Photo by Tim Evanson.

Richard C. Cook, a retired federal government analyst who worked for over 20 years at the U.S. Treasury Department, writes an article exclusive for the Public Banking Institute:

In less than a month the coronavirus has crashed the insanely fragile U.S. economy and, similar to 2008-9, unmasked the rot that lies at the core of the financial system. Of course the usual band-aids like interest rate cuts, low-interest business loans, etc., will be tried, even as trillions of dollars in stock market wealth are simply vanishing along with millions of jobs. The stock market losses include huge amounts of retirement savings from working Americans that may never be recovered.

The measures the Federal Reserve is taking may or may not even work. A new round of bailouts of affected industries, such as airlines, and maybe even banks again, may also be needed. Even so, it will all certainly postpone the inevitable, eventual reckoning. A real solution requires the rot to be exposed, cleaned out, and healed so that the economy can be rebuilt on a solid foundation.

No one is saying so, but this can only be done on a permanent and effective basis by conversion of the Federal Reserve from an entity owned by its member banks—a system “federal” in name only—to a full-fledged public utility operating under the direct authority of the U.S. government.

With all the attention being given by progressives such as Bernie Sanders to the growing inequalities in wealth and the increased suffering of the middle and bottom segments of the population who may lack even a living wage, have a high level of personal debt, and possess little or no health insurance, the proposed solutions are nothing more than the tweaking of a system based on trickle-down concepts. Nothing is being done to fix the bank-based financial system given overwhelming power by the “Reagan Revolution” of the 1980s to replace the New Deal policies that broke down during the Vietnam War and its aftermath.

This power was extended drastically by the Clinton administration’s obeisance to the banking power through its repeal of Glass-Steagall in 1999. Glass-Steagall had kept investment banks out of the commercial banking marketplace. Without it the last restraint was removed from keeping speculators from buying/selling/shuttering whole industries and shipping American jobs overseas to cheap labor markets.

Basically, say Sanders and the progressives, the top earners—the one percent, the billionaires, the plutocrats, however you define them—should pay their fair share for societal needs. So it all comes down to tax increases on the rich so that the government can divert more of the nation’s wealth to those who everyone agrees really do need it. Unfortunately, this is not really the restoration of social democracy as we understood it from the mid-1930s onward, but handouts from the top brackets, who resent every dime subtracted from what they view as their legitimate bounty.

So why don’t progressives attack the system itself that has produced such a disaster? Why don’t they go after the very structure of what is essentially a usury-based system?

Recently I read that back around 2005 Congressman Dennis Kucinich won kudos for working to cap credit card interest rates at 16%. 16%! This figure alone indicates what a travesty has befallen us.

For more than a thousand years, Western civilization considered any interest on lending to be wrong, a mortal sin. To people in that era a legalized interest rate of 16% would have been considered of the Devil. It was also obvious to them, as it should be to us, that interest on lending, especially compound interest, leads to a gradual funneling of all the wealth, income, and property of a society into the hands of those who lend the money.

When you combine this simple fact with laws that introduce almost the entire national supply of currency into circulation through lending of money created out of thin air by private sector creditors and institutions, you get exactly what we have today—a massive concentration of wealth in the hands of the Money Power and the impoverishment of everyone else.

Then, when a crisis comes, as with the bursting of the housing bubble in 2008-9 or the coronavirus in 2020, the debt load crashes, people cannot pay the loans they require to survive, and the whole society defaults and passes into receivership. Eventually, when the markets bottom-out, guess who will have the resources to buy the deflated assets at a fraction of their previous value? The answer is simple: those who still have the cash, or can borrow the money, to get in on the bottom floor of the next bubble.

These mechanisms are really simple and straightforward. But we never hear about them because the creditor class—the usurers—controls the press, so the press can never tell the truth.

It’s the Federal Reserve which is the institution that lies at the heart of the debt-based monetary system. If we converted it from a creature of the Money Power to a public utility—as the Constitution allows by giving Congress authority over the money supply—funding could then be introduced into circulation through interest-free lending or simply paid out for such obvious requirements as economic infrastructure, education, and social welfare for the less-privileged. A publicly-owned central bank could also introduce payments for a Universal Basic Income to all citizens as a dividend based on real economic growth.

The best-known example of such a system in American history was the printing and circulation of Greenbacks during the Civil War to pay soldiers’ salaries and other wartime needs. This was not “fiat currency.” Greenbacks were legal tender and remained in circulation into the early 20th century. Until, that is, the passage of the Federal Reserve Act of 1913 abdicated the government’s responsibility by turning over the nation’s finances to the usurers—the Banking Trust.

We are in the equivalent of a wartime crisis today. Basic change to the financial system is what all progressives should be demanding—now. Not just improved trickle-down handouts from a system catastrophic in its very essence.