Some Examples of Monetary Reform Proposals

Perhaps the single best designed, most well thought out and Constitutionally faithful proposal for monetary reform ever developed is that of the American Monetary Institute. It is titled the American Monetary Act. This proposal became the basis for the NEED Act (H.R. 2990), which is by far the best monetary reform proposal ever set before Congress. By elimination of the fractional reserve system and substitution of Federal Reserve currency with Constitutional, non-interest bearing currency (including digital or "checkbook" currency), this proposal represents true and sorely needed systemic reform.

Its unique design allows for a smooth transition from Federal Reserve "debt-serving-as-money" to real Treasury money, with two happy by-products that are also essential components of maintaining a stable and far more democratic monetary system. One by-product would eventually eliminate the national debt altogether while state and local bonded debt could also be reduced substantially, or eliminated. The second fortuitous by-product would provide much needed mechanisms by which our government would spend - or PAY - new money into the economy directly (initially for infrastructure development), without the need to acquire new debt and without the incentive - or authority - to add earmarks or pork to spending bills. Importantly, this new money would not be inflationary because of the systemic monetary reform that occurs simultaneously. Most importantly, this new money is absolutely essential for keeping the economy running as smoothly as possible without deflation or other painful disruptions.

  • In our opinion, a crucial element of the NEED Act, which was also part of the final draft of the American Monetary Reform proposal, is what was once known as the "sovereignty proposal" developed by Ken Bohnsack. This concept advocates that Treasury notes (U.S. Money issued by the U.S. Treasury) should be issued to state and local governmental entities in the form of interest-free loans. This critically important element places a significant portion of "money creation" power at the local level. It supplies necessary funds for local projects which will be "extinguished" as local, citizen-authorized taxes or other fees pay off the loan principal, sans interest and other fees, saving enormous sums that now go to the financial industry. This provision for local control over resources and funding is an important design element of our founding documents and one that should not be ignored. See Part II of our book and our slide presentation for more.

A small sampling of additional reform proposals are listed below, with our own personal reservations discussed for each. In addition, it will serve you well in your own evaluation of the fine print of various monetary reform proposals entering the public domain to apply the following three key items needed for proper reform. These three key elements were formulated by The American Monetary Institute and are absolutely essential for REAL monetary reform:

1) The present form of the Federal Reserve System [central banking] must be ended. Its apparatus and functions must become a part of our government - what people mistakenly think it is now! In the Treasury Department is best.
2) The accounting privilege that banks now have to create what we use for money out of debt, must stop once and for all. What's called fractional reserve banking must be decisively ended. In this way, this Act nationalizes the money system - NOT the banking system.
3) In order for the economy to function in accord with the needs of the people, the Congress must understand and be empowered to create new money and pay it into circulation as money, not debt. For example the $2.2 trillion dollars the Engineers tell us is needed for infrastructure over the next five years.

One proposal that has gained an amazing amount of traction is that of "competing currencies". This is effectively promoted by Congressman Ron Paul of Texas, and a variety of organizations, including Freedom Works, Campaign for Liberty and Lew Rockwell, to name a few.

  • Our concern with this proposal is multi-faceted. While it is indisputable that the currency function of the Federal Reserve System needs to be abolished, we cannot be left with "competing currencies" to take the place of the monetary function of the Fed. For very good reasons competing currencies have a very bad track record in our nation's history. Similarly, using precious metals as the nation's currency (or that of an individual state) brings its own horrifying set of problems. We can only guess that the many and serious flaws of this proposal are rooted in three main factors. 1) A poor understanding of what money is, 2) An incomplete understanding of how our monetary system actually works to devalue (rather than inflate) the dollar by creating an ever-expanding overload of debt in the face of a growing shortage of money to pay that debt 3) And an incomplete understanding of our nation's history, particularly as it relates to coinage. It is only this incomplete understanding which can then lead to the odd marginalization of Article 1, Section 8 which gives Congress the power to "coin" the nation's money - making that money legal tender in payment of taxes even as it provides a uniform currency throughout the nation.

The Social Credit Money System is another fairly well known monetary reform proposal. It was originally developed by Major C.H. Douglas decades ago and information as to how it would work is contained in these articles.

  • Our reservation about this system is that it does not provide for the Bohnsack element mentioned above which is uniquely relevant to our form of government, providing as it does an orderly and effective source of power to local communities. In addition the social credit system does not provide an adequate, easily understood and managed mechanism for extinguishment of money that has served its purpose (illustrated in the "sovereignty proposal" above for instance). This extinguishment feature will maintain faith in and stability of the currency, even as the entire system dramatically reduces taxes and fees at every level. This "extinguishment" feature together with the Bohnsack element is also, in our opinion, critical if we are to ever reduce the kind of waste and over-consumption that plagues us today.

Bill Still, as narrator of the popular Money Masters documentary, offers his own monetary reform act proposal at the end of the DVD copy of his documentary, portions of which he says were advanced in part by Milton Friedman. At the end of this documentary Mr. Still provides a good outline (with some key elements of the NEED Act included) of simple, painless procedures which could rescue us from financial disaster if put in place soon enough.

  • One of our reservations about Mr. Still's vision has to do with the manner in which he suggests money be created - at the rate of a 3% increase in the money supply per year. We believe this has the potential to cause unnecessary currency inflation - especially if a significant portion of the population were to return to small farms and/or a more self-sufficient, health-giving and planet-friendly lifestyle. To the extent that said automatic, unrestrained 3% increases in the money supply do not reflect public need at a given point, the current twin evils of over-consumption and waste, at least over the long term, stand little or no chance of winding down of their own accord. Conversely, a surge in public creative endeavors might require more than a 3% increase in the money supply. In other words, the money supply needs to be flexible - which means it needs to expand and contract as current public needs dictate. In any case, there is a better way in our opinion and it is best expressed in the NEED Act, and is clearly described in Part II of The Two Faces of Money and our slide presentation.


As part of the process of working towards true monetary reform, it may help us in our communications if we seek to better understand how and why governments and investors get seduced by the money power to accept false solutions.

This understanding must today take into account the transition of "public/private partnerships" into money-making machines which - in America at least - has been accomplished under the radar of average citizens and most of their elected officials. These increasingly unpopular partnerships create an added layer of resistance to fair and proper monetary reform among those who benefit from such partnerships, even as they add to the general confusion as to who or what is responsible for our growing economic woes - which is of course the monetary system.

The transition of "public/private partnerships" into money-making machines has been occurring gradually, primarily through adoption of the "CAFR" accounting structure, together with exploding public debt, with the result being that governments are suckered into selling public assets for quick cash and then making financial investments in the very things that are our undoing: Big Pharma, Big Ag, the Defense Industry, all manner of sketchy derivatives and so on. All in the vainglorious hopes of making profits sufficient enough to maintain the kind of balances in CAFR fund accounts that meet the approval of ratings agencies. The net effect is to provide an ever-growing income stream to the financial industry through management and "finder's fees" and a gigantic and ever-growing drain on all governments who purchase and hold such investments. This at the very same time these governments feel pressured to sell public assets to the financial industry as a means of solving a "budget crunch".

This was briefly discussed in Part I of The Two Faces of Money. Two good articles on the subject are here and here and a couple more can be found on our Notable Articles page. You may also want to explore this introduction to the CAFR reports for a discussion of how these Cafrs function.

Through its United Nations Economic Commission the United Nations also actively encourages the development of public/private partnerships around the world. A major, but poorly understood problem with these kinds of partnerships is that they serve to funnel money away from the Real economy and into the financial economy, increasing the movement of money upwards into the hands of the few.

All due to the manner in which our monetary system operates, out of debt. Too few people, including most of our government officials and most working in the financial sector, understand the full ramifications of this trend within the current monetary context and it behooves all of us to research and discuss the issue thoroughly with each other and our government officials. We must understand what money is, and what our founders understood it to be: Treasury notes, bottomed on a tax which would redeem them, that is to say "trust inscribed", a creature of law and an abstraction rather than a "thing".

While "public/private" partnerships can arguably serve the public good when properly executed within the proper, Constitutional legal framework, today they are part of what can only be called the mushrooming Corporate State which relies on "debt/money" as its engine. In current form, these partnerships serve the few at the expense of the many and are in reality part of what we call the power structure surrounding the Federal Reserve, described in more detail in The Two Faces of Money and by our slide presentation The Encroaching Economic Police State.