Dear President Obama,
The monetary earthquake and its subsequent economic implications that have been shaking the world of finance since the subprime crisis in 2007 started in the USA. Therefore this must necessarily be contained and neutralised from your own country, and I do not think that anyone but you can perform this huge task.
The result of my research work is a macroeconomic law that commands the pace of progress of each national activity – and therefore growth (more details can be found on my website: bayard-macroeconomie.com).
This law demonstrates that the cycle of production activity expands or decreases according to whether it is supplied with more or less liquidity. National activity, therefore, works much like the motor of a mechanical engine. It moves more or less quickly according to whether it is more or less powered with fuel, i.e. liquidity.
The economic situation nowadays is a liberal economy which is left to the unregulated and thus disorderly influences of opposite endogenous factors, namely: savings and credit. Savings play the role of the brakes and credit plays the role of the accelerator. In addition, an exterior balance showing a deficit amplifies the brake effect, whereas a beneficiary balance amplifies the accelerator effect.
I have done a study in order to apply my research to the economy of your country, and this is the result:
In your last report to the Congress (ERP-2013), we can find (in trillions of US Dollars):
- Combined balance of trade from 1980 to 2012 = -9.0
- Combined budgetary deficits from 1980 to 2012 = -9.5
In my opinion, these two factors are the root cause of the debt that they have fed. At the end of 2012 (as an estimate) this debt reached 16.2 trillion US Dollars, i.e. 104.2% of GDP estimated as 15.5 trillion US Dollars on the same date. The difference between the two deficits and debt is of little importance if we show them in terms of broad categories.
Here are my comments:
1 – External trade
The production activity of the USA has been slowed down by unbalanced external trade (see the note above on the macroeconomic law). The amounts taken away from GDP show a transfer of purchasing power to foreign countries. This can be verified by the ability of creditors to acquire directly the property of the State, should they decide to so use the 9 trillion US Dollars that they own.
We can compare this with what the “Troika” (EU, ECB and IMF) is imposing on us in Europe! Is this not meant to satisfy the insatiable appetites of the all-powerful markets?
The solution – which I have recommended for the last fifteen odd years – consists in setting up bilateral or multilateral agreements between every country, so that the value of their trade is close to zero. This is because at the world level: exports = imports. The markets, wrongly considered regulative, would no longer impose their law, much to the satisfaction of the general public. Private interests should give way to public interests.
2 – Budget
The GDP of the United States, as it has been obtained for the last three decades, can be mostly explained by the budgetary deficit of 9.5 trillion US Dollars. The State makes monetary regulation with Keynesian stimulus without knowing it.
As mentioned above, (monetary) savings play the role of the brakes in the progression of production activity, whereas credit plays the role of the accelerator. When the monetary resources depend 100% on debt, growth requires further debts and interest to pay for further savings.
The "subprime crisis" had broken the system of consumer credit, the development factor in the production activity, mostly in your country. This is the reason why production activity is depressed, with booming unemployment and misery as consequences.
From my study of monetary circuits (please see my website), I can verify that the system has frozen the term savings deposits (TMA) in the commercial banks. The latter occupy what we can call “monetary parking places” that are useless for the economy, since they cannot leave the bank as long as the depositor does not give the order to put them back in the circuit of demand deposit accounts (DDA). It is thought that the economy circulates – but that is not true.
According to the same Congress report (ERP-2013), the bank TMA of which the deposits are less than 100,000 US Dollars (a rule set out by the Fed if my information is accurate) represent 4.4 trillion US Dollars. To this we should add the bank TMA of more than 100,000 US Dollars deposit, the amount of which I do not know. We do not exclude the fact that the short, middle and long-term bank TMA – whatever the amount may be – comes close to 9.5 trillion US Dollars. If it was the case, my thesis would only be reinforced.
Let us talk now about the budget itself:
The State budget is a treasury budget, indistinctly consisting of:
- the receipts, the ones concerning taxes as well as income from its investments in public companies, property transfers and loans, and
- the expenses, the ones concerning operating costs, diverse and various aids, investments, interests on loans and the refunding of loans.
The first and absurd consequence of this is to force the State to borrow in order to increase its wealth and to sell its assets in order to pay off both its capital (net of depreciation) and the interests! This constitutes a completely grotesque situation.
Every year as the debt increases, the annual interests increase as well. Unless I am mistaken, they currently drain from your budget an approximately amount of 400 billion US Dollars a year.
The debt policy is dictated by the ‘almighty’ monetary system. It favours lenders over the working masses whom are paying the interests.
The solution I propose consists in issuing so-called permanent money, i.e. without any interest or repayment deadlines in favour of the Public Treasury – with, of course, the agreement of the Houses of Representatives of the nation.
Its amount could now be fixed to the sum of the bank TMA frozen in banks that constitute the most powerful brake to the development of the real economy, i.e. at least 4.4 trillion US Dollars (a figure mentioned earlier).
The financial needs of a country can broadly be divided into three groups:
a) – Public operating expenses,
b) – Investment expenses,
c) – The monetary needs of economic regulation (savings/credit) aimed to set a target growth rate.
The first ones should be covered by taxes. As for the two others, they should be covered by permanent money.
Thus, the creation of permanent money, intended for the State only, puts an end to the intervention of the financial markets and of the rating agencies over a sovereign debt that does not run default risk any longer, since there is no more sovereign debt on the markets!
It is rightly said that power belongs to he who fights money. You cannot run a country effectively – with all that this implies – if you do not have total control over money.
That is why, Mr President, I permit myself to invite you, in the most respectful way, to urgently regain total control of your central bank: the Federal Reserve.
This is made all the easier by the fact that – if my information is correct – on 6th January 2011, with the greatest discretion, the Fed placed itself under the protection of the Public Treasury, in a situation of quasi-bankruptcy.
It became a "Bad Bank" and our NCBs, led by the ECB in Europe, are about to become such as well.
In order to save the bank system, but above all the corporation, the Fed recovered all the toxic assets that the bank had detained, and thus had to bear their losses. From being the lender of last resort it gave way to the State being the payer of last resort!
By nationalising the American central bank you would send a strong signal to the world of finance. By taking over the reins of the monetary policy of your country and by practising monetary regulation you could revive growth, effectively combat the unemployment and misery prevailing in your country and anywhere else in the world.
The governance of a country should no longer be an issue of taxation, but of finance and money.
As you already know, the monetary system is seriously disabled. It has become incapable of carrying out its primary mission, which is to finance the economy. All the past and future attempts at regulation were and will be doomed to failure because the ones who decide are the ones who must be reformed.
On my website I propose two solutions of monetary reform: the first one liberal, and the second one, administered. I think they should facilitate any decision taken.
In the end, the crisis has shown that the independence of the central banks was exerted through the dependence and submission of the people. Your country and the entire world are waiting for you to free the people from the yoke and the taboos of the monetary system.
Please forgive me for the length of this letter, but this is such a serious matter that I was not able to make it shorter without sacrificing the sum and substance of it.
I remain, sincerely yours, Mr President.
Jean Bayard
31 October 2013
Major C.H. Douglas is said to have written the following text. Whether it is original or not, it takes on full significance in light of the message of this letter:
The world is populated
By two categories of people
The immense majority
Whom produce all the wealth
Through their work
And the tiny minority of bankers
Who produce all the money
Through paper transactions.
To consume what they produce
The immense majority
Borrow all their money
From the tiny minority.
But the immense majority
Have not understood
A seemingly simple problem:
If you go into debt for eternity
The rates of interest
Accumulate eternally
And we become ruined.
It's as simple as that.
At some level this seems unbelievable.
And because it is unbelievable
The party continues
For the tiny minority.
Unless one day
In a flash of coherence
The VAST majority
Realize that because
They produce all the wealth
It is they who produce all the money
Through paper transactions.
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