What is the Fed? What is Capitalism? What is Sovereign Currency?
By Jamie Walton, October 13, 2014
First it’s most important to define terms. What is the Fed?
The Fed is what we call the Federal Reserve System. It consists of a Board of Governors in Washington D.C. and 12 regional Federal Reserve Banks. The Board of Governors is an “independent governmental agency” which comes under the Executive Branch of the U.S. Government. The 12 Federal Reserve Banks are “nongovernmental organizations, set up similarly to private corporations” in that they have stock which is held by each of the private banks in their district that are members. (http://www.frbsf.org/education/teacher-resources/what-is-the-fed/structure)
The Fed is not owned by a few wealthy Americans and Europeans. That is nothing more than a “conspiracy theory” and should be disregarded. For more detailed information, see:http://www.monetary.org/is-the-federal-reserve-system-a-governmental-or-a-privately-controlled-organization/2008/02
What is Capitalism?
Capitalism is what we call the economic system that we say we live under. Wikipedia defines Capitalism as “an economic system in which trade, industry, and the means of production are largely or entirely privately owned and operated for profit.” Investopedia defines Capitalism as a “system of economics based on the private ownership of capital and production inputs, and on the production of goods and services for profit.” A central characteristic of Capitalism is capital accumulation. There are two fundamental types of capital: real capital (factories, machinery, etc.), and financial capital (financial assets or the financial value of assets, such as cash, i.e., money). In practice, capital accumulation means financial capital accumulation, i.e., the accumulation of money. But where does that money come from? Under the present monetary system, all money is created or controlled by the banking system. All deposits in bank accounts are created by banks when they make loans or purchases. Even physical cash has to initially be withdrawn from a pre-existing bank account, meaning someone had to go into debt to a bank or sell something to a bank before even a penny can get into circulation.
Thus, what we call Capitalism could be called “Bankism” since the whole economic system is subject to the banking system, because in a monetary economy, nothing moves without money, and all the provision of money is completely controlled by the banking system.
What is Sovereign Currency?
Sovereign Currency is Sovereign money: “Sovereign money is legal tender (lawful money) issued by a state [national] authority” (http://sovereignmoney.eu). Sovereign money is legal tender, on hand as well as on account or mobile storage device. It contrasts with commercial bank money, i.e. demand deposits, also called sight deposits, as currently used for cashless payment. As to the wording, there are alternatives such as safe, sound or stable money (in various connections), liquid money (M. Schemmann), plain money (J. Huber / J. Robertson), chartal money (derived from chartalism), state money (R. Werner), public money (K. Yamaguchi), constitutional money (R. Morrison) and, specifically in the United States, U.S. money (S. Zarlenga). Sovereign money seems best to encapsulate what it is all about. Beyond descriptive aspects, the notion of sovereign money also conveys the constitutional dimension of the monetary prerogative which is one of the most important sovereign rights. For more detailed information, see: http://sovereignmoney.eu/what-is-sovereign-money
Note that Sovereign Currency is Constitutional and legal/lawful, and can be issued without any associated debt or interest. In the U.S., coins issued by the U.S. Mint since 1792 are Sovereign Currency and are an asset to the holder and a liability (debt) to nobody. What that means is it provides spending power without owing anything. Sovereign Currency is accompanied by a special advantage called seigniorage, which creates net income:
Seigniorage and Net Income
Seigniorage is the difference between the face value and cost of producing circulating coinage. The Mint transfers seigniorage to the Treasury General Fund”
(U.S. Mint 2013 Annual Report, page 6: http://www.usmint.gov/downloads/about/annual_report/2013AnnualReport.pdf)
Seigniorage enables us to receive public goods and services without taxing or borrowing. This is a very important thing to know. It can solve most of the problems in each country.
How does the NEED Act fit in?
The National Emergency Employment Defense (NEED) Act, introduced as H.R. 2990 in the 112th Congress, fully restores the Constitutional power of Congress over money in the U.S. (Article 1, Section 8, Clause 5).
The NEED Act abolishes the Board of Governors of the Federal Reserve System and establishes a Monetary Authority to conduct monetary policy in accordance with the law. The NEED Act nationalizes the 12 Federal Reserve Banks by buying back their stock from their member banks and incorporates them as a bureau of the U.S. Treasury alongside the U.S. Mint and Bureau of Engraving and Priniting.
The NEED Act removes the power from banks to create and control our money supply and places it within the checks and balances of our democratic representative government. The NEED Act makes all U.S. money sovereign currency: an asset to the holder and a liability to nobody. It ends the system of creating our money with debt and interest.
The NEED Act enables the Congress to promote the General Welfare and approve spending on much needed infrastructure, education, health care, grants for state governments and an interest-free loan facility for local governments, mortgage relief, social security assurance, pays off the national debt as it comes due, and much much more – all without taxing or borrowing a dime, and all without causing inflation. For more information, see: http://www.monetary.org/wp-content/uploads/2013/01/HR-2990.pdf
What kind of economic system will we have with the NEED Act? Perhaps a new name will have to be coined. Whatever we decide to call it, it will be Constitutional and democratic.