called "tallies" with varying
notches to indicate the denomination. The sticks were then split
in half and one half was held by the King to prevent counterfeiting.
The other half was used by his subjects to buy and sell goods.
The King required all taxes to be paid with these sticks. This
tally system financed the British Empire successfully for 700
Prior to our Revolutionary War, Pennsylvania
issued money for 50 years because England limited the supply of
its money in the colonies. The King's edict prohibiting the colonies
from issuing their own money was a cause of that War.
The American colonies financed the Revolutionary
War by issuing paper money.
During the Civil War the Northern Banks
would loan President Lincoln money to finance the Civil War only
at interest rates of 24-36%, so Lincoln caused the Congress to
authorize the Secretary of the Treasury to issue Greenbacks, paper
dollars that were U.S .legal tender. These Greenbacks successfully
financed the Civil War and remained in circulation for decades
Stephen J. Zerlenga has drafted a proposed
American Monetary Act.
This proposed Act is very useful concrete
example of how the U.S. would create its own money, how it would
work, and the surprising array of public benefits that could be
The proposed Act begins with a finding:
(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 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
The Secretary of the Treasury, following
targets established by a 9 member Monetary Authority appointed
by the President with the advice and consent of the Senate, shall
directly issue all money, called United States Money, the nominal
unit being the U.S. Dollar. This money shall be legal tender,
backed by the full faith and credit of the United States.
The Act stops the creation of money by
private banks. Fractionalized Reserve Banking is prohibited and
banks can loan only the United States Money they actually have
The Federal Reserve System (but not the
local banks) is nationalized as a Bureau within the U.S. Treasury.
The United States would no longer borrow
money. The Secretary of the Treasury shall issue United States
Money as needed in lieu of public borrowing.
All existing money shall be exchanged
for United States Money.
U.S. Money can be loaned to local banks
which can continue to loan United States Money but with maximum
charges not to exceed 8%. Banks can loan only U.S. Money.
The U.S. shall pay off the principal and
interest of the national debt as they came due with directly issued
United States Money.
The U.S. would use directly issued United
States Money to rebuild the nation's infrastructure.
The United States could loan United States
Money interest free to states and local governments.
It is contemplated that in the future
United States Money would be issued to finance Universal Health
Care and an Education Funding Program that would at least put
the United States on par with other developed nations.
President Obama and his economic advisors
can be encouraged by the fact that famous and influential economist
Milton Friedman supports the idea of abolishing the Fed. For at
least 300 years, the private banks have used their wealth and
power to persuade governments to allow them exclusive control
over money. They have relentlessly and vigorously battled every
single effort of governments to create currency. The author Ellen
Brown does not expressly claim that banks have resorted to actual
assassination, but she does note the strange sudden deaths of
many of the reformers such as President James Garfield who urged
public creation of currency. The political power of Wall Street
banks is currently illustrated by their ability promptly to get
billions of dollars of bailout money with no serious debate. The
banks due to their own greed and ineptitude are now near bankruptcy
and collapse. They are more vulnerable now to nationalization
than they ever have been. They have brought all of us to the brink
of economic disaster. This is a strategic political time for the
U.S. to create our money. The awesome political power of private
banks driven by the quest for huge profits would be curbed. Public
control of the money supply would unleash the government to meet
our legitimate human needs as it has done in the past in our own
history. If the private banks can create money out of thin air,
there is no reason why the government could not do it. We would
all escape our excessive debt and tax burdens due to the interest
owed to private banks. If interest must be charged, let it go
into the public treasury.
Doug Page is a retired lawyer for unions,
a former Democratic politician, and a life long observer of government,
unions and business. He can be reached at: firstname.lastname@example.org.
Read other articles by Doug, or visit Doug's website.