Money Creation for Home Ownership

Money creation is the responsibility of the government, not the Federal Reserve.

The US dollar represents a promise backed by the people of America, not the Federal Reserve. The Federal Reserve facilitates money’s creation, but it is not responsible for honoring the promise Americans make to the world which is:

If you have an American dollar in your pocket, or in one of America’s banks, the US Government, backed by its enterprising, honest, and hard-working people — not the Federal Reserve –will make sure that a dollar represents true value when it is spent anywhere in the world.

U.S. dollars that are created for housing debt are fully collateralized by American homes. This makes collecting trillions of dollars from American housing debt virtually risk free. The Federal Reserve has constructed a system built on this risk free housing debt as a conduit to transfer money from the general population to a limited few wealthy investors. This bold charade has been cloaked in misinformation and half-truths about how money lending for the nation’s housing needs are best handled.

The pretense that banks and their hand-picked investors were risking their own money finally came to the public’s attention during the 2008 financial disaster that was centered in the Federal Reserve’s blatant disregard of prudent economics and fiduciary duty. Bailouts were needed and the whole world’s economy is being reset because profit taking turned into its greedy cousin — profiteering.

The truth of mortgage lending is that the money needed for mortgage debt is created, not borrowed. Mortgage debt does not need to be sold to wealthy investors. In fact this practice drives costs of buying a home to double or triple needlessly.

The National Home Lending Bank mentioned so often in this website calls for the government to create money for home lending directly without interest, independent of the Federal Reserve. This is the first step in lowering costs associated with housing and having public input directly influencing money creation.

The money created in this fashion will be tied to production –the preferred method of money creation– and not speculation which the modern method of fractional reserve banking obviously has problems controlling.

How Existing Money and Newly Created Money Interact

Money is obviously created out of thin air. It is not found in nature, and 95% of money exists as electronical digits flying around on computers. All money in existence is already being used for some important purpose. It is either invested, being saved, or circulating as spending. People are born into a world filled with money. There was so much money in existence that the gold standard, money’s final tie to a redeemable, tangible asset ended in the 1970’s. PB&J does not believe in going back to the gold standard. It believes the current fractional reserve system of money creation can work well going forward for awhile if public banking is allowed to compete for consumers dollars.

The push for public banking is a reasonable response to the purposeful and unwitting favoritism being shown in the creation of money to the tremendously large pools of money in existence. A phenomenon brought on by too much money in too few hands has bastardized how money was meant to circulate productively, which in turn supports the overall goal of money which is maximizing human potential. Money is intended to facilitate getting work done and setting a standard of value between currencies in the global economy.

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The mistakes made in the past with managing money creation are directly related to the problems we are seeing today: bank bailouts, quantitative easing, negative interest rates, wild swings in asset values due to speculative investing, a disconnect between corporate America and the general population, income inequality, unaffordable housing, stagnate wages. Let’s end this, and admit a poorly functioning global economy steeped in uncertainty is not what is wanted from money creation. When money stops circulating properly, and it has, bad things happen.

PB&J would like to see the public directly using the power of money creation being used with housing. Doing so would be the easiest and most logical fix to try and tie money to production. Ideas like universal income are becoming popular and for good reason, money is not circulating. Yes, robots are coming for your job. Yes, new technology is a major disrupter. But the money to be found in cutting housing costs, by brining money creation’s benefits directly into the home, money will start circulating. Too-big-to fail banks will shrink in direct proportion with the rise of a publicly created bank focused on housing.

This new governing body which will oversee money creation will see the Federal Reserve (FED), and a National Home Lending Bank (NHLB) beginning a new era in money management. The Fed will focus on business lending, and the NHLB will focus on home lending. They will be using different lending strategies, the FED using interest and the NHLB not, but this is exactly what is needed for a 21st century monetary system.

The nuts and bolts of money creation are well documented on the internet. PB&J will provide a few links below for those that would like to explore the topic;

Fractional reserve banking

Fed video

Double book accounting