by Bill Parks

Created on: March 18, 2009

When people finally understand the cause of this financial crisis, they will see that the remedy is simple, easily applied and far from being painful, a great benefit to most people.

The cause of the crisis is the private issuance of our money supply by the Federal Reserve and commercial banks. When money is created out of nothing and issued into the economy as the principal of loans that must be repaid with interest; when no institution creates money to pay the required interest, that banking system is doomed to failure.

Limited to lending money, no private banking system has the purpose nor the capability to create stable currency indispensable for a sustainable economy.

Only a sovereign government has the authority, power and flexibility to create and issue stable currency. The government can create and lend money to the banking system, it can create and spend money directly into the economy and it can fine-tun the economy with taxation.

To solve the American economic crisis, the US government must grant itself a complete monopoly for creating and issuing all of the nation's money. It can then stabilize the banking industry by prohibiting banks from creating money, requiring 100% fractional reserve for all deposits, issuing and lending money to the all banks at a single modist interest, allowing banks to set their own interest rates and compete among themselves for costumers. As was done in a similar system used colonial Pennsylvania, interest payments would be used to run the government.

Direct spending by the government needed to replace the money drained from the economy by the payment of interest on bank loans and adjust the money supply to compensate for population and economic growth. With an average interest rate of 6.0% and a population growth rate of 3.0%, direct government spending would be 9.0%. In the current $50 trillion economy, the government should create and spend about $4.5 Trillion on infrastructure, programs and services to the people. This is new money. It is not tax money. Most taxes can be eliminated all together.

The government can generate a very large amount of money for private investments in businesses and corporations by simply substituting government currency for the government bond that comprise the national debt. Because currency and bond can be used as payment for goods and services, they are both forms of money. The difference is bond bear interest but currency does not. Although substituting currency for bond relieves the government of an interest payment, it does not increase the amount of money in circulation, and it does not change the value of investors' assets. If an investor had a $20,000 portfolio with $10,000 in stock and $10,000 in bonds, substituting $10,000 in cash for the bonds would not change the value of his assets. He would have $10,000 in unallocated, surplus cash to either spend or invest. Like bleeding air speed from a landing plane, paying off the entire national debt may take decades for the economy to absorb the $11 trillion, but there will be no shortage of investment capital.

If we take these simple steps, we will solve our economic crisis by providing the stable currency, tax incentives and investment capital needed to grow a sustainable economy.

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