Here's today's squeak from the wheel (should we rename the blog, "Squeaks from the Wheel"? There's probably already one named that). Anyway, if you want to help grease the movement a little, you can send a similar letter of your own. Feel free to plagiarize.
While the "Review and Outlook" editorial in yesterday's Wall Street Journal ("Calling Hank Paulson," WSJ, 08/28/08, A14) is a start in the right direction, calling for a restructuring of the banking system of the United States, it does not go far enough. Since World War I the federal government has managed to circumvent the intent of the Federal Reserve Act of 1913 and use the central bank of the United States to monetize its deficits. This leaves the industrial, commercial, and agricultural sectors of the economy — the "private sector" that produces wealth and generates income — out in the cold, shut off from the power the central bank has to monetize the productive capacity of the nation and provide financing for capital formation.
Genuine reform of the banking system would restore the original purpose of the central bank of the United States, cut the federal government off from the money creation powers of the Federal Reserve, and institute a 100% reserve requirement for commercial banks. The Federal Reserve would provide the reserves by opening up the discount window so that commercial banks could "sell" qualified industrial, commercial, and agricultural loan paper to the Federal Reserve. The Federal Reserve would create the currency and demand deposits to purchase these liens on hard assets instead of government debt, thereby providing commercial banks with the necessary 100% reserves and restoring an asset-backed currency.
A further reform would empower every American citizen with access to the process of capital formation, and thus the ability to become an owner. This could be done by providing each individual with the right to finance a pro rata portion of the annual "growth ring" of additional new capital formed each year (c. $2 trillion), monetizing the new capital when a borrower presents the loan officer of a commercial bank with a financially feasible project, collateralized by the project itself and backed up with capital credit insurance instead of existing pools of savings. The commercial bank would immediately discount such loans at the Federal Reserve, thereby creating an asset-backed currency to finance capital formation without the need for government intervention, foreign investment, or further complicating the tax system.
A program has been developed along these lines called "Capital Homesteading for Every Citizen," from the book with that title. Responding to President Reagan's call for an "Industrial Homestead Act," Capital Homesteading details necessary banking and tax reforms to establish a financially sound and political feasible "ownership society." At the very least, it is worth looking into before the politicians manage to destroy what remains of America's economic base.
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