Dennis Kucinich (D-OH) introduces monetary reform bill

On December 17, 2010, Dennis Kucinich introduced a radical bill in the House, "The National Emergency Employment Defense Act of 2010" (the NEED Act). The bill would allow Congress to create and regulate money, taking this power away from the private central bank. It calls for the creation of money by private financial institutions as interest-bearing debt to cease once and for all. The government would issue debt-free money to pay for infrastructure projects and to pay down the debt.

This is a fascinating bill just from the standpoint that monetary policy should be the primary concern of government at this moment. The fact that private banks are in control of our money supply is a tremendous robbery perpetrated on a daily basis against the American people. However, the question I have regarding this bill is whether Congress can be trusted with something as important as our money supply. I don't think they can do worse than the Federal Reserve which only serves the interests of the bankers. However, Congress is indebted to a variety of interests and we have to wonder if they can handle the responsibility of money creation that is solely in the interests of the American people.

Ben Franklin's views on monetary policy still resonate today

I just finished reading an essay entitled "Benjamin Franklin and the Birth of a Paper Money Economy," written by Professor Farley Grubb, based upon a lecture he gave at the Federal Reserve Bank of Philadelphia on March 30, 2006.

"In 1765, in response to Lord Grenville's challenge to come up with some palatable way for the British to increase taxes on the colonists to help pay for the Seven Years War, Franklin writes up a proposal for a North-America-wide universal paper currency modeled on Pennsylvania's land bank system. The British would run the colonial land bank and collect the interest on the paper money loaned out to colonists in place of any new direct taxes placed on the colonists."

Isn't this interesting that the colonists would consider allowing the British to issue paper money and collect interest on it in place of direct taxation? It is my understanding that today we allow the banks to issue paper money and collect interest on it, but this does not go to fund our government, but to only to deliver super-sized profits to the banks. The government must collect taxes in addition to the citizens subsidizing the banks through their charter to issue money.

Franklin also write in "Of the Paper Money of America" that the depreciation of the Continental dollar operated as an inflation tax or a tax on money itself. Again, today we all pay a steep inflation tax, presumably paid to the issuing banks, as well at being taxed directly at almost every turn.

In 2003 Paul Krugman predicted money printing and soaring interest rates

"[M]y prediction is that politicians will eventually be tempted to resolve the crisis the way irresponsible governments usually do: by printing money, both to pay current bills and to inflate away debt. And as that temptation becomes obvious, interest rates will soar."

This was written in 2003. We know now, in 2010, that the Federal Reserve is printing money and is monetizing the debt, but they have been able, thus far, to keep interest rates down. Disaster has been delayed for a long time. How bad will it be when interest rates begin to rise out of the control of the central bank's ability to print more money? When they lose control, how high will interest rates soar and will the US government be able to borrow any money at all, for any price? What will happen to US small business, homeowners, and local governments when their interest payments skyrocket? Will we see international bankers repossessing nearly every tangible asset in the US? And is that the goal?

"A Fiscal Train Wreak," Paul Krugman, New York Times, March 11, 2003