How Money is Created in Our Country – Part 2

By Colin Stuart McCoy
Editor’s Note: Corrections or clarification to the original article published in 1995, by the Oregon Observer, will be in (parenthesis).

What is the Difference Between Realistic Monetarism and Illusionary Monetarism?

In order to be able to really see how the magical, out of thin air creation of money impacts our daily lives, a person needs to know and understand a few things. (Nothing really magical about it.)
1.) The Gross National Product of the United States {GNP} circa (1995), is approximately 5 trillion dollars. That’s 5000 billion dollars, or 5 million-million dollars worth of sales taking place. The economy of the United States is a large “animal”, you have to smack it pretty hard to get a noticeable reaction
2.) One noticeable reaction would be a noteworthy rise in the inflation rate. The Government of the United States has been spending hundreds of billions of dollars a year more than it takes in, in tax revenues, for decades. The term for that scenario is “deficit spending.” The government has been fairly successful in keeping the inflation rate right around 2 percent and 4 percent while spending money it does not really have. There have been periods, however, when the inflation rates have been higher. The higher inflation rates have occurred for a few reasons. The first reason could be for political reasons. For example, if the (Federal Reserve -Board of Governors ect..), took a real dislike to a president, they could “monkey wrench” the economy to make the president look bad. There is evidence that some point to, (circumstantial ?), as an indication that this has happened more than once since the Federal Reserve was born in 1913.
The second reason for the higher interest rates was due to the Federal Reserve finding out that most of their standard formulas for manipulating the economy were obsolete. The Federal Reserve board members have learned that when working with our complex, (multi- faceted), modern economy, they can’t just plug in a program and check in from time to time. They have learned that a modern economy has to be monitored at all times, (in a more comprehensive manner using all the most modern technologies at their disposal.)(A third explanation for the occurrence of inflation, as a noticeable sign of a problem was due to a de-stabilization or loss of control over the balance of supply vs demand.)
3.) The monetary system of the United States is virtually mirrored by the monetary systems of the other developed nations. (Virtually mirrored, only in so much as they are also not a gold backed currency but “fiat currency” systems as well.)
4.) The “primary” cause of inflation is the de-stabilization of the balance between supply and demand. The only limit to economic stimulation is what limits are necessary to prevent an imbalance in the supply and demand equation. The rate with which we use the resources fueling the economic stimulation must be sustainable.
5.) Communism and socialism are failed economic philosophies that, even when conducted with the good faith of the governments involved, always end up limiting the growth of the individual and therefore the economy as a whole. (As to Communism and Socialism being failed economic philosophies, this is still true. However it must be clarified that their failure is a product of their limited singular use of either Communist, or Socialist processes. Purely Capitalistic models, while being far better in most cases also “fail” when only Capitalistic processes are used or considered. All positive aspects of the various economic models must be incorporated into a total economic model in order to serve the most the best.)
6.) Financial reward can only come to a healthy, hard working person through activities that are found to have value in a free market. Any other belief is spiritually and intellectually bankrupt. (Altruistic efforts are not always seen to be of needed value in purely capitalistic or free market processes, and this is incorrect. Such activities are necessary to the good health of the free market system, and this must be acknowledged. These efforts as well as the people who make said efforts must be nurtured and sustained in any “free market” system that is to be able to accomplish all that is needed for society.)
7.) The economic system that provides the best opportunities and protections for the rights of the individual is a Capitalistic one; one that recognizes the right of the individual to own property, (and protects those rights against any stealthy encroachment thereon.)
(While also still true..If we are serious about trying to decrease the number of needless victims created/facilitated by our current economic systems.. We must recognize and incorporate the positive potentials, when ever needed, of both the Communist and Socialist models. As a needed part of this we must also seek out and eliminate the harmful potentials contained within purely Capitalistic, Communist, and Socialist economic models.)
With this information at a persons disposal and with acceptance of it’s validity, things begin to come into greater focus.
Every time the government tells us we can’t do what is needed or right because of a lack of money, even though the resources exist; we are being told a lie. This is the biggest social lie of our age. (One of the top two anyway.)
When we look at the potential for what could be under the realities of the mechanics of modern economies. (Currency attributes, and controls under Realistic Monetarism principles,)- and then you see the existence and the limits to that existence that are being forced upon us by those in (greater) control, we should all get a little angry. (Perhaps more than just a little.)
Every time our government allows people to starve because there is not enough money, (they say), this is a lie! Every time people die or suffer because of a lack of medical care and we are told that it has to be this way because there is not enough money to treat them, it’s a lie! Every time environmental damage occurs or we’re told it can’t be fixed, (or halted,) because there is not enough money, it’s a lie! Every time we’re told there is a lack of funding for educational opportunities, it’s a lie! (Resource availability, as well as the ability to maintain a sustained draw upon those resources, human and natural, without causing an imbalance between needed stability in the supply vs demand equation, is the only factor that should dictate whether or not needed social/environmental programs take place.)
We live in a world where governments are trying to maintain the illusion that money is a finite resource like oil or wheat. Money is not finite; it’s just a tool to be used in the creation of the most humane form of society possible. Money, as a tool, can help us to achieve a society where we can begin to live again by the values we all hold dear, rather than just paying those values lip service. (Over the past several years, money as a finite resource in and of itself, is an illusion that all have finally begin to see clearly fade)
I call the system we currently live in under “Illusionary Monetarism,” because it ignores the truth/potentials of our modern (fiat) currency. I call the system that I would like to see become reality “Realistic Monetarism” because it operates based upon the true physical realities and potentials of our currency structure. Considering the needs of our modern economic system, our government only needs burden itself with the debt/government securities necessary to meeting the task of inflation control under the auspices of “Realistic Monetarism”, (this in conjunction with other inflation control devices to be newly implemented or that would also remain in effect.)
Government /deficit spending need not burden any government with debt after a few physically simple, yet politically difficult, changes are made.
Why, because under Realistic Monetarism new processes controlled by a fully informed voting populace would dictate when and how much new money would be released into the private sector. (Within frameworks established through international treaty.)
As a selling of government debt is one of the main inflationary control devices currently being used and how as mistakes will no doubt occur in the beginning of the implementation of Realistic Monetarism, the government must be prepared to issue long term securities in order to pull cash out of the economy in the event that the voting populace (or those they select) release too much new money into the economy. (Other new processes that could resemble localized sales taxes could also be used for this purpose with the collected funded being transferred to a null file and extinguished. I like this better than the selling of “Government Securities” tool)
This is a physically simple way to keep our economy moving in a positive direction that would benefit all of the people who are participating in our economy by spending or supplying goods and/or services. It is politically difficult because it would mean scrapping the Federal Reserve as we know it. (This scrapping we speak of would represent changes more in underlying operational philosophies than major changes in how things would look physically.)
As long as money is viewed as something of value in and of itself, rather than just an effective tool for a successful nation, (world), our society will not achieve the “spiritual “, (“social value realization potentials”)..growth it needs.
When we look around at all that is wrong with our world and see the meanness and decay of our values structure: the decline of morality and decency and the “wrong” kind of thinking that goes on now every where. (Wrong as in irrational or without needed reason.) Where does it all come from? What is the source of the energy that nurture the exponential growth of all things horrible, mean, rotten, nasty, evil and perverse while withering into dust things that are innocent, decent, honest, and just?
There is a well read book that offers us a clue as to what that root source may be. In it you will find an interesting quote: “For the love of money is the root of all evil”.
Any guesses as to the title of the book?
When I think of a place where people, who like to stack and re-stack the little piles of money under their control, gather … when I think about where a place must exist where people give money power it was never meant to have, place it upon a pedestal where it, (in manners, or ways) was never meant to be placed, where they worship money in ways it was never meant to be worshiped … I see the Federal Reserve and the people who control it. 
(I think this last might be a little hard on the Federal Reserve, maybe … others might deserve this dubious consideration to a greater degree … The U.S. Congress and the attached lobbyists or special interests? Wall Street securities brokers?? U.S. Supreme Court- I.E. Citizens United??? After these and others perhaps you would find next in line the folks at the Federal Reserve, but upon closer study perhaps they are only guilty of being too human, combined with a common trait of not seeing or looking for the forest because of all the trees around???? A lack of innovative out of the box thinking?) I do see the integrity of process that can often be seen attached to their efforts, but still?????