Author’s note: This is a very brief and condensed article covering the major aspects of my ideal alternative for the banking and financial system. I would like to go into greater detail in future writings on each of the below aspects, and I am not married to any idea to the extent that I cannot change my opinions expressed here. I hope to flesh these concepts out moving forward with the help of other Georgists and finance-heads to make a more comprehensive plan and vision.

P.s.: I apologize for the delay in getting part 2 out, I got very ill traveling back from Rhode Island. Thank you for your patience and understanding.

Part 2: Recommendations for Reform

To replace the centralized, debt-driven model of the Federal Reserve critiqued by my colleague Jimbo in the first part of this series, we will in part two propose the creation of a U.S. Commonwealth System: a decentralized, democratically governed alternative to the Federal Reserve System that treats money and credit as a public utility, not a private investment. 

Our thesis is that the U.S. Dollar can be understood as a commons. Its creation is exclusive (only the government and its approved banks can issue it from nothing) but its use is universal. Everyone depends on it. That’s the essence of the fractional reserve system critiqued in part one.

There are many ways the Commonwealth System could be structured and organized. It could borrow the general structure of the Federal Reserve regional banks with additional state and local branches. The Washington DC office could be a general assembly of regional public bank or credit union delegations. Whatever the structure, the core of the Commonwealth System is decentralization, democratic decision-making and bottom-up governance.

This proposal assumes the implementation of land value taxation and the “Chicago Plan” as outlined in part one: ending fractional reserve banking, requiring full reserves for all private bank deposits, and shifting the power of money creation entirely to the public sector. In this framework, private banks act only as intermediaries and financial service providers, not creators of money.

When natural monopolies formed around public utilities like electric power and water, local cooperative enterprises were often created by federal and state governments. Money and credit (which underpin our modern capitalist economy) function in a similar way and deserve a similar treatment. Michael Hudson said it best: “Credit must become a public utility”.

Among Nobel laureate economists, few have had such an impact on commons governance theory than the late Indiana University political science professor Elinor Ostrom. Ostrom’s theory of the commons challenges the idea that shared resources must be either privatized or state-controlled to avoid overuse. Instead, she found that communities can successfully manage common-pool resources through self-governance, using locally crafted rules, trust, and mutual monitoring. 

If governed as a commons, money creation and credit allocation would be democratically and locally managed to serve public needs rather than dominated by private banks or centralized hierarchical authorities. This approach could support monetary stability, fairer access to capital, and reduce systemic rent extraction by a financial elite.

Ostrom’s concept of “nested enterprises” is significant. Resources should be governed at multiple levels, from local to regional, without relying on centralization. Robert Swann’s vision of community land trust banks and resource-based local currencies aligns with this model. Local public banks or credit unions could issue credit backed by real assets and land value.

The Schumacher Center for a New Economics has long advanced the idea that local currencies and democratically managed banking institutions are essential for building resilient, people-centered economies. The late American land reformer Robert Swann, in “The Place for Local Currency in a World Economy,” writes that “local currencies are tools to link unused labor and underutilized resources with unmet needs in a region.”

This principle aligns with Swann’s community land trust model by creating community-owned financial institutions that hold public land and natural resource assets in common. In a Swannian system, wealth is rooted in place and recycled for communal benefit rather than extracted for outside shareholders.

This localized economic infrastructure could be further strengthened by integrating TDR contributor Jamal Thomas’s vision for Full Reserve Equity Banking. In his 2024 HGSS award-winning essay, Privatize the Methods, Publicize the Profits, Jamal proposed a full-reserve bank that issues dividends rather than interest, and prioritizes community equity over debt extraction.

He argues: “Creating a bank that does not create loans out of thin air… but is focused on building a diverse equity portfolio and local growth would be fierce competition for the status quo while also supporting all people involved.”

Georgist land value taxation already offers a model of efficient, locally governed public finance. Property tax regimes currently enable local municipalities to recover land rents directly. A Commonwealth System would apply this principle to money, treating wealth creation as something that emerges from the ground up, rather than flowing from on high like with the Federal Reserve in Washington DC.

There is much to learn from the insights of Silvio Gesell, who, like Henry George with land, treated money as a common resource not to be monopolized. While Gesell proposed a “demurrage” fee (a tax on holding money) to discourage hoarding, his model was tailored for slow-growth, commodity-backed currencies. In today’s fiat system, we don’t need to penalize money-holding itself, we can simulate the decay of idle capital through regular, low, and steady inflation generated in part by public spending. The difference in our model is that inflation is no longer feared, because we are taxing the root cause of destructive inflation: land rent.

In a Georgist system, as productivity, population, and demand rise, so do land values. But instead of those gains being privatized by a class of rentier monopolists, they are captured by the community through “Land Value Return“. This means the government gains more revenue capacity as the economy grows, providing a natural, equitable way to fund public services. Inflation becomes the reflection of shared economic growth, not a threat to be tamed by interest rate hikes.

This is where Modern Monetary Theory (MMT) comes into play, and also where we go further than its advocates. MMT correctly recognizes that a sovereign government can and should issue new money directly through public spending, not through borrowing or bank-driven credit expansion. In our model, the Treasury creates new money and injects it into the real economy by funding infrastructure, education, healthcare, and public goods people vote for.

But here’s the critical Georgist correction: MMT ignores the importance of taxing land rent. Without it, new public money gets immediately siphoned off by rising land values and rents, feeding speculation, unstable inflation and asset bubbles instead of serving the common good. That’s the fatal gap. LVT plugs that hole, keeping land speculation in check and completing the monetary circuit.

We might call this the Life Cycle of a Dollar:

• A dollar is born in the Treasury, issued into the economy through public spending, funding roads, schools, clinics, and perhaps even public banks.
• It lives in the private sector, circulating between households and businesses.
• Then it returns to the public through land value taxation, drawn from the rising economic value of location and infrastructure.
• It is reborn again; reinvested into public goods, completing a virtuous cycle of productive growth, equitable access, and monetary stability.

Instead of money supply and economic growth being dictated by the Federal Reserve through interest rate manipulation (like Immortan Joe releasing water from on high in Mad Max: Fury Road) money flows from the ground up, governed locally and democratically. The Treasury becomes the wellspring of public money, not Wall Street banks. And the credit system, through state and local public banks, supports productive enterprise, not real estate speculation.

Land Value Tax also redirects private lending away from mortgage-fueled asset inflation and toward actual capital investment (businesses, equipment, innovation) grounded in productive value, not location monopoly.

This system doesn’t just reform banking. It rebuilds the political economy from the bottom up, restoring both land and money to their rightful place: as shared resources, governed by and for the people.