Monetary reform Monetary reform is any movement or theory that proposes a system of supplying money and financing the economy that is different from the current system. Monetary reformers may advocate any of the following, among other proposals: * A return t ...

, the reform of monetary creation and thus of the banking system, is a topical political issue in the United States, especially in light of the

public debt A country's gross government debt (also called public debt, or sovereign debt) is the financial liabilities of the government sector. Changes in government debt over time reflect primarily borrowing due to past government deficits. A deficit oc ...

(15 trillion dollar in November 2011),

household debt Household debt is the combined debt of all people in a household, including consumer debt and mortgage loans. A significant rise in the level of this debt coincides historically with many severe economic crises and was a cause of the U.S. and su ...

(student debts, etc.),

Social Security Welfare, or commonly social welfare, is a type of government support intended to ensure that members of a society can meet basic human needs such as food and shelter. Social security may either be synonymous with welfare, or refer specificall ...

and other public sector undertakings and state debts. The financial crisis that began in U.S. in the fall of 2007 and subsequently affected large parts of the world, and was followed by massive bank rescues (so-called bailouts), also plays a major role in this context as well as criticism of

Federal Reserve The Federal Reserve System (often shortened to the Federal Reserve, or simply the Fed) is the central banking system of the United States of America. It was created on December 23, 1913, with the enactment of the Federal Reserve Act, after a ...

. Strictly speaking, there are two separate movements for monetary reform in the U.S., one is more left-wing and the other is more right-wing. In Congress these views are represented mainly by

Dennis Kucinich Dennis John Kucinich (; born October 8, 1946) is an American politician. A U.S. Representative from Ohio from 1997 to 2013, he was also a candidate for the Democratic nomination for president of the United States in 2004 and 2008. He ran for ...

, who belong to the progressive left, and

Ron Paul Ronald Ernest Paul (born August 20, 1935) is an American author, activist, physician and retired politician who served as the U.S. representative for Texas's 22nd congressional district from 1976 to 1977 and again from 1979 to 1985, as well ...

, known right-wing "Fed critic." The debate often focuses on questions such as how the banking system works today, debts, bailouts, the Federal Reserve, and more. But history is also alive in the debate, for example is

Abraham Lincoln Abraham Lincoln ( ; February 12, 1809 – April 15, 1865) was an American lawyer, politician, and statesman who served as the 16th president of the United States from 1861 until his assassination in 1865. Lincoln led the nation thro ...

's so-called Greenbacks something that often is mentioned. The main American organization for "monetary reform" is the

American Monetary Institute {{Notability, date=April 2022 The American Monetary Institute is a non-profit charitable trust established by Stephen Zarlenga in 1996 for the "independent study of monetary history, theory and reform." Aims The institute is dedicated to moneta ...

History

1600-1860

During the 17th and 18th century the situation was largely reversed compared to today, because several colonies then had their own currencies. This disturbed the British financiers and in the late 18th and early 19th century they worked to gain acceptance in the

Congress A congress is a formal meeting of the representatives of different countries, constituent states, organizations, trade unions, political parties, or other groups. The term originated in Late Middle English to denote an encounter (meeting of a ...

for the idea of an American/United States-central bank modelled by the Bank of England. Several of the U.S. Constitution fathers objected, however, saying that the colonies should be allowed to maintain their own monetary system. The fight was won in the end of the British bankers and their allies, and in 1781 the Bank of North America was founded, America's first central bank. However, it was not a real central bank since it only operated in three states and in 1791 was replaced by the

First Bank of the United States First or 1st is the ordinal form of the number one (#1). First or 1st may also refer to: *World record, specifically the first instance of a particular achievement Arts and media Music * 1$T, American rapper, singer-songwriter, DJ, and rec ...

. From 1811 to 1816, the United States had no central bank at all, then the Second Bank of the United States 1816-1836, and after that another period without a central bank from 1837 to 1862. Monetary reform during the 19th century in the US largely focused on the goal of keeping the local money and criticism of the central bank. One of the harshest critics were

Andrew Jackson Andrew Jackson (March 15, 1767 – June 8, 1845) was an American lawyer, planter, general, and statesman who served as the seventh president of the United States from 1829 to 1837. Before being elected to the presidency, he gained fame as ...

, the country's seventh president, who said that the central bank concentrated the nation's financial strength in a single institution, that it made the rich richer, that it gave power to the bankers instead of Congress, that the country became controlled from outside (read: from British financiers) and the northeastern states were favored at the southern and western states expense.

1860-1913

At the end of November 1910, Senator Nelson W. Aldrich and Assistant Secretary of the

U.S. Treasury Department The Department of the Treasury (USDT) is the national treasury and finance department of the federal government of the United States, where it serves as an executive department. The department oversees the Bureau of Engraving and Printing and ...

A. Piatt Andrew Abram Piatt Andrew Jr. (February 12, 1873 – June 3, 1936) was an American economist and politician who served as Assistant Secretary of the Treasury, the founder and director of the American Ambulance Field Service during World War I, and a m ...

, and five of the country's leading financiers (

Frank Vanderlip Frank Arthur Vanderlip Sr. (November 17, 1864 – June 30, 1937) was an American banker and journalist. He was president of the National City Bank of New York (now Citibank) from 1909 to 1919, and Assistant Secretary of the Treasury from 1 ...

Henry P. Davison Henry Pomeroy Davison Sr. (June 12, 1867 – May 6, 1922) was an American banker and philanthropist. Biography Henry Pomeroy Davison was born on June 12, 1867 in Troy, Pennsylvania, the oldest of the four children of Henrietta and George B. Davis ...

Benjamin Strong Benjamin Strong Jr. (December 22, 1872 – October 16, 1928) was an American banker. He served as Governor of the Federal Reserve Bank of New York for 14 years until his death. He exerted great influence over the policy and actions of the entire F ...

, and

Paul Warburg Paul Moritz Warburg (August 10, 1868 – January 24, 1932) was a German-born American investment banker who served as the 2nd Vice Chair of the Federal Reserve from 1916 to 1918. Prior to his term as vice chairman, Warburg appointed as a member of ...

) arrived at the

Jekyll Island Club The Jekyll Island Club was a private club on Jekyll Island, on Georgia's Atlantic coast. It was founded in 1886 when members of an incorporated hunting and recreational club purchased the island for $125,000 (about $3.1 million in 2017) from John E ...

to discuss monetary policy and the banking system. They created the Federal Reserve during this meeting. According to th
Federal Reserve Bank of Atlanta
the 1910 Jekyll Island meeting resulted in draft legislation for the creation of a U.S.

central bank A central bank, reserve bank, or monetary authority is an institution that manages the currency and monetary policy of a country or monetary union, and oversees their commercial banking system. In contrast to a commercial bank, a central ba ...

. Parts of this draft (the Aldrich plan) were incorporated into the 1913

Federal Reserve Act The Federal Reserve Act was passed by the 63rd United States Congress and signed into law by President Woodrow Wilson on December 23, 1913. The law created the Federal Reserve System, the central banking system of the United States. The Panic ...

1913-2008

In the 1930s, during the

Great Depression The Great Depression (19291939) was an economic shock that impacted most countries across the world. It was a period of economic depression that became evident after a major fall in stock prices in the United States. The economic contagio ...

and especially before the Second World War, there were a lot of discussions about the banking system and how to improve it. The most well-known proposal for a big reform during this time is the so-called

Chicago plan The Chicago plan was a monetary and banking reform program suggested in the wake of the Great Depression by a group of University of Chicago The University of Chicago (UChicago, Chicago, U of C, or UChi) is a private research university i ...

2008-

The Need Act, presented in the House of Representatives in September 2011 by

, is a proposed law that implies that "the creation of money by private financial institutions as interest-bearing debts should cease once and for all".

References