Want a 60% instant raise? Monetary reform and public banking deliver ~$3 TRILLION to Americans yearly

“That is to say, under the old way any time we wish to add to the national wealth we are compelled to add to the national debt. Now, that is what Henry Ford wants to prevent. He thinks it is stupid, and so do I, that for the loan of $30,000,000 of their own money the people of the United States should be compelled to pay $66,000,000 — that is what it amounts to, with interest. …But here is the point: If our nation can issue a dollar bond, it can issue a dollar bill. …It is absurd to say that our country can issue $30,000,000 in bonds and not $30,000,000 in currency. Both are promises to pay; but one promise fattens the usurer, and the other helps the people.”  – Thomas Edison and Henry Ford, interview with NY Times, 1921

The punchline in my series teaching about what the US uses for money is every US household would receive annual benefits equal to a 60% raise:

Monetary reform nationalizes the Federal Reserve (this name is deceptive so the public would perceive it as a government entity) and retain its use for bank administrative functions. Fractional reserve lending by private banks would be made illegal, with the US Treasury having sole legal authority to issue new money for the benefit of the American public rather than the benefit of the banking industry. About 30% of the national debt is intra-governmental holdings (47) and ~16% held by the Fed (48); this debt would be cancelled as it becomes a bookkeeping entry with nationalization. Of the publicly-held debt of various parties holding US Securities, the US Treasury would monetize (pay) the debt in proportion to fractional reserves being replaced with full reserves over a period of one to two years to monitor money supply and avoid inflation. This means the US government would create debt-free money to pay the debt as it’s due exactly to the extent that private banks’ ability to create credit is reduced. The purpose of this is to avoid inflation.

The American Monetary Institute has a proposal called the American Monetary Act (49) to do this. This proposal was also endorsed by America’s best-known economist, Milton Friedman, as the single most important action possible for US economic improvement (see footnote 14 on this monetary reform proposal [50]).

The governmental cost of this reform is negligible because it simply authorizes Congress to enter money into its own account to directly pay for public goods and services. In fact, Americans would save money from decreased reliance on managing taxes.

The benefits are astounding: the American public would no longer pay over $400 billion every year for national debt interest payments (because almost 50% of the debt is intra-governmental transfers, this is a savings of over $200 billion/year). If lending is run at a non-profit rate or at nominal interest returned to the American public (for infrastructure, schools, fire and police protection, etc.) rather than profiting the banks, the savings to the US public is conservatively $2 trillion (51). If the US Federal government increased the money supply by 3% a year to keep up with population increase and economic growth, we could spend an additional $500 billion yearly into public programs, or refund it as a public dividend (52). This savings would allow us to simplify or eliminate the income tax (53). The estimated savings of eliminating the income tax with all its complexity, loopholes, and evasion is $250 billion/year (54). The total benefits for monetary reform are conservatively over three trillion dollars every year to the American public. Three trillion is $3,000,000,000,000. This saves the ~100 million US households an average of $30,000 every year. Another way to calculate the savings is to figure those amounts per $50,000 annual household income (for example, if your household earns $100,000/year, you save ~$60,000 every year with these reforms).

This savings represents a 60% raise for every US household’s income.

Those of us working on these solutions openly invite professional economists and committed citizens to analyze and comment on our observations of costs and benefits.

To give you an idea of this amount, imagine a new stack of $1 bills. New bills are about 200/inch. Imagine if you laminated bills in a horizontal stack; this would be the same size as a 2×4 board. Now imagine that this board of money was to travel on your nearest freeway. How far would the money-board go to equal $3 trillion? Make your guess, then check the footnote (55).

The private sector economic costs of monetary reform are transfers of wealth from the banking industry to the American public. The replacement would be either non-profit banks operating as needed with minimum public cost such as fire departments and the postal service, for-profit banks lending time-deposits in regulated free-market competition, or a hybrid of the two (perhaps with government mortgages at a non-profit rate of 1%). The Public Banking Institute works for the public to act now for at-cost credit (56) rather than waiting for federal reform.

Monetary reform stops the current built-in increases of the money supply through fractional reserve banking, and redirects it for direct payment of taxes for public goods and services. Each dollar transferred from bank creation to public benefit is one dollar less in public tax payment.


47 Treasury Direct. The debt to the penny and who holds it: http://www.treasurydirect.gov/NP/debt/current

48 Federal Reserve Bank of St. Louis. Federal debt held by Federal Reserve banks. 2014: Q2: http://research.stlouisfed.org/fred2/series/FDHBFRBN

49 American Monetary Institute. American Monetary Act. 2011: http://www.monetary.org/wp-content/uploads/2014/04/32-page-brochure.pdf

50 The Money Masters. Monetary reform act: http://www.themoneymasters.com/monetary-reform-act/

51 Of $60 trillion total debt, a conservative current interest cost of 5% is $3 trillion every year. Two trillion dollars of savings if the profits are transferred to the American public rather than to the banking industry is probably low. St. Louis Federal Reserve Bank: https://research.stlouisfed.org/fred2/series/TCMDO

52 The US GDP is ~$17 trillion. Three percent growth is moderately conservative.

53 Of the US Federal government’s ~$4 trillion annual budget, about $1.7 trillion is received from income tax.

54 Tax Foundation. Hodge, S, Moody, J, Warcholik, W. The Rising Cost of Complying with the Federal Income Tax. Jan. 10, 2006: http://www.taxfoundation.org/research/show/1281.html

55 About ten times around the world at the equator. Yes, that’s a lot. Earth’s circumference is ~25,000 miles. There are 63,360 inches in a mile.

56 Web of Debt. Brown, E. California dreamin’: how the state can beat its budget woes. July 8, 2009: http://www.webofdebt.com/articles/california_dreamin.php


Carl Herman is a National Board Certified Teacher of US Government, Economics, and History. He worked with both US political parties over 18 years and two UN Summits with the citizen’s lobby, RESULTS, for US domestic and foreign policy to end poverty. He can be reached at Carl_Herman@post.harvard.edu

Note: Examiner.com has blocked public access to my articles on their site (and from other whistleblowers), so some links in my previous work are blocked. If you’d like to search for those articles other sites may have republished, use words from the article title within the blocked link. Or, go to http://archive.org/web/, paste the expired link into the box, click “Browse history,” then click onto the screenshots of that page for each time it was screen-shot and uploaded to webarchive. I’ll update as “hobby time” allows; including my earliest work from 2009 to 2011 (blocked author pages: here, here).

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