by Bill Parks

Created on: April 02, 2009

For a quick fix, the government can boost spending for maximum economic effect by taking a leaf from Abraham Lincoln's book, ordering the Treasury Department to issue U.S. currency, called greenbacks, in almost inexhaustible quantities and without increasing the nation's debt, substituting that currency for government bonds, partially paying off the national debt and freeing huge amounts of unallocated private money for spending and investing.

Currency and bond are forms of money because both are transferable between persons and they can be used as payment for goods and services. The difference is bond bear interest while currency does not.

The government can free ample amounts of money for spending and private investments in businesses and corporations by simply substituting government currency for the government bond that comprise the national debt. Although substituting currency for bonds reduce the national debt and relieves the government of some interest payments, it does not increase the actual amount of money in circulation, and it does not change the value of investors' assets. The money represented by bonds is already in play in the economy, so substituting currency while simultaneously withdrawing the bonds, leaves the total money equation unchanged. A $1,000 bond, at maturity, is equal to $1,000 in currency. Similarly, 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 stock and $10,000 in unallocated, surplus cash to either spend or invest.

The authority and power of the government to issue all of the nation's money have been established in precedent in the courts. In 1884 the Supreme Court ruled, in Juilliard V Greenman, that the authority to issue the nation's currency was inherent in its sovereignty and need not be enumerated in the Constitution.

Like driving a care, controlling its speed using both the accelerator and the brakes, paying off the national debt must be done with care, adjusting the rate of substitution, controlling economic growth without overwhelming the economy or causing inflation. Absorbing the entire national debt, $11 trillion, may take the economy decades, but there will be an abundance of spending money and investment capital. However these actions will not result in a stable currency nor will they grow a sustainable economy by itself.

Only governments have the inherent authority to issue

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