"No Gold; Britain's Positive Money Movement; NEED Act; and more": Part 31: Monetary Reform: Series 1

Hi Mark Morehouse,

The fact that gold is limited is exactly why NEED Act proponents don't want it. There are many other reasons too. As for gold being "money," it would be no more or less money than anything else we settle on as our medium of exchange.

You wrote, "Monopoly in banking is more injurious than monopolies in other industries. They are always maintained by government and restrict commerce. Only the free market can adequately provide the services needed by a civilized society."

So, your position is that the NEED Act can't accomplish what it is designed to accomplish in terms of infrastructure funding sans inflation/deflation. You are an anti-Greenbacker. You don't like Greenbacks (United States Notes). You'd rather go back to the Gold Standard or something else but still based upon gold. You are a laissez-faire/anarcho capitalist and don't like any public property or services. Everything should be privately held. Is that right? If not, please clarify/elaborate.


Tom Usher


Joe Bongiovanni,

I'm still listening.

"How Money is Made / Created: Ben Dyson Explains the Debt Crisis" is a good video. Thanks for sharing it.

The only thing I disagree with is the idea that lending for housing doesn't help the real economy. He should have left room for the construction industry. Construction, if done correctly, can be every bit as productive as plenty of types of manufacturing -- it is sort of manufacturing afterall.

His point though was focused in on ease of bubble creation by virtue of the ease of lending in housing. I take his point there. It was right on.

I'm about to watch the second video now.


If the government were to not take loan-repayment money from the banks but at the same time, stop any new fractional-reserve loans and then just create new United States Money and spend it into the real economy, what would that do as opposed to taking the money away from the banks?

I still think nationalizing the Federal Reserve Notes, declaring them United States Money, is a distinctly workable possibility, cheaper, and more environmentally intelligent.

The banks would pay whatever they owe to whomever until the fractional-reserve money were to dry up. The rate of inflation/deflation wouldn't be any different than were the government to take the money from the banks.

I guess the NEED Act doesn't want to leave all those Federal Reserve Notes in the hands of the banksters even if declared United States Money (debt-free). The government wouldn't have as much inflation-free money as quickly in that case.

The vast majority of money is debt-money though and not Federal Reserve Notes. There must be a workable balance there, an equation/ratio.

In addition, I sure would like to see a working model of the debt-money working its way back through the banking system until all loans are repaid. I wonder how many times money would have to change hands, if at all, until the final shoe were to drop.

The most basic fractional-reserve model assumes all fractional-reserve money disappears upon repayment before the banks pay any debts -- that the banks use mostly interest earnings and fees (and zero fractional-reserve-loan-repayment "principal") to pay bank debts.

How many bankers taking a repayment who would be asked to hand the money over to the government would say to the government that the given bank needs to channel it elsewhere? What documentation would the bank be able to produce to prove that?

Question: Does every debt built within the fractional-reserve system extinguish with repayment to the first bank/originating bank or is there a chain? I think it extinguishes with the first bank (which is the originating bank).

I should think it only fair to audit the banks though to determine how solvent they are at the time of transition so that none would be allowed to fail that were truly not over leveraged but rather following non-fraudulent rules. Those who have built a house of cards on toxic so-called securities, etc., would be taken over and liquidated or reorganized or what have you.

That's what should have happened anyway.

Those who were prudent and would simply face an otherwise avoidable cash-flow crunch by virtue of the loss of properly forecast fractional-reserve lending should not be left out to dry.

What do you think?


"The lending banks, however, do not expect to retain the deposits they create through their loan operations. Borrowers write checks that probably will be deposited in other banks. As these checks move through the collection process, the Federal Reserve Banks debit the reserve accounts of the paying banks (Stage 1 banks) and credit those of the receiving banks." -- Modern Money Mechanics

This only matters when the loan proceeds are deposited in another bank (not the lending bank).

Also, a bank doesn't necessarily have to borrow to lend when excess reserves are lacking. It can sell assets to meet the reserve requirements when checks/transactions clear. The bank may also borrow directly via the Fed.

"In the real world, a bank's lending is not normally constrained by the amount of excess reserves it has at any given moment. Rather, loans are made, or not made, depending on the bank's credit policies and its expectations about its ability to obtain the funds necessary to pay its customers' checks and maintain required reserves in a timely fashion." -- Modern Money Mechanics again

In thinking some more about my recent comment concerning the video(s), links to which Joe supplied, it occurred to me that I should qualify my comments by way of saying that when I said I don't disagree, I was referring solely to the video's representation of the status quo and not to its prescriptions in total.

Scott, would you tax the landholdings of non-profits? Also, Mosler is citing the similarities and ignoring the differences. The differences are huge and directly related to class consciousness and struggle. He doesn't have your heart, although his is better than most.

Joe, I find the following language to jibe nearly exactly with the thrust of my previous commentary: "As per section 24(1)(c) the aggregate liability to the Bank of England – which is the aggregate of all the former current accounts – shall be repaid by the institution at a schedule that shall correspond to the maturity profile of the institution's loan portfolio. This shall be done in such a way as not to jeopardise the cash flow or the financial health of the institution."

I also found it very timely to my own thoughts and my comments here that the notes you cited and quoted also stated: "Furthermore, this aggregate figure is for the purposes of an accounting process only, and no actual money is held."

When a loan is repaid and the amount extinguished, there is no actual money. Paying anything over to the federal government is an accounting entry. Not paying anything over is no windfall if no further fractional-reserve banking is allowed going forward. If the federal government were not to transition loan-repayment money, which would otherwise extinguish, into United States Notes or Money but would rather simply leave the banks out of it entirely and just begin spending money into the real-economy at a proper rate to avoid inflation/deflation and to increase real-economy growth and employment, it would likely eliminate many steps and concerns. As it is now in the Act, the money that is transitioned is parked in the Revolving Fund until moved/spent/lent.

The need for doing it the way the NEED Act suggests escapes me. At this point, I think it's just needless extra steps. Does anyone have any defense against that? If I'm missing a required reason for the way the Act is proposed over and above my points, I'm listening.

Regardless, as I've said repeatedly in this thread now, the NEED Act needs language to protect non-fraudulent bankers (defined as such not because they didn't practice legal fractional-reserve lending but because they didn't engage in the types of fraud very clearly and often discussed by Bill Black). This point of mine is in keeping with the spirit of the "Positive Money plan," which spirit was lacking in your own commentary in this thread, Joe. I find it interesting that you actually posted a follow-up comment containing the following:

"In case anybody missed it, this is in there:
"'This shall be done in such a way as not to jeopardize the cash flow or the financial health of the institution.'"

I certainly did not miss it. Why though did you pooh-pooh my same concerns but turn around and point to the Positive Money effort in a positive manner? I'm not trying to pick a fight with you, Joe, or to embarrass you or score points or anything of the like. I'm simply wanting to know why the difference? Was it just a simple misunderstanding?

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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