Friday, November 28, 2008


(Week 16 - Friday, Nov. 28)

On June 22, 1775, the Second Continental Congress meeting in Philadelphia assumed the power of sovereignty by issuing the first currency that was common to all the Colonies, the "Continental Currency". This act could be deemed to be the effective break with England, though it preceded the Declaration of Independence by slightly over a year. This was a publicly-issued currency, not tied to precious metals, commodities, land banks, or other forms of "backing".

There is a common "wisdom" that assumes that the eventual failure of the Continental Currency proves that the issuance of money should be left to private banks. In fact, the oft-repeated phrase "not worth a Continental" arises from this period. This phrase is, in turn, routinely picked up and repeated by those who argue against the public issuance of currency. The historical record, however, indicates quite a different story. The Continental Congress authorized and printed $241 million, but after accounting for the redemption of worn bills, there were never more than about $200 million in circulation at any one time. The British spared no efforts at trying to render the currency worthless by counterfeiting and distributing this amount many times over (estimated at one to two billion).

It has long been recognized that to debauch their currency is an effective way to undermine the power and will of an adversary, and the Revolutionary War period was not the only time that this principle was used by the British to further its interests. In the 1790's they engaged in a counterfeiting campaign to destroy the Assignats, a publicly-issued currency of the French Revolutionary period. When contesting the Dutch over New Amsterdam (New York) they even flooded the colony with Indian wampum (beaded sea shells used for ceremonial purposes), which the Dutch had adopted as currency.

The British counterfeiting campaign was massive and sophisticated. Benjamin Franklin, an advocate of paper money, noted:

"The artists they employed performed so well that immense quantities of these counterfeits which issued from the British Government in New York, were circulated among the inhabitants of all the states, before the fraud was detected. This operated significantly in depreciating the whole mass."

They ran an ad in a British-occupied New York paper which read:

"Persons going into other Colonies may be supplied with any Number of counterfeit Congress-Notes, for the Price of the Paper per Ream. They are so neatly and exactly executed that there is no Risque in getting them off, it being almost impossible to discover, that they are not genuine."

This "unparalleled piece" prompted George Washington to comment, "... no Artifices are left untried by the Enemy to injure us." In spite of this, Continental Currency continued to function reasonably well. After three years of war it was still exchanged at $1.75 against $1.00 of coinage. This led and exasperated General Clinton to complain to Lord Germaine (cabinet secretary in charge of war in the American colonies), "The experiments suggested by your lordships have been tried, no assistance that could be drawn from the power of gold or the arts of counterfeiting have been left untried, but still the currency . . . has not failed." The currency did finally collapse, but not before seeing the new nation through its birth pangs, prompting Thomas Paine to write, "Every stone in the bridge that has carried us over, seems to have a claim upon our esteem. But this (Continental Currency) was a cornerstone, and its usefulness cannot be forgotten."

Evidently its usefulness has largely been forgotten, and what remains in the culture to commemorate its critical importance is the phase "not worth a Continental". The eventual collapse of the Continental Currency is very frequently cited as evidence that the issuance of money cannot be trusted to the government, and should instead be left to private banks, but these sources virtually never mention the massive counterfeiting of the currency by the British (as well as private counterfeiters encouraged and protected by the British). How often this is a willful omission is hard to say, but I have many times heard it repeated reflexively even by those whose intention of the moment was evidently not to make a monetary argument. This is an example of how our culture and founding national mythology has been co-opted into an effective, though largely unconscious, conspiracy to cause us to forget our true monetary heritage.

Richard Kotlarz

The complete set of columns from this series is posted at the following websites.

Wednesday, November 26, 2008


(Week 16 - Wednesday, Nov. 26)

The U.S. economy itself is essentially a gambling house managed by a financial corporation (Federal Reserve) that manages the game according to "house rules" that assure that those who own the House get their "return on investment", while those who labor in the productive sector and are responsible for all wealth creation are expected put up their hard-earned money for the game, and to cover all losses. We could picture the way it operates as follows:

Suppose that a gambling house offered to host a group of poker players, and that their game would be subject to only one house rule; that is, that the House would collect five percent of every pot. As the game commenced the fortunes of the players relative to each other would rise and fall however they might. The single outcome of which we could be certain, however, is that due to the one governing house rule, the money that the players brought to the game would disappear at an inexorable five-percent-per-pot rate into the bank accounts of the owners of the House.

Eventually the players who fared relatively poorly would begin to run out of funds, but no matter. The House would "graciously" offer to lend them money so they could stay in the game. The House would of course need more than the word of a gambler as security for such a loan. It could perhaps demand a contract signed by the gambler that promised that if he failed to pay back the money, the House could collect its "debt" in the form of some item of value held by the player, like say the title to his car or the deed to his house. If a player were foolish enough to continue his participation on such terms, this money would eventually go back to the House also, and his only option for continuing would be to borrow still more. It would not be long before he, and indeed all his fellow players, would lose virtually all their wealth and become indentured servants to the House.

This poker game analogy is an accurate image of the U.S. economy at present. The players are the workers in the economy who produce all wealth. The dollars they bring to the game are like the poker chips that serve as its currency. The playing table is the marketplace where they risk their money. The "pots" are represented by the monetary wealth subject to changing hands in the course of a fiscal year. The percentage of the action due the House is reflected in the yearly "interest" charge that accrues to the use of the dollars. The House itself is the Federal Reserve System.

Let us suppose that the banks of the Federal Reserve System attached, on average, a five percent yearly "interest" charge to the use of their Federal Reserve Notes. That means that at the end of one year, for every one thousand dollars in the game, the banking system will have drawn out $50, and the players as a whole would still be holding $950. After two years the House's cumulative take would be $97.50 ($50 + [$950 x 5%]), and the players would be left with $902.50. After three years the split would be $143.63 and $857.37, respectively. In subsequent years the distribution (rounded to the nearest dollar) would be as follows:

Fourth - $185 vs. $815
Fifth - $226 vs. $774
Sixth - $265 vs. $735
Seventh - $302 vs. $698
Eight - $337 vs. $663
Ninth - $370 vs. $630
Tenth - $401 vs. $599
* * * * * * *
Fifteenth - $537 vs. $463
* * * * * * *
Twentieth - $642 vs. $358
* * * * * * *
Twenty-fifth - $723 vs. $277

We can see that after twenty-five years (one generation) the amount of money still in play is only about a quarter of the original total. If we continued to follow this progression we would see that the take of the House would approach 100 percent.

Often, when I outline this poker-game analogy, people immediately recognize that anyone who submits to playing under such terms is being very foolish indeed. Is it not obvious, they wonder, that however well one might fare in the short run, the prospect of coming out a winner diminishes inexorably with each play of the game? Of course, there are many people who do play in casinos under house rules while imagining they will "beat the odds" and become rich, but if they are compelled to do such under a spell of addiction and denial (as opposed to accepting their losses as a cost of entertainment, and, some would argue, even then) we say that they are deluded.

This begs the question, why do we as a civilization that imagines itself to be sophisticated in matters of finance continue to submit our lives and fortunes to just such a game in the casino that the Federal Reserve economy has effectively become? Why is the affect of the "house rule" represented by the "interest" payment on our money supply hardly even mentioned in the public dialogue about the current "debt" crisis? Why have I virtually never heard it spoken about directly by the politicians and experts who have been paraded before us in the media as the ones, it is presumed, who are going to lead us out of the "debt" wilderness?

The answer, I believe, is that we also, as individuals and as a social order, are acting out of an addiction to the illusions of the "debt"-money game, and are in a denial of that condition. This is something that we, individually and collectively, need to come to grips with. I mean no blame or criticism by this assertion, as a lack of consciousness about money is a condition of culture at this juncture of human evolution. I continue to struggle with it in my own life. The providential task before us is to wake up to what we are doing, and at long last walk away from this rigged game.

Richard Kotlarz

The complete set of columns from this series is posted at the following websites.

Monday, November 24, 2008


(Week 16 - Monday, Nov. 24)

I would pose a question. Let us imagine that a young worker, say twenty-five years of age, wanted to find a prudent way to insure that he would have enough money when he retired forty years hence. Let's suppose further that he subtracted money out of his paycheck to provide for that eventuality, which would, of course, amount to a foregoing of the benefit of already earned purchasing power for those intervening decades. Would it be reasonable for this worker to hand this money over to a casino gambler based on the assurance that he could be trusted to gamble with it "prudently" and return these funds in due time, with interest, out of his winnings?

Would we not say that this worker was naïve at best, foolhardy at worst, to accept such terms for the supposed safekeeping and management of his heard-earned money? Yet, that is essentially the arrangement people agree to when they allow their money to be given over to retirement portfolio managers to hold in trust and, hopefully, grow the value of their accounts.

I am not saying that retirement portfolio managers are in their own minds willful gamblers with other people's funds, or necessarily dishonest. On the contrary, they may very well be honest brokers who take seriously their fiduciary responsibility to hold in trust and manage wisely their clients funds. The problem is that such pools of deferred earned income act essentially as slush funds out of which "investors" (financial interests looking for ways to earn money with money, as opposed to investing in actual economic enterprise) draw capital to use in speculative financial activity.

We have been through a period of some decades when this scheme seemed to work. After all, have there not been millions of people who have had money deducted from their paychecks or made voluntary contributions to retirement accounts and pension funds who have in due time drawn out the benefits promised? Indeed, this has happened (though not nearly in all cases, to be sure). It should be noted, however, that we have in recent decades lived through an unprecedented era in which real economic output has for many reasons multiplied many-fold. This is true especially since the 1930's, which saw the advent of Social Security and the beginning of the proliferation of privately funded retirement accounts, in large part due to the successes of organized labor at the bargaining table. This burgeoning economic activity has made it possible to keep up with paying benefits promised out of current cash flows. This could not have been done otherwise since, within a "debt"-based monetary system, there is no way that monies supposedly sequestered for decades could actually have been held out of the flows of the money supply without causing catastrophic economic contraction.

The possibilities for continuing in the pretense that income withheld decades ago is somehow the source of funds being drawn upon to maintain current retirees can no longer be maintained. The actual physical economy can no longer double and redouble on a regular basis to keep up with continually compounding promissory paper. That is why retirement accounts are presently losing massive amounts of supposed value, or going broke altogether.

The prerequisite for a solution to the retirement account crisis is to return the money-creation-and-issuance franchise to the public sector, after which it would be possible to maintain the quantity of money in circulation at any level desired as a matter of public policy.

The size of the monetary pool could be set such that a large portion of it could indeed be put away in retirement accounts without creating the need to borrow money into circulation at "interest" to make up for the amount so sequestered. Some of it could even be invested in bonafide economic activity. With the existence of an adequate money supply assured, opportunities for making "investments" that are essentially schemes to "earn" money with money would be greatly reduced, and those who would be inclined to invest their retirement savings would be obliged to seek their opportunities in the role of financial partners to productive enterprise. Thus the genuine activity that current "investment" strategies purport to be would become a reality.

This said, I would recommend that the putting away of monies for funding our "golden years" be deemphasized. Even if this arrangement is supportable within the context of a publicly-issued money supply, it is a bit of a ruse. This is because material wealth generation that is dedicated to supporting needs in any given period of time is actually financed by money flowing in that same time. Injecting funds that have been inactive for decades into that flow would introduce monetary distortions that would have to be compensated for with a great deal of extra "paperwork", both to manage payouts in present time, and to maintain such funds over the years. To be sure, the numbers could be made to work, but why accomplish the same end by a more laborious route?

A better way to handle the situation, I would suggest, is by the establishment of social contracts to manage the distribution of resources to meet real needs in real time. In effect, that is what we are doing anyway, the extra mental gymnastics required to maintain the illusions of money-put-away notwithstanding. A hybrid of the money-put-away and social-contract techniques would be to set up arrangements whereby abstract credits could accrue to work history, the ultimate value of which would be determined at the time benefits were drawn upon.

As a further evolution in our thinking, I would suggest a relatively lesser dependence on financial arrangements, and a greater emphasis on investments in the material and human realities, to provide for our later years. The idea of the myriad members and sectors of society mutually supporting each other across every stage of life, as opposed to each of us competing to have our needs covered individually through financial nest eggs, needs to be explored. One factor that would expedite this evolution would be the removal of the threat to the family homestead caused by property taxes. In my view, property taxes are unwarranted, illegal and anti-ethical liens against already paid-for personal property. Their elimination would be a major factor in enabling people to secure their personal estate in old age.

Finally, I would suggest that we think of the provision for those of advanced years, not so much in terms of special "retirement" benefits, but as an integral part of the securing of the material adequacy and personal dignity of every person. Such a social ethic would contribute to the regarding of our "retirement" years as a period ripe with life and the possibilities of elderhood, rather than a social institution for the presumed idleness and "pensioning off" of those no longer deemed "economically useful" in the labor force.

Richard Kotlarz

The complete set of columns from this series is posted at the following websites.

Friday, November 21, 2008


(Week 15 - Friday, Nov. 21)

In the last two columns I have described the problematic financial nature of how retirement accounts are currently conceived and set up. In the case of Social Security it is not realistic to expect that deductions from paychecks would be monies put away on behalf of retirees until the day when they can begin to draw them out. In actuality they constitute a tax that finances current revenue flows, out of which benefits are paid. As for private retirement accounts, money put away, whether by involuntary payroll deductions or voluntary contributions, are effectively transformed from being purchasing power earned in present time, into funds that are used to make financial "investments". These "investments" will, most commonly, be in the form of "debt" contracts that people are obliged to take on in their lives by the very fact that the deferring of purchasing power represented by these retirement accounts will deprive the economy of the ability to complete its own market cycle, and so make such borrowing necessary.

In both of these scenarios the benefit sought through the putting away of money for retirement is ultimately not realized. Such arrangements may have seemed to have worked for the last two or three generations, but that is because the shortchanging of purchasing power could be covered by the taking on of more "debt" to cover current financial flows, and their workings obscured by deceptive concepts and language. Now that cost is coming due, as indicated by the massive losses in the supposed value of retirement funds, or their going bankrupt altogether. The mounting indebtedness of the economy is now reaching the point where even the basis for Social Security appears threatened.

The prerequisite to resolving this crisis is to take back the money-creation franchise from the private banking system, and return it to the public sector. This can be done through a legislative act that would repeal the corporate charter of the Fed, purchase its outstanding stock from member banks, and bring its capabilities under the direction of the U.S. Treasury. From that point, money would be either spent or loaned into existence directly out of the Treasury.

With respect to Social Security, beneficiaries would, as now, receive checks from the Treasury, but the difference is that the Treasury would not itself have to "borrow" the money to cover them, and thereby add to the Federal "debt". It would instead create the money "out of thin air" with the writing of the checks (as banks do now for the money they lend to the government). Monetarily speaking, their ability to do this is unlimited, so the mental ruse of thinking that there must exist some fund out of which the money is being drawn would be less tenable. The only real limit to what can be funded is determined by the physical actualities of the resources available to the society as a whole to provide for the needs of the elderly. An assessment would be made (much in the manner that any budgetary process is conducted now) that would determine what part of the national income would need to accrue to seniors, and then legislated into law. That sum, apportioned between eligible recipients by whatever formula is used, would be what each would receive.

Alternately, within a public monetary system, it would also be possible for the Treasury to maintain enough money in circulation so that deductions could be made from paychecks and put away in a Social Security Trust Fund against the day when it would be drawn upon. This would work in this case simply because money issued publicly would not be obliged to "earn interest". There would be no cost associated with letting such funds lie idle, for decades even, because the additional money that would be needed to compensate for their withdrawal from general circulation could be issued by the Treasury and spent into existence.

That said, I recommend that it not be done this way. This is because to do so would effectively begin to put conditions on the allocation of resources that wound be available when these monies are eventually paid out, which, in turn, could create issues of equity and adequacy that could not be anticipated. As a compromise solution, it would be possible to assign social credits to money earned (instead of subtracting money to be put away), the value of which would be determined at the time of retirement, but this would create additional paperwork and also introduce possible complications with respect to the equities of distribution.

In any case, if we went to a public monetary system all of these options, or combinations thereof, could be made to work on a sound and consistent monetary basis. We as a society would have opened up the possibility of working out provision for the elderly that was reliable, understandable and based upon the physical ability of the economy at the time to provide it.

A question naturally arises concerning whether this inflow of "cost free" money into the economy would balloon the money supply, and thereby cause inflation. If it were managed well it would not, simply because any excess buildup could be removed from circulation through taxation, and retired. Thus would the quantity of money in circulation be maintained at the level required to monetize (lend a monetary dimension to) any activity in the economy that needed to be accounted for, including putting away funds to cover Social Security, if that were what is called for.

In the next column I will describe how a return of the monetary franchise to public control could open the door to resolving the problems associated with private retirement accounts.

Richard Kotlarz

The complete set of columns from this series is posted at the following websites.

Wednesday, November 19, 2008


(Week 15 - Wednesday, Nov. 19)

In yesterday's column I talked about how the Social Security Trust Fund is not a pool of money deducted from paychecks and held in trust, as is commonly assumed, and that the political recriminations over the supposed "raiding" of this fund to cover the general expenses of government are misguided in that there is no way that these funds realistically could be withheld from the general revenue flow without creating an effective need to borrow an additional sum into circulation at "interest" from the private banking system to replace the monies so sequestered. Thinking of it as a fund that is being "raided" distracts our minds away from the fact that the remedy for the "trust fund" issue is dependent on making the transformation from a "debt"-based private monetary system, to one in which our money supply is issued directly out of the U.S. Treasury.

The problem with private retirement funds, including 401k's, Keoghs, company pensions and other private-nest-egg accounts, is similar, though it manifests in a somewhat different way. Rather than being used to make up for deficits in other sectors of the Federal budget, private retirement accounts are effectively capital funds for monetary speculation in the financial markets (government accounts other than Social Security can be a mix of the two). Within the context of an economy whose money supply is borrowed at "interest" from private banks, this could hardly be otherwise.

Most people realize their nest-egg money is being "invested", and generally approve of the idea. After all, the earnings are being applied towards growing the balances of their accounts. To be sure, this is one way their money can be managed, but I would suggest that if people thought through fully the implications such an arrangement, they would see the high cost that they, and the social order in general, are paying for the widespread practice of providing for retirement accounts via private "investing" of "debt"-based money.

To understand this, we need to take a look at the basic dynamics of the free-enterprise market cycle. Goods are produced, and then they are sold in the marketplace. The cost of bringing goods to market is accounted for exactly by the wages, salaries and profits paid to those who are responsible for producing them. In the aggregate, the number of dollars paid to those responsible for producing goods (i.e. the cost of production) always matches, to the dollar, the income they take receive as they transition to the role of consumers (i.e. gross income). This is a mathematical identity, and its balance cannot be upset any more that a drop of fluid circulating in a closed system can avoid coming back to the place where it started, unless, that is, there is a leak in system.

In a market cycle within which the circulating medium is "debt"-based dollars there is indeed a leak in the system; specifically the leakage cause by the obligation to pay "interest" for the use of the currency. The way that works out is this:

Let us say that a worker gets paid $2000 for whatever value he is responsible for producing. He takes home his paycheck and pays his bills. Let suppose that he makes a mortgage payment of $600, of which $200 is applied to the retirement of the loan, and $400 is credited towards the "interest" payment.

In his role as producer, our consumer accounted for $2000 dollars worth of goods, but on the consumer side of the equation he has less than that to spend. The $200 dollars applied to the retirement of the loan is actually accounted for as purchasing power, because it is part of the sum of money he borrowed to compensate other people for building his house. For the $400 paid towards the "interest", however, he receives no goods of tangible value. This means that by the time he has spent his paycheck he will be able to purchase only $1600 dollars worth of goods, and an equivalent of $400 worth of unsold goods will pile up in some producer's inventory.

If money paid out as the cost of production does not show up fully as disposable income, goods go unsold, orders for new goods decline, workers are laid off, less goods are produced, and the market cycle goes into a spiraling contraction. The only way this tendency can be prevented is for someone to keep borrowing more money into circulation to buy up otherwise un-sellable goods.

Just as "interest" charges attached to the creation of money cause a shortfall in purchasing power, so does the subtraction of money from the income of a working person to fund a retirement account. Rather than being used to buy up goods produced in present time, purchasing power deferred until retirement is "loaned" back to workers in the economy indirectly through "investments". These will include buying up the "debt" contracts that people will increasingly be obliged to take on in their lives by the very fact that the deferring of purchasing power represented by these retirement accounts will rob the economy of the ability to complete its own market cycle, and so make such borrowing necessary.

Thus, a pernicious cycle is set up whereby income earned becomes purchasing power deferred, which is compensated for by its transformation into "money loaned". The irony is that the very funding of retirement accounts with "debt"-based money eats away at and eventually destroys the economic base that retirees will depend upon. The cumulative burden of this snowballing "debt" and speculative expectation is precisely what is causing millions of retirement accounts at present to lose much of their value, or go belly-up altogether.

None of this is to say that the material wellbeing of the elderly portion of our population cannot be provided for. On the contrary, to do so is both a moral and an economic imperative. We will be exploring ways to make it happen on a sound and consistent basis as these columns continue.

Richard Kotlarz

The complete set of columns from this series is posted at the following websites.

Monday, November 17, 2008


(Week 15 - Monday, Nov. 17)

The virtually universal view of pensions or retirement accounts is that they are monies that are put away in dedicated funds that are held in trust until the day they can be drawn upon when the beneficiary reaches an eligible age. This is not, in my view, an accurate description of how these accounts are presently constituted within the current monetary system, and the widespread misunderstanding about that has led to expectations that cannot possibly be fulfilled. The result is that, while we as a society have enacted social contracts designed to insure the financial wellbeing of those who have attained an advanced age, they have been formulated in such a way that millions of people who are counting on the solvency of such arrangements are in the current financial crisis seeing their value decline precipitously, or are losing them altogether.

Retirement accounts can take on many forms. Let us look first at the one we citizens of the nation hold most in common, and perhaps take most for granted; i.e. the Social Security Trust Fund.

Let us imagine a situation in which money is deducted from the wages of a worker early in his productive years and "put away" in this fund. Now fast-forward to, say, three decades later when this person retires and draws his first Social Security check. Let us suppose that he spends the first of those dollars on eggs for his morning breakfast. I would ask the question, were those eggs really purchased with dollars that were earned thirty years before? If one answered "yes", one would also have to answer the question, "Where, then, have these dollars been held for all that time?"

For some strange reason we in this "financially sophisticated" society seem to think that when retirement money is deducted from a paycheck it must be put into some vault where it is kept for safekeeping until the day that we need it. I would point out that if that were indeed the case, then the money so sequestered would constitute a net withholding of money from circulation that would have to made up for by someone "borrowing" an equivalent amount into circulation from the private banking system. To "fully fund" the Social Security Trust Fund, therefore, the social order would be obliged to take on an immense amount of new "debt" on which compounding "interest" payments would need to be made. What is more, these idle funds held in trust would themselves represent a vast quantity of money that had been borrowed into circulation, and upon which "interest" payments would need to be paid in an ongoing manner. Essentially we the people would be paying double "interest" charges for the use of the sum of money held in the trust fund. Monetarily speaking, this is a prohibitively expensive arrangement.

Nonetheless, in our political dialogue we as a society seem to lack a basic understanding of this fact. If that were not so, why then in the political arena is there an almost universal chorus of protest raised about the supposed raiding of the Social Security Trust Fund to finance general expenses of the Federal government? Do we really expect that these hundreds of billions of dollars should be left to languish in a vault unused until the workers from whose checks they were deducted retire and start to draw them out? The "interest" payment on such a sum would of itself typically offset the whole value of the fund, or more.

This professed platform plank is so contrary to the realities they are obliged to deal with in their budget-making processes that it makes me wonder what they could be thinking of when they say such things. Assuming that they are for the most part sincere, then the passion and tenacity with which they cling to this dubious idea can only be a telling example of the great disconnect between their understanding of the monetary realities they are called upon to deal with, and the economic notions that they hold. Truth be told, I don't think that our leaders are alone in this confusion, as I almost never hear anyone challenge them on this view in the public domain. On the contrary, almost invariably there comes an echoing demand from the public to "get spending under control" and stop the supposed "raid on their money".

The economic activity required to produce the first eggs of post-workforce life occurred within a few short days prior to their being consumed, and the money that financed that activity had to have come from cash flow that was concomitant with the productive process that was responsible for the material manifestation of the product itself. In other words, material wealth that is coming into existence today is financed by dollars flowing today. Whatever dollars were deducted from a worker's paycheck years ago had to have long since flowed into other economic activities. The notion that this could be otherwise within the current "debt"-based monetary system is a bookkeeping fantasy. Our failure to understand the actualities of our financial lives and deal with them in a clear and positive way is at the core of why we have become so anxious about the certainly of these so-called dedicated funds being there when we reach retirement age.

In truth the Social Security "Trust Fund" is not a trust fund. It is not money that has been put away. It is, rather, a system for the tallying of credits that determine the eligibility of each citizen for access to the money that is flowing through its operating budget in any given month after one has reached the age of eligibility. The monies that are is paid out through Social Security do not come out of a pool of capital that has been put away for that use, but are taken out of revenues flowing through government coffers in present time.

The problem with thinking of it as a fund that is being raided is that it distracts our minds away from the true nature of the threat to the national economy which underwrites this social welfare program, which in turn is the source of the perception that it is being raided it in the first place; that is, the unrelenting demands placed upon the economy in general, and government budgets in particular, by the "interest" payments required to maintain the money supply. Such misunderstanding leads to the misguided proposal to insure the purported fund's solvency into the future by opening it up for "investment" in the financial markets. The ultimate irony is that if such a proposal is carried out, it truly will become a fund that has been raided. I will continue with this analysis in the next column.

Richard Kotlarz

The complete set of columns from this series is posted at the following websites.

Friday, November 14, 2008


(Week 14 - Friday, Nov. 14)

The essence of insurance agency is the formation of a pool of money into which people make a contribution, and from which they can expect to receive compensation to cover the financial cost of a potentially catastrophic loss of life, limb or property. These funds are generally managed by corporations. This means, supposedly, that such businesses have been issued a corporate charter by the society they supposedly serve to perform this specific function for the benefit of that society. As long as what transpires stays within these bounds, everything is very upfront, straightforward and transparent. The function for which the agency was formed is perfectly legitimate, and the social order that chartered it is well served.

Over time, this has been less-and-less the case. The premium payments which people make have been dedicated less to protecting them from loss, and more to forming pools of capital out of which financial speculators gamble with their money. This is done in the name of "investing" their premiums to help defray their cost, but in reality it is a withholding of policyholders money under deceptive pretenses, which is then used to buy up the increased quantity of "debt" paper that the public (including the company's clientele) is obliged to take on due to the decreased consumer buying power that is caused by the very withholding of that money.

Understood in this way, this widespread mode of doing business by the insurance industry can be seen, not only as a matter of questionable business ethics, but also as a practice with monetary implications. To put it succinctly, insurance companies have become financial purveyors on behalf of their stockholders at the expense of their policyholders and the public at large.

The question then becomes, what can be done about it? The obvious answer may seem to be more regulation, but this does not get at the root of the problem, which is that within a monetary system in which money is borrowed into circulation at "interest" from private banks, there exists a virtual financial imperative for that "money" itself to earn "interest" to cover the "interest" cost of maintaining it in circulation. It is very difficult for a person in a position of fiduciary trust to justify doing otherwise.

If regulations governing the insurance industry were put into effect which mandated that they maintain the monies collected through premiums as idle (non-invested) pools of capital, then that in itself would constitute a diminishing of the money supply which would have to be made up for with more borrowing by the nation as a whole, whether privately or through government. This is a catch-22 that executives of the insurance industry are not realistically in a position to do anything about by themselves (whether they realize the nature of their dilemma, and would be inclined to do anything about it is another matter). For the most part they are playing the game the only way they can see to play it.

The solution for the problem needs to come from society as a whole through its political process. The key is for the People to direct their government to reclaim their rightful money creation franchise from the private banking system. The initial steps in that process would be to repeal the Federal Reserve Act of 1913, purchase the outstanding stock of the Fed from the member banks who are holding it, and convert its resources and employees to the task of facilitating issuance of public money under the direction of the U.S. Treasury.

The Treasury would thereby gain the ability to maintain a quantity of currency in circulation that is calculated with precision to meet the needs of commerce for the nation. If one of those needs is to maintain an extra margin of money in circulation so that a certain amount is available to lie "un-invested" in pools of capital required to underwrite insurance policies, that is not a problem, as the increment of funds so designated can be issued at virtually no cost simply by adjusting the level of money supply.

The amount of capital needed to underwrite insurance policies is in the national aggregate considerable, even under the strictest interpretation of the requirements of the business. As such, it represents a great sum of money upon which, within the current system, someone is obliged to make "interest" payments just to keep it available for that purpose. To "invest" such funds, then, can seem to be the responsible option, the fact that this is in the larger picture monetarily self-defeating notwithstanding.

The very existence of such an "investment" opportunity attracts financial players who are not necessarily concerned about the ethics or logic of the way insurance companies do business, but are simply looking for a way to make money with money. Through the ownership of insurance company stock, they can make their demands and reap their reward. Whatever the case, insurance executives are effectively pressed into being agents for "investors" seeking a "profit" through the control of their policyholders' excess premium payments.

With the establishment of a system in which money is issued publicly, this seeming fiscal imperative (in the case of good-faith insurance agency), or opportunity (to the financial speculator) is effectively removed. This is because whatever amount of money was needed to be tied up in pools of insurance capital could be made up for quite readily by letting the level of the money supply rise as a matter of public policy.

Insurance companies could then be limited to being compensation pool managers by restrictions written into their corporate charters. As businesses, this need not be experienced as an arbitrary limitation, because it would allow them to focus on the crux of their task; or as a competitive hardship, because other companies working in the field would be obliged to observe the same boundaries. Their operations would be simplified, their costs lowered, and, I can imagine, the burdens of management greatly relieved. The net contributions through premium payments, and payouts for claim satisfaction could be tracked through a transparent public accounting. The company's customers and the public at large would be well served, and, I suggest, there would never have arisen a need for any massive "bailout". I wonder if the executives at AIG would agree.

Richard Kotlarz

The complete set of columns from this series is posted at the following websites.

Wednesday, November 12, 2008


(Week 14 - Wednesday, Nov. 12)

The lead article in Monday's Wall Street Journal announced that the Federal government has agreed to offer AIG (American International Group), the nation's largest insurance company, a "bailout package" worth $150 billion. This raises the question, has there occurred somewhere recently massive losses of life, injury and property that have made such a financial rescue plan a necessity? Clearly there has not. If we follow this line of inquiry through to its logical conclusion, we will discover that "insurance companies" are no longer primarily insurance companies. Rather, they have become more-and-more a means to create pools of capital to be used for financial speculation.

Theoretically an insurance company is a business that has been granted a corporate charter by the society it supposedly serves to gather and manage a pool of money for the purpose of providing people with protection against catastrophic financial expenses brought on by loss of life, health or property. The idea is that each person that subscribes to the service contributes money to a common pool of funds through the payment of premiums, and those relatively few people who experience a loss are then compensated out of it. The premium rates, then, would presumably be set at such a level that the amount of money in the pool would be adequate to compensate expected claims, plus provide enough left over to cover the actual expenses of the company, and allow for a modest profit. This is all so straightforward that it hardly warrants explanation, but increasingly it is not what happens.

Instead, insurance companies use the premiums they collect to create "investment" funds, which they then use for speculation in financial markets. While it is true that they do in fact pay claims out of premiums collected, their unstated financial speculation agenda causes them to have to charge higher premiums than they would otherwise have to merely to cover claims. They justify their "investments" by saying that they are merely acting responsibly with their customer's money. After all, so the rationale goes, since there always needs to be a substantial pool of capital maintained to insure that there are adequate funds available for when their customers experience a loss, they may as well "invest" these funds so that the income they produce in the meantime can be used to defray part of the cost of the premiums. On the surface this sounds reasonable. On a deeper level it is very deceptive.

To begin with, excess funds that are bound up in such "investments" are not, relatively speaking, very "liquid". That is, they are not readily available to cover ordinary day-to-day claims made against the capital pool. Therefore, the "investment" pool is essentially extra capital that must be maintained over and above the actuarial requirements of the insurance function itself.

It could be claimed that the nature of a given company's business is such that it insures against losses that occur infrequently and on a large scale, as might be the case, for example, for one whose primary business is to cover losses incurred from natural disasters. It would make good business sense, supposedly, to earn "interest" from these idyll funds while they are lying for long periods of time at the ready, so to speak. This argument too breaks down. Such a monies may need to be paid out on short notice, and therefore the essential financial quality that is called for is liquidity. A large capital pool that is bound up in a portfolio is almost by definition not very liquid, and the necessity to make it so quickly may result in having to dump its speculative-paper contents on the market in what is essentially a fire-sale circumstance, thereby driving down the its redeemable value. That would tend to defeat the argument that the purpose of "investing" their customers' premiums is a way to defray their cost. As a hedge against this, the tendency will be again to maintain a fund that is larger than is necessary for the purposes of insurance alone.

Looking deeper into the problem, when an insurance company collects a premium, it is taking money out of the money supply for which the consumer receives no immediate value in return. Essentially the buying power it represents is held in abeyance until a claim is made and the money paid back out. To the extent that this is necessary it can be justified as a business practice. To the extent that premiums are "invested", however, it cannot.

With respect to the market cycle in the economy, the "investment" of insurance premiums has a net affect that is similar to that created when "interest" payments are made on private bank loans, whereby the payments go to "investors" who have bought the "debt" contracts by which the loans were created so that they might be the recipients of those payments. The consumer in the aggregate is shortchanged of the earned income required to pay the cost of the goods and services equivalent to what he produces. This money is effectively withheld from circulation until someone comes along who is willing to "borrow" such funds from the "investor", thereby returning it to the money supply, but now with an increased "debt" obligation attached.

The money that is paid in as premium payments to an insurance company that is excess to the amount required to cover claims, plus the actual material costs of and a reasonable profit to the company, acts in much the same way as those "interest" payments made on bank loans. These net over-payments represent a net subtraction from the money supply, which, in turn, creates a need for someone to "borrow" this money back into circulation so that the market cycle can be completed.

This practice, then, of insurance companies maintaining capital pools that are "invested" in financial instruments, supposedly for the benefit of their customers, is revealed to be a wealth transference scheme that is carried out at the expense of their customers, and of the society at large. Increasingly, the insurance industry has become a cash-cow for the speculative financial industry, and AIG is the prime example. If that is not so, then where are the actual losses in life, limb and property that the citizenry is being called upon to pay? With this AIG "bailout" package, We the People, through our government, are being asked to take on an enormous "debt" to cover the losses of financial speculators. It has absolutely nothing to do with the legitimate functions of the insurance business.

Richard Kotlarz

The complete set of columns from this series is posted at the following websites.

Monday, November 10, 2008


(Week 14 - Monday, Nov. 10)

Everything evolves, and so does this column. The initial concept was to put out a daily message of four to five hundred words that could be read over "morning coffee" as a daily antidote to the standard media fare. In practice I have found that these offerings tend to take on their own natural length, which turns out to be roughly twice what was originally contemplated. It has required a major exercise in discipline to keep them within even those bounds, as anything that touches upon the topic of money tends to swell in the enumeration. Truncating or dividing the topic arbitrarily tends to cut the heart out of it, and so I let whatever is wanting to be written have its way. The upshot is that I have produced twice the amount of verbiage that I intended, and keeping up that pace is not sustainable.

Most of the feedback I get indicates that while much, if not most, of the readership has kept up with the reading, they too sometimes fall behind, and the unread email mounts up. There seems to be on their part a determination to keep up, as the columns as a series represent a systematic and carefully measured development of thought. If a link is missed, something is lost.

Taking this all into account, I have decided to reduce the frequency of the installments to three per week; those coming on Monday, Wednesday and Friday. This column is the first of the new rotation. I anticipate that the length of the typical column will be approximately the same, but the less frantic pace will leave me more time to devote to producing each one, plus attending the correspondences and dialogues which the columns have been a seed for starting. I have tried to be responsive to communications that have been sent to me, but have fallen far behind in spite of strenuous efforts. I apologize for that. I look forward to catching up on my backlog and being more responsive in the future.

All this said, this effort is not about writing columns. It is about precipitating change. We are at a juncture in the life of our nation where the portent of that sentiment has never been more acute that now. The providential turn represented by the latest election has released a breadth and depth of hope into the world that, if harnessed in the right way, could provide the boost to at last overcome the opposition to permanently transformative change in the realm of money. This would be truly the culmination of a battle of the ages.

It is not mere coincidence that our new President will take office at the height of the greatest financial crisis the nation, and the world, has yet faced. Indeed, the urgency of the matter will not even wait for him to take his oath, as it is pressing down upon him even now. It is a foreboding sign that already he is being hedged about by a coterie of heavy-hitting financial advisors that will surely impress upon him the importance of going even deeper into "debt" as a way of resolving the "debt" crisis. I do not say that such voices should not be heard, but truly liberating virtues of public money need at last have their hearing.

If the promise of the moment bounces back unrequited in the unfolding of events, then the present euphoric mood will turn upon the People as it metamorphoses into the bitterness of cynicism, and our state will be at the last incalculably worse than at the first.

What is more, nothing will be changed by reading; only by acting. We Americans are doers. That is what we bring to the world. What then to do? That is for each to determine out of his or her own inspiration.

As a thought, there are practical initiatives that can be pursued in concert with others. One is the Concord Resolution, which is an effort to recreate in our time essentially what was done by the colonial government of Massachusetts in 1690; that is, to issue public money in service to the commonweal of the People, as the alternative to relying on private money, which would make of the colony a debtor to the moneylenders. This Resolution has been reworked of late to make it more focused on the transference of the money-creation franchise itself from the private banking system to the U.S. Treasury. It has also been presented in such a way as to encourage others around the nation to introduce parallel resolutions in their communities. It is our hope that this could become a movement.

It is incumbent upon me to address the matter of resources. I have, and will continue, to offer up the column, and the fruits of all other initiatives that I am engaged in, free of charge, and remain true to that commitment regardless of whatever personal sacrifices it entails. That said, the effort cannot move forward without resources. To date that burden has fallen upon a very limited circle of people who have effectively emptied themselves out to insure that the work, at least on a minimal level, continues to move forward. The level of critical work that needs to be done with respect to the monetary sphere far exceeds the resources available to perform it. It may not be too much to say that this is a tragedy of our time.

Help is needed in researching specific topics on money, and I would be willing to speak to anyone who is willing to lend a hand.

Basic material help of many kinds is sorely needed. This, of course, includes financial assistance. Funds contributed to the effort become in effect monies that are consecrated to the liberation of the whole of humanity from the ravages of a bogus "debt". This is not simply a worthy sentiment, but a spiritual principle that works through money itself. I will have more to say on that subject in future columns.

Finally I would express my appreciation for all who have taken an interest in these discourses. I have received hundreds of communications posing questions, offering critiques, or lending encouragement. I am grateful for every one. In the future it is my hope that I can be more responsive, and tighten up the time lag in the dialogue.

The time for action on the transformation of the way our society creates, issues and controls money is now. I encourage each to find their own path of commitment according to their own authentic calling. For those with ears to hear.

Thank you for your patient and considerate attention.

Richard Kotlarz

The complete set of columns from this series is posted at the following websites.

Saturday, November 8, 2008


(Week 13 - Saturday, Nov. 8)

In "Religion and the Rise of Capitalism", historian R. H. Tawney observed:

"Few who consider dispassionately the facts of social history will be disposed to deny that the exploitation of the weak by the powerful, organized for purposes of economic gain, buttressed by imposing systems of law, and screened by decorous draperies of virtuous sentiment and resounding rhetoric, has been a permanent feature in the life of most communities that the world has yet seen."

It is time to arrest this tragic litany. Throughout history there have been many struggles to win the rights, protect the dignity, and insure the welfare of mankind. Unfailingly, these demands have been resisted by a reactionary establishment whose power is rooted in the economic order of their day. It at first denies, then stonewalls, then grudgingly accommodates the demands. Eventually it preempts and incorporates the changes for its own devices, as part of the "imposing systems of law" and "decorous draperies of virtuous sentiment and resounding rhetoric" with which the system props itself up.

Chattel slavery is abolished, universal suffrage is won, the rights of labor are established, a social safety net is laid out, environmental protections are enacted, and a multitude of other reforms are accomplished. A black man is elected as President of the nation (alternately a woman nearly elected Vice-President), and the euphoria of the moment transcends party lines. Our society indeed moves ahead by quantum leaps.

Still, there is something crucial we are not getting at. That is that the energy of our civilization, and in turn its social, political and economic structure, is still controlled from the top for the benefit of the few, rather than percolating up from the bottom for the welfare of the People. Indeed, it may be argued that the economic polarization is getting ever more extreme. What is more, one could make a case that we, as a species, are lurching dangerously close to self-annihilation on many fronts, from resource exhaustion, to disease pandemics, to species extinction, to loss of genetic diversity, to environmental poisoning, to nuclear holocaust, to climate change, to moral degradation, to (fill in the blank).

The reason for this, I believe, is that we have not properly recognized the bedrock importance of the nature and control of the monetary system. Money is an abstraction. It is weightless, colorless, odorless, ephemeral and intangible in every physical way; yet is seems to control everything. It is the essential energy, the life force, the prana, the chi of the system.

To draw a medical analogy, if a pathogen attacks a body, it does so through the blood, the fluids, the nerve synapses, and other processes by which it circulates energy to live and grow. If a pathological agenda attacks a socio/political/economic body, it does so through the monetary system for the same reason. This is not just another issue, but a little recognized reality that underlies all issues. We have come to an unprecedented point in history where it can no longer await its turn for attention. Humankind has reached the stage where we have the power to threaten our very existence through many avenues. We must at last gain control of our own energy processes.

Expanding the medical analogy, in a material sense a dead body may contain every element it had when it was alive, down to the most infinitesimal cell structure. What has changed is that the connection with the intangible energy that animated every fiber of its being has dropped below viability and ceased to function.

An economy is much like that. The physical part abides. The sun beams down, the rains fall, the plants grow, the infrastructure persists, and the hands, hearts and minds remain willing and able to do the work. This is equally true in times of boom and bust alike. What changes is this ephemeral abstraction which seems to control everything: the monetary system.

Money is a paradox. It is nothing, yet it is everything. We must finally transcend that paradox if the human race is to gain control of its own destiny. In doing so, we will at once transform the debate on all issues, from an impasse in which we appear to be checkmated by lack of funds, to an open-ended march to the future with all the physical and human resources we can mobilize. Money will cease to be a bludgeon that hinders or drives the social order. It will instead become a superconductor that transfers energy efficiently and equitably though it.

When we get fully into this process we will be dealing with, not just finances, but the transformation of our whole civilization. It is the economic dimension of a larger key to crack the whole mess we are in wide open. We would at last break out of the "debt-money" straightjacket, and dispel the Federal-deficit sword of Damocles. Then we will start to get a handle on our other seemingly intractable problems; social, political, ecological, agricultural, urban, rural, education, health care, or whatever. Living morality will merge with common-sense practicality as we begin to reclaim the creativity, civility and humaneness of our civilization.

For those with the vision to see this represents, not merely a solution for an economic problem, but also the opening of a new horizon; one which could light up the imagination of a whole new generation. To be sure, the audacity of the prospect is intimidating, but if we approach it with grace, determination and aplomb, it may turn out to be our nation's greatest adventure yet.

I saw in the youthful faces of those gathered in Chicago Tuesday evening a deep yearning for what might be. Let us not foreclose on their hope for the future by failing to act.

Richard Kotlarz

The complete set of columns from this series is posted at the following websites.

Friday, November 7, 2008


(Week 13 - Friday, Nov. 7)

The only time one can affect what type of tree will grow is when one selects and plants the seedling. So it is in the political process.

A critical lesson I learned from my years of political activism is that once the campaigning starts, even in its pre-public stages, the chance for fundamentally affecting its direction has effectively passed. By then the decision about why a candidate is running is set, the early money attached to expectations has started to flow, and the themes and aspirations of the candidacy have been virtually cast in cement. The only things left to work out are how they will be reflected in the talking points and campaign strategies.

Once a candidate has made the plunge into the frenzied pace of running for office, he or she will have precious little time for input or reflection. To expect that any major change in direction can be effected is unrealistic. The deliberative pretense of the electoral process, with its glad-handing photo-ops and staged "town meetings", is a charade. If one would be so uncouth as to pose a question, however cogent, that is not within acceptable bounds, he or she will be made to feel as the intruder who released flatulence into the room. Candidates on the trail are not interested in going out into the public to discover what the people think. Rather, they have already determined what the public ought to think, and the formidable machinery of campaigning is geared to effecting that end.

The problem is not so much the venality of the candidates themselves. How could they do otherwise given the ordeal we put them through so that they might demonstrate their mettle to our satisfaction? This is not a process that supports earnest exchange or conversation, so it is futile to expect it.

If there is any real deliberative process that does go on, it happens well before the campaigning starts. At that point politicians contemplating a run for the prize may well be involved in a discovery process. They may even be seeking inspiration. At the very least they are looking for those initial elements of support that can start the "momentum" ball rolling in their favor. In my experience it is at this very nascent stage that they are accessible, and looking for ideas. This phenomenon varies, of course, and career pols tend to be in a more-or-less campaigning mode virtually all of the time, but if there is any openness and flexibility possible in the situation, it will be in the formative pre-campaign stages.

If one would hope to plant the seeds of a monetary dialogue in particular, this early open-endedness is crucial. If the candidate is indeed a seeker of truth (I believe that there are a few, but we tend not to recognize them because we treat them badly) there will at best be a narrow window of opportunity to gain a deep hearing. If it is not seized upon, then virtually every word, thought and position that comes after will be rooted in a socio/political/economic culture that springs from the private-bank-loan transaction upon which the social order is founded. The usual, but spurious, intellectual cornerstones related to "balancing the budget", "running the government like a business", "paying down the 'debt' so our children won't have to", creating "economic growth" (a euphemism under the current system for "borrowing" more money), the "un-affordability" of human services, and so forth, will be immediately set, and the argumentative structure of the candidates' appeal will be built on top of them. After that, they are almost helpless to fundamentally change their direction even if they "see the light" and reach a different conviction in some greater or lesser degree.

This immediate post-election period, then, is the season for planting the seed of the tree. After such a long and tedious election cycle, the People will almost universally be inclined to turn to the more personal business of celebrating the upcoming holiday season. Who could blame them?

But, the power of money never sleeps, the demand for "interest" payments is unrelenting, and whatever potential the age of Obama represents is being undermined even now. Despite our undeniably momentous achievement, we can be sure that we as a nation are being set up by the seductive allure of lucre (as after the War of Independence) for yet another "feeble sequel". If we cannot stay conscious, determined and vigilant throughout this transition, then it has, in critical ways, all been for naught.

Richard Kotlarz

The complete set of columns from this series is posted at the following websites.

Thursday, November 6, 2008

Column #76 WHAT NOW?

(Week 13 - Thursday, Nov. 6)

This nation has from time-to-time passed through periods of incredible euphoria for the heights of achievement and sacrifice it has achieve. I sensed such a moment in the aftermath of Obama's victory amidst the throng in Grant Park in Chicago. The People basked briefly in the sublime light of fulfillment in their realization that this nation's very soul, though sullied by its passage through chattel slavery, Jim Crow and racial bigotry, had traversed the length of human mendacity in at last coming to elect as its leader the first African American President.

Few believe that being black, or of any other particular description, is a qualification for high office, but the identity of the candidate in this case cannot be separated from the momentousness of the attainment. Obama had endured the vicissitudes of the process, and that few seemed inclined to question that he had fairly "won" (whatever that means in politics) was somehow cathartic to the nation. Even John McCain could not help but dedicate the first words of his concession remarks to that historic achievement, and President Bush issued his own declaration commemorating the event. We have long been a people that prides itself on the belief that any new soul born into its fold could aspire to any position in the land. Until last night this promise was in some measure hypothetical, but the question is now laid to rest.

Had the election tipped the other way, an historic precedent would have been set in another direction; i.e. the first woman to attain to the office of the Vice-Presidency. There was a time when for even one party to entertain the idea of having a Catholic on the ticket was pushing the bounds of thinkable thought (as for JFK), but now it seems the breaking of the Protestant-white-males-only-need-apply rule was done it stride. Surely as a nation we have grown up.

What now?

The events of yesterday were in part a culmination of the American Revolution, but something crucial remains undone. After a heroic War of Independence announced with a noble Declaration and guided by "founding fathers" of high principles, one might think that the establishment of the right of the nation to create, issue and control its own money would be a foregone conclusion, but if history teaches anything it is to not underestimate the money power (the amorphous principality that the power of money, as co-opted by forces inimical to the commonweal, represents; it is not any particular persons, but persons of every class or description can, and do, fall under its spell). While the People have on occasion arisen to great heights of purpose and sacrifice, afterwards they understandably tend to turn back to their private lives. The money power, on the other hand, never rests, leading monetary historian Alexander Del Mar to observe ruefully:

"Never was a great historical event (the American Revolution) followed by a more feeble sequel. A nation arises to claim for itself liberty and sovereignty. It gains both of these ends by an immense sacrifice of blood and treasure. Then, when the victory is gained and secured, it hands the national credit (the authority to create money) over to private individuals, to do as they please with it."

This is the unfinished business of the American Revolution. It is what we will have to reckon with if the promise of the nation, so clearly reflected in the yearning faces seen last night in Chicago, is to be fully realized. None of this is to take away from the momentous import of what has already been achieved, but if We the People merely turn back to our private lives after the great mobilization of energy, resources and willingness to get involved represented by this election cycle, then our hope will have been allowed to expire in yet another "feeble sequel", and America's promise will in the end ring hollow.

Richard Kotlarz

The complete set of columns from this series is posted at the following websites.

Wednesday, November 5, 2008


(Week 13 - Wednesday, Nov. 6)

I have spent the evening in the company of good friends with whom I watched the election returns on the television. At this late hour I am more in the mood to be personal than analytical. Election days are singular in their effect upon me. They are a unique hiatus between one rhythm of life and another. The campaigns are over, and now we go back to work.

I am a quintessential baby-boomer and child of my time. I grew up in what I experienced as the halcyon 50's, and came of age in the turbulent 60's. The thought that kept coming to me tonight is, "what a difference forty years can make". I was born and raised in Chicago, and grew up with familiarity with Grant Park, site of Obama's acceptance speech. Forty years ago it was the location of the massive disorder ("police riot" some called it) that swirled around the '68 Democratic Convention. How different that was compared to the virtual love fest that reigned there tonight.

I did not experience the mayhem in Grant Park in '68 because I was in the midst of another chaotic scene in Vietnam. From there it seemed that "the World" (what we called the states from "the Nam") was coming apart. Over a hundred cities, we were told, were beset by rioting and on fire. Martin Luther King had been murdered in the spring. Bobby Kennedy, who's last public utterance was "And now on to Chicago", met the same fate shortly after. This finished off, it seemed, the innocence of a generation, coming as it did less than five years after the assassination of his brother.

I experienced a particular feeling of sadness upon hearing McCain's most gracious concession speech. I realized that no veteran of Vietnam had served in the office of President, and that McCain was perhaps the last best hope of that happening. It still isn't too late, or course, but I had the feeling that with the public taking a pass on his candidacy, perhaps the torch was being handed off already to a new generation. It seemed that the experience of the souls who had served in the war that marked our generation, but were still keeping it all inside, was somehow being passed over also.

Obama's dignified acceptance address aroused in me feelings of hope. More so did the looks on the faces of his crowd. Much has been said about the shallowness, mendacity and venality of modern political campaigns (not without reason), but I did not see evidence of that in the countenances of this celebratory, but serious, throng. How long will such comportment last? I do not know, but it is reassuring to know that it is there and can be called forth if the moment can be made right.

As I reflect upon the differences between the times now and forty years ago, it strikes me that, culturally and politically speaking, much has changed, except perhaps the one thing that needs most to change. That is, we still cannot have an authentic public dialogue about money. To be sure, there are many partisan ideological arguments about taxes being too high, spending being out of control, having to pay the "debt" so our children won't have to, and the like, but those are not sober soul-searching conversations about what money is, how it is created and controlled, and who it serves.

McCain and Obama both talked in a heartfelt way about the need to come together. Money is one topic that is common to us all. Notwithstanding that it is typically invoked in a divisive manner, my experience is that it is the one subject around which it is most possible to have a unifying transcendent dialogue. I have tried to demonstrate something of that potential through these columns. It is my hope that in the relative political calm between now and inauguration day, the seed of a productive discourse on money can be planted, before the looks on those faces fade again into the disunity of political business as usual.

Richard Kotlarz

The complete set of columns from this series is posted at the following websites.

Tuesday, November 4, 2008


(Week 13 - Tuesday, Nov. 5)

The campaigning is done, and each office seeker has made his or her case. This poem is offered from the heart as something to reflect upon as each reader casts his or her vote. If one cannot find clear expression for the thought and sentiment it raises on the current ballot, then may it at least plant a seed of resolve for the next time around (which starts tomorrow).


Hark the entreaties of the broken
Souls who have borne usury's curse,
Debt-money's train of death and woes.
The huddled betimes scarce awoken
Soon to find wit and will aburst,
The hour, impending, no one knows.

The meek get ready to inherit the earth,
The earth prepares to receive the sky,
The youth anon will discover a future,
The wise, in love, smile – and now you know "Why?"

May we all walk in wisdom on this day of decision.

Thank you for listening.

Richard Kotlarz

The complete set of columns from this series is posted at the following websites.

Monday, November 3, 2008


(Week 13 - Monday, Nov. 3)

Tomorrow is "election day". Ostensibly, this is the long-anticipated pivotal day of decision on which we set a bold new direction for the future of ourselves and our children. After observing the pattern set in previous election cycles, it might be fairly asked if it is not instead an empty civic ritual whereby, amidst much expensive political hoopla, we participate in the ratification of the same old system, with no realistic chance of making a choice for the positive? In the persons presented on the ballot (as per John McCain and Barack Obama, for example; not meaning to overlook the fact that there are others also), is there presented a bona fide choice between two divergent roads forward, or is it essentially a non-choice, between "Tweedle Dee and Tweedle Dum". Is the only real alternative to "waste" one's vote on a protest third-party candidate?

Taking the question a bit deeper, is it a constructive act to cast one's vote at all? This, to be sure, may appear to be out of synch with the civic tenor of this special day, but in my travels the question is presented to me frequently by serious-minded souls who are seeking an affirmative way to act, but are torn between hoping that they can make a difference, and feeling that their precious time and energy are being co-opted to add political bunting to the same old corrupted civic structure.

For my part I am encouraged that the level of interest and participation among the electorate, even after what seems like an interminable four-year grind since the last Presidential election. In a peculiar sort or way the vast quantities of cash that have been pouring into campaign coffers is an indication that there is a vast reservoir of hope that is being drawn upon, even to the extent that people are electing to vote with their financial substance through a difficult time. For all that, however, the issue of monetary transformation, is nowhere represented on the ballot, except in the guise of the tired old rhetoric of getting-spending-under-control-and-balancing-the-budget-so-our-children-won't-have-to-pay-our-"debt". What could be more discouraging?

This begs the question, is there a reason for hope? I believe that there is.

Permit me to offer an analogy. In the field of chemistry there is a phenomenon known as a "super-saturated solution." By way of explanation, if one were to take a liter of water and then begin to add small quantities of a salt, the salt would dissolve into the water forming a solution; until, that is, the water held in solution all the salt that it could hold. At that point the solution would be "saturated", and any additional salt added would fall undissolved to the bottom of the container.

Now suppose that one started with a solution that was already saturated (with no extra salt at the bottom), and began to let water evaporate out of the container. As the water evaporated the salt would be left behind, but the measure of salt that was supposedly dissolved by that amount of water would stay dissolved, and not precipitate to the bottom. The solution in the container would have entered a state of being a "super-saturated solution"; that is, it would be holding in suspension more salt than it could supposedly hold. The reason that it would stay in suspension is that there is nothing identifiable in the solution that represented truly the pattern the excess salt would precipitate into if it had the chance. If one were to introduce into the solution a seed crystal, however tiny (it need only be at least one molecular replication of the true pattern), then the excess salt in the solution would precipitate out (this is in fact how crystals are grown).

The state of the macro-political climate at present is analogous. The energy in the hopes, fears, debates, activism, anxieties, seeking and prayers of the people around the world about the present state of affairs constitutes a mighty socio/economic/political super-saturated immersion. There is a great deal of angst-ridden argument out there about having to find a new and better way. Many issues are raised, some which venture tantalizingly close to the core truth, but we remain yet at a collective loss as to what precisely the problem is, and what exactly can be done about it. If, however, the seed crystal of a true alternative can be sown into the public consciousness, what would precipitate out would be breathtaking. That is what this column, hopefully, is all about. If in fact it can be constituted so as to form a seed crystal of what is yet unmanifest, but striving to be born. This is no mere metaphor, but a principle of real power and change.

Seen in this light, the tremendous energies that have been poured into this election cycle, without, in the view of many, evident fruit need not be lost. They do indeed come from a deep font of human hope in the future that can be precipitated out into a bright new vision for the future. The seed crystal that is yet lacking, I would suggest, is a true dialogue about the nature, realities and practice of money.

Richard Kotlarz

The complete set of columns from this series is posted at the following websites.

Saturday, November 1, 2008


(Week 12 - Saturday, Nov. 1)

Christopher Hollis, British economist and guest professor at Notre Dame University, observed:

"Indeed the historian has to record that in almost every age there was some superstition or other of utter unreason which strangely occupied the minds of men, otherwise of activity and vigor . . . We are sometimes ready to congratulate ourselves that our age has outgrown all superstitions. But the historian of the future will, I fancy, reckon in the same class . . . the strange superstition that, whenever money is invented, a percentage must be paid forever afterwards as a propitiation to a banker. It is on that superstition that the whole empire of Mammon is built."

Private bank money is the "strange superstition" of our time. It behooves we modern scientific sophisticates to ask ourselves if we as a civilization have fallen for an assumption that is as unscientific as the flat-earthery of an earlier time. Frederick Soddy, a British scientist and Nobel Laureate in Chemistry, was appalled by the anomalies caused by the usury-based monetary system. He wrote,

"The sensationalism of the scientific prophet could hardly imagine anything so sensational as this. A nation dowered with every necessary requisite for an abundant life is too poor to distribute its wealth, and is idle and deteriorates not because it does not need it, but because it cannot buy it."

Such thoughts precipitated an inquiry on his part which resulted in what many consider to be a classic volume, Wealth, Virtual Wealth and Debt. This treatise compares economics with physical science. The creation of real wealth, he reasoned, always involves the expenditure of energy, and must conform to the laws of thermodynamics, whereas to set up "debt" paper as the source of wealth turns reality on its head. Among his many insights was the conclusion that,

"If we reasoned similarly in physics, we should probably discover that weight possessed the property of levitation."

My observation is that in our "enlightened" era, denial, especially when related to money, is perhaps the strongest human failing. I can imagine a time in the future when our descendents (for whom we are so ostentatious about not wanting to pass on our "debt"), will come to their senses and dispel the bank-money bogeyman back to the irrationality from which he came, and wonder in amazement how an age of "science" could ever have believed in him. They will regard with horror the terrible price we were willing to pay, rather than relinquish our attachment to this pernicious notion.

In my view, the so-called "national debt" is a phantom. By taking it at face value, and arguing within an arena circumscribed by its own ostensible terms ("loan", "debt", "interest", "pay back", etc) , howbeit even "against" it, we effectively legitimize its chicanery and cement it as a fixture of our intellectual landscape. Our reflexive hand-wringing on this "issue" needlessly traumatizes our children into believing this abstraction is real, and unintentionally programs them into an acquiescence to a dead-end future. We do untold violence to their prospects, their psyches and their hopes, however unintentionally, because we are reluctant to break our denial on this.

If We-the-People were to wake up to the reality that the "national debt" is a made-up construct, and that it could be de-constructed, there would be a new world in the morning. What is more, the sky would not fall, and the whole financial mess the nation finds itself in could begin to be resolved directly, systematically, transparently and without default to anyone.

Monetarily speaking the way forward is straightforward. It begins with the restoration of the money creation franchise to the public sector. It continues with the deflation of the "debt" bubble (not a paying of the "debt") by the redemption as they come due of already outstanding U.S. bonds with real money (United States Notes; as per the "Greenback"). It is completed with the scrapping of the fractional reserve formula, and the redefining of all "credit money" already issued as legal money.

The playing out of the transition is bigger and more complex than this of course, but eminently doable. This may sound like a preposterous vision, but, I would suggest, it is not. It only seems so because our minds have been trained out of the ability to even entertain such fits of common sense by the cumulative force of our "debt-money" rooted acculturation.

Next week the citizens of the nation will enter the voting booth in what is widely billed as a "pivotal election that will determine the future of our children's future." In spite of what has come to be years of strenuous campaigning at a cost of hundreds of millions of dollars, the issue of money is not even represented by anyone on the ballot in any definitive way. Whatever the turnout, and whoever the victors, this is a great tragedy for our nation. It was not always so. Let us resolve that it never be again.

Richard Kotlarz

The complete set of columns from this series is posted at the following websites.