How to Save the U.S. Economy by Richard C. Cook

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by Richard C. Cook
featured writer
Dandelion Salad
October 10, 2008

The crashing stock market has given its verdict. The financial rescue plan currently being implemented by the U.S. Treasury Department and the Federal Reserve System will fail to revitalize the producing economy, even with continued interest rate cuts. This is because the banking system is essentially a supply-side, trickle-down mechanism with a currency based on a pyramid of bank lending and debt. All the current plans being suggested by economists and others to save the financial system by varying degrees of tinkering are useless. Similarly useless is the pumping in of credit or liquidity by Treasury or the Federal Reserve because it is no more than new debt to roll over old debt.

The cause of the financial failure is that the producing and consumer economy is “maxed out” and is unable to repay existing loans much less new ones. This is because purchasing power in the U.S. has collapsed.

Purchasing power has collapsed not only because we have outsourced our industry abroad and allowed our infrastructure to crumble, but also because of structural defects identified decades ago by C.H. Douglas and John Maynard Keynes. These defects occur due to the need for retained earnings (i.e. savings) to overcome the Law of Diminishing Returns. This leads to insufficient aggregate demand; i.e., the gap between prices and purchasing power that is endemic in an industrial economy.

The problem is not the collapse of the stock market which simply reflects the deflation of the bubble economy. The problem is the oncoming recession/depression caused by the absence of an economic engine to generate new producing power.

Keynesian plans for top-down creation of jobs by government deficit spending has never worked and has always ended in an attempt by the government to inflate its way out of debt. Everything being suggested by the Obama/McCain campaigns is based on the failed Keynesian formula.

An entirely new paradigm is needed. This can be provided through dividend-based economics like the Alaska Permanent Fund, the 2008 tax rebate stimulus, and the basic income guarantee (negative income tax) discussed during the 1960s and 1970s.

Following is the “Cook Plan”:

  1. Non-taxable vouchers should be issued at the rate of $1,000 per month per adult and $500 per month per child which may be used for food, housing, fuel, communications media, utilities, and educational services provided at outlets within the U.S. Distribution of vouchers may be delegated to state and local governments.
  2. Vouchers will be deposited by service providers and vendors only in a new network of local chartered savings banks—one for each county in the U.S. Deposits will be made to the bank in the county of the local point-of-sale.
  3. Banks will lend locally at zero-percent interest using voucher deposits as capitalization. The banks may create loans at a 1:10 reserve ratio with borrowers paying administrative fees only. Borrowers must provide a 20% down payment as collateral or purchase default insurance at 2% of the loan principal.
  4. Lending will be made only to business entities, including family or commercial farms, operating from an established location within the county.

This system will create a grassroots “bottom-up” economic infrastructure to parallel the “top-down” Federal Reserve System which is collapsing. Transfers between local savings banks and the banks of the Federal Reserve System will be denominated in U.S. dollars with vouchers redeemed within the banking system.

The system could be implemented within a matter of weeks through seed-money provided by the federal government. It could be replicated by any other nation.

It is requested that readers give this plan the widest possible distribution.

Copyright 2008 by Richard C. Cook

Richard C. Cook is a former U.S. federal government analyst, whose career included service with the U.S. Civil Service Commission, the Food and Drug Administration, the Carter White House, NASA, and the U.S. Treasury Department. His articles on economics, politics, and space policy have appeared in numerous websites and print magazines. His book on monetary reform, entitled We Hold These Truths: The Hope of Monetary Reform, will soon be published. He is the author of Challenger Revealed: An Insider’s Account of How the Reagan Administration Caused the Greatest Tragedy of the Space Age, called by one reviewer, “the most important spaceflight book of the last twenty years. His website is Comments or requests to be added to his mailing list or to purchase his special report on the 2008 election may be sent to


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46 thoughts on “How to Save the U.S. Economy by Richard C. Cook

  1. Yes I read that article when it was published at Global Research.

    I would prefer to live off of the fruits of my own labor, not those of the ‘collective’. Being a student and supporter of the Austrian school of economics, I can’t say I support any type of collective or socialized system.

  2. The money for vouchers comes from a government distributive account not based on taxation or borrowing but as monetization of the production potential of the economy.
    Dividend economics has been in existence as a theory since the 1920s and is the basis of the Social Credit movement of the UK, Canada, Australia, and New Zealand.
    The Alaska Permanent Fund, which paid a 2008 dividend of $3,269 per resident is a modified example. The basis for dividend economics as applied to the US is explained in detail in my Global Research article, “An Emergency Program of Monetary Reform for the United States.” Here is the link:
    Also see the website for the New Zealand Democratic Party for Social Credit.

  3. Where does the money for these vouchers come from? Surely not the government, what with it’s $10 trillion debt.

    I have a better idea. How about we try CAPITALISM?

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  13. Look forward to hearing more about the “Cook Plan”, Richard. Very good ideas.

    What do we do to get this going? Should we send this post to our Congressperson and Senators?

  14. I have been asked to provide more detail on the “Cook Plan” and will be doing so as time goes on. One very good suggestion is that the community savings banks provide zero-percent interest mortgage loans.

    Also, I want to say that anyone who says a plan like this simply will never be implemented for political reasons is digging his or her own grave. A lot of people probably said this on the eve of the American Revolution. But the real patriots persisted.

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  16. Thanks to all for the comments. I don’t worry too much about whether my ideas can be implemented in the current political environment. I am an optimist, not a prophet, and certainly not a politician. Mankind is evolving, I believe, though slowly. Maybe things will change for the better in six weeks, six months, six years, or six centuries. Still, it will happen in God’s own good time, especially since it is so obvious that the power elite is a parasite that is killing the host. Our job is to be faithful to what is good and true as best as we can discern it. Thanks especially to Gary Corseri for his always inspiring wisdom and eloquence.

  17. I think America has been smacked down hard in recent weeks (not to mention the past few yrs of the Bush administration!) and people just may begin to understand the viability of a bottoms-up approach over a trickle-down one.

    Of course, Mr. Cook is talking revolution–but he’s talking in terms we can all appreciate by now. If it’s not clear to the masses now that capitalism–especially finance capitalism–is in crisis mode, it will never be clear. Mr. Cook is revolutionary in his approach, and, personally, I’m glad he isn’t couching his logic in hackneyed political and social sloganeering, ideological language. Haven’t we had more than enough bickering between leftist intellectuals?

    There’s still a huge problem concerning education. Yes, the masses are ready for new information, radical ideas; but are they sophisticated enough to distinguish between what can actually help them and what cannot? Collapse in Germany and Italy in the 20’s led to Hitler’s National Socialism and Mussolini’s “corporatism.” (Calling his program “socialism” was Adolf’s version of putting lipstick on a pig.) The essence was fascism, whatever it was called, and there’s always this awful danger when things fall apart–people look for the strong man on the horse with his (and sometimes her!) easy, radical, and invariably violent and repressive “solutions.”

    Still, Mr. Cook is gutsy to put forward his ideas now. No doubt, many will misunderstand his good intentions. But, we had better start developing programs of our own–grounds-up, grass-roots–or we’ll surely get caught with another bailout request … and another … and another–ideas “trickling down” until we’re caught in a whirlpool. I’m sure Mr. Cook has developed his ideas in his forthcoming book, WE HOLD THESE TRUTHS, and I for one look forward to reading it.

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  21. All way over my paygrade, but here’s this:

    “Instead of wasting $700 billion on a bailout of the guilty that does not address the problem, the money should be used to refinance the troubled mortgages, as was done during the Great Depression. If the mortgages were not defaulting, the income flows from the mortgage interest through to the holders of the mortgage-backed securities would be restored. Thus, the solvency problem faced by the holders of these securities would be at an end”.

    ~Paul Craig Roberts–

    ie: BAILOUT THE PEOPLE! They are not the ‘wellfare queens’ the freemarket maniacs allways claim.

  22. Great ideas, but I’m with the above comment in not believing it will happen.

    The one good thing possibly happening from this collapse is that the US will get a totally new Congress and one that is responsible to their constituents and not corporate lobbyists. If that happens, then this idea can be floated.

  23. first off…. Mr. Cook avails himself very well with this explanation of the current crisis

    “The cause of the financial failure is that the producing and consumer economy is “maxed out” and is unable to repay existing loans much less new ones. This is because purchasing power in the U.S. has collapsed.”

    As solid and simple of an honest explanation as you’re gonna get.

    The only thing truer is the very next sentence…
    “Purchasing power has collapsed not only because we have outsourced our industry abroad and allowed our infrastructure to crumble, but also because of structural defects identified decades ago…”

    And he nails it right on the head when he mentions that Obama/McCain are continuing the use of the same economic vehicle.

    I humbly offer a few critiques on his four point plan. It’s not that I don’t think it’s a good idea (and i’m not saying it is)…. it’s that it has not a chance in hell of happening in this weird new America we live in….

    Plan point 1 This has no chance of happening. I take that back, it would take an extremely different arrangement of factors, and almost a different psychological state for the nation to get down with this. First off, the CorpWhoes and the GOPers are gonna yell “entitlement!” Then they’re gonna yell “Communism”. Then they’re gonna fire up violent (but ironically, poor) grassroots activists. Poor and Working people would have to somehow be convinced that giving them money is not only good for them, but for the economy. The bottom classes in American Society are notorious for voting against their own interests. And where are those tax dollars gonna come from?

    Plan Point 2. Ditto on the “Gov’t taking over!!!! COMMUNISM” campaigns

    Plan Point 3. Wish it could be done. Long term, I think it had some beneficial effects in Japan’s economy. The bankers will crucify anyone trying to do this (eventhough the Yen has become the refuge currency of Asia)

    Plan Point 4. Whoa boy. I think when America peaks under THIS rock, it’s gonna poo itself– hard. Just creating the standards and definitions for number 4 will all but end your career.

    I admire the simple ingenuity of Mr. Cook’s plan. But in this America 2.0 of ours…. idk… it would take a whole heap of political, cultural and economic will just to get into a position to start this.

    Good idea, though.

    One Love,
    –Reverend Manny and the Twilight Empire

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