The Follies of the Modern Greenbacker Movement

Lately there has been growing interest in what might be called the modern Greenbacker movement, in homage to the historical political party. The new movement deplores the current system under which the government issues interest-bearing debt to commercial and central banks. Instead, the modern Greenbackers want the government to create new fiat money directly to cover its fiscal deficit. The movement has backing from mature authors as well as glib 12-year-olds. But there are dangers in this approach — it could be a cure worse than the disease.
The basic complaint—largely accurate—of latter-day Greenbackers is that the structure of modern banking and monetary systems allows private individuals (the bankers) to effectively issue money out of thin air in the process of giving loans and taking assets onto their balance sheets. When the government runs a fiscal deficit (by spending more than it collects in tax receipts during a given period), it covers the gap by issuing new bonds, which are effectively IOUs in the taxpayers’ name, and thereby enlarging the national debt. To the extent that the banks (including the central bank) end up holding this new debt, the total stock of money is enlarged (causing price inflation) and, to add insult to injury, the taxpayers must then pay interest on this debt to the private bankers.
This is a very convoluted process, but when one drills down to its essence, the Fed and the commercial banks are arguably giant counterfeiters. (Interested readers can see a step-by-step breakdown of the swindle in my article here.) In this light, it is completely understandable that so many people reject the current system and seek to replace it with something seemingly more democratic.

Read more: http://www.theamericanconservative.com/articles/the-follies-of-the-modern-greenbacker-movement/