On May 19, 2012, Dylan Matthews posts on Ezra Klein’s Wonkblog:
“‘Modern Monetary Theory’ was coined by Bill Mitchell, an Australian economist and prominent proponent, but its roots are much older. The term is a reference to John Maynard Keynes, the founder of modern macroeconomics. In ‘A Treatise On Money,’ Keynes asserted that ‘all modern States’ have had the ability to decide what is money and what is not for at least 4,000 years.
“This claim, that money is a “creature of the state,” is central to the theory. In a “fiat money” system like the one in place in the United States, all money is ultimately created by the government, which prints it and puts it into circulation. Consequently, the thinking goes, the government can never run out of money. It can always make more.
“This doesn’t mean that taxes are unnecessary. Taxes, in fact, are key to making the whole system work. The need to pay taxes compels people to use the currency printed by the government. Taxes are also sometimes necessary to prevent the economy from overheating. If consumer demand outpaces the supply of available goods, prices will jump, resulting in inflation (where prices rise even as buying power falls). In this case, taxes can tamp down spending and keep prices low.
“But if the theory is correct, there is no reason the amount of money the government takes in needs to match up with the amount it spends. Indeed, its followers call for massive tax cuts and deficit spending during recessions.
The proper role of monetary policy should be to broaden private, individual ownership our business corporations and companies, who exponentially replace labor or degrade labor’s input replace by the non-human factor of production––machines, superautomation, robotics, digital computerized operations, etc.––and hoard the future ownership of the productive capital assets the non-human factor represents. See http://www.cesj.org/about/programs/declarations/monetaryjustice.htm
Coalition For Capital Homesteading
DECLARATION OF MONETARY JUSTICE
Whereas, the United States economy is today plagued by a growing gap between the rich and the non-rich; by a global recession and credit crisis; by debilitating waste and under-employment of human talent; by inadequate growth alongside shackled technological potential; by record-level trade and governmental budget deficits; and by an estimated “hidden debt” of $56.4 trillion (or $483,000 per household)* in future Social Security and Medicare entitlements, added to historically high Federal debt being imposed on young Americans and generations not yet born; and
Whereas, the sustainable growth and energy self-sufficiency of the American economy in the Twenty-First Century will require trillions of dollars each year of new and improved, life-enhancing technology, rentable space and physical infrastructure; and
Whereas, the Joint Economic Committee of Congress, as early as 1977, has declared broad-based ownership of new capital as an effective strategy for raising national productivity; and
Whereas, the national goal of equal economic opportunity has been blocked by artificial barriers to widespread capital ownership; and
Whereas, this policy objective has been frustrated by the systemic concentration of economic power and exclusionary access to future capital credit to the advantage of the wealthiest Americans; and
Whereas, the Federal Reserve System has stifled the growth of America’s productive capacity through its monetary policy, by monetizing public-sector growth and mounting Federal deficits and bailouts of mortgage loan sharks and their Wall Street syndicators; by favoring speculation over investment; by shortchanging the capital credit needs of entrepreneurs, inventors, farmers and workers; by increasing the dependency of families by burdening them with usurious consumer credit; and by perpetuating unjust capital credit and ownership barriers between rich Americans and those without savings; and
Whereas, there is a fundamental difference between asset-backed credit for productive uses and debt-backed credit for non-productive uses, consumption or speculation; the first being critical for stimulating private sector investment, savings and the supply of new marketable wealth, and the second being used to give people more inflated dollars to chase the same supply of existing wealth; and
Whereas, the Federal Reserve Board is now empowered under Section 13 of the Federal Reserve Act to reform monetary policy to discourage non-productive and speculative uses of credit, to encourage accelerated rates of private sector growth, and to promote widespread individual access to productive credit as a fundamental right of citizenship;
Now, Therefore, Be It Resolved, that the Congress amend the Federal Reserve Act (1) to require the Federal Reserve Board to stop monetizing government debt through its buying and selling of U.S. Treasury securities, (2) to begin re-activating its discount mechanism to encourage private sector growth linked to expanded ownership opportunities for all Americans, and (3) to provide a lifetime ownership share in each regional Federal Reserve bank to every citizen as a fundamental right of citizenship.
To This End, we hereby petition the Federal Reserve Board to adopt a two-tiered money-creation and credit policy that sharply distinguishes between ownership-expanding, productive credit, and ownership-concentrating, non-productive and speculative uses of credit. The upper tier, reflecting the higher market costs of borrowing “old money” from existing domestic and foreign savings pools and existing assets, should continue to be maintained as a source of market-rate credit to public-sector borrowers, consumers, speculators, and for all other non-productive purposes. The Federal Reserve discount rate for the lower tier should be reduced to no higher than 0.5 percent as a one-time “service fee” for creating interest-free “new money” backed by sustainable, non-inflationary and broadly owned growth.
This new reservoir of Federal Reserve monetized credit should be reserved exclusively for commercial bank members of the Federal Reserve System to the extent they in turn make available in equal periodic allotments to every citizen through “Capital Homestead Accounts” (Special IRAs) direct access to capital credit at reasonable service charges and risk premiums, with prime rates set by market forces above the Fed discount rate to its member banks. Such expanded bank credit should not be subsidized by the taxpayers, and should be backed and collateralized by the newly acquired assets and private sector credit insurance to cover the risk of default.
Such ownership-broadening capital credit borrowed through local banks at the lower tier rates could be invested in “qualified” securities such as newly issued, full-dividend payout, full voting shares in a company for which a member of the citizen’s household works; companies in which the citizen’s household has a monthly billing account; for-profit Citizens Land Banks/Cooperatives/Corporations organized for large-scale local land and infrastructural development; Employee Stock Ownership Plans; Homeowners Equity Corporations for turning renters into owners; production and marketing cooperatives and partnerships; family-owned and -operated businesses and farms; and mature companies with a history of solid earnings; and
Be It Further Resolved, that a copy of this Declaration of Monetary Justice be sent to the President and to members of Congress and the Board of Governors of the Federal Reserve System.
