Currency as Debt: A New Theory of Money
Working for the Man
 

My Dear Friend,

Recently I have been reading The National Economic Stabilization and Recovery Act, or NESARA, a bill proposed for the next session of Congress. This bill attacks and resolves root problems that have long plagued the nation.

Alan Greenspan, commenting a year or so ago about the economy, remarked that “this is as good as it gets.” He was right; as soon as the economy got better the Federal Reserve System Board of Governors raised interest rates to slow economic expansion, this being the current approved method to fight inflation.

Consequently the economy slowed, but only after an initial surge in borrowing by people anticipating more rate increases, exactly opposite the desired effect.

Fighting inflation is surely a noble effort, but I see two serious problems with the current method. First is the knee-jerk response of incrementally increasing interest rates. The inverse response is bad enough, but the mechanism itself exhibits a much worse secondary response. Namely, those higher interest rates shift real wealth from working people and small business operators to financial institutions and affluent investors. The working people need borrowed funds to support a reasonable lifestyle or to continue in business. Under current monetary policy, anytime the national economy shows real improvement, the Fed moves to limit that expansion. The inevitable result? A small moneyed elite prospers while numerous workers who generate real wealth pay the freight.

NESARA provides several changes to current monetary policy, perhaps the most important being a new control mechanism, the Treasury Reserve Account. This new fund, under the exclusive control of the new Treasury Reserve System Board of Governors, acts as an economic shock absorber. The fund allows the removal and storage of currency when there is an excess in circulation, or the release of currency back into circulation in case of a shortage. A new currency index called the Treasury Credit-Note Exchange-Value Index, exposes excesses or shortages of currency in circulation. Best yet, NESARA provides the new board with one simple and straightforward mandate: maintain a stable currency.

NESARA also eliminates a significant amount of public (national) debt, but in all reality that portion of the debt is mostly bookkeeping and does not directly affect the people. Nonetheless, NESARA will greatly control the public debt because the new Treasury Reserve Board can no longer sell public debt. NESARA limits the board to buying debt on the open market and after buying, NESARA requires the board to extinguish that debt.

Congress does have constitutional authority to borrow, therefore the government will continue selling its debt to the public through Treasury auctions. However, NESARA prevents selling directly to the new Treasury Reserve System. As I just mentioned, the Treasury Reserve Board can buy government debt through open market operations, but NESARA requires the board to extinguish that debt. Unlike the current Fed, NESARA prevents the new board from holding the debt. More significantly, the simple prohibition of selling public debt directly to the Treasury Reserve System forces Congress to borrow real currency already in circulation from the people. The current system allows the Fed to create funds out of thin air to purchase government debt; NESARA prohibits such monkey business. NESARA forces Congress to live on a budget just like every American.

Under NESARA therefore, the public, at the local level, regulates the creation of currency to balance the output of goods and services. People have the power to create currency by borrowing at local banks, that is, through monetizing their debts. Local commercial banks have a special government license to monetize this debt, the only place such activities should take place. Creating hidden inflationary currency at the national level will be no longer possible.

Another important feature is that NESARA changes the bank loan equations for secured loans made on a fractional reserve basis. Compound interest on such loans is prohibited. Instead, the people repay the principal of such loans and then the bank calculates the monetization fee. Once the borrower repays the entire principal, banks can start collecting their monetization fee. The people build equity much faster and banks experience fewer defaults, increasing the industry’s stability. Banks still profit, but in the same thirty year cycle, do so through three customers rather that one. Through a straightforward monetization fee, borrowers pay on their home mortgages the extra equivalent of half a house rather than one and a half houses or more. This significant change greatly changes the debt burden picture across America.

Furthermore, at the time NESARA becomes law, all existing secured loans made on a fractional reserve basis will be automatically recalculated to the new equations retroactive to the origination date. For people with new loans, those changes will mean debt burdens of about 15 years instead of 30 years. For those who are in the middle of 30-year loans, the recalculations will likely mean the debt is paid in full.

NESARA promotes low monetization fees by imposing an excise tax on rates greater than 5%. Banks can charge higher rates, but the tax cuts into their profits. Additionally, banks are discouraged from charging higher rates because those rates will inversely affect the fees banks charge up front (points) for making the loan.

With such dramatic changes in the law—reduced debt burdens, and the reduction of earned wealth being shifted unearned to the moneyed elite—this nation will see an economic boom never dreamed by those who regulate the national currency with the out-dated mechanisms of today. No longer will people find themselves working entire lifetimes “for the man,” but instead only a small portion of their lives need be burdened by debt. Once debt-free they can enjoy their piece of the American dream.

When people begin to understand the potential and incredible fairness of NESARA, I fail to envision how they could do anything short of demanding passage. Unlike useless political rhetoric of the past, this bill offers real positive change.

With all due regard and affection,

Your friend
 

Editor’s Note:

To understand how NESARA restores the national currency to being a true public utility, please read the following portions of the bill:

• Part I. Banking and Monetary Reform, Section 2 Findings
• Part I. Banking and Monetary Reform, Section 3 Congressional Control Of The United States Monetary System

To understand how NESARA establishes honest and moral characteristics for the national currency, please read Part I. Banking and Monetary Reform, Section 4 Provisions For United States Currency (Note: Section 4B, the characteristics necessary for Congress to lawfully define United States Treasury credit-notes).

To understand the new banking regulations and formulas, read the following portions of the bill

• Part I. Banking and Monetary Reform Section 7. Regulation of Commercial Banks and Other Financial Institutions
• Part I. Banking and Monetary Reform Section 8. Excise Tax Imposed on Monetization-Fee Or Interest Income

To understand how NESARA maintains stable purchasing power and maintains a stable exchange value of all currencies in circulation, please read Part I. Banking and Monetary Reform, Section 9 Regulation Of The Exchange Value Of Treasury Credit-Notes.

To understand the implications of restoring the national currency to being a public utility, please visit the What’s In It For Me? section.
 

Farewell address of Andrew Jackson