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Dennis Kucinich: Delete The Fed


Karl Denninger

I’m stunned.

Really.

Dennis Kucinich, which many people have (properly) labeled as one step removed from a communist in the past, and who has a reputation as having a hard-core left slant in his politics, has just written up and introduced a bill that will fundamentally restore the free market – for real – to banking and credit.

It will also **** a lot of people off.

His bill would end the process of money issuance by The US Federal Government as a debt instrument.  It would thus restore actual “lawful money” as Ron Paul claims to want, but in a form he has never, ever elucidated.  It does, however, exactly match up with the base position I have propounded upon, along with Bill Still and a few others.

Instead, Treasury would issue and spend into circulation United States Notes.  The existing “FOMC” would be replicated in Treasury with a mandate identical to The Fed’s, with one important addition – a requirement that their operations be neither inflationary or deflationary.

That is, the precise mandate that is required – that United States Money maintain its purchasing power.

It would bring into effective existence my One Dollar of Capital standard for bank lending, by requiring that all lending be funded by either a loan granted by Treasury (where interest would inure to the Government, not a private bank) or be funded by the issuance of private debt with no government backstop.

It would absolutely bar the use of depositor reserves for any lending purpose whatsoever – that is, if you deposited funds into a transaction account (any sort of “demand” account) the bank would have to hold the funds as an actual custodian with fiduciary requirements for performance. Other than by direct and punishable fraud, depositor losses would instantly become impossible.

Note that this bill would not bar lending at interest.

However, it would immediately end the abuse and extortion of The United States Federal Government by banks and other institutions who argue that they “cannot be allowed to fail”, then using that power of extortion to extract monstrous amounts of money from the economy for their personal benefit – by some estimates, as much as 20% of GDP.  It would force the government to actually borrow by specific Congressional authorization in order to spend beyond its means.  Such borrowing would have to be funded in the open market as the “Primary Dealer” nonsense would instantly end, so if the Government overspent it could be immediately reined in and stopped by the open market simply by refusing to buy (or demanding a very high interest rate.)

Many people say that Democrats are the party of “overspending.”  Well, not any more.  When one of the standard-bearers of The Left produces a work like this, and actually propounds that it be passed into law, immediately ending all of the abusive practices of the financial industry, the usual claims of the folks on the “right” side of the aisle are turned on their ear.

We’re about to find out if people like Ron and Rand Paul really stand for what they claim, or if they’re empty suits.  If they do, then I expect to see them on the Tee Vee within hours demanding passage of this bill, and joining with Mr. Kucinich in making sure that it is immediately reintroduced in the new Congress – and passed.

This is a bill that must become law.

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