The connection of money being a fungible proxy for labor is a great realization and gets to the heart of how to fix our economic system. Anyone can tell our current Private Central Banking Controlled system is corrupt but not many can say what to replace it with.
Capitalism is NOT free market. Capitalism vs. Communism is a false dichotomy. Satan knows humans love to take sides. See how easy the Russian Communists party members divided up Russian assets and became Russian Capitalists? Capitalism gives unelected economic power to those with the capital. And NO we did NOT vote with our dollar. Also, there are no capitalist term limits.
We need an economic system that is Constitutional and Free Market without the need for the Capitalists to decide what they will invest in or what they will short. Problem is that the US adopted European Fractional reserve banking and didn't even follow our own Constitution. Another false dichotomy is that we would rather have the Capitalist decide what to invest in than the government. How about an economic system that lets the people decide?
Gold is not a viable system by itself because there never is enough gold to grease the economic engine. This has led countries to attack their neighbors (Rome), to get more gold. Especially when a country has a trade deficit with China. In more recent history, countries like Great Britian have flooded other countries with drugs to drain it of its gold reserves (Opium Wars).
What happens now is the US pays the Private Federal Reserve to print our currency. Every dollar is linked to the sale of a bond. So, every dollar really is a certificate of debt that must be repaid with interest. When the FED just prints money without selling a bond it devalues the currency and causes inflation that is a hidden tax on the value of our savings. Inflation is just like a Cyprus-style bail-in where the government goes into your private segregated account and takes 15%. In the fiat system we pay either way. If we sell bond we owe interest to the bond holder, if the FED just prints, our dollars are devalued by inflation which is a hidden tax. It's a lose-lose system.
It is unbelieve how our fiat fractional reserve system works today. When FED-member banks borrow $100 from the FED at prime interest rate (currently 0%), they can then lend 10 x the money or $1000 out to the people at 6% compounded interest. After all is repaid, that is the creation of $2000 for $100. The FED-member bank just repays the original $100 or 200$ if there is some interest. If the FED loan is more highly leaveraged through derivatives investment, that $100 can create $10,000 in fiat money. This is called the money multiplier.
You realize if a FED-member bank borrows $100 from the FED for free at 0% and then buys $1000 in US bonds earning 1% interest, to float our national deficit. That 1% compound interest is free money to them. We are paying people to borrow money from us. Lenders are supposed to charge interest to lend not pay interest to lend. The US is actually paying to lend right now. Thats why the Mega-bankers have been giving themselves huge bonuses following TARP and QE.
This is how the Petro-Dollar system works. Britian has a deal with Saudi Arabia to only sell oil in dollars. What's in it for Britian? The deal is that Saudi Arabia must only deposit their dollars in City of London banks. If Saudi Arabia earns $1000 in the sale of oil and deposits $1000 in a City of London bank, the western bank then can lend $10,000 and earn back $20,000 or more in principle and interest via fractional reserve lending. Just imagine what kind of money is created when $1 billion is deposited. Just imagine the economic power. Remember, Saudi Banks operate under Sharia Law which is prohibited from this kind of fraudulent lending.
Fractional Reserve lending goes back to the Middle Ages and Templar Houses where a crusader or traveler on pilgrimage would deposit his gold. The Templar house would issue gold certificates and found they could issue many more certifucates than the gold they had in deposit.
This sort of thing was legitimized later by DeMedici banks with double entry ledgers where it was shown if a bank lends $100, the borrower deposits the $100 back in the bank. So the bank can then lend $90 at 10% fractional reserves. The $90 goes back into the bank as a deposit. So the bank lends $78. The $78 is deposited and $65 is lent.... ect ect down to the last $1. This is the justification for turning $100 into $1000 loan.
Safety Society System (True Democratic Constitutional Economic System)
The key to the Safety Society System (SSS) is to create a bank that is immune to failure. To do this you have to understand how and why banks fail.
Banks fail because they operate on fractional reserve principles. When a bank loses its reserves it becomes insolvent and it cannot lend and it cannot pay its depositors. Banks lose their reserves in 1. run on bank 2. stock market, derivatives, or bond market crash. So, to prevent banking failures, SSS must be full reserve and the US Treasury must create all money and control and prevent inflation.
Banks operate by fractional reserves. They only keep less than %5 in deposit. All the rest is lent out. 1. If more than %5 come to withdraw their money, the bank is insolvent and fails. This is a "run" on the bank. 2. Because of inflation, the bank must keep its %5 reserves in investments and not cash to keep up with inflation. However, if there is a bond default, derivatives failure or stock market crash, even though the bank has billions in loans, if the bank loses its %5 reserves, the bank can't make new loans, it becomes insolvent and fails.
Again, to prevent banking failures, SSS must be full reserve and the US Treasury must create all money, control and prevent inflation.
The US Constitution says in Article 1 Section 8 that the Congress via the US Treasury should have the power to "coin" or "print" or "create" all the money and regulate its value. This simple statement solves everything. What the US Constitution calls for is a perfect economic system that is full reserve and inflation-less. Right now the FED-member banks create most of the money via fractional reserve lending out-of-thin-air. Money does grow on trees if you're a FED-member bank.
The only reason we have mega banks in the US is Britian used to manipulate gold and silver triggering panics and crashes and cause small fractional reserve banking failures in the US and then convinced us we needed to consolidate banking power in big mega-banks and ultimately the FED in 1913. Consolidation of power (giving up liberty) is never the right answer to achieve safety.
The secret to control Inflation is given by the Milton Freidman equation M x V = P x G
M = money supply (printing)
V = velocity (money circulation)
P = price or inflation
G = real growth (GDP)
What we need is an on-demand system where money (M) is created at the precise moment that money is needed (G) . What creates the booms and busts in the US system is periods of not enough money or too much money in the system at any time.
In reality, money creation doesn't begin at the printing press. In reality, money creation begins with loan origination.
Here is how SSS works:
1. An individual goes to the local SSS for a home loan.
2. Community SSS bank is non-profit and earns money on loan origination fees and monthly service fees just as your local bank or credit union does now. SSS just earns enough to pay overhead.
3. If the individual or group (business loan) is credit worthy (skilled employment), the US Treasury will create money (digital), at the exact time the loan is qualified for and approved. (quality/skilled labor = money).
US Treasury creates %100 of money, and local SSS determines loan qualification (power to the people).
4. The US Treasury charges a fee/tax on all money created. This fee/tax makes it so savers have an advantage over borrowers. The US government generates most all its revenue on this loan origination fee and tarrifs. No Income tax.
5. The US Treasury Loan origination fee/tax controls the amount of money supply (M) in the system to control for and prevent inflation. Too much money in the economy raise fee/tax. There is NO inflation in this "on-demand" system because (M) never exceeds (G).
6. SSS bank only loans money for real repossessible assets like land and real estate. (how banks fail is they are invested in stock or derivatives and the stock crashes, and there is nothing of value to repossess)
7. SSS never loans deposits. If an individual deposits $1000 in their local SSS, that $1000 stays there on the books forever and is never lent out or invested by the bank and then lost in a bad investment. If there is no inflation, and the bank is non-profit, the SSS bank can keep your deposits as cash forever. This Full Reserve Banking makes it impossibke for a run on the bank to crash the bank.
8. Skilled/employeed Individual qualifies for takes out a fee-based, no-interest home loan. Individual repays loan on a monthly basis and earns equity on month 1. (no amortized mortgage schedule).
9. If the individual loses his job or becomes ill, monthly payment is deducted from equity. The home loan becomes an instant "reverse mortgage". This serves as an immediate mortgage insurance policy.
10. If the individual loses all equity in the property, he is in default and the bank repossesses the property, sells the property and prevents any loses. The SSS bank never loses money because it always has a real asset (land or building) to repossess.
11. Real estate must be insured. Value is placed on quality building, fire-prevention, building in flood-safe areas, fire-resistant materials.
12. Real Estate should NOT appreciate in value. This generates inflation. M>G. Real Estate should retain value only.
13. Loan money created by US Treasury is backed by land and real estate it is being used to purchase. Currency is 100% backed by land and real estate.
14. Value of goods and services is determined by the amount and quality of labor needed to produce the good or service. House price determined by amount and quality of labor needed to produce all needed materials and labor needed to construct the house itself.
15. Venture capital business investment must be a separate institution (Restores Glass-Steagall). Still a need for Mitt Romney and Bain Capital but it must be separate from SSS. SSS can lend for the land and building only. SSS loans can also be made to mine local natural resources. Federal Lands and mineral rights must be returned to the States (end National Parks Act).
16. Every country on Earth can start their own SSS system. Every country can educate their people and build homes. Every country can be first-world.
17. If a community wants an aquarium or museum or hospital. The community passes a voter referrendum for a 1% sales tax . With the projected revenue, they qualify for their fee-based no-interest loan. The money is created. The building begins.
18. Repaid money (digital) is returned to the US treasury and retired/cancelled/destroyed.
19. Tarrifs needed to protect prices local manufacturing and industry from slave-produced goods in corrupt foreign countries. Free Trade is NOT Free.
20. US Revolutionary War was fought over control of credit and currency, NOT taxation without representation. US Civil War was fought over Tarrifs and Protectionism NOT states rights and slavery. If we don't remember and preserve the purpose they died for, what good is remembering?