Wednesday, February 20, 2013

Restoring the Federal Reserve


As should be evident from the previous postings on this blog regarding Delegate Bob Marshall’s proposal for a study of currency reform, the Commonwealth of Virginia has a unique opportunity to lead the rest of the country in a fundamental financial reform that has the potential to revitalize the entire U.S. economy.

That is why it was so gratifying to receive some very positive commentary about the “campaign” to get Bob Marshall to talk to Norman Kurland from Dr. Norman Bailey, a prominent economist who supports the goals of Capital Homesteading.  It also represented another opportunity to write to Mr. Marshall, who might appreciate some brief e-mails of support from other people — whether or not they live in Virginia.  He can be reached at delegatebobmarshall [at] Hotmail [dot] com.

February 15, 2013

Dear Mr. Marshall:

Yesterday, Dr. Norman Bailey, former Director of Planning and Evaluation for the National Security Council under President Ronald Reagan, later appointed Special Assistant to the President and Senior Director of International Economic Affairs at the White House, sent me an e-mail after reading the letters I’ve been sending to you.

Dr. Bailey, who has contributed numerous articles to the Yale Law Review and other periodicals, is a leading authority on monetary theory and its sound application.  He has, to a significant degree, guided CESJ in developing the proposed monetary and tax reforms embodied in Capital Homesteading.  More about Dr. Bailey’s impressive credentials can be found if you click on this link.

While it didn’t occur to me, Dr. Bailey noted something that should be obvious the moment it is pointed out.  As he said,

“Why not suggest that instead of trying to ‘return’ to a gold currency, the Commonwealth lobby the Richmond Federal Reserve Bank to refuse to accept for discounting anything but real bills?  I believe you will find that although the right has not been exercised for many decades, the regional Fed banks can adopt their own policies in this area.  In fact, that was the whole point of having not a ‘central bank’ as such, but a series of regional banks to supply liquidity as needed to the commercial banks in their respective regions.”

Dr. Bailey’s suggestion answers any objections that might remain once the critical issue of collateralization is addressed with capital credit insurance and reinsurance.  By rediscounting bills used to finance expanded ownership of new capital, the Richmond Federal Reserve — or any other regional Federal Reserve Bank, for that matter — could provide financing for all feasible capital projects without being limited by existing accumulations of savings.

Further, this would be done without redistributing existing wealth through inflation, or by putting it on the backs of the taxpayers.  By financing new capital formation with the present value of future increases in production instead of past cuts in consumption, mass consumption power would not only be sustained, but increased, stimulating economic growth and, yes, creating meaningful and productive jobs without subsidies or raising the minimum wage.

Again, this would be done without the standard Keynesian tools of inflation or taxation.  It would institute an elastic, stable, and asset-backed currency to replace the inflationary and volatile currency backed by government debt — but without the necessity of a “Virginia-Only” or parallel monetary system.  Consistent with the principles of social justice, this approach would reform and restructure, not undermine or destroy the existing system.

Dr. Bailey’s comments open up a means of realizing the program presented in CESJ’s book, Curing World Poverty (1994), within a very short time, and with significant benefits not only to the Commonwealth of Virginia, but to every citizen.  As you commented to Norman Kurland, the book’s principal author,

“Your free-enterprise approach to solving poverty with the founding of the Center for Economic and Social Justice is the fundamental perspective needed to bring people to economic independence.  Your years of study and research in order to write Curing World Poverty: The New Role of Property is a generous contribution to the betterment of much more than our local community.”

Again, I urge you to call Norman Kurland at your earliest convenience to discuss this critical issue.

Yours, etc.

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