The bill is gaining supporters from many pockets of the internet. What this indicates is that there is still a lot that needs to be done in terms of educating the public about the basics of economics. This bill is quite simply loony,
Passage of the bill would create even more problems and chaos for the economy than already exist, at an exponential rate.
The bill calls for among other things:
To abolish the creation of money, or purchasing power, by private persons through lending against deposits, by means of fractional reserve banking, or by any other means.
Now, there is nothing wrong with stopping the issuance of loans where a bank doesn't have the funds on deposit to make the loans. i.e. fractional reserve banking. That's simply preventing fraud, but to call for the limitation of loans where on all deposits is simply mad. An economy grows because people save by depositing money in banking institutions, where the money is lent out. To the degree the money is loaned to the business sector, capital is available for further production. There is simply nothing wrong with this at all. [NOTE: To further clarify what type of deposits a bank should be allowed to make loans against, it should only be against deposits where depositors leave their money with understood time restrictions, such as certificates of deposits, as opposed to, say, demand deposits.]
The bill also calls for the loans function to be turned over to the government:
To enable the Federal Government to invest or lend new money into circulation as authorized by Congress and to provide means for public investment in capital infrastructure.
This is simply central planning. Instead of money being placed in the hands of multitudes of entrepreneurs via bank loans, this bill calls for loans to be made by the government. The same government, I might add, that funneled billions upon billions in TARP funds to elite banks. Entrepreneurship will thus be replaced by a government power structure that will dole out money based, of course, on influence. Further, it appears that there is no limit set on how much money may be printed for this mad adventure.
The bill goes on:
To incorporate the Federal Reserve System into the Executive Branch under the United States Treasury, and to make other provisions for reorganization of the Federal Reserve System.The executive branch has gained and continues to gain enormous power. The executive branch now wages wars at will, this bill would give even more power to control the entire economy. "He who has the gold" or in this case, paper money, makes the rules. This is simply mind boggling. It is giving the exeecutive branch the power to declare a great economic war over its own citizens.
The bill also calls for the inflationary idea of printing money to resolve any deficit problems:
In General- After the effective date, and subject to limitations established by the United States Monetary Authority under provisions of section 302, the Secretary shall originate United States Money to address any negative fund balances resulting from a shortfall in available Government receipts to fund Government appropriations authorized by Congress under law.
Even more inflationary, the bill calls for paying off the entire U.S. debt by simply printing money:
Before the effective date, 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.
Just for good measure, the bill throws in controls on interest rates:
Limit on Rate- The annual percentage rate applicable to any loan of money may not exceed 8 percent on unpaid balances, inclusive of all chargesIn addition, the bill calls for the printing of money for education, mortgages, local governments and on and on:
The Congress shall be aware that funding through this Act is available for a universal health care plan as may be enacted by Congress...And, what the hell, they are just going to print money and give it to everyone:
The Congress shall be aware that funding through this Act is available for Congressional enactments for resolving aspects of the mortgage crisis....
Before the end of the 180-day period beginning on the date of the enactment of this Act, the Secretary shall provide recommendations to the Congress for a program of interest-free lending of United States Money to State and local governmental entities, including school boards and emergency fire services for infrastructure improvements under their control and within their jurisdictions, based on per capita amounts and other criteria to assure equity as determined by the Monetary Authority...
In General- Before the effective date, the Secretary, in cooperation with the Monetary Authority, shall make recommendations to the Congress for payment of a Citizens Dividend as a tax-free grant to all United States citizens residing in the United States in order to provide liquidity to the banking system at the commencement of this Act, before governmental infrastructure expenditures have had a chance to work into circulation...
Some supporters on the internet argue that this type proposal will not be inflationary. They argue for a sort of sterilization that will reduce Fed created money in sychronization with the issuance of new currency to retire U.S. government debt is issued. They argue they will do this by raising the reserve requirement.
But the U.S. debt stands at a near $14 trillion. The total amount of money in the system, the money supply (M2), is only, roughly, $9 trillion.
It's going to be a neat trick sterilizing $14 trillion by simply erasing $9 trillion. That's a shortfall of more than 50% and does not include the increased trillions to be printed for healthcare, mortgages, education and the Citizens Dividend!
Never mind the huge distortions caused by all this, there is also (and this is really the most insane part of a totally insane proposal) the complete wipe out of all bank loans made to all businesses--as the sterilization takes place.
Bottom line: We have an entire set of people who believe that money printing itself creates wealth. They somehow don't get that production of goods and services is the only thing that creates wealth. They want to take power away from the way Fed as it is now structured as a fractional banking system--which should be done because the Fed does print money and thus distorts the economy in favor of the banking elite. But they don't see the money printing as part of the problem, just how it is now done. For them, printing more money is going to mean, by itself, more cars,education, healthcare and homes, as starters.
It is serious, serious confusion that if adopted by Congress would result in nightmare inflation and totalitarianism that would put us directly on the road to a Zimbabwe type economy. Let us hope that there is nowhere close to a majority that support any part of this bill.