Part 18: Monetary Reform: Series 1

Difficult conversation:

Joe Bongiovanni,

"Please leave your judgemental hat at home and deal with the substance." Look Joe, I've responded to, among other things, you calling my position Goddamned. When I explained that and asked that you refrain, I heard no apology, no understanding, no nothing. Yet, here you are telling me to leave my judgmental hat at home. Try looking in the mirror. I won't dwell on this sort of stuff, but there is a huge difference between your connotation of the term judgmental as you've used it here and my discernment concerning your motives and approach.

My legal construct does not fail, Joe. The problem is your lack of logic (limited ability to follow a train of thought to its rightful conclusion in this case).

The NEED Act:

(a) In General- For purposes of this Act, the following definitions shall apply:
(1) BUREAU- The term 'Bureau' means the Bureau of the Federal Reserve established under section 314 of title 31, United States Code, as added by section 303.
(2) DEPOSIT- The term 'deposit'--
(A) has the meaning given such term in section 3(l) of the Federal Deposit Insurance Act); and
(B) includes--
(i) a member account (as defined in section 101(5) of the Federal Credit Union Act) in a credit union; and
(ii) any transaction account.

BTW, there's a stray parenthesis (jot/tittle) there. Maybe the site I'm using made that mistake. Someone's not perfect somewhere though

Here's "3(l) of the Federal Deposit Insurance Act":

(l) Deposit
The term "deposit" means—
(1) the unpaid balance of money or its equivalent received or held by a bank or savings association in the usual course of business and for which it has given or is obligated to give credit, either conditionally or unconditionally, to a commercial, checking, savings, time, or thrift account, or which is evidenced by its certificate of deposit, thrift certificate, investment certificate, certificate of indebtedness, or other similar name, or a check or draft drawn against a deposit account and certified by the bank or savings association, or a letter of credit or a traveler's check on which the bank or savings association is primarily liable: Provided, That, without limiting the generality of the term "money or its equivalent", any such account or instrument must be regarded as evidencing the receipt of the equivalent of money when credited or issued in exchange for checks or drafts or for a promissory note upon which the person obtaining any such credit or instrument is primarily or secondarily liable, or for a charge against a deposit account, or in settlement of checks, drafts, or other instruments forwarded to such bank or savings association for collection.
(2) trust funds as defined in this chapter received or held by such bank or savings association, whether held in the trust department or held or deposited in any other department of such bank or savings association.
(3) money received or held by a bank or savings association, or the credit given for money or its equivalent received or held by a bank or savings association, in the usual course of business for a special or specific purpose, regardless of the legal relationship thereby established, including without being limited to, escrow funds, funds held as security for an obligation due to the bank or savings association or others (including funds held as dealers reserves) or for securities loaned by the bank or savings association, funds deposited by a debtor to meet maturing obligations, funds deposited as advance payment on subscriptions to United States Government securities, funds held for distribution or purchase of securities, funds held to meet its acceptances or letters of credit, and withheld taxes: Provided, That there shall not be included funds which are received by the bank or savings association for immediate application to the reduction of an indebtedness to the receiving bank or savings association, or under condition that the receipt thereof immediately reduces or extinguishes such an indebtedness.
(4) outstanding draft (including advice or authorization to charge a bank's or a savings association's balance in another bank or savings association), cashier's check, money order, or other officer's check issued in the usual course of business for any purpose, including without being limited to those issued in payment for services, dividends, or purchases, and
(5) such other obligations of a bank or savings association as the Board of Directors, after consultation with the Comptroller of the Currency, Director of the Office of Thrift Supervision, and the Board of Governors of the Federal Reserve System, shall find and prescribe by regulation to be deposit liabilities by general usage, except that the following shall not be a deposit for any of the purposes of this chapter or be included as part of the total deposits or of an insured deposit:
(A) any obligation of a depository institution which is carried on the books and records of an office of such bank or savings association located outside of any State, unless—
(i) such obligation would be a deposit if it were carried on the books and records of the depository institution, and would be payable at, an office located in any State; and
(ii) the contract evidencing the obligation provides by express terms, and not by implication, for payment at an office of the depository institution located in any State;
(B) any international banking facility deposit, including an international banking facility time deposit, as such term is from time to time defined by the Board of Governors of the Federal Reserve System in regulation D or any successor regulation issued by the Board of Governors of the Federal Reserve System; and
(C) any liability of an insured depository institution that arises under an annuity contract, the income of which is tax deferred under section 72 of title 26.

Now, I don't know how good you are, Joe, at reading law. So far, I don't think you're very good at it, but you may yet disabuse me of that notion. We shall see.

With very few exceptions, the definition of a deposit under the NEED Act includes time and demand deposits and all deposits per general usage and as the Fed and banks may determine (change). In other words, the definition is fairly open-ended and one would not be unreasonable in arguing in court and elsewhere what exactly constituted or constitutes a given circumstance vis-a-vis the legal definition of "deposit." Regardless, the operative point so far here is that deposits are both time and demand.

Concerning the NEED Act:
"(i) a member account (as defined in section 101(5) of the Federal Credit Union Act) in a credit union; and"

The "and" there is not good statutory/contract form. That aside, the fact that after that "and," it says "(ii) any transaction account."

So, is a "transaction account" defined in the NEED Act as anything other than a "deposit" (that includes both time and demand types)? The answer to that is that it is not.

The NEED Act says:

The Secretary shall cause United States Money to enter into circulation by and through any of the following means:
(4) Any action provided for in the transitional arrangements specified in title IV of this Act, including the conversion of all deposits in transaction accounts into United States Money.

Fine. Other than that, all the action concerning "transaction accounts" occurs in SEC. 402.

"(a) Conversion Process-" Is not at issue here. Time deposits can earn interest. Fine.

"(c) Accounts in General- Before the effective date, the Monetary Authority shall prescribe new lending and accounting regulations for various types of accounts including transaction accounts and time deposit accounts described in subsections (d) and (e)."

It says, "including transaction accounts and time deposit accounts." However, as only an imbecile won't have seen already, for purposes of the Act in its current form, time deposit accounts are transaction accounts. It's not critical, yet.

Now we come to (d) where all the action is concerning the clear and plain ambiguity/lack of clarity and which I have pointed out numerous times now but that Joe has not been able to see for lack of trying.

(d) Transaction Accounts-
(1) FRACTIONAL RESERVE BANKING ENDED- The regulations prescribed under subsection (c) shall provide that--
(A) any depository institution shall have a fiduciary responsibility for the money of any depositor on deposit in a transaction account which--
(i) shall be held for the exclusive use of the account holder; and
(ii) may not be used by a depository institution to fund loans or investments;

Okay, that's not worded very well to preclude misunderstandings that what is meant there concerns demand deposits and not time deposits. I would strengthen the language to avoid arguments.

"(B) a dollar of United States Money shall be on hand or in a Federal Government account for each dollar in a transaction account;"

Transaction accounts include all deposits. The banks will have an equal amount on deposit with the Federal Government as on deposit with the banks (time and demand). Remember, so far, a transaction account is defined as follows:

"(3) money received or held by a bank or savings association, or the credit given for money or its equivalent received or held by a bank or savings association, in the usual course of business for a special or specific purpose, regardless of the legal relationship thereby established, including without being limited to,...."

"without being limited to" there is huge. What it means is all money, period. All money the bank has shall be mirrored in money deposited with the Federal Government. So, we must read on to see if that's handled.

d) Transaction Accounts-
(2) TRANSACTION ACCOUNT DEFINED- For purposes of this section [SEC. 402 only], the term, 'transaction account'--
(A) means a deposit or account on which the depositor or account holder is permitted to make withdrawals by negotiable or transferable instrument, payment orders of withdrawal, telephone transfers, or other similar items for the purpose of making payments or transfers to third persons or others; and
(B) includes demand deposits, negotiable order of withdrawal accounts, savings deposits subject to automatic transfers, and share draft accounts.

We are to preclude time deposits then concerning SEC. 402. So, Joe, you probably think I've proved your point; but there's this:

(a) Conversion Process-
(A) IN GENERAL- All deposits at any depository institution shall be designated as and treated as United States Money (either cash or an electronic equivalent) and as transaction accounts.

"All deposits" there is per the Act's definition of deposits. We've already seen that deposits include all time and demand deposits. Therefore, all time deposits become SEC. 402 transaction accounts, but SEC. 402 transaction accounts exclude what SEC. 402 just included. Do you know what ambiguity means, Joe? Whether or not I know what the drafters intend is irrelevant to cleaning up the Act so it won't have circular problems such as this one.

"All deposits...shall be designated...transaction accounts" is broken.

I spent an inordinate amount of time showing how this is all a problem, and it is broken for more than the reasons I've spelled out here in this session. I already said in prior sessions it impacts upon what and how the banks may lend even time-deposit money. That still stands.

However, here's at least a possible beginning on fixing the language. It would be nice were others to help work on the actual language rather than spin. I can already think of how this must circle back to be checked all the way through to see whether it would work or exactly where the fix should begin so as to require the least editing of the Act as a whole:

Replace 402(a)(1)(A) with:

For purposes of this section, all deposits or accounts on which the depositor or account holder is permitted to make withdrawals by negotiable or transferable instrument, payment orders of withdrawal, telephone transfers, or other similar items for the purpose of making payments or transfers to third persons or others; and all demand deposits, negotiable order of withdrawal accounts, savings deposits subject to automatic transfers, and share draft accounts shall be designated as and treated as United States Money (either cash or an electronic equivalent) and as transaction accounts.

Delete 402(d)(2):

TRANSACTION ACCOUNT DEFINED- For purposes of this section, the term, 'transaction account'--
(A) means a deposit or account on which the depositor or account holder is permitted to make withdrawals by negotiable or transferable instrument, payment orders of withdrawal, telephone transfers, or other similar items for the purpose of making payments or transfers to third persons or others; and
(B) includes demand deposits, negotiable order of withdrawal accounts, savings deposits subject to automatic transfers, and share draft accounts.

By doing this, the circular problem with "deposits" is removed. It's not hard, but it does require changing jots and tittles.

I will grant that my prior comments took too much for granted concerning relative abilities to know what is "understood." I will endeavor to spell things out more in future. I'm not used to having to do it to this extent, but I will make the adjustment for the sake of the many.

"I never brag about which "roads I've been down"." Well, you are a huge name dropper; and you glorify your father and bask/brag in his memory. He knew so much and taught you that you don't need to brag about yourself. All you need to do is mention your dad. As for what I said constituting bragging, that's your take. I didn't submit my resume before writing a great deal on this discussion thread. The one and only reason I brought up my background was to possibly get you to perhaps consider that you might not be seeing something. I'm not going to play ego games here. I don't show the hole in my coat to prove my humble circumstances. I have experience that I shouldn't have found necessary to mention. My prior efforts here should have been enough to show, but you are fond of saying how MMTers think of themselves as the smartest people in the room while you come across that way about yourself. You're not stupid, Joe; but I don't see you as being the smartest guy in the room, even though you act like it about yourself.

I find your "With my apologies to others" expression supercilious and probably not a view shared much by the others here, who have at least been willing to entertain my input without acting as if they own the place and the NEED Act.

I do note the lack of others saying whether or not they see the specific wording problems I've shown. Perhaps they were waiting for the details I've now supplied. I hope that's all it is. Maybe they just read you as one who will not work on the bill's wording, but they don't want to be run off by you.

Moving on to your next reply and regarding the Revolving Fund, look Joe, you're not taking me to school on the Act or what can or can't be done with the money. My point, which assumed too much concerning you, was that instantly, the banks will be faced by the ending of cash flows upon which they had planned and built. Paying off the National Debt is something you cited concerning velocity, but that will come as due (as you said yourself). Plus, I had already made quite clear that I'm for paying it all off now. So, do you remember who you're talking to and what that person has already made clear he or she knows?

Your second point concerned rehashing the money multiplier and the reduction in the money supply upon loan repayments.

A bank enters into a contract for a new high rise. It has done the financial projection that led it to believe that it will be able to afford paying the architects, engineers, and general contractors, etc. It has used in its projections its forecasted lending and interest profits, etc. That interest-earnings cash (flow) is not unspendable money for the bank when repaid. It doesn't disappear. Let's not be talking apples and oranges here. I'm speaking in ways here that are irrelevant to, beyond, the money-multiplier debate.

Suddenly, the bank may only offer loans against time deposits which will not be sufficient to fund the on-going construction project(s).

Who's liable? Don't tell me it's not even theoretically possible. Do you think that the banks aren't going to say something about this during congressional hearings concerning the NEED Act? Please. You don't understand cash flow interruptions and what they mean to business? Have you never run a business? My plan handles it. Yours doesn't.

So, under the NEED Act, the banks are supposed to come with hat in hand looking for liquidity and solvency due to the Act. That's no way to run a railroad. Didn't your dad ever tell you that?

As for your quip about your father, "He was a monetary reformer before you were an idea," do you want to compare fish? Brother. I wasn't supposed to mention my experience, but here you are. It doesn't matter whether your dad was a monetary reformer or not for purposes of working on the wording of the legislation. As for when I first became an idea, don't bet on it.

You went on to disregard my concern for throwing people out of work. You missed the point, as usual. The MA messing up spending to regulate inflation/deflation and maintain/increase employment in conjunction with the cash-flow issue I cited was my focus.

"Why do you conjure up unemployment from a bank going bust?" What a heartless attitude. That's why I hate capitalism! I suppose you've never been hungry and homeless either. The whole NEED Act is supposed to be about heart; otherwise, I can guarantee it that Dennis Kucinich wouldn't touch it. He's closer to what I think than to your callousness.

"Don't you think banks should fail?" Where have you been? I'm for one nationalized bank. How could it fail without humanity failing? Commercial banks can be handles by nationalizing those that "fail," which could mean that all the tens of thousands of employees who did not make any of the bad decisions made at the top would not be thrown out of work placing emergency pressures on the system to keep them in their homes, etc. Are you really a Progressive? You talk like one and then turn around a talk like a Libertarian-Capitalist. Make up your mind.

"Why are we bothering to talk about this conjured up stuff when there is nothing being said about, first, what is wrong with the Bill and, second, on how to fix what is wrong?" You don't know how stupid that sounds.

"shoot-the-messenger" Spare us. You are the messenger of what? You are the messenger for whom? I have focused on the language of the bill and on underlying ideological issues and competing schools of thoughts. You haven't liked that. Too bad! Tough luck.

Nevertheless, may God bless,

Tom Usher


Hi John Hermann,

That's the first reply were I'm surprised by a very short attention span on your part.

I didn't stake out a position concerning brokered CD's. You read that in. I was simply informing you that they were not solely what you were suggesting. It had nothing to do with credit-money, which if you will search your memory concerning me and what I've written in this whole thread is something I've been against and have been from the start.

Also, pertaining too, "Tom also said: " John, outline the flow-of-funds in an endogenous-only system (sans the government creating money). I don't see it," why did you pick that out when my comment went on to say that you had spoken to it in a later comment to Joe?

I said, "I think your answer to Joe of 2 days ago probably laid out your view. What I see there is where what I've said and where Hummel agrees (I came to it independently – never heard of Hummel before I had already arrived at one bank) but absent any further socialism and rather an unbridled capitalism. Will you clarify? After the one bank is created that neither borrows nor lends (my position, and apparently Hummel's too), then what level of Adam Smith's invisible hand is responsible for all funding versus what I advocate, which is local, democratic council consensus-building and decision-making with governmental funding via United States Money/Notes?

"It seems that your second reply of 2 days ago further clarified (in your mind) by stating that you had not intended to suggest that the money creation would not be governmental. Nevertheless, please address the laissez-faire versus socialist approach."

You didn't address the thrust of my comment but went into a bit on endogenous versus exogenous. On that though, pardon me, but who are the arbiters concerning this and economics? These are terms subject to semantical position/interpretation. What you consider inside or outside is something that works for you, you think, within your context. However, I specifically asked about laissez-faire versus socialism. If that doesn't cause you to understand a context shift, where do you need me to explain? I would have thought you'd see it, but this thread has amazed me with what doesn't get seen.

"reactive (not proactive), so that the overall process is endogenous" Have you not heard that we are made up of parts? I'm sure you have. I hope you take my point without my having to backup too far to flesh it out. There are many issues of private versus public in the whole NEED Act discussion. I was trying to figure out where you stand on socialism versus anarcho or other so-called forms of capitalism. Can you speak directly to that in language a teenager would understand – humor me.

Much of the rest of what you said is cleared up by my reply to Joe.


Monetary Reform: Series 1


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  • Tom Usher

    About Tom Usher

    Employment: 2008 - present, website developer and writer. 2015 - present, insurance broker. Education: Arizona State University, Bachelor of Science in Political Science. City University of Seattle, graduate studies in Public Administration. Volunteerism: 2007 - present, president of the Real Liberal Christian Church and Christian Commons Project.
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