The Objective Money Amendment
The following is a proposed amendment to the Constitution of the United States. Its purpose is to:
- Retire the National Debt
- Ensure a proper supply of money for use in trade and necessary government expenditures
- Prevent the government from incurring new debt
- Forgive mortgage and revolving credit loans on a one-time basis so that the United States is no longer a culture of debt
- Prevent the government from inflating the money supply in a way detrimental to the people of the United States
Objective Money Amendment
Section 1
The power of Congress to issue money shall not be delegated, except to the United States Treasury.
Section 2
The power of Congress to borrow money on the credit of the United States, as specified in Article I, Section 8 of the Constitution, is hereby repealed.
Section 3
The practice of fractional reserve banking is hereby outlawed. The creation of money by lending against deposits shall be deemed counterfeiting unless the amount of the deposits is decreased by the amount being lent.
Section 4
Money shall be issued initially in an amount necessary to fulfull the following:
The quantity of money issued shall be increased or decreased each year by a per annum fraction of the growth or shrinkage of the population of the United States between the previous two census results.
- To purchase back all debt instruments previously issued by the United States
- To retire all mortgage and revolving credit loans taken by non-corporate persons and/or partnerships up until one year prior to the adoption of this amendment
- To lend banks, at no interest, sufficient money to raise their reserves to 100% after the retirement of mortgage and revolving credit loans, such loans to be repaid upon the bank closing.
- To replace, dollar for dollar, any Federal Reserve Notes in circulation at the time of adoption of this amendment.
Section 5
Congress shall have the power to legislate a temporary issue of money in order to pay for such projects as it sees fit. Such temporary issue must be legislated separately from all other temporary issues or other legislation, and must include an expiration date. Money so issued shall be destroyed by the expiration date.
Section 6
Money issued by the United States shall be legal tender for all debts and payment of taxes.
Section 7
The right of individuals or groups to issue money in units other than the United States dollar shall not be infringed. Such money shall not be legal tender for payment of taxes.
posted by Lisa | 12:09 PM
14 Comments:
There is always going to be a conflict between savers and spenders.
The proposed amendment will not change this.
There are currently mechanisms to retire the national debt, and we can start climbing out of debt lifestyle at any time. The problem is that the savers have been, and are currently, continuously kicked in the private parts. Savers have no political power.
Allow me a line-by-line analysis:
Retire the National Debt
Nice idea, but Obama doubled the debt in one term. Sans any political change, the debt will be right up there again in record time.
Ensure a proper supply of money for use in trade and necessary government expenditures
Neutral.
Prevent the government from incurring new debt
Who's going to enforce this? What penalty?
Forgive mortgage and revolving credit loans on a one-time basis so that the United States is no longer a culture of debt
This is the kind of societal change you can't achieve with a constitutional amendment. Extending credit is a powerful motivator for economic activity, and it need not be negative. It has been misused, yes. But to forgo it is to ask for less economic activity, less economic growth. Are we willing?
Prevent the government from inflating the money supply in a way detrimental to the people of the United States
A lot of opinion involved here. We'll be having the same debate we are having today.
(con't)
The power of Congress to issue money shall not be delegated, except to the United States Treasury.
This essentially slaps the name "Federal Reserve" on the Treasury. No change.
The power of Congress to borrow money on the credit of the United States, as specified in Article I, Section 8 of the Constitution, is hereby repealed.
Excellent idea, if it can be enforced. I expect massive push back from the usual. And the game playing will be cosmic: money will be borrowed against each cabinet department; there will be a provision for emergency spending, and then everything becomes emergency spending.
The practice of fractional reserve banking is hereby outlawed. The creation of money by lending against deposits shall be deemed counterfeiting unless the amount of the deposits is decreased by the amount being lent.
I like this, but it means less economic activity, less growth. Are you prepared for the rioting mob demanding a return to easy money?
Money shall be issued initially in an amount necessary to fulfill the following:
Good luck with these proposals. Some people would win, some would lose. The angry mobs here will be in expensive suits.
A buyback of direct federal debt under this amounts to replacing it all with a zero coupon bond that reverts to the new currency upon maturity. Whoa! I can feel the anal sphincters puckering across the finance world. Buying and forgiving consumer debt is massively unfair, rewarding the behavior we are trying to curb. Might as well give amnesty to illegal aliens.
Congress shall have the power to legislate a temporary issue of money in order to pay for...
This undermines all the preceding. Congress will issue money with a due date of a very large finite number. Status quo is maintained.
Fred, you make a lot of good points. It's probably my fault for not noting here that I've updated the text of the amendment, and posted it on its own website: http://end.starways.net/. There's a forum there as well, which is an excellent place to discuss this. Much easier than in the comments on a blog.
That said, I will make a few comments.
Section 1 doesn't make the Treasury into the Fed. The Fed creates money by creating debt. By selling treasury notes that we have to pay back, and that carry interest. This amendment doesn't permit that any more.
Section 5 has been changed. The total temporary issue of money can't exceed 10% of the regular money supply, and has to expire no later than 10 years from issuance.
And re: your comments about the buyback of debt, I didn't notice any angry mobs when the government bailed out the banks. Why should bailing out the people be any different?
Angry mobs are a metaphor. Somebody wins, somebody loses in these things.
Printing too much money is bad, but printing too little has some problems. One needs to stay in the sweet spot.
The Fed creates money by creating debt.
I feel the need to snark here. Look at Bernake's quantitative easing: he prints money to buy back previously floated debt.
I'm interested to see how bitcoin works.
Having one central authority issue money in a reasonable fashion has worked pretty well compared to the alternatives. Fed/Treasury would have the same function, and we would face the same policy debates.
Printing too little? How can keeping it proportional to the population be "too little"?
As far as Bernanke, do you really not get how QE works? The treasury sells T-bills and the money that's paid for them gets deposited into the Treasury's account at the Fed. That isn't buying back debt; it's creating more debt.
Plus, you're ignoring where most of the money in circulation comes from, and it isn't the Fed or the treasury. It's the commercial banks. They issue money as they see fit, with zero oversight other than the 10% reserve requirement the Fed imposes on them. That means that effectively, they can lend out $2 for every dollar deposited with them.
In 2009, Obama made some changes in rules for banks issuing credit cards. As a result, the banks closed accounts and lowered credit limits on many more. Effectively reducing the supply of money.
Banks should be allowed to decide how much credit they give, but they shouldn't be allowed to manipulate the nations money supply, which is what the current system allows them to do.
While I don't agree with all of it, I suggest that you go to YouTube and watch "The Secret of Oz". You'll learn something.
Btw... not to be a pain, but any other posts here, I'm going to answer on the AHM forum and just post a link here. I think this discussion is worthwhile, and should be read by more than just the people who read my blog.
One more note: on the END forum, when you post, you can check a box that subscribes you to the thread. You'll get an email every time someone replies to you.
I shall wander over to AHM on my web travels, but I think you miss some fundamental things about money, including QE, and fractional banking: if a bank lends $100, but gets paid back $100, how is the money supply increased? (A bit of a trick question, but it makes a point.)
Reply posted here.
Nice blog.
There needs to be an allowance for time of war or natural disaster when overspending is unavoidable.
Nice blog.
There needs to be an allowance for time of war or natural disaster when overspending is unavoidable.
The problem with that is that it actually encourages war. I think allowing a 10% expansion of the money supply would suffice in such cases, no?
It might encourage war but it's also necessary when war is foisted upon the Republic. War and disasters are not always of a government's choosing but it must have the flexibility to respond.
On the other hand such exceptions could be written in under strict condition such as "We can only overspead on war if we are attacked or to help support our allies".
You may have a point. Although... disasters is another questionable thing. For example, was Katrina a disaster? Should the whole country be obligated to save people who deliberately build a city below sea level in hurricane territory? And then rebuild it in the same place even after it gets wiped out? It seems to me that there should be some personal responsibility tied up in such choices.
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