Sustainable Monetary Policy Act

A BILL

To establish sustainable monetary policy conducive to and corresponding with sustainable real economic activity.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

(a) This Act may be cited as the ‘‘Sustainable Monetary Policy Act.”

SEC. 2. FINDINGS AND DECLARATIONS.

(a) The Congress finds that—

(1) for the general welfare of present and future generations, the level of economic activity must be, first and foremost, sustainable;

(2) the level of economic activity is determined by the Nation’s population and its per capita consumption, as measured primarily with gross domestic product (GDP);

(3) the best available science indicates that the national and global economies are operating at or beyond their long-term environmental capacity, and therefore unsustainably;

(4) management of the monetary sector of the national economy affects rates of growth in the real sector, and in other ways affects the social and economic stability of the real economy and the financial institutions serving the real economy;

(5) excessive issuance of credit places a burden on debtors to produce more goods and services, exacerbating the environmental deficits of the real economy;

(6) the Federal Reserve System is the predominant, authoritative manager of the monetary sector;

(7) the Federal Reserve System is mandated by the Federal Reserve Act of 1913, as amended by the Federal Reserve Reform Act of 1977, to pursue maximum employment and stable prices;

(8) the Federal Reserve System has typically pursued maximum employment by encouraging GDP growth, under the assumption that a growing economy provides more jobs;

(9) in addition to its environmental and therefore economic unsustainability, GDP growth is becoming a less reliable means of increasing employment due to technological developments and because increasing proportions of income have flowed toward wealthy individuals, corporations, and financial institutions;

(10) the dual mandate of maximum employment and stable prices is also self-contradictory, because GDP growth and maximum employment are pursued primarily by lowering interest rates, which, oftentimes if not usually, is conducive not to stable prices, but rather to inflation;

(11) the Federal Reserve System commonly assesses the utilization of manufacturing capacity, but overlooks the agricultural and ecological capacities that underpin the manufacturing sectors;

(12) a viable money supply with real purchasing power is ultimately dependent upon the agricultural surplus at the base of the economy, which allows for a division of labor and makes money a meaningful concept;

(13) the ability of the Federal Reserve System to pursue full employment or stable prices has been and continues to be limited by—

(A) environmental capacities and trends that affect real economic activity;

(B) fiscal policies enacted by Congress and administered by the President;

(D) international trade and the value of the Federal Reserve note relative to other currencies; and

(14) the Steady State Economy Act of 2032 calls for substantial changes in the goals and policies of the Federal Reserve System, while alleviating some of the contradictory pressures faced heretofore.

(b) The Congress declares that—

(1) monetary policy must be—

(A) designed in a manner conducive to real economic activity at sustainable levels; and

(B) coordinated with fiscal policy to achieve equitable distributions of wealth;

(2) in order to better coordinate with fiscal policy makers, the Federal Reserve System shall become a Cabinet-level department in the Federal government;

(3) the Federal Reserve System needs a new set of goals that are congruent, in no way contradictory, and suited to the challenges of the mid and later 21st century;

(4) the Federal Reserve System shall develop and apply a longer-term perspective on monetary policy than heretofore, reflecting a new concern for environmental trends that affect economic capacity;

(5) the Federal Reserve System must take every precaution to avoid the growth of the economy to a level that damages long-term ecological capacity; and

(6) the Federal Reserve System must coordinate with Congress and regulatory agencies to protect the economic capacity of the foundational, agricultural sector, leaving a buffer of insurance capacity for episodes of environmental, meteorological, geological, and climatological stress such as drought, heat, flooding, climate change, volcanic activity, and other known or unknown natural environmental processes that affect economic capacity.

SEC. 3. DEFINITIONS.

(a) In this Act—

(1) the term “Act,” unless otherwise specified, refers to the Sustainable Monetary Policy Act;

(2) the term “agricultural surplus” means the production of food crops, brought to market or donated for consumption, beyond what is required to sustain the farmers producing the crops, but not including crops left in the field to waste or otherwise wasted;

(3) the term “biocapacity” means the potential of a cropland, forest, fishery, or rangeland ecosystem to regenerate natural resources such as crops, timber, fish, and forage, respectively;

(4) the term “Board” or “Board of Governors” means the Board of Governors of the Federal Reserve System;

(5) the term “economic biocapacity” means the GDP that can be ecologically supported over the long term by a Federal Reserve Bank district or other geographic unit;

(6) the term “capacity utilization” means the percentage or proportion of economic resources used, including the biological and ecological resources required to support the production of goods and services and the population that consumes them;

(7) the term “Chair” means the Chairman of the Board of Governors of the Federal Reserve System;

(8) the term “dollars” means chained 2017 dollars;

(9) the term “ecological footprint of economic activity” means the area required to support a given level of GDP;

(10) the term “enactment” means the passage into law of the Sustainable Monetary Policy Act;

(11) the term “fund-service resources” are ecological assets from which economically valuable services flow, such as forests from which carbon sequestration, biodiversity maintenance, and outdoor recreation services flow, in addition to any flows of natural capital stocks such as timber and pulp;

(12) the term “GDP” means gross domestic product as measured and reported by the U.S. Bureau of Economic Analysis;

(13) the term “lawfully available for extraction” means not preserved or otherwise protected from harvest or disturbance by federal, state, or local laws and policies, including but not limited to environmental protection laws and economic zoning policies;

(14) the term “long term” means a period of time sufficient to include protracted and complex ecological, social, demographic, and economic processes and trends, and for Federal planning and policy purposes, implies a period of 150 years;

(15) the term “monetary emergency” means a crisis or imminent crisis in the monetary or financial sectors that threatens the value of the currency, the solvency of the banking system, the liquidity of markets, or the credit rating of the United States;

(16) the term “natural capital” means renewable and nonrenewable resources occurring in nature and requisite to economic production, including but not limited to soil, water, timber, fish, and forage;

(17) the term “quantitative easing” or “QE” means the creation, electronically, of new money by the Federal Reserve System in quantities exceeding fifty billion (50,000,000,000) dollars within a one-month period for the purchasing of assets outside of normal open market operations;

(18) the term “steady state economy” means an economy with stabilized or mildly fluctuating real GDP, maintained by a rate of throughput within the regenerative and assimilative capacities of the ecosystem;

(19) the term “stock-flow resources” are raw materials found in nature that can be transformed into economically valuable goods which can be stockpiled;

(20) the term “sustainable” means ecologically and economically operational for the long term without causing significant and irreparable environmental deterioration or shortages of crucial resources;

(21) the term “sustainable money supply” means an amount of money warranted by the agricultural surplus at the base of the economy, which limits the potential division of labor and GDP, such that the amount of money is not so great as to induce inflation and not so small as to induce deflation, and is in proportional balance with (not equal to) economic biocapacity or GDP, whichever is smaller; and

(22) the term “Division” means the Federal Reserve System Division of Ecological Capacity Monitoring.

SEC. 4. REORGANIZATION.

(a) One hundred eighty (180) days after enactment, the Federal Reserve System will become a Cabinet-level department of the Federal Government.

(b) The Federal Reserve System shall retain its existing organizational structure and will retain elements of self-governance, except that—

(1) the Chairman of the Board of Governors (“Chair”) shall report directly to the President; and

(2) the Chairman of the Commission on Economic Sustainability will serve ex officio on the Board of Governors (“Board”), for purposes of providing—

(A) expert advice on ecological capacity; and

(B) long-term planning perspective.

(1) the Committee shall be comprised of thirteen (13) voting members, not twelve; and

(2) the President of the Federal Reserve Bank of Kansas City shall be an ex officio member, for purposes of providing continual expertise on agricultural production and surplus.

(d) With the President, Secretary of the Treasury, Chairman of the Commission on Economic Sustainability, and other Cabinet members, the Chair shall coordinate with Congress and relevant federal agencies in the transition to a steady state economy pursuant to the Steady State Economy Act of 1932.

(e) Federal Reserve System staff will become federal civil servants with General Schedule salaries and benefits managed by the Office of Personnel Management, concurrent with the abolishment of the Federal Reserve salary structure, except that—

(1) the Chair remains a political appointment of the President and the term of office remains 4 years; and

(2) all other members of the Board will become non-career members of the Senior Executive Service.

(f) The Chair shall rank as the sixth-place successor to the President, immediately below the Secretary of the Treasury and above the Secretary of Defense.

(g) One hundred eighty (180) days after enactment, the Office of the Comptroller of the Currency will become an office of the Federal Reserve System, and the Comptroller of the Currency will become a career member of the Senior Executive Service reporting directly to the Chair.

(h) Federal Reserve System revenues will remit to the U.S. General Fund.

SEC. 5. REORIENTATION OF GOALS.

(a) The Federal Reserve System shall heretofore pursue the goals of—

(1) transition to and establishment of a sustainable, steady state economy as indicated by a stabilized GDP, congruent with the 25-Year Steady-State Transition Plan of the Commission on Economic Sustainability;

(2) maintenance of a money supply that reflects, waxes and wanes with, the level of real economic activity;

(3) non-inflated, non-deflated, stable prices;

(4) stability and fairness of the banking system and associated financial institutions;

(5) equitable investment in healthy communities;

(6) protection of farmlands, rural areas, and natural ecosystems from overinvestment and loss of rural character; and

(7) protection of consumers and investors from fraudulent financial activities.

SEC. 6. LONG-TERM PLANNING.

(a) Time periods of planning shall be designated as—

(1) short-term: one (1) year or less;

(2) medium-term: more than one (1) year and less than five (5) years; and

(3) long-term: five (5) to one hundred fifty (150) years.

(b) In addition to the ongoing development of System Strategic Plans, Tailored Bank Plans, and other regular and periodic plans deemed necessary by the Federal Reserve System, the Chair shall oversee the development of a Long-Term Capacity Maintenance Plan.

(c) The Long-Term Capacity Maintenance Plan will incorporate relevant findings of the Commission on Economic Sustainability in its Report on Sustainable Population and Optimal GDP and its 25-year Steady-State Transition Plan, and will further assess—

(1) stocks of natural capital required to support the economy, including at a minimum the natural capital stocks of topsoil, fresh water, forests, rangeland, and fisheries;

(2) funds of ecosystem services required to support the economy, including at a minimum biodiversity, wetlands, rivers, and riparian areas;

(3) trends of the natural stock-flow and fund-service resources identified and assessed pursuant to § 6(c)(1,2) of the Act;

(4) impacts of climate change on natural stocks and funds; and

(5) impacts of economic activity on natural stocks and funds.

SEC. 7. DIVISION OF ECOLOGICAL CAPACITY MONITORING.

(a) There is hereby established a Federal Reserve System Division of Ecological Capacity Monitoring, herein “the Division.”

(b) The Division, in collaboration with the Federal Reserve Bank of Kansas City, will serve as the Federal Reserve lead in estimating the ecological capacities of Federal Reserve Bank districts.

(d) The Division shall be staffed and funded at the level of the mean staffing and funding of the other Federal Reserve divisions operating at the time of enactment.

(e) The Federal Reserve System Division of Management and Financial Services shall manage personnel operations in developing the Division.

(f) The Division shall consist of professional staff including ecological economists, ecologists, and sustainability scientists with advanced knowledge of the principles of ecological macroeconomics and the techniques used to calculate or estimate ecological footprint and biocapacity.

(g) The Division of Ecological Capacity Monitoring shall perform two primary functions:

(1) Assisting Federal Reserve Banks with estimates of—

(A) the economic biocapacity of their districts;

(B) the ecological footprint of economic activity in their corresponding districts;

(D) sector-specific capacity utilization assessments pursuant to the criteria provided in § 9 of the Act.

(2) Education and training of Federal Reserve System personnel including—

(A) the Board of Governors;

(B) economists assisting the Board; and

SEC. 8. FEDERAL RESERVE BANK OF KANSAS CITY.

(a) As with other Federal Reserve Banks that specialize in particular topics, analyses, or procedures, thereafter playing a leading role across the Federal Reserve System in the study and practice of such topics, analyses, or procedures, the Federal Reserve Bank of Kansas City, or “Kansas City Fed,” shall maintain and build upon a specialty in the topics of—

(1) agricultural economics;

(2) ecological economics;

(3) potential GDP as a function of agricultural surplus; and

(4) calculating or estimating, in collaboration with the Division of Ecological Capacity Monitoring—

(A) economic biocapacity of Federal Reserve Bank districts;

(B) regional contributions to sustainable money supplies, based upon economic biocapacity calculations or estimates; and

(b) The Kansas City Fed shall host an annual Conference on Agricultural Surplus and Sustainable Money Supplies, open to members of Congress and Congressional staff, and open to the media, and the conference shall be attended, at a minimum, by—

(1) the Chair of the Commission on Economic Sustainability;

(2) no less than two members of the Board of Governors of the Federal Reserve System;

(3) no less than two board members of each Federal Reserve Bank; and

(4) no less than three economists from each Federal Reserve Bank.

(c) The purpose of the annual Conference on Agricultural Surplus and Sustainable Money Supplies is to report, explain, and discuss the annual findings of the Federal Reserve Bank of Kansas City on the subject matter described in § 8(a).

SEC. 9. SECTORAL CAPACITY UTILIZATION.

(a) The Federal Reserve System shall continue its capacity utilization monitoring of manufacturing, mining, and electric and gas utilities, except that it shall—

(1) not assume sufficient availability of natural resources to operate the manufactured capital in place; and

(2) adopt capacity indices based not on the output from a reference year, but rather based on the physical stocks of natural resources that are economically and lawfully available for extraction.

(b) The Federal Reserve System, led by the Division of Ecological Capacity Monitoring, shall institute and prioritize capacity utilization studies and monitoring for—

(1) agriculture including, at a minimum, cereal grain production;

(2) livestock production;

(3) poultry production;

(4) forestry;

(5) commercial fishing; and

(6) water.

SEC. 10. REAL AND POTENTIAL GDP.

(a) The Federal Reserve System, while striving to maintain full employment of labor, and while allowing markets and fiscal policies to determine the utilization of manufactured capital, shall conduct its operations consistent with the goal of maintaining real GDP at least ten (10) percent less than potential GDP, such that natural capital stocks and funds of ecosystem services are maintained with an insurance buffer for—

(1) environmental health and the ecological integrity required for the maintenance of non-human species with viable populations that are not threatened and endangered;

(2) unforeseen ecological disruptions that may suddenly or quickly lessen potential GDP, such as droughts, severe storms, or volcanic events; and

(3) war-time emergencies during which a temporary surge of economic growth is required for purposes of national security.

(b) Potential GDP shall be calculated or estimated annually by the Division of Ecological Capacity Monitoring and shall be reported annually to—

(1) the Chair for guidance in developing or amending each three-year strategic plan;

(2) the President of each Federal Reserve Bank for guidance in developing strategic plans and annual performance plans; and

(3) the Chair of the Commission on Economic Sustainability for corroboration with said Commission’s research and reporting.

SEC. 11. INTEREST RATES.

(a) Interest rates shall be managed by the Federal Reserve System with the primary goal of contributing to the transition to and maintenance of a sustainable, steady state economy, and secondarily for purposes of—

(1) adjusting to fluctuations in natural capital stocks and flows;

(2) maximizing employment; and

(3) stabilizing the value of the dollar by preventing inflation or deflation.

(b) The Board of Governors shall not target or manage interest rates for purposes of incentivizing higher levels or faster rates of economic activity at any period during which the real economy is in ecological overshoot, as deemed by the Commission on Economic Sustainability, with the exception provided in § 10(a)(3) of this Act.

SEC. 12. SUSTAINABLE MONEY SUPPLY.

(a) The Federal Reserve System shall—

(1) monitor agricultural production, especially cereal grain harvests, along with other major food-producing sectors including commercial fishing, food horticulture, and meat and dairy industries, for purposes of developing a statistical model for estimating, quarterly, a money supply that is warranted by real production at the base of the economy and therefore unlikely to create inflationary or deflationary pressures;

(2) manage the money supply in such a manner that it reflects the capacity of the real economy for producing goods and services, starting with the agricultural production at the base of the economy, along with extractive sectors that produce raw materials for heavy and light manufacturing and open niches for producer and consumer service sectors; and

(3) study the potential of using cereal grain harvests as leading indicators of GDP trends.

(b) The Division of Ecological Capacity and Monitoring shall lead the Federal Reserve System in research and reporting on sustainable and warranted money supplies.

SEC. 13. SIZE OF BANKS AND BANKING SYSTEM.

(a) The Federal Reserve System, in coordination with the Commission on Economic Sustainability, Office of the Comptroller of the Currency, Federal Deposit Insurance Corporation, and States, shall guard against the development of a banking system with monetary and credit aggregates that exceed the long-term capacity of the real economy.

(b) The Federal Reserve System shall coordinate with the Office of the Comptroller of the Currency to strategically guard against excessive concentration of capital and debt within the banking system.

(c) The Federal Reserve System shall issue no credit to, or purchase securities from, banks with domestic assets of greater than eight hundred billion (800,000,000,000) dollars or with consolidated assets of greater than one trillion (1,000,000,000,000) dollars.

(d) The Office of the Comptroller of the Currency shall accept no new applications for national banks or federal savings associations, except for purposes of replacing such banks or associations that have relinquished charters, voluntarily or involuntarily, such that the total, combined number of national banks and federal savings associations remains steady, differing by no more than five (5) in any one (1) year, commencing in 2032.

SEC. 14. QUANTITATIVE EASING LIMITED TO EMERGENCIES.

(a) The practice of quantitative easing (“QE”) is prohibited except under emergency conditions as declared by the Monetary Emergency Committee establish pursuant to § 14(b) of this Act.

(b) A Monetary Emergency Committee is hereby established, comprising—

(1) Chair, Commission on Economic Sustainability;

(2) Federal Reserve Chair;

(3) Chair, Council of Economic Advisors;

(4) Secretary of the Treasury; and

(5) Director of the Office of Management and Budget.

(d) The Monetary Emergency Committee shall not approve QE except during a crisis or with a crisis imminent in the monetary or financial sectors that threatens the—

(1) value of the currency;

(2) solvency of the banking system;

(3) liquidity of markets of real goods and services; or

(4) credit rating of the United States.

(e) Notwithstanding § 14(d) of this Act, the Monetary Emergency Committee shall not approve QE if actual GDP exceeds 95% of potential GDP.

SEC. 15. PROMULGATION OF RULES AND REGULATIONS.

(a) No later than nine (9) months after enactment, the Chair shall submit to the Federal Register, for public review and comment, a draft, comprehensive, detailed set of rules and regulations designed to assist Federal Reserve System Governors and staff with carrying out the mandates in this Act.

(b) The public shall have ninety (90) days to submit comments to the Federal Reserve System.

(c) Within 60 days of the close of the public commenting period, the Chair shall submit to the Federal Register a report summarizing the public comments received and any modifications to the draft rules and regulations resulting from public comments.

(d) Within 90 days of the close of the public commenting period, the Chair shall submit to the Federal Reserve System and to the Code of Federal Regulations the final rules and regulations.