“But here is the point: If our nation can issue a dollar bond, it can issue a dollar bill. The element that makes the bond good makes the bill good... If the Government issues bonds, the brokers will sell them. The bonds will be negotiable; they will be considered as gilt edged paper. Why? Because the government is behind them, but who is behind the Government? The people. Therefore it is the people who constitute the basis of Government credit. Why then cannot the people have the benefit of their own gilt-edged credit by receiving non-interest bearing currency… instead of the bankers receiving the benefit of the people’s credit in interest-bearing bonds?”
--Thomas Edison, quoted in NY Times, Dec. 6, 1921
If you think about it, it does seem odd that the US Government is the monopoly supplier of US dollars and yet our politicians go through life thinking the government will run out of money unless it can borrow more. Of course that’s not true, the coins in your pocket are legal tender and yet were not issued against debt. They’re minted by the US Government, backed only by the gilt-edged credit of the American people, no one is paid interest on it and they don’t add a penny to the statutory debt. What’s more, the use of coins as legal tender is scalable, they could replace the use of Treasury debt sales. No, you wouldn’t have to carry more coins in your pocket. Nothing would change except Treasury would be credited by the Federal Reserve for the sale of interest-free Treasury coins (presumably of large denominations) instead of interest-bearing Treasury bonds.
The two great powers of a sovereign state are the monopoly of violence and seigniorage, the profits from the creation of money. If the federal deficit (that is, expenditures in excess of tax receipts) were funded by seigniorage revenue, not only would there be no debt service owed on the money, there’d actually be no deficit.
http://my.firedoglake.com/beow...e-of-the-debt-limit/
Since first proposed in January 1989, the Sovereignty loan plan has been endorsed by over 1,814 city, town, and county governments and school boards, as well as by the U.S. conference of Mayors, the Michigan state legislature and the Community Bankers Association of Illinois, which represents 515 banks.
As loans, the money would be repaid, so money injected into communities would fund projects, then be removed. Of the three methods for putting money into circulation available to Congress, giving, paying, and lending, lending is the most cautious.
Benjamin Franklin attributed the economic success of the colonies to their creation of all the money they needed. He said that the root cause of the Revolution was the act of Parliament that prohibited the colonies from continuing to issue their own money. The moneylenders of England thought it more profitable that the colonies borrow their money.
We hear from Washington that we need to sacrifice to bring the deficits under control — cut consumption, save, and invest. When that slows the economy, we will be told to spend more to stimulate the economy. We have heard it all before. Neither method works. We need debt-free interest-free money to fund the work that needs to be done. It’s not sacrifice we need; it’s productive employment. Let Congress use its unique power to coin money and regulate its value to fund that employment.
Money is no more than an accounting device, a system of notes certifying that the bearer has done a share of the work and deserves a share of the wealth. Money’s backing is the goods and services produced by the labor force. By creating money Congress can activate the idle productive power of our people. And what they produce will add real wealth to the U.S. Treasury and add nothing to the federal debt.
http://www.majik.org/cruxenrose/?tag=government
All the money issued by the Government today is backed by nothing except the full faith and credit of the United States of America, and that means that our Government can always use its constitutional authority to create money to pay its previous debts at any point in time, as long as it chooses to spend to meet its obligations. There’s no solvency issue and no solvency risk. America can’t go broke. The Government doesn’t finance its expenditures, either through taxing or borrowing. So even if it has a temporary inability to tax or to borrow it can't go broke, unless its political authorities (including Congress) fail to honor its obligations in violation of the provisions of Section 4 of the 14th Amendment to the US Constitution. To get a better understanding of why this is true, take a look at this passage from the transcript of the presentation of Professor Stephanie Kelton given at the Fiscal Sustainability teach-In Counter-Conference (held at George Washington University on April 28th 2010).
http://www.correntewire.com/fi...n_2_stephanie_kelton
