Michael Clark

I am very sorry I cannot be with you this evening to share memories and pay homage to Stephen Zarlenga.

My own experience was brief, even meteoric, but life changing. It began early in 2010, when Dennis Kucinich handed me a thick sheaf of paper and said, “Hey, Mike. I’ve been holding this bill for a while, but I think it’s about time to introduce it. Could you look it over, make sure you’re comfortable with it and have it ready to go by next week?”

I won’t name names, but I am sure those of you who had dealings with Dennis’s office in those days were well aware that the bill did not enjoy strong support among the staff. Most professed not to understand it, and more than a few told me that they were counting on me to kill the bill once and for all. I learned years later that some of the staff called me the “Dennis whisperer”, and they thought I could find a way to persuade Dennis to quietly shelve it.

When I read the bill, I found it took me a while – days, actually – to understand what was being said. In part, the bill was made unwieldy because of the great care that had been given to process issues, and in part because it tried to address the many concerns that readers might have about the radical monetary reform ideas it embodied.

I felt the bill needed help – and that I needed help. So I asked Dennis for more time. I asked if I could meet with the people who had drafted the original bill, and I told him we would need the help of a Parliamentarian with knowledge of legal and procedural issues the bill would raise.

Dennis agreed and set up a meeting with Stephen – I would soon understand that there was no way Stephen was going to let me touch that bill without his involvement! Staff supported the approach thinking I was being especially methodical and clever in my effort to deconstruct the bill. And I read and reread the bill trying to understand what was going on.

The problem I soon came to understand wasn’t just the complexity of the bill, but that the monetary ideas it proposed were completely alien to the common sense of the time – a common set of seemingly natural understandings that I now realized I largely shared.

You see, before I met Stephen and before Elizabeth lent me a copy of Stephen’s book — what she called Stephen’s gold brick – I was convinced that money, or at least the resources that back it, is scarce. I believed that banks took in deposits and lent out the same money loans. I believed that through the wonder of what was called “financial intermediation” that mobilize funds from savers, and made them available to people who need them. I also thought the job of bankers was particularly challenging because of a temporal mismatch between the need to allow depositors to access money on demand and slow return of money, and that therefore banks were prone to runs and runs were prone to panic and crisis. For which we had central banks who acted as lender of last resort to provide liquidity, restore confidence and calm markets.

This was the common sense – it was what every economist I knew believed. (I did have one close friend, chief operating officer of a major US bank, who told me once, well before the financial crisis, that in his opinion, commercial banking was driving the economy through a huge Ponzi scheme – but I was sure he must be joking.)

But in Stephen’s version of the American Monetary Act, there was this very different view of money and of the role it should and must play in the functioning of the US economy. I have to confess that I didn’t understand it fully, at least not at the time. But the core idea was clear – money creation is a constitutional authority that has been delegated to private banks (this was undeniable), private banks create money at no cost to themselves (how they did this was the part I didn’t quite get – the reference to “fractional reserve banking” didn’t work for me), and a large number of problems enumerated in the Act could be attributed to the private creation of money (the ongoing deepening of the financial crisis made this seem obvious).

Meeting Stephen for the first time was a bit daunting. I had already decided that the real purpose of the bill would be propagandistic in the best sense of the word. Its purpose would be above all to present this new view of how money should come into being and should be managed in the public interest. I began a sharp paring of the language removing whole sections, and streamlining each and every line as far as I could to make the core view is as clear as possible. I knew that there were endless details to be sorted out, and that true legislation to implement the Act would end up being hundreds, if not thousands, of pages. And I did all this without consulting Stephen and his team. I approached the first meeting with more than a little nervousness, but convinced that in general, if perhaps not in detail, the approach was the right one for the time.

What we needed was to change the conversation at a time when a lot of people were working on financial regulation, but with operating assumptions completely steeped in the conventional orthodoxy that had created the mess we were in.

Well, we met. He was as nice as could be, greeted me warmly, and thanked me for what by then was becoming a major investment of time. I wondered if he would thank me after he read what I had done. But Stephen listened carefully as I explained what I was trying to accomplish, and told me he agreed with the general approach but would need to talk with his team (I soon learned that he ALWAYS gave credit to his team).

To my great relief, Stephen came back to me quickly. The team had had a difficult conversation, I gathered, but were eventually persuaded by Stephen that this would be the best way to go. They corrected some errors and restored some language, but by and large accepted the reorganization.

The last thing we needed was a real expert in US law and the legislative process to help put the Bill in proper form. I thought this might be a deal killer since just about everyone who had any knowledge of money and banking was tied up with Dodd-Frank or the numerous hearings taking place. And even if there were people available, they would probably not be supporters of the legislation and would find ways to beg off.

Enter Jim Wert on a white horse. Jim was as busy as could be in the spring of 2010, but it became very clear from our first meetings that Jim had a history with these issues and that his heart was in it. Somehow he made the time, and saw the Bill through to its formal submission.

The experience of drafting the NEED Act, or rather redrafting the American Monetary Act (Dennis came up with the new title), was an accidental privilege that, as I said, changed my outlook and life.

Certainly, when it comes to monetary affairs, to government funding, to banking regulation, there is no going back for me. The Act was right in asserting that our delegation of the Government’s constitutional authority and responsibility to create money has contributed materially to growing inequality; led to unbridled expansion of debt, both public and private; weakened our capacity to finance public infrastructure, including education and health; and made us vulnerable to prolonged spasms of unemployment and dislocation.

Today, thanks to Stephen’s work and the work he inspired, it is no longer possible for experts to believe the fairy tale stories about financial intermediation and the role of banks in mobilizing savings; we have now seen the Central Banks create (we said “originate”) ex nihilo literally trillions of dollars, pounds, euros, renminbi, and yen without causing even a ripple of inflation; and we can see the possibilities more and more clearly than ever that real reform of America’s monetary and banking institutions can bring extraordinary benefits to all Americans.

I shall be forever grateful to Stephen (and his team) for his generous, public-minded spirit – the unwavering spirit that carried though the enormous effort of The Lost Science of Money, the courageous spirit that enabled a small band to stand against all “reasonable” and “knowledgeable” opinion, and the generous spirit that embraced the work of a neophyte who had the temerity to unilaterally rewrite the work of many others far more knowledgeable than himself.

May he rest in God’s peace, and may his memory inspire in us the strength to carry on this noble, vital work of restoring democracy to our economic and political life.