According to the Bureau of Fiscal Service, America’s public — and completely non-productive — debt and liabilities now stands at $42.9 trillion and rising. At the same time, America’s net worth in private sector agricultural, industrial, and commercial wealth is estimated at $123.8 trillion, while the federal government owns $5.2 trillion in assets.
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| Henry C. Adams |
No one in power seems very concerned about the debt, but it is a serious problem. The surest way for a country to decline is to get itself into the non-performing debt trap and suffer from the illusion that issuing worthless currency and creating money and spending it like a drunken sailor on leave is the road to national prosperity. No, as Henry C. Adams noted at the end of the nineteenth century in Public Debts,
The tendency of foreign borrowing is in the same direction as that of domestic borrowing. As the latter obstructs the efficiency of constitutional methods, so the former tends to destroy the full autonomy of weak states. The granting of foreign credit is a first step toward the establishment of an aggressive foreign policy, and, under certain conditions, leads inevitably to conquest and occupation. . . . The facts disclosed permit one to understand how deficit financiering, carried so far as to result in an interchange of capital and credit between peoples of varying grades of political advancement, must endanger the autonomy of weaker states unable to meet their debt-payments. Provided only that the interests involved are of sufficient importance to make diplomatic interference worth the while, the claims allowed by international law will certainly be urged against the delinquent states, and the citizens of such states may regard themselves fortunate if they succeed in maintaining their political integrity. (Henry C. Adams, Public Debts, An Essay in the Science of Finance. New York: D. Appleton and Company, 1898, 25, 28-29.)
Ironically, the entire national debt could be transformed from non-performing to performing within a very short time (one to two years), and repaid within thirty to forty years or even sooner if the United States adopted a program of “Total Financial Mobilization” to get rid of non-productive debt, create full employment of labor and capital, save Social Security, eliminate student debt, establish and maintain the U.S. Dollar as a uniform, stable, elastic, and asset-backed reserve currency, among a host of other benefits — and all by adopting the Economic Democracy Act.
Total Financial Mobilization (TFM) is a concept based on marshalling all financial resources of a country to achieve a goal, whether it be national sovereignty or national solvency . . . which, as Adams noted, often go together. Further, TFM would do this in a way that brings general prosperity in which everyone can participate instead of inhibiting it or allowing only a small elite to benefit.
The program is divided into direct and indirect financial mobilization. We define direct financial mobilization as using existing money raised to be spent on defense. Indirect financial mobilization, on the other hand, means monetizing existing wealth and creating new asset-backed money in ways that
· Retain financial resources within the country,
· Make more funds available for debt reduction through borrowing or taxation, and most important,
· Broaden the base of capital ownership in the country.
Ideally, every citizen would become a capital owner with a defined ownership stake and thus a personal interest in keeping their country (the United States or anywhere else) free, independent, sovereign, and economically and politically democratic.
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| When government creates money . . . |
Unlike current policy in most countries and virtually all other proposals and plans, Total Financial Mobilization does not rely on issuing new government debt in the form of bills of credit (newly created government money backed by future taxes that may never materialize), existing savings, grants, or foreign loans to sustain the defense effort.
Foreign grants, loans, and infusions of investment capital, frankly, cannot be sustained indefinitely and, being largely dependent on foreign sources, are not reliable. Private sector foreign investors or lenders, after all, should be cautious about investing other countries, while foreign governments have limited resources and must give priority to their own interests.
Total Financial Mobilization, therefore, does not rely on spending existing money to keep the economy going, but which would draw resources away from the debt reduction effort. Rather, in Total Financial Mobilization, existing financial resources would be used more efficiently for debt reduction, and new financial resources would be created to encourage participatory private sector economic growth. New production for general consumption would be financed with the present value of future profits from increased production instead of past and current reductions in consumption.
In contrast to traditional financial and economic thinking (the false dichotomy of the supposed “guns or butter” dilemma), economic growth within the Just Third Way paradigm creates financial resources on which the debt reduction effort can also draw instead of forcing the country to choose between economic growth or debt reduction.
Consistent with classic banking theory and the principles of the science of finance as applied in the Just Third Way, then, the idea of Total Financial Mobilization is to:
· Expand the domestic monetizing of future production to finance private sector growth and increase taxable income through commercial banks and the Federal Reserve,
· Monetize the country’s existing wealth for debt reduction purposes, and
· Lay the groundwork for continuing the feasible and sustainable private sector financing in ways that increase the number of capital owners.
In this way, it will be possible to, as R. Buckminster Fuller put it in his “Challenge” for the future: “Make the world work for 100% of humanity, in the shortest possible time, through spontaneous cooperation without ecological offense or disadvantage of anyone.”
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