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Kucinich unveils new bill to 'replace the fed'.

This is one hell of a bill folks and what is interesting is that Karl Denninger of Tea Party fame supports this bill. IN fact he even goes so far as to call out Ron and Rand Paul to back this bill threatening them with the empty suit moniker in case they refuse.


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Monetary Reform Needed - But This Bill Needs Improved

I applaud the efforts of Mr. Kucinich (D, Ohio, 10th District) and the American Monetary Institute (AMI) in promoting the need for reform and the remedy; direct issuance of U.S. Notes (sovereign credit). While I fully agree with the ultimate solution, I think HR6550 (National Emergency Employment Defense Act of 2010) misses the mark in several key areas:

1) HR6550 Centralizes the Power of the Purse in Washington

The bill establishes a “Monetary Authority as an authority within the Department of the Treasury under the general oversight of the Secretary of the Treasury.” I think the decision making power should be as close to the people as possible via local private banks and newly formed publicly owned state banks. Congress, through the U.S. Treasury, should fulfill its responsibility in making new money available but it should not control the distribution of the new money. That should continue to be a function of privately and publicly owned banks as a needed check and balance.

The federal government, through the treasury, could provide U.S. Notes as required by private and public banks for final distribution into the economy. The Treasury could supply the money and collect an issuance fee to help pay for itself without income and employment taxes. I agree that debt free money should be spent on infrastructure projects but the decisions should be left to the states through publicly owned state banks. Publicly owned state banks can become a valuable financial resource for the people and communities, e.g. rolling over existing debt and seeding alternative energy initiatives.

The new “Monetary Authority” is neither needed nor wanted. Bill language stipulates that the Monetary Authority “shall consist of 9 public members appointed by the president” and they would operate both autonomous and independent. The need for new money should be determined by willing and worthy borrowers. The Bank of England was nationalized and the “Monetary Policy Committee” was organized to operate similar to that defined in HR6550. It is essentially run to serve special interests and is a poor model.

2) End the Fed – Don’t Buy It! We need a National Bank Instead

Why would we want to continue the Fed central bank model? It is important to continue some functions, e.g. clearing accounts, but this can be done with a national bank instead of a central bank. Henry C.K. Liu does an excellent job of explaining the difference between a “national” and “central” bank; see excerpts from “Critique of Central Banking, Part I: Monetary Theology” #5 below.

The bill suggests that “…reserves of any member bank that is held by any Federal reserve bank shall be returned to the member bank in the form of United States Money” – why would we pay for reserves that were created for free and have an accompanying liability (reserves are destroyed when held securities are sold)?

3) Fractional Lending Bugaboo

If the U.S. treasury would supply all new money to private and public banks, as I mentioned above, there would be no “fractional lending” as 100% of the money would be created by the treasury. I think the bill misses the significance of what it terms as “fractional lending” which is really a myth as 100%; not a fraction, of new money is created by banks through loans. Technically, the banks are currently lending at above 100% reserves as the actual money multiplier has fallen below 1 (see chart from Federal Reserve) URL http://research.stlouisfed.org/fred2/graph/?s1id=MULT

The point is that the money supply must continuously grow at a rate at least equal to the destruction of existing money (repaying principal debt to a bank extinguishes money) to avoid contraction. The bill creates a bureaucratic bottle neck and limits the means to introduce new money where and when needed.

4) No Mention of the Interest Conundrum

The bill does a fine job in describing the benefits of issuing U.S. Notes rather than renting FRNs but it misses the critical fact that our interest based debt money system has an inherent and fatal design flaw. It is inequitable, unsustainable and unstable – it causes defaults and depressions as a mathematical certainty as there will always be more debt than money.

Residual debt has been accumulating for years as may be seen by the fact that there is a great deal more debt than money – aggregates M1 $2 trillion, M2 $8 trillion while total debt is around $58 trillion (not including unfunded liabilities). We are over $50 trillion short which if left unchecked, will cause massive defaults and collapse.

The AMI, Money as Debt, Zeitgeist, Byron Dale, Chris Martenson, SwarmUSA, John Turmel, Marc Gauvin and many others have explained the inherent flaws of our interest/debt based monetary system. Turmel and Gauvin have shown the power of applying engineering principles to complex and dynamic monetary systems.

I think their work is irrefutable and it should serve as a bright flare in the darkness of modern economics. Politicians and policy makers should be called to the carpet to refute or concede the terminal flaws of our system – once the problem is widely understood; reform will become a top priority. See the following:

Formal Stability Analysis of Common Lending Practices and Consequences of Chronic Currency Devaluation by Sergio Dominguez and Marc Gauvin http://bibocurrency.org/Formal%20Stability%20Analysis%20and%20experiment%20(final)%20rev%203.4.pdf

Banking Systems Engineering Math; Banking System Blueprint by John C. Turmel, B. Eng. http://turmelpress.com/bankmath.htm

It is almost beyond comprehension that our financial system is doomed by design but yet we continue on, hoping behavior or regulation will somehow change the outcome and save the day. A fair and prosperous society can only be built on an equitable and stable monetary system – it is a human rights issue. We need to understand and mitigate this terminal design flaw.

5) Henry C.K. Liu Explains the Important Difference between a “National” and “Central” Bank (Federal Reserve is a Central Bank)

Excerpts from Critique of Central Banking, Part I: Monetary Theology

“Central banking insulates monetary policy from national economic policy by prioritizing the preservation of the value of money over the monetary needs of a sound national economy. A global finance architecture based on universal central banking allows an often volatile foreign exchange market to operate to facilitate the instant cross-border ebb and flow of capital and debt instruments. The workings of an unregulated global financial market of both capital and debt forced central banking to prevent the application of the State Theory of Money (STM) in individual countries to use sovereign credit to finance domestic development by penalizing, with low exchange rates for their currencies, governments that run budget deficits.

STM asserts that the acceptance of government-issued legal tender, commonly known as money, is based on government’s authority to levy taxes payable in money. Thus the government can and should issue as much money in the form of credit as the economy needs for sustainable growth without fear of hyperinflation.

By making STM inoperative through the tyranny of exchange rates, central banking in a globalized financial market robs individual governments of their sovereign credit prerogative and forces sovereign nations to depend on external capital and debt to finance domestic development. The deteriorating exchange value of a nation’s currency then would lead to a corresponding drop in foreign direct or indirect investment (capital inflow), and a rise in interest cost for sovereign and private debts, since central banking essentially relies on interest policy to maintain the value of money. Central banking thus relies on domestic economic austerity caused by high interest rates to achieve its institutional mandate of maintaining price stability.

Such domestic economic austerity comes in the form of systemic credit crunches that cause high unemployment, bankruptcies, recessions and even total economic collapse, as in the case of Britain in 1992, the Asian financial crisis in 1997 and subsequent crises in Russia, Turkey, Brazil and Argentina. It is the economic equivalent of a blood-letting cure.

A national bank does not seek independence from the government. The independence of central banks is a euphemism for a shift from institutional loyalty to national economic well-being toward institutional loyalty to the smooth functioning of a global financial architecture. The international finance architecture at this moment in history is dominated by US dollar hegemony, which can be simply defined by the dollar’s unjustified status as a global reserve currency. The operation of the current international finance architecture requires the sacrifice of local economies in a financial food chain that feeds the issuer of US dollars. It is the monetary aspect of the predatory effects of globalization.

The mandate of a national bank is to finance the sustainable development of the national economy, and its function aims to adjust the value of a nation’s currency at a level best suited for achieving that purpose within an international regime of exchange control. On the other hand, the mandate of a modern-day central bank is to safeguard the value of a nation’s currency in a globalized financial market of no or minimal exchange control, by adjusting the national economy to sustain that narrow objective, through economic recession and negative growth if necessary.”

END the FED before it ENDS US



Free includes debt-free!

making things that break for "prosperity"

The problem is this Keynesian idea that broken windows & planned obsolescence helps stimulate the economy.

It's not like they are using government funding to research better alternatives to asphalt that don't have to be repaired every season, or tires that last 10-times or real energy innovation.

No way! Such technology would kill the economy.

This bill is garbage. Kucinich has proven he is clueless.

Denninger is an idiot if he read this bill and thinks its a good idea. My guess is he didn't read it.

In a nutshell, it does NOT repeal the Federal Reserve Act. Instead, it places the Fed under the control of the Treasury Department as a public agency.

The most important flaw though, is that it authorizes the printing of blatant FIAT notes which Congress does NOT have the authority in the Constitution to do. Congress has the power to COIN money. The word "coin" does NOT mean "print." I don't know why people are stuck on stupid with these simple words. This bill interprets "coin" to mean "create" which it then translates to "print" or its digital equivalent.

It then authorizes that these "US Money" items are spent directly by Congress into circulation. So now, he's saying we should just print whatever the hell we want to spend. HELLO TO THE UNITED STATES OF ZIMBABWE.

This bill will wipe out the American People in short order.

There is NO limitation on the size of the notes in circulation save what the Congress wants to spend.

Additionally, the "lender of last resort" function continues. So this new "US Money" will be used to fund massive bailouts and "pay for" the absurd Socialist Obamacare. (says so in the bill)

Want to put a new road or bridge in your district? No problem, the new "Bureau" of the Fed will just print the paper to "pay" for it.

Too expensive to give everyone free health care? No problem, we'll just print the paper to "pay" for it.

Ran your company into the ground because you are either greedy or an idiot or both? No problem, just come to Congress and threaten collapse of America, and they'll print some crisp new "US Money" for ya.

If Ron or Rand Paul support this bill, I no longer support Ron or Rand Paul. This is 100% against what the good Dr. has been trying to educate everyone about.

This is probably the worst way to "fix" the present mess one could devise, though I'm sure once the leadership gets its hands on it, it will somehow be made even more absurd.


What about the basic idea of a federal bank (like the Ex-Im Bank) that loans to the US at 0%? I realize we'd need a Constitutional Amendment to make it legal, but what about the idea itself?

There has to be some maximum, based on some variable (e.g. GDP) that limits government spending. I concede that the government will always borrow money instead of living within the tax revenue, so what policies/ideas allow that but satisfy our concerns?

The answer is have no central bank.....

To balance the GDP, give it over to the US Treasury so the House can "coin legal tender" as that is the only thing stated in the constitution.


Any other thing, especially a central bank has led to bankruptcy. The only answer is to have the US Treasury be the rightful bank and lender.

A national fiat money is tyranny.

Pretty good discussion here.

Free includes debt-free!

Garbage indeed. But the problem is the national debt.

Will the US creditors accept these paper coupons to extinguish our national debt?

But some argue the Federal Reserve has made paper/digital money work.

It worked so well that the Dollar once made of Silver is now a paper bill worth about a penny in 1913 dollars in less than 100 years.

In 1913 a Silver Dollar would buy:
-dozen eggs
-gallon of milk
-1 pound of steak,
-6 pounds of flour
-10 pounds of potatoes
-10 gallons of kerosene

Today the silver in that Silver
Dollar coined by Congress is worth $22 in 2010 dollars.

(I believe this is where Howard Zinn and other historians have gone wrong. They did not consider the economic reality of the wages paid on the day the pay was issued. $5 a week in 1913 would be $110 today and there was no income tax.)

Government must only take Gold and Silver Coin in tender for payment of debt. Only Congress can coin Money and set standards of weight and measures.

Free includes debt-free!

There's no way the Drs will support this travesty...

....In its current form especially there is absolutely no way the Good Drs. will give any support for this.

It's against all principles for which they stand, far more important than politics or anything of note.

It essentially proves this document correct:

The Federal Reserve was Congress's own making, the doing of Nelson Aldrich and other traitors. To give it back to them would make it much much worse...then to simply repeal legal tender law all-together and begin every state taking back their rights.

How Ron ever let himself get

How Ron ever let himself get sucked into the hollow-eyed Kucinich vortex I'll never know.