Op-Ed; Opinion

OPINION: Basic Income, QE3 Plus, and the Euro crisis

By Gary Flomenhotf

Not everyone follows the actions of central banks, such as the private bank cartel called the US federal reserve (the fed), but you should know what the fed is up to lately:  QE3[1] PLUS! See article here. You may know that QE3 is a fed program to purchase $40 Billion in mortgage bonds per month from banks, basically taking crap off their hands and making US citizens pay for it.  The latest plan is to add $45 billion in Treasury bonds to that. These are open market operations where the Treasury bonds are bought from banks, thereby increasing the money supply and supposedly lowering interest rates further.

The US Treasury pays interest on Treasury bonds, and the fed supposedly returns most of it to the US government as profit.  But the fed only owns a small fraction of the US debt, much of it is owned by foreigners and banks. The government doesn’t get that interest back, and it is the cause of sovereign debt crises, when interest on governments’ debts becomes unpayable.

Just to remind people where the fed’s money comes from, the fed prints it, or nowadays types it into a computer account as a bank balance.  Since the US Treasury outsourced the creation of money in 1913, the fed has produced a small part of the money supply directly, and the rest is created through fractional reserves by private banks, about 95%.  This is called variously seigniorage, money creation, or monetary supply, which is a sovereign privilege of the state given over to central banks and private commercial banks worldwide.  Under 100% reserve requirements, the central bank would create the entire money supply and not commercial banks. The IMF recently published a surprising essay called “The Chicago Plan Revisited” discussing this idea, first promoted by major economists in the 1920’ and 30’s.  A trial balloon perhaps?

The Treasury could also issue the entire money supply as interest-free US Notes or bank balances and do away with the central bank entirely.  The US Treasury has issued these notes in the past starting with Greenbacks issued by President Lincoln to finance the US Civil War.  100% reserve requirements are essential to end the loss of money creation to banks and the resultant interest paid on every dollar of money in the economy.  Banks opposed the Chicago Plan in the 1930’s because it takes away their privilege of collecting interest on money they create from nothing, when they make loans using fractional reserves.

The total of QE3 PLUS is $85 Billion per month.  Doesn’t sound like much these days with debts in the trillions, and derivatives in the hundreds of trillions, but let’s figure it out.  Take the US population of about 315 million and divide into $85 billion and you get $270 per month or $3240 per year.  How would you like that or $12,960 per year for a family of four as a basic income?

The fed is not allowed to finance citizens, states, or municipalities, only banks and the Treasury.  And remember that US states are forbidden from issuing “bills of credit” by the Constitution (Article 1, Section 10, Clause 1).  For more on this see Vermont currency commons website.  Now this reminds me of a joke I heard when Iraq was writing their new constitution after we invaded and instituted “regime change”.  “Why don’t they take our constitution, we’re not using it.”  Congress is supposed to coin the money supply, not banks,  as stated in Article I, Section 8, Clause 5.  I see no reason to follow this prohibition since the national government isn’t following the Constitution, but let’s leave it be.  States can create public banks, and these banks can issue credit that is not considered an illegal state bill of credit. States could also issue warrants or other IOUs as California has done on two occasions.  See currency commons article on California.

The problem in Europe is that countries have given up their sovereign monetary policy when they joined the Eurozone, as US states did when they ratified the Constitution and joined the union in 1789.  Even EU countries that haven’t joined the Euro like England, Denmark, and Sweden still let banks issue most of the money with interest, so they are at the mercy of the banksters.  I suspect even Iceland, which told the bondholders to take a hike, is still letting banks create all the money with interest.  Old habits die hard…

Anyone traveling to the Eastern Caribbean, for example, will find transactions taking place in Eastern Caribbean Dollars, US dollars, and Euros side-by-side without much difficulty.  So there is no practical reason for countries to give away their monetary policy to a central authority.  It is the interest paid on private money creation that is the problem, not the sovereign monetary authority of individual countries. For more on this see Dr. Margrit Kennedy’s website.

So what would happen if central bank quantitative easing and open market operations were redirected to basic income payments to individuals rather than loans to banks?  Let’s not forget that the fed has already issued QE1 and QE2 without much result.  QE1 was $1.25 trillion and QE2 was $600 billion for a total of $1.85 trillion.  That is $5873 for every person in the US given to banks, in a form of “trickle-down” theory that it will eventually benefit the economy.   Don’t you think it would have been more effective to pay directly in a dividend check to citizens amounting to $23,492 for a family of four?  A sovereign state or country could issue its own public credit money without interest, and get out of the bankster racket that pays interest on money they create out of thin air. Guernsey did it starting in 1822.  Any country or state could do it, and even issue it as an interest-free basic income, trickle-up, not “tinkle-down.”

About the author:

Gary Flomenhoft is an International Post-Graduate (IPRS) and University of Queensland Centennial Scholar and PhD Candidate at Centre for Social Responsibility in Mining. His research area is the economic value of common wealth and governance of Sovereign Wealth Funds.

Prior to enrolling at SMI, Gary was a faculty member for 11 years in Community and International Development and Natural Resources at the University of Vermont (UVM), serving as a Lecturer in Applied Economics, Renewable Energy, International Development, and Public Policy. He conducted many development projects in The Commonwealth of Dominica, St. Lucia, and Belize with students and local partners. He also originated and coordinated the Green Building Design Program at UVM.

He had a secondary appointment as a Research Associate and Fellow at the Gund Institute for Ecological Economics under Director Robert Constanza. His primary research was in public finance for the state of Vermont including green/environmental taxes, common wealth and common assets, subsidy reform, and public banking. His 2013 report on Vermont public banking formed the basis of the “10% for Vermont” legislation passed in 2014, which allocated $35 million of state funds to local investment. He directed the grant funded Green Tax and Common Assets project at the Gund Institute for seven years, where he originated the Vermont Common Assets Trust Fund (VCAT) bill, which was submitted to the legislature twice. His chapter on Vermont Common Assets appeared in the book “Exporting the Alaska Model”, which promotes the Alaska Permanent Fund and Dividend as a model for basic income around the world using Sovereign Wealth Funds.

[1] QE means quantitative easing, a fed policy of purchasing bank securities in order to increase the money supply to encourage additional lending by banks, and lower interest rates

About Guest Contributor

Guest has written 134 articles.

The views expressed in this Op-Ed piece are solely those of the author and do not necessarily represent the view of Basic Income News or BIEN. BIEN and Basic Income News do not endorse any particular policy, but Basic Income News welcomes discussion from all points of view in its Op-Ed section.


  • ..not just interest free money…debt free at creation from nothing money, that the government does, as did Franklin and Lincoln, but today we could keep track of it better with the states invovled with their powers of nullification to prevent overprinting, etc….but you’ll never see this idea on Fox fauxnews…Bill Still likes it, but so far I can’t say anyone else even notices the possibility.

  • Del Mar

    There is not much discussion of QE for the people and businesses, is there not? Quite the opposite, there is a massive propaganda effort for the opposite, alluding to the “fiscal cliff” … a phrase that appeared all of a sudden in October!

    The Bush tax cuts, for all his faults, were a type of QE, now expiring.

    An interesting essay on the coincidence between state-owned central banks/banking systems, and NATO/US invasions, is


    Also, to Dr. Lamar, the American Monetary Institute (monetary.org) continues to organize and inform around this issue, having managed to introduce a monetary reform act in Congress, though this too is expiring.

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.