UPDATE 2-11-2012

I enjoyed the Occupy Pittsburgh protest march on Saturday (10-15-11).  I tried to make myself and my sign as conspicuous as possible.  In fact, I virtually led the march from the Hill District to Market Square.  I was up front, ahead of the banner, next to the guy carrying the American flag.  I waved my sign and stuck it right in front of the media cameras.  Unfortunately, all the cameras stopped filming when I approached and started filming again a split second after I had passed.  Nobody who watched the three local TV stations got to see my sign that read: SAVE SOCIAL SECURITY AND MEDICARE – WWW.RAYUHRIC.COM – THE NATIONAL DEBT IS A SCAM AND A SCANDAL.         

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The primary message of this web site is this: The federal government has the Constitutional and legal authority to issue debt-free money in any amount that is necessary to “promote the general welfare” of the American people.  Promotion of the general welfare is a mandate issued in the first sentence of the United States Constitution to all federal politicians.  The issuance of debt-free United States Notes (U. S. Notes or Greenbacks) can be done in accordance with article 1, section 8 paragraph 5 of the Constitution and the Legal Tender Act of 1862.  Treasury issued, debt-free money is the only solution for our fiscal, monetary and economic problems.

However, there are other people who have competing plans for monetary reform.  Recently, Congressman Dennis Kucinich (D-OH) has been promoting his H.R. 2990 NEED Act.  The NEED Act is based on the ideas of Kaoru Yamaguchi of the American Monetary Institute.  The H.R. 2990 legislation and the proposals of Professor Yamaguchi are, in my opinion, totally wrong.  I tried to contact Congressman Kucinich repeatedly, but he refuses to acknowledge my correspondence. 

Ellen Brown, author of the Web of Debt blog, promotes monetary reform based on Treasury issued, debt-free United States Notes.  We are in agreement on this point.  However, our ideas of how to implement the reform are much different.  I would like to state emphatically that the Lincoln/KennedyMonetary Reform proposed on this web site is in no way connected with the ideas of Ellen Brown, Kaoru Yamaguchi, Congressmen Dennis Kucinich or Ron Paul.  I want this point clearly on the record to avoid any confusion. 

My proposals are based on the U.S. Constitution and existing law. Lincoln/KennedyMonetary Reform can be adopted immediately with no disruption to our economy and no change to our government.  Under my reform proposals, we can have a perfectly legal $2 trillion (or more) debt-free stimulus to our economy with little or no inflation, without borrowing from the financial markets and no increase in taxes.  Debt-free money can also be used to reduce or even eliminate the national debt.  The objection that U.S. Notes will not be accepted internationally is totally without merit.  United States Notes are legal tender just as Federal Reserve Notes are legal tender.  Both have exactly the same value and they serve the same purpose.  In fact, U.S. Notes are currently part of our national money supply.  Because of opposition by Congress, $300 million of debt-free United States Notes remain uncirculated.      

A quick Internet search of the U.S. Treasury Department web site:  U.S. Treasury FAQ: Legal Tender Status of U.S. Currency will confirm the fact that my statements about debt-free United States Notes are true. 

I have been trying for more than seven years to get a fair public hearing regarding U.S. Treasury issued debt-free money, without success.  I have written to politicians, pundits, academics, educators, think tanks, advocacy organizations, the media and talk show hosts.  So far, apparently, nobody is interested.  The recent letters that I wrote to Pennsylvania Senators Pat Toomey, and Bob Casey, Pennsylvania Congressmen Tim Murphy, Mike Doyle, Jason Altmire, Mike Kelly and Pennsylvania State Representative Jesse White are reprinted on this web site.  All have refused to acknowledge my correspondence.  In 2004, I began my effort to convince our politicians to use Treasury issued, debt-free money for government expenditures rather than borrowing and taxing America into oblivion.  In 2004, the national debt was $7.4 trillion.  Today, as we all know, the national debt has exploded to $15 trillion.  

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JOBS, INFLATION and the “PAYROLL TAX CUT/HOLIDAY”

On this web site, I have tried to debunk most of the commonly accepted economic policy and monetary theory myths.  Remember when we were told that high government debt would cause high interest rates?  That myth has finally vaporized.  I debunked the myth that “printing money causes inflation” previously on this blog.   To save time, I won’t repeat my argument here.  However, it is important to remember that printing money does not cause inflation.

JOBS

Another myth that must be tossed into the dust bin of history is: “The government can’t create jobs.  Only the private sector can create jobs.”  This statement is so ridiculous I’m amazed that anyone would repeat it with a straight face.  Of course the government can create jobs.  The government creates thousands of jobs – important jobs, jobs that must be done.  Conservatives and Republicans constantly repeat this myth because they want us to believe that we are totally, hopelessly dependent on the private sector for our jobs.  Using 1929 as a starting point -- the stock market Crash, the Great Depression, periodic recessions, financial market bubbles and busts, commodity price bubbles and busts, the housing bubble, the credit crisis, the Great Recession, crushing personal and government debt, the working poor, Wall Street fraud and greed resulting in massive foreclosures, outsourcing, competition with overseas sweat shop labor, looted pension plans, record income inequality, Swiss bank accounts, millions without health insurance or a pension, offshore tax shelters, viciously contrived boom and bust “business cycles” and the final crash and burn into the “New Normal” of high unemployment and low wages -- proves that the private sector is a cruel and selfish provider.

Millions of Americans are looking for good jobs that don’t exist.  There are lots of bad jobs, but raising a family properly requires an adequate income.  Obviously, our economic system must provide enough good jobs in order for American families to be raised properly.  With millions of Americans unemployed or underemployed, I say the general welfare of millions of Americans is not being promoted by the private sector.  The conservative private sector shills on talk radio and television insist that the unemployed or underemployed take the bad (low wage) jobs and like it.  The Occupy Movement is our way of telling the plutocrats in Washington, on Wall Street and in the media that we don’t like it.

Who is to blame for a high unemployment rate?  Conservatives and Republicans claim that “only the private sector can create jobs.”  Well, then I guess all the blame falls squarely on the private sector, not President Obama. 

I’m amazed at how many people really believe the myth that the government can’t create jobs.   Of course, the government can create jobs.  However, in reality, the private sector and their agents in and out of government are doing everything they can to prevent the government from creating jobs.  So, we should blame only the private sector for high unemployment.  Don’t blame the government.

On this web site, I proposed the idea that the government should hire all the unemployed and underemployed Americans and pay them with U.S. Treasury issued debt-free money.  The goal is full employment.  There is plenty of work that can be done and needs to be done.  The private sector shouldn’t mind if the government picks up the pieces and fixes the economy that was broken by the private sector.    

As a result of 2007/2008 housing market crash (caused by Wall Street) and the resulting Great Recession (caused by Wall Street), federal, state and local governments are suffering from reduced tax revenues.  Many government workers are facing layoffs.  With a high unemployment rate (in our thoroughly globalized economy), finding a job in the private sector, with good pay and good benefits, has proven to be impossible for millions of Americans.  Of course, producing unemployed and underemployed workers desperately searching for good jobs is what recessions are all about.  In the words of one conservative economist: “High unemployment [is good because it] produces a pliable workforce.”   

Conservatives and Republicans are piously demanding major cuts to government workforces at all levels.  They say we just can’t afford “Big Government” (I thought this was a rich country).  The fact that many government jobs are necessary and good for society is rarely, if ever, mentioned.    Below are my recommendations for a “Jobs Bill” that will reduce unemployment and underemployment, stimulate the economy and increase the gross domestic product (GDP).  This jobs bill will cost the taxpayers nothing. 

A good example of necessary government is the Securities and Exchange Commission (SEC).  One of the reasons for the 2007/2008 financial meltdown/global credit crisis was the failure of the SEC to do its job.  Many claim that the SEC was/is understaffed and poorly led.  To protect the American people from another 2007/2008 mortgage meltdown/global credit crisis, the government must reform and fully staff this vitally important agency with the best people available.  No Wall Street moles allowed. 

Another important and necessary government agency is the Commodity Futures Trading Commission (CFTC).  This agency’s inaction is also blamed for the 2007/2008 mortgage meltdown/global credit crisis.  In order to prevent Wall Street from running amuck again, this vital agency also must be reformed and fully staffed.  No Wall Street moles allowed.

The Commerce Department also needs to be reformed and expanded.  (Remember, none of this hiring will cost the taxpayers a penny because wages, salaries and benefits would be paid with Treasury issued debt-free money.)  The mission of the Commerce Department is to: “promote job creation and improved living standards for all Americans.”  For all the globalists working at the Commerce Department: the mission statement says Americans.  This important agency can fulfill the mandate of its mission statement by requiring the private sector to act responsibly and in the interest of the American people.

The past performance of this agency leaves much to be desired.  Where was the Commerce Department when our home electronics (the most advanced in the world) and textile industries disappeared?  What did the head of Commerce think when much of our steel industry was dismantled?  When U.S. auto companies were “making cars that people didn’t want to buy,” why didn’t the Commerce Department investigate?  If I was in charge, I would have asked the CEOs in Detroit if they were deliberately destroying their industry so it could be de-unionized, outsourced, off shored and handed to our foreign competitors on a silver platter.  What was the reaction of the Commerce Department to the Michael Moore movie “Roger and Me” that highlighted the economic devastation of Flint Michigan?  That disaster was caused by General Motor’s management’s fifty year, unbroken string of “honest mistakes.”  I’m still calling for a government investigation into the real causes of the destruction of American industry.  I would love to work on that investigation (I’m available).  No globalist Wall Street moles allowed at Commerce either.     

I explained in my 8-16-2011 UPDATE on this web site, that downsizing and privatizing NASA is an exercise in stupidity.  Why pay a fortune to the private sector and foreign governments for something our government can do for free using Treasury issued debt-free money?  Expanding NASA, of course, will also provide many well paying government and private sector jobs.

The Defense Department is another source of important and necessary government jobs.  Obviously, Defense Department spending must not be constrained by budget problems that are caused by Wall Street and the private sector.  I hear lots of talk about waste, fraud and abuse in the Defense Department.  However, as I explained in my campaign platform, waste, fraud and abuse in government is a separate issue from government spending.  Conservative politicians want us to think that cutting government spending “across the board” will magically get rid of waste, fraud and abuse.  The cure for waste, fraud and abuse is strict, honest government oversight.  Things that are good and necessary must be funded, period.  Things that are not good and not necessary are not funded.  These decisions must not be influenced by campaign contributions. 

The Defense Department is an ideal place for veterans to be hired.  Our combat veterans are heroes.   How much are they being shortchanged by budget constraints caused by the economic downturn (caused by Wall Street)?  The Veterans Administration must never be underfunded and understaffed.  This is a perfect place to employ veterans.  Of all the good, sensible uses for Treasury issued debt-free money, veteran’s benefits and well paying jobs for veterans are right at the top of the list.     

I hear prominent Democrats bragging about cutting $2 trillion of government spending.  I don’t care how much money the politicians cut from the budget.  All I want to know is what they cut and why they cut it.  If politicians cut good and necessary government jobs because of lack of money; that means our political/economic system doesn’t work.  When you consider the debt-free monetary reforms instituted under Presidents Abraham Lincoln and John F. Kennedy (before they were assassinated), the current budget “debate” becomes nothing but mindless gibberish.  Politicians take note: we don’t have to go crawling to the banksters begging for money and more debt.  Abraham Lincoln and John F. Kennedy proved that fact.  Tragically, after they were dead, Congress destroyed everything they had accomplished regarding debt-free money.  Thanks to that blunder, the American taxpayer has been thrown into a global school of loan sharks.  As I previously explained, under our current, debt-based monetary system, it is impossible to pay off the national debt.  When will this fact show up in the budget “debate”?  Why is it that the brilliant, and Constitutional, debt-free monetary reforms of Lincoln and Kennedy are virtually nonexistent in the historical record and the public debate?

On the subject of the scrubbed “historical record,” how many people know that in 1933 there was a right wing plot to overthrow President Franklin D. Roosevelt?  It was a hideous incident that makes our current, very ugly Wall Street scandal pale in comparison.  Treason and corruption were swept under the historical rug.  The hero/patriot of the story was General Smedley Butler.  I invite everyone (especially conservative talk show hosts and pundits) to do an Internet search of The Business Plot to Overthrow Roosevelt. 

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In order to achieve full employment and solve the problem of our $15 trillion national debt, I propose a new Greenback Wing for the Democratic Party.  This will counter the anti government (Republican light) Blue Dog Coalition.  The Greenback Wing would promote the use of Treasury issued debt free money for government spending, economic development and reduction or elimination of the national debt. 

Prominent Democrats brag about spending borrowed money and tax dollars to create private sector jobs.  (This is known as Keynesian economics.)  I would think it is the job of the private sector to create private sector jobs since they have lots of money.  Ironically, it seems like the more tax money the Democrats spend to create jobs in the private sector, the more the private sector berates them for tax and spend liberalism.  What ingratitude!  What would have happened in 2008 if the government and the Federal Reserve had done nothing in the face of a global credit crisis?  We would have had an unprecedented global economic disaster.  What would happen if the government and the Federal Reserve took all that money back?  (The global credit crisis again exposed the fatal flaw in our debt based, fractional reserve banking system.)  I recommend that the Democrats fund good government jobs with Treasury issued debt free money.  Let the private sector create private sector jobs.    

President Franklin D. Roosevelt’s New Deal model of employing laid off workers would work perfectly today.  The only difference would be, this time, no tax dollars or borrowing from the private sector would be required.  The government-run Naval Aircraft Factory, located at the Philadelphia Navy Yard from 1917 to 1945, would be the model for American manufacturing, independent of the whims, caprice, selfishness and blunders of our globalized private sector.  The “American” private sector gave away the store to Global Supply Chain.  The time has come to finally put America First and dump globalism.  National security is far more important than the Wall Street ideology of free market “creative destruction.”

The thousands of underpaid and abused social workers should be hired by the federal government and paid the good wages and benefits that they deserve.  They have the thankless and dangerous job of picking up the human pieces of the society that exists outside of the gated communities and private schools.  The private sector whines about our low math and science scores and then they search the third world for cheap mathematicians and scientists.  The solution to our low math and science scores is more social workers and early childhood intervention.  Neglected, abused, frightened and emotionally abandoned children are rarely, if ever, good at math and science.  The problem isn’t the teachers or the schools.  The problem is our society.  A bad environment, with no intervention, is virtually guaranteed to produce problem children with low math and science scores.       

When I was in elementary and high school, there were students who got straight As and students who couldn’t pass a test no matter how hard they tried.  The top of the class and the bottom of the class had the same teacher.  The conservative smear job of our teachers and public schools is an insult to the intelligence of anybody with an IQ above the level of a plant.

I wonder about the efficacy of private sector charities.  An economic downturn always results in reduced funding for charities.  If the charity is truly worthwhile, the hit and miss funding of voluntary contributions seems like a bad idea.  And skeptics of religious based charities wonder if it is proper to promise a reward in heaven for a cash contribution to a charity that promotes increased church membership.

If a charity is worthwhile and legitimately altruistic, (with no ulterior motive) the work can be done by government social workers.  Funding will come from Treasury issued debt free money.  Of course, strict, honest oversight will be necessary to prevent waste, fraud and abuse.  This would be a source of more well paying government jobs.      

Many people rightly complain about our huge, complicated tax code.  I’ve done my own taxes for years.  I almost enjoy picking out loopholes as I read the tax booklet.  Although I know, as a blue collar worker, none of the loopholes will apply to me.  The tax booklet is required reading. Unfortunately, it gets more dense and mind numbing every year.  Consequently, despite a fairly thorough search, I can never shake the nagging question: did I miss something in the code that applies to me? 

This gave me an idea for how to make filing tax returns much less of a chore.  Using debt-free money, vastly expand the IRS, and let the IRS figure our taxes, for free.  The fully staffed IRS would send taxpayers a detailed breakdown of exactly what parts of the code apply to them and the amount of taxes owed.  The taxpayer can then check the IRS’s work in the tax booklet.  If the taxpayer agrees with the IRS’s opinion, a copy is made for the individual’s records and the original is signed and sent back to the IRS with a check or the IRS sends a refund.  If the taxpayer disagrees with the IRS, the dispute should be easy to resolve because the IRS’s position is clearly stated.  This same procedure could apply to all businesses.  In addition, fully staffed regulatory agencies could apply this system to government regulation.  These measures would remove much the so-called “uncertainty” that the private sector cites as an excuse to “justify” their Capital Strike.  (During a capital strike, banks and businesses withdraw capital -- money – from the economy.  This lowers economic growth and raises unemployment.)

My proposal would make the IRS much more taxpayer friendly, it would virtually eliminate cheating and it would create lots of well paying government jobs.  If individuals or businesses would rather hire expensive tax attorneys, they will have the freedom to do that.  And, proactive regulatory agencies would make government regulation much more business friendly, reduce the cost of compliance and make American businesses more competitive.  If businesses would rather deal with regulation in house, they would have the freedom to do that.  

Years ago, when the IRS was better staffed to help with tax problems, I took my tax problems to them.  They had a nice waiting area with room to accommodate everybody with chairs to spare.  They actually filled out my return!  They explained what I was doing wrong, what part of the code applied to me and they always got me a refund, for free (sort of).  I knew the return was done correctly, and I would have no tax problems.  Those were the good old days before the Reagan Revolution, limited government and expensive tax accountants.    

Thousands or even millions of good jobs can be saved and created, for free, if we follow the Constitution, the law and the example of Presidents Abraham Lincoln, Franklin D. Roosevelt and John F. Kennedy.  We can have FULL employment with family supporting compensation if we can just get the private sector out of the way.  I can almost hear the conservative talk show shills sneering at the idea of the government helping people: “You liberals want the government to solve all your problems.  We don’t want the government picking winners and losers.”  I’m not a liberal or a conservative.  I’m a populist and I want the government to solve as many problems as possible.  That’s a Constitutional mandate: “to promote the general welfare.” What’s the matter with that?   As for winners and losers, since the 1950s, the private sector has been picking winners and losers.  The list of winners includes Germany, Japan, Korea, China, India, Vietnam and Wall Street.  The losers are American workers and America.

I won’t list all the good, important and necessary things that the government does and can do.  This will just provoke a time consuming debate with the government haters.  (They forget that the government they hate was created and defined by the Constitution that they claim to love.)  I make a clear distinction between the institution of government and politicians.  There is nothing wrong with our government, government is neutral.  If you have bad politicians, you have bad government. If you have good politicians you have good government.  The Founding Fathers gave us a great government but, thanks to conservative talk show hosts, conservative pundits and conservative politicians, it’s fashionable to hate the government.  Here is a quote from my dictionary for the all those who get paid fat salaries and campaign contributions for slamming the American government: sedition incitement of discontent against [the] government – Syn. See TREASON.  Am I defending the American government?  Yes, absolutely.  I still honor the oath I took when I enlisted in the American military in 1962.  And I would like to remind all federal politicians of the oath they took when they assumed their office. 

A perfect example of good government was the Full Employment Bill of 1945.  This landmark legislation (introduced by Democratic Senator James Murray) could have created a truly just economic system.  Tragically, conservatives in the House of Representatives aborted the bill before it could be born. In the spirit of the Full Employment Act of 1945, I have proposed on this web site a plan for full employment.  The task is huge.  Therefore, the government isn’t too big – it’s too small.

Why do we have high unemployment?  Blame the private sector.  The Wall Street mortgage disaster threw millions of Americans out of work.  After the taxpayers and the Federal Reserve bailed out Wall Street and the private sector (and pumped up the stock markets), despite sitting on trillions of dollars of cash, the private sector imposed a capital strike on the American economy.  The purpose of this economic blackmail, apparently, is to make sure economic growth is low enough and unemployment is high enough for the Republicans to use “Obama’s failed policies” as a campaign issue for the 2012 election.  The Democratic Party will be discredited and more conservative Republicans (and more conservative Democrats) will be elected at all levels of government.  Another election debacle like 2010 may complete the subjugation of the American government to the authority of the global private sector (the global supply chain).  Another “benefit” of the capital strike -- for the private sector -- is that it forces the government to cut business/corporate taxes and government regulation in order to revive the economy.   

Most economists agree that the current sluggish economy is the result of lack of consumer demand (of course, they ignore the capital strike).  I blame the lack of demand on globalization, the New Normal and the capital strike.  We can have FULL employment with good wages and benefits, without inflation or raising taxes or borrowing from the credit markets.   If the politicians would like to explain why they refuse to follow the example of Presidents Abraham Lincoln, Franklin D. Roosevelt and John F. Kennedy to achieve full employment, they can contact me at PO Box 815, Coraopolis, PA 15108.  I will reprint their correspondence on this site with my response.  Incidentally, yesterday I checked my post office box and, as usual, there was no response from Senators Pat Toomey and Bob Casey.  And there was no response from Congressmen Tim Murphy, Mike Doyle, Jason Altmire, Mike Kelly and Pennsylvania State Representative Jesse White.

INFLATION

But, what about inflation?  If the government prints the money to hire all the unemployed and underemployed workers and pays them good wages and benefits, wouldn’t that debase our currency and cause inflation?  NO!  No, because our money is not a commodity.  Dollars are a medium of exchange; their value is regulated, by law (Congress), according the Constitution: article 1, section 8 paragraph 5.  When currency speculators set the value of the dollar, that is a violation of the Constitution, and, I would assume, illegal.  Therefore, the size of our money supply has no bearing on the value of our currency.  Of course, if Congress and the Treasury issued enough debt- free money to wallpaper our walls, that would debase the currency.  This is the red herring that is always thrown on the table to justify an inadequate money supply.  But there is no reason for Congress to authorize the Treasury to issue more money than the economy actually needs to promote the general welfare of the American people.   There are several causes of inflation.  But printing money is not one of them.                        

What are the real causes of inflation?  Two income families is a major inflationary factor.  More disposable income in a household means the private sector can, and does, jack up prices to gobble up the extra income.  A healthy economy is another excuse to raise prices.  When people have more money to spend, prices will invariably go up.  This is what I call Greed Inflation.  Greed inflation is a result of a free market, unregulated economy.  Blaming the government’s “printing money” for inflation is economic disinformation.  It’s a clever head fake that directs our attention away from the real causes of inflation.    

Why did gasoline cost four dollars a gallon in June of 2008?  The price peaked because we were nearing the end of the pre crash bubble economy.  And the speculators in commodity markets knew that it was their last chance to really gouge the consumers before Wall Street’s Great Recession wrecked the economy.  Four dollars a gallon gasoline is a textbook example of greed inflation.  (Of course, you will never find the term in any textbook.)  We had four dollars per gallon gas before “helicopter Ben” Bernanke had to throw trillions of dollars at the global financial system to prevent a second Great Depression. Where was the hyperinflation that the Gold Bugs and Bond Vigilantes were frantically warning us about?  (Another myth debunked.)   Of course, a conservative will say the pre crash economy did have more (borrowed) money available for consumers to spend so naturally prices had to go up.  This is the “law” of supply and demand, right?  Wrong.  Prices went up because of greed inflation.

Did the cost of oil production go up?  Did the oil field workers get pay raises?  Did some Arab Sheik demand more for his oil?  The answer to all these questions is – probably not.  (When oil was $140 per barrel, a Saudi prince said he would sell oil to anybody with a tanker for $65 a barrel.)  So, why was oil $140 a Barrel?  Because “The Markets” said it was $140 a barrel. 

How did the commodity speculators drive the price of oil from $65 to $140?  They did it by flooding the oil market with money.  The price of a commodity goes up when speculators buy massive positions in futures or options contracts.  There are supposed to be “position limits” to prevent so-called “excessive” speculation.  However, when oil rockets from $65 to $140 and then crashes to $60 it would seem to indicate that position limits aren’t getting the job done.  My point is that the Federal Reserve “printing money” had nothing to do with the oil price spike.  The problem was greed inflation.

The speculators could push the price of oil to $140 a barrel because hot money was pouring into the U.S. housing market from all over the world. This money inflated the housing bubble.  Billions (trillions?) of dollars of fictitious “securitization” credit money was injected into the economy by the cash bloated financial markets.  The speculators/banks, hedge funds and oil companies knew exactly how to get their hands on that money.  The price spike had nothing to do with the Federal Reserve printing money or low interest rates.  This is the fundamental lesson we must learn about inflation: the private sector will charge whatever the hapless American consumer will bear.  This is greed inflation.  When consumers are strapped for cash, prices will go down.  Supply and demand is just a fictitious “textbook” excuse.

Another inflationary factor is the hoarding of a commodity.  Some people claim that this was the real cause of the oil price spikes in the 1970s.  Gasoline rapidly went from 35 cents to $1.35 a gallon.  Was there really an oil shortage?  Were we really “running out of oil”?  People in a position to know say no.  Consider this question: Why didn’t the price of gasoline return to thirty five cents a gallon when, in the 1980s, we had an oil glut?  The logic of supply and demand pricing would call for the price to have fallen below thirty-five cents a gallon.  Instead, the price trend was up and it never stopped rising until it hit four dollars a gallon.

The supposed law of supply and demand is based on the idea that the supply of a commodity is limited and the demand for the commodity determines the price.  In reality, The Market’s judgment of these two factors is subjective, arbitrary and self-serving.  The level in oil storage tanks dropping from 85% to 75% is no reason to jack up prices.  Increased holiday driving is no reason to jack up prices.  (In theory, increased consumption should lower prices because increased production lowers unit cost.)  Prices can swing wildly even if there is no actual shortage.  That’s why many commodity speculators, the banks they work for and hedge funds are very rich despite the fact that their function is supposed to be regulated by position limits.  It’s a classic case of pump and dump.  Does commodity speculation serve any purpose other than to make speculators, banks and hedge funds rich?  I’ve heard the arguments for speculation, and I find them unconvincing.  Deadly food riots in poor countries are a good reason to take a close look at the way commodity markets work.  If supply remains adequate, should increased demand cause a price increase?  Selling more of a product should make the price go down.  Should commodities as vital as food and energy be subject to so-called market forces?   

Even if supply and demand pricing was true and valid (something I don’t accept), Treasury issued debt-free United States Notes would be exempt from this supposed rule of economics.  Why?  The supply of United States Notes is unlimited, (unlike Federal Reserve Notes).  This fact is the key to restoring prosperity to America.  As I said above, if Congress and the Treasury issued enough debt-free money to wallpaper our walls, that would debase the currency.  But why would Congress do that?  They wouldn’t deliberately destroy the value of the dollar in order to discredit “fiat money,” would they?  (I debunked the myth that money printing caused the German hyperinflation of the 1920s in part three of my article “SocialSecurity/Pensions.”)  It is true that we have to depend on the intelligence and integrity of our elected officials in order to make my Lincoln/Kennedy Monetary reform proposals work properly.  Many people will say this is a major snag in my proposal.  However, the politicians can find a detailed explanation of how debt-free United States Notes can solve our fiscal and economic problems in my article “Lincoln/KennedyMonetary Reform”.

Another inflationary factor is the hundreds of millions (billions?) of dollars that the private sector lavishes on conservative think tanks, shadowy industry propaganda groups and operatives, “Astroturf” movements and “dark money” organizations. These costs are added to the price of the products we buy.  That causes inflation.  Or, the money is taken from the pay checks and benefits of the workers, thus, lowering their standard of living.  (The effect on workers is the same as inflation.)  A gig at a conservative think tank is a plum job that requires nothing in the way of useful, productive work (the same can be said about Astroturf movements and dark money “bundlers”).  I can’t help but wonder, do these conservative think tanks hire scholars or shills?  What do I think of the so-called “liberal/progressive” think tanks?  Don’t ask.   

The “cost of money” is another cause of inflation.  The billions of dollars that business pay in interest is added to the price of the things we buy.  If I was the head of the Commerce Department, I would ask our corporate executives why they never pay off their long term corporate debt no matter how profitable they are.  It seems like every major corporation has a permanent three or four billion dollar long term debt.  (It is a little known fact that in the early twentieth century, many businesses were financing their expansion out of profits.  The stock market Crash and the Great Depression put a stop to that.)  If we followed the Constitution, businesses could borrow United States Notes at low interest rates or interest free from the Treasury or from a reformed Federal Reserve System.  We wouldn’t have to worry about a private sector capital strike ruining the economy.  Unfortunately, it is highly unlikely that Congress would ever take the corporate debt cash cow away from Wall Street and the Bond Vigilantes.  Remember, we pay for the interest when we buy virtually any product or service.   

The money businesses spend on advertizing and promotion is inflationary, because it is added to the price of the goods and services we buy.  Do we really have to pay celebrities and athletes millions of dollars to endorse a product that they may or may not use or even like?  Isn’t a paid endorsement inherently dishonest?  I think the Asian sweat shop workers who made the products the millionaire celebrities endorse deserve the money more than these so-called “role-models.”  And let’s not forget the American workers who lost their jobs to the Asian sweat shop workers.  Anybody who buys a product because a famous person endorsed it is acting irrationally to say the least.

As I explained previously, banks and insurance companies are expensive, redundant private sector bureaucracies, not industries.  If President Obama would have done what many of us Democrats working on his campaign hoped he would do, we would have universal health care in the form of Medicare for all.  I worked on President Obama’s election campaign, and I wrote to him more than once explaining how we could fund Medicare for all workers with legal tender United States Notes.  The Obama campaign ignored me (as did the Kerry Campaign in 2004).  My proposals are based on the Constitution; I thought a Constitutional scholar like Barack Obama would be interested.  How does this relate to inflation?  Besides saving the enormous, redundant administrative costs of the private sector insurance “industry,” consumers would save the millions of dollars that insurance companies lavish on advertizing and promotion.  The cost of the massive amount of redundant, mind numbing paperwork generated by the health insurance “industry” would be eliminated by Medicare for all workers.  And thousands of oxygen producing, CO2 absorbing trees would live to do their job.  These savings would apply to all insurance companies.  If the government got into the insurance business (bureaucracy), American consumers could put billions of extra dollars in their pockets.  And we would no longer have greedy corporations and businesses and insurance company death panels denying health care to workers, their families and retirees who desperately need it.  U.S. Note funded Medicare for all workers would have no spending limits based on cost because there would be no profit motive.  Doctors and patients would make healthcare decisions – not insurance companies.           

Lavish corporate and business spending on salaries, bonuses, perks, multimillion dollar golden parachutes, corporate/business jets, showpiece office towers, swag passed out to the corporate elite and the beautiful people, huge contributions to “charities,” corporate/business funding of (and controlling) the economics departments of our colleges and universities; all this profligate spending is inflationary.  Conservatives will tell us this is all just the cost of doing business.  But then they say good wages, healthcare and a pension for the workers will make America uncompetitive.  Is this a valid business model or are some businesses, corporations and their shareholders just spendthrift, greedy and selfish?

The unimaginably expensive lifestyles of some of the executives, owners and inheritors of businesses and some celebrities and some athletes are a major inflationary factor:  A 2011 Bugatti Veyron Super Sports car will set you back $2.4 million.  At auction, a 1957 Ferrari 250 Testa Rossa cost the lucky bidder $12.1 million.  The cost of $100 million homes has to come from somewhere.  Two hundred million dollar 450 foot yachts are far from the biggest or the most expensive on the market.  Besides the initial cost of a $60 million private jet or ship size yacht, you have to factor in the cost of a crew and fuel.  The cost of this fantastic extravagance is slapped onto the price of the products and the services that we buy.          

The cost of the hundreds of millions (billions?) of dollars that businesses, corporations and shareholders spend on lobbyists, politicians, super PACs and political campaigns is inflationary.  Paying dividends to people who contribute nothing to a corporation simply because they own stock is inflationary (what a scam).  Buying back stock at a premium is inflationary.  I know that the stockholders who bought the initial public offering gave money to the corporation.  However, that money could have been borrowed and paid back, ending the transaction.  Stockholders are permanent parasites on the backs of corporations.  They constantly demand more work for less pay from the workers so stockholders can make a capital gain when the stock price goes up. Stockholders don’t have to actually WORK for their money.  Capital gain profits are “passive income.”  It’s passive because the shareholders don’t actually WORK for the money.  This is the new “American Dream:” make $21 million a year WITHOUT WORKING, like Mitt Romney.  Or, have your parents give you $20 million – no WORK required.  I thought capitalism was supposed to be efficient.  Economists claim they can calculate the productivity of a worker.  If you calculated the productivity of someone who lives off their investments or millions of dollars from their parents, the resulting number would be negative infinity!

The huge costs of unnecessary mergers and acquisitions and corporate “turnarounds” are inflationary.  The fat fees, costs and debt incurred when a private equity company like Bain Capital “returns a struggling business to profitability,” are inflationary.  I know that some of these costs are taken out of the hide of the workers but the rest are inflationary.  Does any government agency ever investigate how these “struggling” companies got into trouble?  Was it all just a slick and lucrative stock play?  Does the “work” that Bain Capital does prove that the old American dream for many American workers is a myth? 

I could go on but I think I made my point that all the inflationary factors listed above have nothing to do with the government printing money.  Conservatives blame the Federal Reserve’s “money printing and pump priming” for inflation.  As I explained above, this is simply not true.  In fact, Abraham Lincoln proved that increasing the money supply does not cause inflation.  He increased the money supply by 25% with no inflation.  Many people get angry at Federal Reserve Chairman Ben Bernanke when he says the rate of inflation is low.  But, from his perspective, the rate is low.  He is too polite or too constrained to slam the Wall Street speculators and greedy businesses for the inflation.  Getting rid of the speculation and imposing price controls on commodities would control much of the greed inflation and show that Chairman Bernanke’s numbers are credible.  In 1921, if the German Weimar Republic had suppressed speculation and imposed price, currency and interest rate controls, the hyperinflation would have been stopped in its tracks, regardless of how much money was in circulation.  If Weimar had controlled inflation, the Nazis never would have taken over Germany.  Weimar’s hands off, free market blunder and the Great Depression gave Hitler credibility in the eyes of the German people.  Our politicians can learn an important lesson from the mistakes of the Weimar Republic and Andrew Mellon.      

“PAYROLL TAX CUT/HOLIDAY”

After more than seven years of stonewalling my monetary reforms, the Democratic Party has finally pushed me out of the Party organization (I’m still a Democrat, however).  Their idiotic “payroll tax cut/holiday” is one blunder too many.  For more than seven years I have been telling anybody who will listen that the so-called payroll tax IS NOT A TAX!  The FICA/social security deduction is a premium payment to a government administered insurance/pension plan.  FICA stands for Federal Insurance Contribution Act.  If my memory is correct, the payroll deduction at one time was simply called FICA on the W-2 form.  I suspect that some Wall Street mole crawled into the government and dishonestly changed the name of the deduction.  Paying taxes is a major sore spot these days.  So, calling the FICA deduction a tax makes it seem like an onerous government imposition to some people.  The politicians think that calling FICA a tax somehow makes it a tax.  It doesn’t.  That’s just their phony justification for spending our social security money like a tax.  Anybody who calls the social security payroll deduction a tax is either ignorant, stupid or a liar.  What if the politicians intercepted your car insurance payment or took money from your bank account or your investment portfolio and spent it?  Stealing “trust fund” money is the same thing.  I hear economists lament the “low savings rate” of the American people.  But they never mention the fact that the $4.6 trillion raided and spent from all the trust funds was the savings of the American people!   

From the first day that President Roosevelt proposed the social security program, conservatives and Republicans have tried to destroy it.  Evidence of this fact can be found in the historical record.  Now, the Democrats have joined the crusade to destroy social security.  The so-called “payroll tax cut” is only the latest in a long list of sellouts, but it was the one that caused me to resign from the county Democratic committee.

The so-called payroll tax cut is a Republican idea that raids more money from the so-called social security “trust fund.”  As I explained previously on this site, the $2.6 trillion raided from the mythical trust fund has been added to the national debt by the politicians.  However, since it was the politicians who spent the $2.6 trillion, it’s THE POLITICIANS who owe the money to the trust fund, not the taxpayers.  Maybe we should attach their salaries and confiscate their campaign contributions.  They owe us that money.

Like the derivatives salesmen who exacerbated the 2007/2008 financial crisis, the politicians put $2.6 trillion worth of IOUs in the trust fund with no money to back them up.  The IOUs are nothing but debt loaded on the backs of us taxpayers.  Thanks to the Democrats, you can tack the cost/debt of the so-called payroll tax cut right onto the $2.6 trillion trust fund debt that is part of the $15 trillion national debt.  With all the hot air swirling around about how to pay for the payroll tax cut extension, it seems that nobody thought to ask the politicians how the original payroll tax cut was paid for.  It wasn’t.  The money was borrowed.

I’m amazed at how all the Democrats and their allies in the media stay on message.  They always call the FICA deduction a tax and they never mention that the original payroll tax cut was paid for with borrowed money.  It was the Republicans who blew the whistle on that.  Nevertheless, the Republicans love the so-called payroll tax cut.  The Democrats insist that the trust fund has a $2.6 trillion surplus and it’s good until 2035.  If this is true, why don’t the politicians just pay for the payroll tax cut with trust fund money?  The answer is obvious; there isn’t any trust fund money.  The money to pay for the FICA funding shortfall and the payroll tax cut comes from the general revenue fund.  Since the general fund is already in the red, the additional money for social security is borrowed and added to the national debt.  But the most outrageous and infuriating aspect of the Democrat’s so-called pay roll tax cut is that the national debt is the excuse the conservatives and Republicans use “justify” slashing social security!  Is it possible that the Democrats don’t understand how this self-defeating dynamic actually works? 

For more than seven years, in numerous letters to politicians and in articles on my web sites, I clearly explained that the $2.6 trillion raided from social security will never be replaced under our current monetary system.  (The ongoing dilemma over how to pay for the so-called payroll tax cut extension clearly illustrates this point.)  All the proposed “solutions” to the contrived “social security crisis” involve cutting benefits, cutting other parts of the government or raising taxes.  This is simply robbing Peter to pay Paul the money that was robbed from Paul.  There are only two ways to literally replace the missing $2.6 trillion; force the politicians who spent the money to pay it back or replace the money with United States Notes.  Obviously, only the second solution is practicable.  Until the money is literally replaced, I consider the money stolen.  Using Treasury issued U.S. Notes, we can replace the $4.6 trillion stolen from all the government trust funds and make social security, Medicare, Medicaid, the Pension Benefit Guarantee Corporation and all the trust funds permanently solvent (without raising taxes or borrowing money.)                        

I would like to remind everybody that it was the private sector that caused the weak economy and the shortfalls in tax revenue and social security contributions.  But, despite all the trouble they’ve caused, the private sector is still pushing our government around just as much as they did before they blew up the world economy.  The Wall Street shills and stooges in the media, academia and government are happy to give the banksters and the private sector a pass and move on.  Meanwhile, The Markets, the politicians, academia and the private sector pundits are calling for “painful austerity” from the American people to fix the debt problems that were caused by the politicians and the private sector.  The private sector (with the help of their crony politicians and crony regulators) wrecked the economy.  But the private sector’s paid shills in the media; academia and the government try to blame the government and the Federal Reserve for the damage.  It’s unfortunate that so many Americans fall for this disinformation head fake.

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I would like to make a few more comments about President Obama’s “Jobs Bill.”  He wants to use general fund tax money to pay for infrastructure, roads and bridges.  Did it occur to anybody to ask how we paid for infrastructure before the Great Recession created the need for a jobs bill?  Answer: the gasoline tax.  Thanks to the Great Recession, high gas prices, the New Normal and more fuel efficient cars, people are driving less and using less gasoline. As a result, the gas tax revenue is inadequate.  Instead of raising taxes or borrowing more money, the politicians should pay for infrastructure, roads and bridges with Treasury issued debt-free United States Notes.  They can use the same Constitutional authorization that Abraham Lincoln used to pay for the Civil War.  I wonder what Constitutional scholar Barack Obama thinks about this idea?

I read about a proposed commuter railroad from the Pittsburgh suburbs to the city.  The project is dead in the water because there is no government infrastructure money.  The government infrastructure money can be provided debt-free and tax free if we believe article 1, Section 8, paragraph 5 of the Constitution.  The money can be issued under the authority of The Legal Tender Act of 1862. 

I hear lots of talk about extending unemployment benefits with tax dollars and borrowed general fund money.  I have a better idea: FULL EMPLOYMENT.  I already explained how we can do that.  So, I won’t repeat my proposal here.

I tried, unsuccessfully, to keep this article brief.  There is much more to say but it will have to wait for a future update.  If Senator Pat Toomey or any other reputable politician, pundit, academic or economist would like to challenge my analysis, they can contact me at:

            PO Box 815,

            Coraopolis, PA 15108

I will put their objections and my rebuttals on this web site.  Our debate will be public and in the historical record.  This is a debate I have been trying to provoke for more than seven years.  I’m getting tired of waiting.

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I have a message for the Occupy Movement and the Tea Party Movement: DEMAND THAT OUR ELECTED LEADERS ADDRESS THE ISSUE OF DEBT FREE MONEY.  The politicians can do this by responding to the open letters on this web site. 

Here are some suggestions for signs and chants at future Occupy and Tea Party rallies and protests: DEBT FREE MONEY!  DFM! UNITED STATES NOTES!  U.S. NOTES!  USN!  ARTICLE 1, SECTION 8, PARAGRAPH 5!  PAY OFF THE NATIONAL DEBT WITH UNITED STATES NOTES!  LINCOLN/KENNEDY MONETARY REFORM!  LINCOLN AND KENNEDY KNEW WHAT TO DO --- BUT THEY WERE ASSASSINATED!  LEGAL TENDER ACT OF 1862!  FULL EMPLOYMENT BILL OF 1945!  USURY USED TO BE A SIN!  THE “PAYROLL TAX” IS NOT A TAX!  FICA IS INSURANCE!   FEDERAL INSURANCE CONTRIBUTION ACT!  STOP STEALING MY “TRUST FUND” MONEY!  THE POLITICIANS OWE SOCIAL SECURITY $2.6 TRILLION!  THE POLITICIANS OWE ALL THE TRUST FUNDS $4.6 TRILLION!  BOOST GDP WITH DFM!  BOOST GDP WITH USN!  CURRENCY SPECULATION IS UNCONSTITUTIONAL!  IS CURRENCY SPECULATION ILLEGAL?!

Update 8/16/2011

Yesterday, I checked my post office box and, as usual, there was no response from Senators Pat Toomey, and Bob Casey. And there was no response from Congressmen Tim Murphy, Mike Doyle, Jason Altmire, Mike Kelly and Pennsylvania State Representative Jesse White.

Senator Toomey has refused to acknowledge my December 10, 2010, letter, my February 6, 2011, e-mailed copy of that letter and my February 7, 2011, phone call confirming that his Washington, DC, office received the e-mail. I would like to remind Senator Toomey that I have a Constitutional right “to petition the government for a redress of grievances.” To date, he has denied me this right. The same charge applies to the other six politicians. This is a clear case of taxation without representation.

I am reluctant to fall into the trap of sending follow-up letters, faxes and of making dozens of fruitless, long distance phone calls. After seven years of frustration, I have learned that all that effort was a waste of time and money.

I believe this stonewall of silence reveals something very important: Politicians have an agenda that is framed and controlled by campaign contributions. This, of course, is old news. However, I don’t think the true consequences of this situation are fully understood. For the people who are concerned about the turmoil in “the markets,” the partisan slugfest in Washington and the bi-partisan attack on social security, Medicare and Medicaid, this is my view of the “The Big Picture.”

First of all, I would like to encourage everyone to research and verify everything that I say. The easiest way is to go on line and “Google” key words like “capital strike” and key concepts like “cutting taxes increases tax revenues.” You will usually find thousands of articles on virtually any subject. It is important to read articles on both sides of the issue. That way you can make an objective judgment. I recommend the articles on this web site as a starting point. Just click the articles on the right side of this page. These articles are my campaign platform from my 2010 run for the Pennsylvania state legislature. Please click on my article “Taxation” to get a counter argument to the notion that cutting taxes increases government revenue. For the record, I would like to state emphatically that I have no intention of running again for public office.

It is truly remarkable that after more than seven years and my two political campaigns, not one politician, media pundit or academic will engage me in a serious public debate on this web site. Who are the people who won’t debate me? You name them, and I’ve probably called, written, faxed or e-mailed them. Seven glaring examples of the stonewall of silence are in bold type in the first paragraph of this UPDATE.

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To examine the Big Picture, let’s start with the above mentioned term, capital strike. This is a polite way of saying economic blackmail. The primary reason the Great Depression dragged on for ten miserable, disastrous years was that the banking and business communities imposed a capital strike on the American economy. They did this to punish President Franklin D. Roosevelt for the New Deal. To be blunt, I’m sick of listening to conservatives and Republicans blaming the New Deal for the Great Depression. This is a myth created to discredit the truth that the government can fix problems that are caused by the private sector. And, the Great Depression was not caused by the Smoot-Hawley tariff legislation. This is another myth, created to justify unregulated, free market globalization, which is one of the main causes of our present economic and fiscal problems. I bring up the issue of a capital strike because the American economy, and the American people, are currently the victims of a new capital strike. Apparently, campaign contributions from banks and corporations have mandated that the Democrats never acknowledge this fact. But, before I explore the issue of the capital strike, I want to, once and for all, set the record straight with regard to the Great Depression.

The seeds of the Great Depression were sown, in 1919 (after World War I), when crushing reparations were imposed on Germany by the Treaty of Versailles. Then, in 1929, the stock market crash wiped out the cash reserves of the American banking system (and exposed the fatal flaw of our fractional reserve system). In the spring of 1931, Austria’s Creditanstalt, the biggest bank in Central and Eastern Europe, failed. This triggered the collapse of the entire European banking system. Without credit, the global economy went over a cliff. This is exactly what happened in 2007/2008. This time, however, the trigger was the massive fraud and greed on Wall Street. That, the product of deregulation, destroyed the global housing market and the banking system. Believe it or not, it was the actions of former Treasury Secretary Henry Paulson, Federal Reserve (Fed) Chairman Ben Bernanke and Treasury Secretary Tim Geithner, under the authority of President Barack Obama, that prevented another Great Depression. Unfortunately, nobody in the public or private sectors did what was necessary to prevent the mortgage meltdown disaster and the global credit crisis.

It has been said that the Great Depression was caused by the Smoot-Hawley tariff because it restricted global trade flows. This is total nonsense. Millions of Americans were out of work and destitute. They owned nothing but the clothes on their back. Why didn’t the American private sector economic system put these people to work producing the goods and services that they desperately needed? Two reasons: one, the banking system and stock market destroyed a large part of our money supply. And two, after President Roosevelt, that is, the government, recapitalized the banks; they went on strike to punish FDR for being a great president. The similarities to today’s “jobless recovery” are undeniable.

In 1937, thanks to government intervention, the economy had recovered significantly. However, on the advice of his supply side economic advisors, President Roosevelt drastically cut government spending in order to balance the budget. The result was the Second Great Depression. Too bad President Roosevelt didn’t have better economic advisors. He should have followed the Constitution (Article 1, Section 8, Paragraph 5) and example of President Abraham Lincoln. As Lincoln did in 1862, Roosevelt could have had Congress authorize the Treasury to issue debt free United States Notes (Greenbacks) and put that money directly into the economy. That would have been a debt free, tax free, economic stimulus. The money injection would have countered the capital strike and quickly ended the Great Depression. For an explanation of how Treasury-issued, debt free money can solve our economic and fiscal problems, please click on my article The Legal Basis for Lincoln/Kennedy Monetary Reform.

Today, Governor Rick Perry’s statement, that Fed Chairman Ben Bernanke’s actions were “almost treason,” may have unintended consequences. Mr. Perry, in a peculiar way, endorsed the idea that “printing more money” stimulates the economy. But, apparently, Rick Perry doesn’t want Ben Bernanke to stimulate the economy until after the 2012 election. This might be good for the Perry Campaign but it would be hell for the American people.

Of course, increasing the money supply, aka “printing more money,” stimulates the economy. That was the lesson we learned the hard way from the Great Depression. The notion that printing more money devalues the dollar and causes inflation is debunked in part three of my article Social Security/Pensions. I don’t want to give a long dissertation on monetary theory now. I just want to make a few points. Right now, we are in an economic trap. Globalization has created a permanently weakened American economy. The Bush/Obama tax cuts drastically reduced tax revenue. Factor in the $14 trillion national debt. The result: the government doesn’t have and can’t borrow enough money to stimulate the economy. And the capital strike, apparently, means the private sector will sit on its hoard of cash until they get a Republican in the White house. It all adds up to (or subtracts to) the “New Normal” of permanent austerity for workers, the poor, the sick, the disabled and the elderly.

The new deficit commission has a mandate to cut $1.2 trillion from the federal budget. How much good, useful and necessary spending will be cut? The Constitution gives Congress and the Treasury the authority to issue enough debt free money to “promote the general welfare” and “ensure the domestic tranquility” of the American people. In light of this fact, to eliminate good, useful and necessary spending to “balance the budget” is the height of stupidity. A perfect example of this stupidity is the politician’s attack on NASA. This is a classic Washington/Wall Street squeeze play: politicians underfund the space program because of the national debt and reduced tax revenue. The private sector and foreign governments then happily fill the void left by what is a precious national asset. As a result, the American people will have to pay the private sector and foreign governments a fortune for what our government can do for free! This isn’t fiscal responsibility; this is fiscal stupidity. We will have privatization rammed down our throats no matter how stupid or destructive it is. If the private sector wants it, the politicians will force us to take it.

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When it comes to economic data, you can’t believe the numbers or the people who put them out. If you factor a deliberate capital strike into the economic data, all the numbers suddenly become meaningless. For example, Unemployment is 9.2 %. This proves the economic stimulus didn’t work, and President Obama’s policies kill jobs. Wrong. What would the unemployment rate be without the capital strike? (And what would the unemployment rate be without the stimulus?) Another example: The Gross Domestic Product is an anemic (pick your number) %. This proves President Obama’s economic policies are a failure. Wrong. What would the GDP be if there was no the capital strike? (And what would the GDP be without the stimulus?) The capital strike has been literally and publicly acknowledged by prominent media fixtures, Larry Kudlow and John Fund. And a capital strike has been blatantly implied and threatened by the famous Tea Party leader, Dick Armey, and many other conservative pundits. But, for some unexplained reason, it seems that the Democrats haven’t noticed the capital strike. I guess they would rather lose another round of elections than be accused of “bashing corporate America.” To read how we can create good jobs without government borrowing or raising taxes, please click on my article Rebuilding American Manufacturing.

The Republican “jobs plan” is to cut taxes on businesses and to destroy government regulation and oversight. This will, supposedly, dispel the “fear and uncertainty” that has, supposedly, paralyzed the business community and caused high unemployment. The Republicans and conservatives carefully avoid any mention of the New Normal economy that has been crippled by globalization and deregulation. I doubt that anything, including the Republican jobs plan, will induce the business community to abandon the maximum profit/global supply chain business model. The merchants and shareholders are demanding a transition to a China/India economic model.

The Democratic plan isn’t much better: borrow more money to build and rebuild the national infrastructure. Why can’t the private sector build and rebuild the infrastructure on its own? Why do the taxpayers have pay to hold the private sector’s hand? Meanwhile, the Right Wing plan to destroy government regulation and oversight is rolling along just fine. In all the talk about jobs, there is no mention of vitally important government jobs. When are we going to clean house at, and fully staff, the Securities and Exchange Commission? When are we going to clean house at, and fully staff, the Commodity Futures Trading Commission? Have we learned nothing from the financial disaster of 2007/2008!? The Right Wing wants to dismantle the Environmental Protection Agency. Now, that’s a really stupid idea: let’s poison the air and water. But, the Republicans counter that they were elected to deregulate. In reality, the Republicans were elected because of the massive Republican/talk radio/Fox News spin machine. And, they won because there was little or no opposition from the shockingly weak Democratic Party and their Soros-funded “progressive” allies. The Republicans won by default.

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I said there is a bi-partisan attack on social security, Medicare and Medicaid. How is this possible? Aren’t the Democrats supposed to be the defenders of these vitally important government programs? When Democrats call for a “payroll tax holiday,” they are reducing the amount of money that to goes into the social security trust fund. That sounds like an attack to me. This is the only thing I can think of where the Republicans agree with the Democrats. The Democrats claim the lost trust fund revenue will be made up out of the general fund. The problem with that idea is that the extra general fund money will be borrowed, thus, increasing the national debt. Apparently, the Democrats have adopted Dick Cheney’s idea that “Deficits don’t matter.”

To explain the bi-partisan attack on our social safety net, I’m afraid another history lesson is in order. After the terrorist attack of September, 2011, the Federal Reserve made a series of interest rate cuts. This was supposed to prevent the economy from going into a recession. According to some revisionist historians, this was the cause of the disastrous housing bubble. This claim is more self-serving nonsense. Low interest rates should have resulted in low interest rate fixed rate mortgages. But the banks, and Wall Street, did exactly the opposite with adjustable rate mortgages, securitization and predatory lending practices. At the same time, mortgage brokers made fat fees for originating mortgages to just about anybody who would sign on the dotted line. Rating agencies sold AAA ratings for junk mortgage backed securities. And appraisers and real estate agents hitched a lucrative ride on the runaway mortgage freight train. All of this pumped air into a gigantic housing bubble. When the bubble inevitably collapsed, it wiped out the fictitious part of our money supply that was composed of mortgage backed securities and bogus home values. This was very similar to the credit crisis of the early 1930s.

And, much like the 1930s, after the housing bubble burst the global economy instantly plunged into the Great Recession. This, too, is old news. However, this disaster has a direct bearing on the bi-partisan attack on social security, Medicare and Medicaid. And, this disaster is a good starting point for a new Wall Street Conspiracy Theory.

Briefly, the conspiracy theory goes like this. From the minute Democratic President Bill Clinton signed the Republican Gramm, Leach, Bliley deregulation legislation in 1999, the economic and financial disaster of 2007/2008 was inevitable. It didn’t take long for most, if not all, of the Wall Street fat cats to figure this out. But, they knew that in the run up to the collapse, there was tons of money to be made. And, they also knew that when the bubble inevitably exploded, the government would pick up the pieces and bail them out. The government had to bail them out because, if they weren’t bailed out, the global economy would have collapsed, and it would be the Great Depression all over again. Don’t believe the conservatives and Republicans who dispute this historical fact. They are just plain wrong (or worse).

Although Bernanke, Geithner and President Obama saved us from another Great Depression, they couldn’t save us from the subsequent Great Recession. The Great Recession ushered in the “New Normal.” The New Normal is: high unemployment; stagnant or falling wages; record corporate profits; a structurally weakened American economy and, most important, drastically reduced government revenue.

Conservatives and Republicans hated social security, Medicare and Medicaid from the minute they were created. Their ongoing efforts to destroy these programs can be found in the historical record. Now, with a $14 trillion national debt and the Astroturf Tea Party Movement as their weapons, Wall Street and their allies finally have their big chance to destroy our social safety net. Corporate profits are at record levels but social security, Medicare and Medicaid are all on the chopping block. Conservative pundits say “There can be no economic recovery until the entitlement issue is resolved.” And, in a touching display of bi-partisan cooperation, both Democrats and Republicans agree – “cuts must be made to save these programs.” Remember, the seeds of the Great Recession and the bi-partisan attack on our social safety net were sown when Senator (Foreclosure Phil) Gramm, Congressmen Jim Leach and Thomas Bliley and President Bill Clinton deregulated the financial services “industry.”

Conspiracy or not, the fiscal mess in Washington and the national debt are now the justification for targeting another thing that conservatives and Republicans despise -- government regulation. After the disaster of the 2007/2008 mortgage meltdown, how can anybody in their right mind call for more deregulation with a straight face? The housing debacle was the result of deregulation and a lack of government oversight. That’s a fact.

Here is the question we must ask: was it stupidity or conspiracy? Lots of smart people on Wall Street and in Washington knew exactly what was going on in the housing market and where it would lead. Some people made huge amounts of money and some people positioned themselves to be out of the way when the house of cards came crashing down. I know Alan Greenspan publicly confessed to his low interest rate “mistake” that, supposedly, caused the crisis. But is that what really happened? Is this so-called mistake actually a cover story designed to absolve the FIRE sector of the blame for the crisis? (The FIRE sector is: Finance, Insurance and Real Estate.) Coincidence or conspiracy, the results of the crisis are just what Wall Street, conservatives and Republicans wanted all along: Social security, Medicare, Medicaid and government regulation are going to be whacked thanks to the mess caused by the housing bubble, the Great Recession and the national debt. Coincidence? It sounds like a PLAN to me. When you connect the dots, a conspiracy theory is born.

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To learn how we can make social security, Medicare, Medicaid and the Pension Benefit Guarantee Corporation permanently solvent, without raising taxes or borrowing money, please and read my article Social Security/Pensions. For a detailed explanation of how the politicians are raiding the social security “trust fund” and how we can replace the missing money without raising taxes or borrowing money, please scroll down to the article “The Social Security Trust Fund” in my 2010 campaign web site located at the bottom of this site.

……………………………………………………

Finally, I would like to examine the problem of the national debt. After millions of words have been spoken and written about the debt, the debt ceiling and cutting government spending, there is still one important thing that is missing from the debate, the truth. The truth is that the national debt is a scam and a scandal.

It is a scam because the U.S. Constitution gives Congress, and only Congress, the authority to issue our money. This fact was proven during the Civil War when President Abraham Lincoln prevailed upon Congress to authorize the Treasury to issue $449,338,902 worth of debt-free United States Notes (Greenbacks.) I have covered the issue of debt free money extensively on this web site so I won’t labor the point beyond asking one simple question: If the Treasury can issue our money debt free, why do we have a $14 trillion national debt? After more than seven years of trying, I have yet to find anyone who will answer that question.

So, I guess it’s up to me to answer my own question. The national debt is a $14 trillion shakedown of the American people. Our politicians are so negligent and irresponsible that they have let the entire global financial system become dependent on our federal government debt: The Federal Reserve (Fed) creates money by buying federal government debt securities. Without the debt, there is no money. And, since the dollar is the world’s reserve currency, the American taxpayer is on the hook for the global money supply.

I know this sounds crazy but we learned the truth the hard way during the 2007/2008 global credit crisis. In late 2008, in order to fix a “global dollar shortage,” the Fed pumped $4.5 trillion into the global money supply. Does this make Fed Chairman Ben Bernanke a bad person? No. He had no choice. Without that emergency infusion of dollars, the global economy would have collapsed into a second Great Depression. The real villains are the Wall Street banksters who wrecked the global financial system that Ben Bernanke had to fix. My point is this: under our current economic/financial/monetary system, we can’t pay off the national debt.

Congress could legally authorize the Treasury to pay off the entire national debt in one crack with United States Notes. If they did that, what would happen? According to a newspaper editor that I wrote to, the entire global bond market would instantly collapse. I don’t agree with that doomsday scenario but, needless to say, the global bond market wouldn’t like it if their “benchmark debt” suddenly disappeared. And all those poor defenseless investors all over the world would lose their safe haven -- “the flight to safety” -- when the global financial markets are in turmoil. We don’t even charge them rent when they park their money in nice, safe U.S. government debt. In fact, we pay them. What a racket!

And, of course, the Wall Street wheelers and dealers need a place to park their money when they pull “The Big Short” and crash the global stock markets. It must be nice to get paid interest while you sit on your cash in nice, safe U.S. government debt and wait for the last sucker to “capitulate” and sell at the bottom. Then, the “value investors” can rush in and bargain hunt through the wreckage of the IRAs and 401 Ks. All this thanks to the American taxpayers and the $14 trillion national debt. What politician would dare to stand in front of that gravy train? The only one I can think of is me. But, I lost two elections, and I’m not running again. Oh well.

So, that’s the scam. We have a $14 trillion dollar national debt for no reason other than to benefit the financial services “industry.” Yes, yes, I know, the 401 Ks and IRAs have made us all investors and tax avoiders. What a master stroke! Now we’re all Wall Street banksters. We’re all riding the gravy train to wealth and prosperity, Right?

Not necessarily. Once upon a time the Japanese Nikkei stock market was 38,957.44. It crashed to 7054.98 but it “recovered” to 8963.72. The NASDAQ at one time was 5,132.52. It crashed to 1,108.49 but it “recovered” to 2,182.05. Believe it or not, some analysts have said that in the worst case meltdown, the Dow Jones “Industrial” Average could hit 1000! People who play the markets aren’t investors. They’re actually speculators. But there is always the “safe haven” of gold, right? In 1980, gold was $850 an ounce. In 1999 it was $251.70. Here are some fun facts for the Goldbugs (speculators): We can’t go back on the “gold standard” because there isn’t enough gold in the world to support a gold-backed currency. Gold is not money because gold is not legal tender. Only dollars -- Federal Reserve Notes and debt-free United States Notes are legal tender, that is, money. Some economists say gold is in a historic bubble, and the actual, intrinsic value of gold is $250 per ounce.

I always disliked the idea of speculating in gold because you are betting against your own country. When conservative fear mongers predict the decline and fall of America, the Goldbuggers rush out and buy more gold. Conservative talk show hosts who slam our “worthless dollar” are just pumping up the gold price. What a coincidence that these conservative talkers are sponsored by the same people who sell you the gold. I recommend an Internet search of the expression “pump and dump.” This will explain how financial markets work. What would happen if Congress totally fixed America’s fiscal and economic problems by issuing debt free United States Notes? Would gold crash to $250 per ounce? Like I said, the Goldbuggers are betting against their own country. Sometimes I wonder if the financial markets are all either Ponzi schemes or taxpayer shakedowns.

When will we pay off the $14 trillion national debt? Under our current economic/financial/monetary system, as I explained above, the answer is never. Without the issuance of debt free money, not only is it impossible to pay off the debt, it is becoming impossible to service the debt. I know, I know, all we have to do is tax the rich, close the loopholes, stop all foreign aid, shut down corporate welfare and bring the troops home, and the budget crisis will be solved. Good luck with that. Speaking of debt free money, the conservative economic geniuses tell us that foreign markets will refuse to accept Treasury issued United States Notes. This is more self serving nonsense. Foreign markets will have no choice but to accept United States Notes. They are legal tender just like Federal Reserve Notes. What’s the problem? For an explanation of why United States Notes are a legal and practicable solution to our fiscal and economic problems, please click on my article The Legal Justification for Lincoln/Kennedy Monetary Reform.

Conservatives, Republicans and some Democrats tell the American people that we are “living beyond our means.” Wrong. Our economic problems are caused by a defective economic/financial/monetary system. It is a system designed to produce debt. The historical record and current events prove that creating jobs is, obviously, a secondary consideration. Whether the means is provided for the American people to live is irrelevant. This ugly truth was revealed by the Great Depression and the current Great Recession.

So, how do the politicians plan to service our totally unnecessary $14 trillion national debt? The plan is to impose austerity on the people who can least afford it, of course. The politicians will punish the most vulnerable Americans just to protect the sacred national debt and the bond market parasites aka the Bond Vigilantes. Every politician takes an oath to uphold the Constitution. The Constitution mandates that every politician “promote the general welfare” and “the domestic tranquility” of the American people. Instead, they act as enforcers for the cruel demands of the financial markets.

That’s the scandal.

UPDATE 6/21/2011

Today I began mailing letters to seven politicians: Congressmen Tim Murphy, Mike Doyle, Jason Altmire and Mike Kelly, Senators Pat Toomey and Bob Casey and PA State Representative Jesse White.  Other than a few minor differences necessary to personalize them, the letters are identical to the 6/21/2011 letter that I sent to the Senator Pat Toomey.  The Toomey letter is located below this UPDATE.  I also plan to send a mass mailing to many other politicians in order to get them to publicly state their position on the issue of Treasury issued debt free money.

I would like to emphasize three extremely important facts that completely discredit the current public “debate” regarding the federal budget deficit, the national debt and raising the debt ceiling.

1.      The $4.6 trillion that has been raided from the social security, Medicare, civil service retirement, military retirement and other trust funds, has been added directly to the national debt.  This scandal is never mentioned in the public “debate.”  This is why politicians can claim that they must cut social security and Medicare to deal with the national debt.  

2.      The raided $4.6 trillion is what the politicians call intergovernmental debt.  They say: “This is money that the government owes to itself.”  This is not true.  This is money that the politicians owe to the American people. 

3.      This money can be repaid in full without raising taxes or borrowing money from the credit markets.  This can be accomplished by using the provisions stated in the United States Constitution: Article 1, Section 8, Paragraph 5, and the law: the Legal Tender Act of 1862.

We must DEMAND that our political leaders address these three points.  The fact that politicians, the media and academia suppress the truth compounds this monumental and historic scandal.  The truth is revealed in my letter to Senator Pat Toomey.

.................................................................

Post Office Box 815

Coraopolis, PA 15108

June 21, 2011

Senator Pat Toomey 

502 Hart Senate Office Building
Washington, D.C. 20510

Dear Senator Toomey,

You have refused to acknowledge my December 10, 2010, letter, my February 6, 2011, e-mailed copy of that letter and my February 7, 2011, phone call confirming that your Washington, DC, office received the e-mail.  I would like to remind you, Senator, that I have a Constitutional right “to petition the government for a redress of grievances.”  To date, you have denied me this right.

My grievance has to do with the $4.6 trillion intergovernmental debt.  As you know, the intergovernmental debt is the money that politicians have raided from the trust funds and spent.  These trust funds include social security, Medicare, federal civil service retirement, and military retirement.  In the current public “debate” regarding the budget deficit and the national debt ceiling, the fact that this $4.6 trillion is owed to the American people is rarely mentioned.  Until this money is returned to the American people, in the form of cash, (not IOUs), the money is stolen.  Politicians claim that they will repay the missing money out of future tax revenue.  This will only perpetuate the theft.  You don’t repay the taxpayers with their own money.  The money must come from a source other than the victims of the theft.

You should know that you can repay the $4.6 trillion to the American people without raising taxes or borrowing from the credit markets.  And you can use the same revenue source to solve the budget deficit and national debt problems.  How?  Simply follow the instructions in the United States Constitution. Article 1, Section 8, Paragraph 5, states:  “Congress shall have [the] power to coin money [and] regulate the value thereof.”  The word “coin” can also mean create, as in the expression “to coin a phrase.”  Thus, Congress can create money.  There is nothing in the Constitution about the Federal Reserve or a central bank.

As you know, in 1913, in defiance of the Constitution, Congress gave the power to issue money to the Federal Reserve.  Some scholars believe this action was illegal because it was done without a Constitutional amendment.  I agree, but I am not recommending the abolition of the Federal Reserve.  My objective is to tell the American people (and to remind you) that Congress and the Treasury still have the authority to issue debt free money without involving the Federal Reserve.  There is an extremely important distinction between money issued by the Federal Reserve and money issued by the Treasury.  Money issued by the Federal Reserve is based on debt.  In fact, the Federal Reserve Notes we spend every day are responsible for our $14.3 trillion national debt.  Treasury issued United States Notes (Greenbacks) are based on the law as stated

in the Constitution above.  And, unlike federal Reserve Notes, United States Notes carry no debt.

In 1862, at President Abraham Lincoln’s request, Congress directed the Treasury to issue $60 million worth of United States Notes.  Under the authority of the Legal Tender Act of 1862, during the course of the Civil War, $449 million worth of this legal tender currency was issued (The Federal Reserve didn’t exist in 1862.)  This caused no inflation even though the money supply was increased by 25%.  After President Lincoln was assassinated, Congress reduced that amount to $300 million and froze it at that level.  Subsequently, Congress refused to authorize the issuance of any more debt free money.  However, the original $300 million is still an uncirculated part of our national money supply.  The $300 million amount can be increased by Congress and put into circulation immediately.

On June 4, 1963, President John F. Kennedy signed Executive order 11110 (amending E.O. 10289) authorizing the Treasury to issue billions of dollars of United States Notes.  Although the actual amount and the function of the E.O. are debated, the fact that Kennedy was responsible for the issuance of debt free money is not questioned.  After President Kennedy was assassinated, the United States Notes were withdrawn from circulation and no more debt free money was issued.  In 1966, Congress repealed the original 1933 legislation that gave Kennedy the authority to issue E.O. 11110.  In 1987, President Ronald Reagan repealed E.O. 11110 with E.O. 12608.

I don’t want to promote or endorse the conspiracy theories.  However, I mention these historical facts to prove that issuing debt free money is legal and practicable.  The only thing preventing debt free money from reentering our currently debt based national money supply is the United States Congress.

Therefore, I am publicly calling upon Representatives Tim Murphy, Jason Altmire, Mike Kelly and Mike Doyle to introduce legislation authorizing the Treasury to issue United States Notes.   This will be the same currency that was issued by Abraham Lincoln in 1862 and by John F. Kennedy in 1963.  This legal tender currency can be used to pay off the entire $4.6 trillion intergovernmental debt:  $2.6 trillion owed to social security; $317 billion owed to Medicare; $780 billion owed to the federal civil service retirement fund and $308 billion owed to the military retirement fund.  At the same time, the $23 billion funding shortfall of the Pension Benefit Guarantee Corporation (PBGC) can be eliminated.

In addition to this, I am asking you and Senator Bob Casey to support this legislation.  If you choose to withhold your support, please explain your reasons, in writing, and send them to me at: Ray Uhric, Post Office Box 815, Coraopolis, PA 15108.  I will put your letter on my blog site www.rayuhric.com along with my response to your objections.  Then, the public can judge who is really following his Constitutional mandate to “promote the general welfare of the American people.”

The financial markets have nothing to say about repaying the trust funds with Treasury issued debt free money.  This is money that is owed to the American people.  Supplementing our debt based money supply with debt free money is perfectly legal.  And, there is no reason for this action to cause inflation.  The notion that dollars are just another commodity and that increasing the supply reduces the value is nonsense. 

Commodities are things with intrinsic value, such as corn, wheat or copper.  Dollars are just paper.  They get their value from the law as stated in the Constitution above.  The fact that currency speculators can attack the value of the dollar is a clear violation of the Constitution.  That our political leaders would let them get away with it is a scandal.  The size of our money supply and the value of the dollar are determined by Congress.  It’s the law.  It may be ignored by the politicians, but it is still the law     

Forgive me if I am highly suspicious of the motives of conservative politicians who claim that they must attack social security and Medicare in order to deal with our massive national debt.  It sounds like the same old “starve the beast” game plan to me.  A quick check of the historical record will illustrate the fact that Republicans, conservatives and the financial markets have despised and opposed social security and Medicare from the first day these programs were proposed.  Why would the financial markets and the financial services “industry” want to see social security and Medicare destroyed?  That would eliminate the competition, of course.  They want ALL the money for themselves and their shareholders. 

Apparently, the conservative “starve the beast” strategy to destroy social security and Medicare began with the Reagan administration.  Of course, this plan backfired when Congress simply borrowed more money to offset the lost revenue from the tax cuts and to fund the various wars and other government expenditures.  But now, with a $14.3 trillion national debt and the national debt ceiling looming, it looks like the government haters have the so-called “beast” by the throat.  But to the millions of people whose very survival depends on social security and Medicare, calling these great and vital programs “the beast” is a despicable example of conservative Republican spin.

It is interesting to note how the Cold War, tax cuts, the Iraq war, the mortgage meltdown, the global credit crisis, Dick Cheney’s idea that “Deficit don’t matter,” and other policy blunders have put social security and Medicare right where the government haters want it.  The “privatizers” and the financial markets must have been delighted as the politicians, year after year, weakened social security and Medicare by raiding the trust funds. Then, in a vicious and diabolical act of cruelty, they added every penny of the stolen money onto the national debt!  Is this scandalous economic policy really a legitimate way to conduct our nation’s fiscal business?  Is this a viable monetary system or a scam designed to fleece the taxpayers with debt?

Replacing the missing $4.6 trillion with debt free United States Notes can be accomplished in a matter of days.  Supplementing our current debt based money supply with debt free United States Notes will instantly solve the contrived budget crisis and eliminate the “need” to raise the debt ceiling.  Who could be opposed to that?  Obviously, the funding to make social security, Medicare, Medicaid and the PBGC permanently solvent is at the fingertips of Congress.  Politicians say we must endure austerity and slash social security and Medicare to send a signal to the markets (the bond vigilantes) so they will loan us more money and get us deeper in debt.  The only message we should send to the bond vigilantes is: Article 1, Section 8, Paragraph 5, of the United States Constitution.

This letter will be posted on my blog site www.rayuhric.com.  If you have any objections to my debt free monetary reform proposals, please send them to me at Ray Uhric, Post Office Box 815, Coraopolis, PA 15108.  I will put your letter and my response to it on my blog site.  This will make our debate a matter of public record.  The American people can then judge the relative merits of our respective arguments.

Thank you for your attention to this vitally important matter.  I await your timely reply.

Sincerely,

Ray Uhric

UPDATE 6/3/2011

On April 15, 2011, I received a response from the Federal Reserve (Fed) to my February 13, 2011, letter.  (To date, there has been no acknowledgement of my correspondence from Senator Pat Toomey, Treasury Secretary Timothy Geithner, MoveOn.Org or Democracy for America.) 

The letter from the Fed was written by a director at the Federal Reserve Board of Governors.  Although the content of letter was predictable and disappointing, I give the Federal Reserve credit for taking the trouble to answer my correspondence.  Their response is important because they have put their position into the public record.  This is rare.  I wish Senator Pat Toomey and Treasury Secretary Timothy Geithner had the courage to publicly state their position regarding the matter of Treasury issued debt free money.

It was no surprise that the Fed official rejected my proposal to supplement our debt based money supply with Treasury issued, debt free United States Notes.  Undeterred, I quickly composed a letter rebutting his position and mailed it on April 19, 2011.  To date, there has been no response.  At the end of my letter, I asked for permission to put the Fed’s letter, with my rebuttal, on this blog site.  It has been more than a month since I sent the letter.  Because I have no way of knowing if I will ever hear again from the Fed, I will publish only my rebuttal. 

When you factor in the Constitutional provisions for the issuance of debt free money, the current debate regarding the federal budget deficit and the national debt becomes a scandalous exercise in stupidity.  I say this because our national debt is nothing but a slush fund for the global bond market and Wall Street speculators.  It is a $14 trillion taxpayer shakedown.  This diabolical scheme to back our money supply with federal government debt is an insult to the intelligence of the American people. 

Here is a question that no politician, including Senators Pat Toomey and Bob Casey, Representative Tim Murphy and many, many others, will not dare to address:  How can we pay off the national debt when our money supply, our “savings” and our pensions depend on the existence of Treasury bonds, bills and notes?   Who dreamed up this ridiculous system?  It was the Federal Reserve, Wall Street and their agents in our government.  Here is another vitally important question.  Why can’t we follow the Constitution and increase our national money supply without piling more debt on the backs of American taxpayers?     

We have been suckered into perpetual dependency on a national debt that threatens to destroy social security, Medicare and our standard of living.  This is the trap that the financial markets and our political “leaders” have thrown us into.  My rebuttal to the Federal Reserve letter below explains how we can escape this trap of debt slavery:

**********************

PO Box 815

Coraopolis, PA 15108

April 19, 2011  

/////////////////////, Director

Federal Reserve System

Washington, D.C. 20551

Dear Mr. ///////////////:                                                                            

Thank you for responding to my letter. 

Yesterday, Standard and Poor’s downgraded the outlook for United States Treasury debt.  This action spooked the markets and provoked an immediate reaction from the White House.  It’s a mystery why anyone would pay attention to S&P considering their culpability in the housing bubble disaster.  However, the message of the downgrade was clear.  Reduce the budget deficit or else.  Setting aside the policy blunders that produced a $1.5 trillion budget deficit and a $14.1 trillion national debt, it is obvious that revenues to the Treasury have not kept up with government expenditures.  And there isn’t much chance of this situation changing any time in the future.

States and municipalities across the country (thanks to fraud and blunders on Wall Street) have revenue shortfalls because of reduced tax revenue.  Important government programs are threatened because of budget constraints:  Medicare, Medicaid, the Veterans Administration, NASA, the SEC, the CFTC, the EPA and the Pension Benefit Guarantee Corporation are all underfunded.  $2.5 trillion, raided and spent by the politicians, is owed to the social security trust fund.  And more liquidity is still needed in some areas of the private sector economy.  I could go on at length but I’m sure you get the point:  Our country needs more money in order to function for the benefit of the American people.

As was the case with the Great Depression, in 2007/2008, an unregulated financial sector destroyed a large part of the national money supply. This happened, of course, when the housing bubble burst.  The Federal Reserve valiantly tried to recapitalize the banks and revive the financial markets with low interest rates and “quantitative easing.”  Unfortunately, the result has been mixed at best.  High unemployment and persistent economic problems clearly expose the limitations of conventional monetary and fiscal action when faced with a severe credit disruption.  

We are told by politicians and pundits that the solution to this lack of money is for the American people to make painful sacrifices.  We are told that we must submit to the austerity demanded by the “bond vigilantes.”  And we are told that “America is broke.”  Since it is the Federal Reserve that controls our money supply, I will ask you.  Why is America broke? 

The obvious solution to our economic problems is more money in the national money supply.  But every time I propose increasing the money supply with Treasury issued, debt-free money -- United States Notes -- I get the same knee jerk reaction.  “That will cause inflation and destroy the value of the dollar.”  If there is not enough money, but increasing the money supply will destroy the value of the dollar, apparently, there is something terribly wrong with our monetary system.  This is the essence of my argument. 

                                                                                                                                                           

I believe the Federal Reserve has painted America into an economic corner with its debt-based, fractional reserve financial system.  Money is scarce but increasing the money supply will increase our already massive $14 trillion national debt.  Is this is a hopeless dilemma?  Fortunately, there is an alternative to this unstable, self-destructive system.  Increasing the money supply with Treasury issued debt-free United States Notes is the only logical solution to our current fiscal crisis and economic problems.  Issuing U.S. Notes is perfectly legal.  This fact is confirmed by the law as stated on the Treasury Department’s web site.               

The main stumbling block preventing sensible monetary reform is the foolish notion that dollars, our medium of exchange, are just another commodity.  This blunder exposes our money to manipulation by the currency markets.  The United States Constitution, (Article one, Section eight, Paragraph five) clearly states that only Congress has the authority to issue, and control the value of, our money.  Of course, in 1913, Congress, in defiance of the Constitution, gave this power to the Federal Reserve.  This blunder is responsible for our $14 trillion national debt. 

In his May 11, 2010, speech, Chairman Bernanke quoted the economist David Ricardo: "It is said that Government could not be safely entrusted with the power of issuing paper money.  Abuse by the government of the power to issue money as a means of financing its spending inevitably leads to high inflation and interest rates and a volatile economy.”  First of all, this statement flies in the face of the United States Constitution.  Second, this statement is an insult to intelligence of Abraham Lincoln (see below.)  And third, the crash of 1929, the Great Depression, the recent housing bubble, the crash of 2007/2008, the Great Recession and many other financial disasters over the years, proves that the ability of the private sector to manage a country’s finances is wildly overrated.

What does the historical record tell us about the relationship between the money supply and inflation?  Beginning in 1862, Abraham Lincoln increased the money supply by 25% with United States Notes, and there was no inflation. 

To counter the disastrous “deleveraging” brought on by the 2007/2008 global credit meltdown, central banks around the world pumped multi trillions of dollars worth of liquidity (money) into the global financial system.  Not only was there no significant inflation, monetary authorities were worried about the threat of ruinous deflation.  It is true that the banks did not, to any great extent, loan this money out into the broader economy.  However, the general consensus among economists and business pundits was that this liquidity injection was highly inflationary.  The lack of significant inflation would seem to discredit the commodity theory of money.    

Many people point to the hyperinflation experienced by Germany in the 1920s as a reason to limit our money supply.  This is a flawed interpretation of history.  War reparations imposed by the Treaty of Versailles and a large external debt weakened the German currency and started the downward cascade in the value of the mark.  Uncontrolled, rampant speculation in commodities caused price inflation.  A small segment of the population actually profited from the hyperinflation.  People with access to strong foreign currencies could buy assets at bargain prices.  Internal and external economic forces (the Great Depression), social instability and the possibility that the Weimar government might be overthrown also drove up prices.  The German government printed more money in a vain attempt to maintain adequate liquidity in the economy.  The massive amount of money in circulation was the result of the hyperinflation, it was not the cause.  Strong government intervention and regulation could have stopped the hyperinflation in its tracks.

Of course, the Nazis had their own interpretation of events.  They claimed that there was a conspiracy by international bankers (with the complicity of the Weimar Government) to steal the wealth of the German people.  And they rode this conspiracy theory right into power in 1933.  

Today, our inflation is not caused by an increased money supply.  The amount of money in the hands of the general population has remained flat.  Today’s inflation is caused by the demand for commodities in emerging market economies and the actions of the speculators who control prices in the commodity markets.  The notion that the Fed is causing the inflation by “running the printing presses” is a myth.  The Federal Reserve’s quantitative easing money went directly to the banks and the financial sector.  It is the speculators in the large money center banks who drive up the price of food, oil (gasoline), gold and other commodities.  And at the same time, they lower the value of the dollar.  For the average American, the money supply remains the same, but his or her dollar buys less.  You might say the Fed is the enabler, but it is the banks and the speculators who cause the inflation.                                                                                                            

Chairman Bernanke, in his May 25, 2010, speech, stated:  “We expanded the scale, scope, and maturity of our lending to provide needed liquidity to financial institutions.”  Unfortunately, Chairman Bernanke’s good intentions have backfired.  The Fed’s actions were a bonanza for the financial sector but they caused a bigger burden for the taxpayers and consumers.  This brings up the question that I have been asking for close to seven years: Why can’t we increase the money supply (liquidity) without loading more debt on the backs of the American people?  Nobody will dare to respond to this question because the answer is too explosive:  Our money is based on debt.  The money supply is increased by increasing the national debt.  This occurs when our government issues more U.S. Treasury debt securities.  This is why the national debt will always increase and will never be paid off under our current monetary system.

Increasing our money supply with debt-free U.S. Notes will not monetize our national debt.  Monetizing the national debt occurs when the Federal Reserve buys U.S. government debt from the private sector in order to increase the monetary base.  Of course, the national debt must be increased in order to provide the initial government debt securities to the private sector.  This peculiar and illogical arrangement reflects the false choice that has made debt slaves of American taxpayers.  Increasing the money supply with Treasury issued, debt-free, U.S. Notes does not monetize the national debt because no debt for currency swap is involved.  Government debt is not a part of the transaction.

The problem of monetizing the debt is at the heart of the current debate over raising the national debt limit.  The government needs more money, but it has to sell debt to the private sector to get it.  In order to make our debt more attractive to the “bond vigilantes,” austerity must be imposed on the American people.  This is a stupid, false choice.  The national debt will never be paid off because it is government debt that backs our money supply.  The austerity and cuts in government spending are just a way to bleed more money from taxpayers and weaken the government.  If Congress and the Treasury would have followed the example of Abraham Lincoln and John F. Kennedy, raising the debt limit wouldn’t be an issue at all:  The government could finance itself, just as the Constitution intended.  Abraham Lincoln and John F. Kennedy had the wisdom and courage to issue debt-free, U.S. Notes.  Tragically, their brilliant monetary reforms died when they were assassinated.  And their deaths cleared the way for our $14 trillion national debt.           

The Federal Reserve is the subject of severe criticism since the housing bubble collapse and the disaster of the Great Recession.  A recent Rolling Stone article: “The Real Housewives of Wall Street” has given the growing number Fed critics even more ammunition for their attack on the central bank.  Fortunately, there is a way for the Federal Reserve to redeem itself:  The Constitution-based, debt-free monetary reform that I propose is the perfect opportunity for the Fed to show that it can do more than load enormous debt on the backs of American taxpayers.

My proposal is simple.  Congress can use the Legal Tender Act of 1862 to authorize the Treasury to replace the $2.5 trillion raided from the social security trust fund with United States Notes.  U.S. Notes can also be used to make up the funding shortfall in the Pension Benefit Guarantee Corporation.  These actions are of no concern to the currency markets because the U.S. government owes this money to the American people.  I understand that this action is the responsibility of Congress and the Treasury department.  However, since no politician or anyone at Treasury will respond to my correspondence and address this issue, it is up to Chairman Bernanke to bring this matter to their attention.  Issuing United States Notes is the only way that the federal government can repay the debt owed to the social security trust fund without raising taxes and increasing the national debt.  (Using future tax revenue to “replace” the money raided from social security only perpetuates the theft.)    Issuing United States Notes will be a precedent setting starting point that will open the door to America’s emancipation from debt slavery.      

I read your April 11, 2011, letter and Chairman Bernanke’s May 25, 2010, speech carefully and objectively.  These are arguments that I have heard (and rejected) many times.  You cite a Congressional mandate to maintain price stability as the justification to restrict the money supply to its current arbitrarily low level.  However, you ignore the fact that Wall Street speculators, using their enormous hoard of cash, can drive up the prices of commodities and manipulate the value of currencies simply to produce huge profits and blackmail the government.  History as shown that this, largely unregulated, free flow of capital has caused tremendous damage to society.  While, at the same time, this blatant manipulation produces no benefit whatsoever.  This dreadful (and at times deadly) situation reflects the shocking weakness and complicity of the political class around the world.  Currency exchange rates, and thus the value of the dollar, are negotiated at economic summits.  And central banks “intervene” in the currency markets, by buying and selling currencies, to gain a trading advantage.  All this illustrates the fact that the value of the dollar and inflation can fluctuate wildly with no increase in the money supply.  The money supply/inflation myth is a red herring designed to keep the world to mired debt. 

The global debt burden is a lash across the backs of the poor and the workers of the world.  This evil explains why loaning money for interest is condemned in both the Old and New Testaments of the Bible and the Koran.  How can this fact be reconciled with the debt/interest based global financial system?  Obviously, there is a moral imperative for government regulation of finance.

It is said that inflation must occur when the money supply is increased because “there are too many dollars chasing too few goods.” This is another false notion that must be debunked.  Of course, the point at which there are actually “too many dollars” is never specified.  It is true that inflation can occur when producers and merchants raise prices when there is increased money in circulation.  This is what I call “greed inflation.”  Greed inflation can be controlled by government action.  Space does not permit a detailed description of what form this government action would take.   However, I have explained it in past web site articles.  My proposals reflect government actions that were recommended by Abraham Lincoln.

Some people will recoil at the thought of government intervention to control greed inflation.  However, letting producers and sellers have complete discretion in pricing, irrespective of labor or other cost factors, is problematic.   This “freedom” is a major cause of inflation, poverty and weak economic growth.  Our current economic problems are a perfect illustration of this fact.  The American people and the American economy need more money.  But the fear of greed inflation prevents the Federal Reserve or the federal government from increasing the money supply.  Greed inflation benefits producers and sellers, but it harms the rest of the population and the country.  You don’t have to be a brain surgeon or a rocket scientist to realize that this is a problem that must be resolved in order to have true prosperity in America.     

I prefer not to engage in a protracted debate about debt-free monetary reform.  I’ve wasted nearly seven years already trying to explain the obvious to people who should know better.  The monetary status quo has led to our current and ongoing fiscal and economic difficulties.  The national debt, our hollowed out economy and the blunders of our business and political leaders are much more of a threat to the dollar than increasing the money supply.  In fact, increasing the money supply with Treasury issued, United States Notes is the best way to strengthen the dollar.

Please give my monetary reform proposals serious consideration.  The disastrous events that began in the summer of 2007 have glaringly exposed the flawed nature of our debt-based, fractional reserve financial system.  Thank you for your attention to this vitally important matter. 

Would you mind if I put your letter and this response to it on my web site?  The debt-free monetary reform issue is too important to remain hidden from the American people.  Please respond to this letter in a timely manner.  Thank you.

Sincerely,

Ray Uhric