The End of Money: Take Power Back From the Money and Banking Monopoly

By Thomas Greco, Jr., AlterNet. Posted July 27, 2009.

The dysfunctional nature of the dominant global system of money and banking has for a long time been apparent to anyone who has cared to look at it. Now, in light of the present financial meltdown, it has become painfully obvious to virtually everyone. What most people have failed to recognize is that, regardless of the nominal form of their government, their political power has been neutralized and exhausted by the privatization and misallocation of credit money.

The political money and banking system disempowers communities and enables a small elite to use the present centralized control mechanisms to their own advantage and purpose. It misallocates credit, making it both scarce and expensive for the productive private sector while enabling central governments to circumvent, by deficit spending, the natural limits imposed by its above-board revenue streams.

These are the main flaws inherent in the system:

1. The issuance of money on improper bases, mainly government debt that is created by virtually unlimited deficit spending, but also on the basis of real estate and assets of questionable value.
2. Legal tender laws that force acceptance at face value of the consequently debased political currencies.
3. The charging of interest on credit money that is created by the banks as “loans,” even though the banks have surrendered nothing of value.

Over the years there's been no shortage of would-be monetary reformers who have been warning that the system is broken and needs to be fixed. Some of these have even had some good ideas about how to fix it, but their voices have mostly been ignored or drowned out by the vested interests who have promoted an orthodox doctrine that works to their own advantage. During periods of severe financial or economic distress, such as the present one, some reformers are able to get their views reported in the mainstream media, so today we are hearing calls for a variety of political solutions -- abolition of the Fed, direct issuance of money by the government, a return to the gold standard, tighter regulation of banks and financial institutions, etc.

Some of these actions might have a short-run salutary effect, if they could be gotten through Congress. But statist and political approaches are at best futile and at worst inclined to take us further in the wrong direction toward more centralized control and still greater concentration of wealth. They are futile in that the political process in most countries of the world, despite the trappings of democracy, has long since been removed beyond the grasp of ordinary people. If the people are to regain political control, we will first need to assert our economic power, especially our “money power,” by organizing ourselves to control our own credit and to mediate the exchange process apart from the banking cartel and without the use of politicized national currencies. Putting the money monopoly under new management will not solve the fundamental dysfunctions that are inherent in it.

What about the “Greenback solution?”

Many influential present day reformers (including William Greider, Rep. Dennis Kucinich, and Ellen Brown) are promoting what has been called the “greenback solution." Harking back to Abraham Lincoln’s scheme for financing the Civil War, they are calling for the federal government to bypass the Federal Reserve and the banks and to issue a national currency directly into circulation.

There are many flies in this ointment. First of all, the greenback solution merely seeks to put the money monopoly under new management. Placing the money issuing power into the hands of the Treasury does nominally achieve this, but it is a gross delusion to think that the Treasury is, or might become, independent of the banking interests that now control the Fed. One indication of this is the fact that both the present and former Treasury secretaries have been executives of Goldman Sachs, the most powerful financial establishment in the country. Whose interests have they served?

Secondly, the greenback solution does nothing to eliminate deficit spending and inflation, which are enabled by legal tender laws. So long as political currencies, however issued, are legally forced to circulate at face value, the abusive issuance of money, the debasement of national currencies, and the centralization of power will continue. All government programs, including social programs, need to be funded by legitimate state revenues, not by the underhanded means of monetary debasement. Centralized control of credit money and the imposition of legal tender laws enable the hidden tax called inflation. Salmon P. Chase, who as Lincoln’s Treasury secretary presided over the issuance of greenbacks, later on as Chief Justice of the Supreme Court, argued that they unconstitutionally exceeded the powers of the federal government and that “the legal tender quality is only valuable for the purposes of dishonesty.”

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Thomas H. Greco, Jr. is the director of the Community Information Resource Center, which he founded in 1992. CIRC is a nonprofit consulting organization and networking hub dedicated to economic equity, social justice, and community improvement, specializing in community currency and mutual credit design, development, and implementation.

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