Monetary Reform Task Force

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Sequestration Cuts Cancelled

Posted by dr.ron45 on October 24, 2012 at 2:25 PM Comments comments (0)

When I first wrote the Greenback Renewal Act, my focus was on the threat of a national debt default coming in February next year when the authorization for borrowing runs out. Now it is clear that the threat of sequestration budget cuts is much more worrisome to those who might be affected as early as January. Hence I have just now posted a revision of the Act which puts elimination of the sequestration budget cuts up front and center in the focus of the bill, thereby enhancing its relevance to the perceived economic problems of the day. So even if you downloaded it before, download the Greenback Renewal Act again to see these enhancements. Cancelation of sequestration budget cuts is now explicit in Title II of the revisted draft.


Another change made, in order to make it easier to pass the bill through Congress rapidly, is to exempt the Federal Open Market Committee (FOMC) and the Federal Advisory Council from the annual Fed audits, since the Fed will almost certainly move to kill the bill if they are included. Congressmen have been trying to audit those parts of the Fed almost since the Fed was created 99 years ago, and each time the legislation has been derailed somewhere along the line. We don't know exactly how they do it, but perhaps by bribes, perhaps by blackmail, and perhaps even by babes, the Fed has always been successful in stopping the audit legislation. Since the urgency of passage of the Greenback Renewal Act is so high, I feel it best to let the Fed have its secrecy with respect to the detailed policy makibng processes, at leat for the time being. Also, if things are found to be amiss in the partial audits that are conducted on the rest of the Fed, including the Federal Reserve Board and Federal Reserve Banks, the Act can be amended to include the policy making groups at that time when there is a clear justification for doing so. Of course Ron Paul's HR 459 has passed in the House, and if that is approved by the Senate (S 202) then we will have the complete audits. But it is important that we have the greenbacks flowing even if Paul's audit bill fails. Hence the exemption of the FOMC and the Federal Advisory Council from the partial audit plan.


I also changed the budget defit fortecast from $1.3 Trillion to $1.2 Trillion to make the numbers come out rounder, and to reflect the fact that the most recent deficit number was slightly less than this. I also added a $ column in the table showing the ramping up of greenback issue so that the percentage numbers could be more easily interpreted in absolute $ values.


Posted by dr.ron45 on October 9, 2012 at 1:40 PM Comments comments (0)

It is important to point out that the dynamic systems modeling and analysis effort in relation to the Greenback Renewal Act has not yet been done (however we are seeking funding for carrying out this work at present), What Professor Yamaguchi has done so far is to model the existing purely debt-based money system (i.e. the Federal Reserve System)) and the purely debt-free money system based on the Chicago Plan as developed by the American Monetary Institute and introduced in Congress by Dennis Kucinich as the NEED Act in 2011. The bottom line of his research, which is confirmed by IMF researchers in their recently released research report "The Chicago Plan Revisited" (August 2012), is that the national debt can be paid off with higher employment and output, with greater stability, while keeping inflation under control. It is clear that this would be a much better economy than what we have now from a public interest perspective (bankers may object because of a fear of losing unearned profits, but we are viewing this from the public welfare perspective, not from the private profit perspective).

The focus here is to start the work of finding a feasible transition path from where we are towards where we would be under the NEED Act. . In my view this cannot be done all at once in one step with one bill because nationalization of the Fed and elimination of fractional reserve banking provided for in the NEED Act will not be found acceptable by Congress as first steps in monetary reform. The risks of making such large changes, especially in the midst of a financial crisis, will be deemed to be too great. Instead, a multi-stage transition plan must be developed that allows for learning and adjustments all along the way. It must start small and grow big gradually in order to avoid taking on excessive risk along the way. It would be the "conservative" approach to monetary reform, not the "radical" approach embodied in the NEED Act,.

During the transition period, government issued money and bank created money will coexist in a hybrid money system as they did from 1862 to 1976 when the Cash Door at the Treasury Dept was closed. Hence I feel that the first step in reform must be the renewal of Greenback issues of the Lincoln era modernized and extended with their electronic counterparts. This was the best money issued in American History, being debt free and without interest obligation. It worked before to win the Civil War, and I believe it can work again to prevent the Great Crash of 2013 that is brewing at the moment.

The purpose of the White Paper presented at this site is to show that in fact the double barreled threat to the US economy posed by the sequestration cuts and the national debt ceiling can be overcome with government issued money (I believe this has been shown even without the more detailed analysis that Professor Yamaguchi can provide). Elementary math models are presented that show that by increasing reserve requirements, inflation can be kept under control as budget deficits and even the national debt itself are brought down in such a way as to avert the crash that is looming now. The greenback (or green money as they may be called when the electronic form is included) injection schedules presented satisfy the deficit reduction requirements of the Budget Control Act of 2011 so the sequestration cuts can be avoided, and they are also great enough to stop the growth in national debt before the current debt ceiling is reached so that the threat of a national default can be avoided. These two threats pose major secutity risks to the US, and elimination of both of them must be seen as a task with very high priority.

Professor Kaoru Yamaguchi

Posted by dr.ron45 on October 8, 2012 at 12:45 AM Comments comments (8)

Professor Yamaguchi of the Doshisha Business School in Kyoto, Japan, became fascinated with the Federal Reserve System about 10 years ago upon reading two historical books, (1) The Creature from Jekyll Island - A Second Look at the Federal Reserve by Edward G. Griffin, and (2) The Lost Science of Money: The Mythology of Money - the Story of Power by Stephen Zarlenga.  He had studied the System Dynamics mode of modeling dynamic systems at MIT where Jay Forrester had shown how such models could be developed and used with great benefit for Industrial Systems commonly encountered particularly in manufacturing industry.  He learned the Vensim software for developing and analysing dynamic models with simulation and optimization procedures, and embarked on a project to show how Vensim modeling could be used to great advantage for the understanding of macroeconomic models for alternate economic systems.  This develdopment is described in his draft book (see Yamaguchi links page) that is freely available for download and study.  He became acquainted with Stephen Zarlenga and prepared three important papers analyzing the American Monetary Act proposal for restructuring the monetary system (most recently known as H.R. 2990).  The first (in 2010) dealt with the Liquidation of Government Debt; the second (in 2011) dealt with the Workings of a Public Money System; and the third (in 2012) dealt with the Monetary and Financial Stability under A Public Money System.  Roughly speaking, his bottom line is that Public Money Systems CAN be run without inflation, and they perform better than debt-money systems in almost any respect that you can think of.  They will support higher levels of employment and real output, they can achieve and maintain a zero national debt indefinitely, and do so with much smaller "business cycle" swings than the boom-and-bust debt money systems.  More information is provided on the Yamaguchi links page.

We hope to next look at the dynamics of the transition from a debt-based money system to a public money system by interposing an intermediate stage in which there is a hybrid system in which public (debt-free) money is issued in parallel with  bank (debt-based) money.  Since government money can be issued without any change to the federal reserve system (other than its subordination to a new Monetary Authority), the legislation for this purpose (such as the Greenback Renewal Act linked on the home page) can be much simpler and less controversial.  The research objective is now to show that a hybrid system can be managed in a stable fashion to bring deficits, unemployment, and national debt down at the same time without producing inflation.  Development of specific strategies with specific timetables that can be codified into public law is all part of the research that we are engaged in at this time.  I will attempt to confirm Professor Yamaguchi's results by running similar models in the MATALB/SIMULINK environment provided by MathWorks, Inc.  We should be able to enhance both our models by comparing results and trying to understand any output differences.  We should have positive results by next July when the System Dynamics Society holds its next meeting.

2012 AMI Conference

Posted by dr.ron45 on September 23, 2012 at 11:30 PM Comments comments (0)

I attended all four days of the 8th Annual AMI Conference in Chicago (Sept 20-23).  Here are a few highlights.

* Elizabeth Kucinich gave some personal history and encouraged us to get involved in trying to influence Congressional representatives in favor of the NEED Act, HR 2990.  She provided the Capital Hill switchboard number: (202) 224-3121 and advised to talk with the legislative aide for the area of interest, and to be friendly, "get them to like you" since you may need to talk to them several times before getting anywhere.

* Michael Kumhof (IMF Research Department) presented macroeconomic modeling work corroborating the positive benefits claimed for the Chicago Plan proposed during the Great Depression era (much better control of credit and monetary aggregates, much lower public and private debt, elimination of bank runs) and found two more positive benefits as well (higher output levels and ability to maintain zero inflation in steady state).  This work will be presented again at a Congressional Briefing this coming week in congress, arranged by principal Need Act sponsor, Dennis Kucinich.  Details posted soon.

Stephen Zarlenga, founder and CEO of the American Monetary Institute  and author of the hefty tome "The Lost Science of Money," is not willing to promote government issued money without also including nationalization of the Fed and imposition of 100% reserve requirements at the same time, as provided in the HR 2990 legislative proposal.  I feel that nationalization of the Fed and imposition of 100% reserve requirements, being very controversial, may take a long time to achieve, and therefore plan to press forward with the Greenback Renewal Act alternative that provides for government issued money very quickly with a Monetary Authority composed of two Fed employees plus several government members drawn from Congress, the Council of Economic Advisers, and the Treasury Department, plus an independent non-government and non-banking chairperson selected by the other committee members.  This should get us around the emergency conditions existing now by bringing unemployment, deficits and debt down simultaneously.  Once it is seen how effective government issued money is, it will be much much easier to go forward with the nationalization and 100% goals in a subsequent time frame.