Thomas Edison on Government Created Debt-Free Money
In December 1921, the American industrialist Henry Ford and the inventor Thomas Edison visited the Muscle Shoals nitrate and water power projects near Florence, Alabama. They used the opportunity to articulate at length upon their alternative money theories, which were published in 2 reports which appeared in The New York Times on December 4, 1921 and December 6, 1921.
Objecting to the fact that the Government planned, as usual, to raise the money by issuing bonds which would be bought by the banking and non-banking sector — which would then have to be paid back with money raised from taxes, and with interest added — they proposed instead that the Government simply create the currency it required and spend it into society through this public project.
Thomas Edison made it plain in the following excerpt from The New York Times, December 6, 1921 issue (“Ford Sees Wealth In Muscle Shoals”).
Here, the reporter is quoting Edison:
“That is to say, under the old way any time we wish to add to the national wealth we are compelled to add to the national debt.
“Now, that is what Henry Ford wants to prevent. He thinks it is stupid, and so do I, that for the loan of $30,000,000 of their own money the people of the United States should be compelled to pay $66,000,000 — that is what it amounts to, with interest. People who will not turn a shovelful of dirt nor contribute a pound of material will collect more money from the United States than will the people who supply the material and do the work. That is the terrible thing about interest. In all our great bond issues the interest is always greater than the principal. All of the great public works cost more than twice the actual cost, on that account. Under the present system of doing business we simply add 120 to 150 per cent, to the stated cost.
“But here is the point: If our nation can issue a dollar bond, it can issue a dollar bill. The element that makes the bond good makes the bill good. The difference between the bond and the bill is that the bond lets the money brokers collect twice the amount of the bond and an additional 20 per cent, whereas the currency pays nobody but those who directly contribute to Muscle Shoals in some useful way.
” … if the Government issues currency, it provides itself with enough money to increase the national wealth at Muscles Shoals without disturbing the business of the rest of the country. And in doing this it increases its income without adding a penny to its debt.
“It is absurd to say that our country can issue $30,000,000 in bonds and not $30,000,000 in currency. Both are promises to pay; but one promise fattens the usurer, and the other helps the people. If the currency issued by the Government were no good, then the bonds issued would be no good either. It is a terrible situation when the Government, to increase the national wealth, must go into debt and submit to ruinous interest charges at the hands of men who control the fictitious values of gold.
“Look at it another way. If the Government issues bonds, the brokers will sell them. The bonds will be negotiable; they will be considered as gilt edged paper. Why? Because the government is behind them, but who is behind the Government? The people. Therefore it is the people who constitute the basis of Government credit. Why then cannot the people have the benefit of their own gilt-edged credit by receiving non-interest bearing currency on Muscle Shoals, instead of the bankers receiving the benefit of the people’s credit in interest-bearing bonds?” moreTHIS is what bothers most people about banking and fractional lending. The banks push a few buttons and YOU get to work for 30 years paying them money.
Understanding Why Baseball is Important
by For Madison | November 5, 2010 - 4:30pm
Okay. Let me see if I understand this.
I take out a mortgage for my house as a loan from the bank. The bank does not loan me money that it has, it creates a credit against their assets. So, they’ve just created hundreds of thousands of dollars that didn’t previously exist, by typing numbers into a computer. But I will then repay them this money, plus interest – and I pay the interest first. So, by creating a credit out of thin air, they have made, say, half a million dollars. Woohooo! moreAnd then there was this unusual political bet.
Senate Candidate Bets Congress $100 Million That the U.S. Government Cannot Run out of Money
Warren Mosler Offers $100 Million of His Own Money to Pay Down the Federal Deficit If Any Lawmaker Can Prove Him Wrong
WATERBURY, Conn.--(BUSINESS WIRE)--Warren Mosler, Connecticut’s Independent candidate for U.S. Senate today announced that it is an indisputable fact that U.S. Government spending is not operationally constrained by revenue and will give $100 million of his own money to pay down the Federal deficit if any Congressman or Senator can prove him wrong. “I am running for U.S. Senate to see my policies implemented to create the 20 million jobs we need. And to do this it must be understood that there is simply no such thing as the U.S. Federal government running out of money, nor is the Federal government operationally dependent on borrowing from China or anyone else. U.S. states, individuals, and companies can indeed become insolvent, but U.S. government checks will never bounce,” states Mosler. “Yes, large Federal deficits that push the economy beyond the point of full employment can lead to inflation or currency devaluation, but not bankruptcy and not bounced checks. If lawmakers today understood this fact, they would not be looking to cut Social Security and we would not still be mired in this disastrous recession.”
With 37 years of experience as an ‘insider’ in monetary operations, Mosler knows that President Obama is wrong when he says that the U.S. government has ‘run out of money’ and is dependent on borrowing from China in order to spend. As Fed Chairman Bernanke publicly stated in March of 2009, the Fed makes payments by simply marking up numbers in bank accounts with its computer. Mosler explains further; “The Government doesn’t get anything ‘real’ when it taxes and doesn't give up anything ‘real’ when it spends. There is no gold coin that goes into a bucket at the Fed when you are taxed and the government doesn't hammer a gold coin into its computer when it spends. It just changes numbers in our bank accounts.” Mosler likens this scenario to a football game; when a touchdown is scored, the number on the scoreboard changes from 0 to 6. No one wonders where the stadium got the 6 points, no one demands that stadiums keep a reserve of points in a “lockbox” and no one is worried about using up all the points and thereby denying our children the chance to play.
Warren Mosler urges his opponents, Linda McMahon and Richard Blumenthal, and the entirety of Congress to recognize how the monetary system actually works and implement a full payroll tax (FICA) holiday and his other proposals to restore full employment and prosperity while not cutting Social Security benefits or eligibility. more
Time for a New Theory of Money
By understanding that money is simply credit, we unleash it as a powerful tool for our communities.
by Ellen Brown posted Oct 28, 2010
The reason our financial system has routinely gotten into trouble, with periodic waves of depression like the one we’re battling now, may be due to a flawed perception not just of the roles of banking and credit but of the nature of money itself. In our economic adolescence, we have regarded money as a “thing”—something independent of the relationship it facilitates. But today there is no gold or silver backing our money. Instead, it’s created by bankswhen they make loans (that includes Federal Reserve Notes or dollar bills, which are created by the Federal Reserve, a privately-owned banking corporation, and lent into the economy). Virtually all money today originates as credit, or debt, which is simply a legal agreement to pay in the future.
Money as Relationship
In an illuminating dissertation called “Toward a General Theory of Credit and Money” in The Review of Austrian Economics, Mostafa Moini, Professor of Economics at Oklahoma City University, argues that money has never actually been a “commodity” or “thing.” It has always been merely a “relation,” a legal agreement, a credit/debit arrangement, an acknowledgment of a debt owed and a promise to repay.
In the payment system of ancient Sumeria, prices of major commodities were fixed by the government. Interest was also fixed and invariable, making economic life very predictable.
The concept of money-as-a-commodity can be traced back to the use of precious metal coins. Gold is widely claimed to be the oldest and most stable currency known, but this is not actually true. Money did not begin with gold coins and evolve into a sophisticated accounting system. It began as an accounting system and evolved into the use of precious metal coins. Money as a “unit of account” (a tally of sums paid and owed) predated money as a “store of value” (a commodity or thing) by two millennia; the Sumerian and Egyptian civilizations using these accounting-entry payment systems lasted not just hundreds of years (as with some civilizations using gold) but thousands of years. Their bank-like ancient payment systems were public systems—operated by the government the way that courts, libraries, and post offices are operated as public services today.
In the payment system of ancient Sumeria, goods were given a value in terms of weight and were measured in these units against each other. The unit of weight was the “shekel,” something that was not originally a coin but a standardized measure. She was the word for barley, suggesting the original unit of measure was a weight of grain. This was valued against other commodities by weight: So many shekels of wheat equaled so many cows equaled so many shekels of silver, etc. Prices of major commodities were fixed by the government; Hammurabi, Babylonian king and lawmaker, has detailed tables of these. Interest was also fixed and invariable, making economic life very predictable.
Grain was stored in granaries, which served as a form of “bank.” But grain was perishable, so silver eventually became the standard tally representing sums owed. A farmer could go to market and exchange his perishable goods for a weight of silver, and come back at his leisure to redeem this market credit in other goods as needed. But it was still simply a tally of a debt owed and a right to make good on it later. Eventually, silver tallies became wooden tallies became paper tallies became electronic tallies. moreI have always theorized that money was simply information, but I can agree with Ms. Brown here.