Ron Paul supporters espouse many seemingly radical political views together with some other traditional and Constitutional-based political opinions. One may ask, 'where is the radical ideology regarding "no more foreign aid" or "bring all the troops home" coming from?' In addition to the average Libertarian, Ron Paul's political views are attracting the "conspiracy theorists" vote. Ron Paul has been a frequent guest on favorite Conspiracy Theory radio programs like the Alex Jones show which has exploded in listenership in the last year.
What are the Conspiracy Theorists afraid of? Conspiracy Theorists are concerned with the effects and decisions that come out of regular meetings of the world elite. Several times a year, world elite, Past and future US Presidents, cabinet members, royalty, media moguls, Forbes 100 CEOs, Ivy League University Presidents, Defense Contractors, FED chairman, etc meet at places like Bohemian Grove each July, or the Davos Conference, the Bilderberg Conference, or at the United Nations, or at the G20 Economic conference, or the Council on Foreign Relations, or the Tri-Lateral Commission.
While at these variously titled meeting, these same powerful and wealthy elite set a world agenda which greatly influences and affects US domestic and foreign policy and our laws. Conspiracy Theorists are concerned that these meetings of the global elite constitute a subversive anti-American government of the elite, by the elite, and for the elite.
In the remaining portion of this post, I would like to illustrate how policies from these international globalist organizations are infiltrating, subverting traditional American values, while also greatly harming our peace and prosperity.
George Romney worked for Massachusetts Democratic U.S. Senator David I. Walsh during 1929 and 1930, first as a stenographer, then, as a staff aide working on tariffs and other legislative matters. Romney researched aspects of the proposed Hawley-Smoot tariff legislation and sat in on committee meetings for Senator Walsh who apposed Tariffs. While living in the DC area, Romney opened a ice cream shop and attended night classes at George Washington University. The Smoot-Hawley Tariff act was eventually signed into law by Herbert Hoover, yet the Depression continued to worsen.
Unfortunately, because of the worsening depression, Romney's ice cream parlor failed, and he no longer had the income necessary to finish his degree at GW. The cause of the worsening Depression was hotly debated at the time. Like most Democrats, Senator Walsh opposed tariffs and he along with FDR and others blamed the Smoot-Hawley Tariff act for worsening the depression. Consequently, from that moment on, "Free-Trade" became a plank in the Republican platform when prior to this, Republicans like Lincoln, McKinley, and Hoover were stanch protectionists.
For any LDS readers out there. I am not sure everyone knows who the Smoot is, in the Hawley-Smoot Act. The Smoot in the title of this bill just happens to be Senator Reed Smoot of Utah, who was also an Apostle of the Lord Jesus Christ and member of the LDS Church's Quorum of 12 Apostles. Elder Smoot didn't become an Apostle after being a Senator, Elder Smoot was appointed and ordained to the Holy Apostleship while he was also serving as a State Senator. While LDS do not claim our leaders are infallible, Elder Smoot was one of very best men that the LDS Church has ever produced.
Thankfully, not everyone agrees that tariffs and protectionism policies caused the Great Depression. Milton Friedman, Father of the Chicago school of economics, monetarist theory of money, and Nobel Laureate always maintained that the FED and not tariffs caused the Great Depression. Milton Friedman said the FED's contraction of the money supply is what triggered the Depression.
The FED initially rejected this analysis, but a recent comment by FED chair Ben Bernanke demonstrates how the FED actually views this issue.
2002: Ben Bernanke speaks at Milton Friedman's 90th Birthday and jokes that Milt was correct all along that the FED caused the great depression by contracting the money supply in a fractional reserve system. Later Ben Bernake again supports Milton Friedman's position at a leture :
"Let me end my talk by abusing slightly my status as an official representative of the Federal Reserve. I would like to say to Milton and Anna: Regarding the Great Depression. You're right, we did it. We're very sorry. But thanks to you, we won't do it again."
http://www.federalreserve.gov/BOARDDOCS/SPEECHES/2002/20021108/default.htm
2004: Ben Bernanke speaking at the Washington and Lee University, Lexington, Virginia again expresses support for the monitorist theory of money, and the FED's role in exacerbating the Great Depression by increasing interest rates several times, and advocating several banking holidays which exacerbated cash and gold hording.
"Finally, perhaps the most important lesson of all is that price stability should be a key objective of monetary policy. By allowing persistent declines in the money supply and in the price level, the Federal Reserve of the late 1920s and 1930s greatly destabilized the U.S. economy and, through the workings of the gold standard, the economies of many other nations as well."
http://www.federalreserve.gov/boarddocs/speeches/2004/200403022/default.htm
2005: Federal Reserve no longer publishing M3 data, which is an important measure that monitors growth of the money supply involving derivatives and other complex investments. This concealing of M3 will serve to hide the initial effects of the sale of fraudulent mortgage-backed securities which will follow.
http://www.federalreserve.gov/releases/h6/discm3.htm
2005-2008: M3 balloons to record levels which measured the money creation being done in the speculative and fraudulent derivatives market, driven by Goldman Sachs.http://www.amcalrealestate.com/wp-content/uploads/2009/07/money-supply-rate-of-change.gif
2008: FED institutes the Bank of International Settlement Basil 2 Accords which restricts/lightens fractional reserve requirements, contracts the money supply, and does to America exactly the same thing that Basil 1 did to Japan resulting in their "Lost Decade."http://www.federalreserve.gov/newsevents/press/bcreg/20070720a.htm
"Economic crises have been produced by us for the GOYIM by no other means than the withdrawal of money from circulation. Huge capitals have stagnated, withdrawing money from States, which were constantly obliged to apply to those same stagnant capitals for loans. These loans burdened the finances of the State with the payment of interest and made them the bond slaves of these capitals .... The concentration of industry in the hands of capitalists out of the hands of small masters has drained away all the juices of the peoples and with them also the States .... " (Protocols of Zion 20:20)
Conclusion: This Current Economic Downturn was engineered just like the Great Depression. Mr. Bernanke confessed to Milton Friedman that he is well aware of how a contraction of the money supply would affect our fractional reserve economy. Mr. Bernanke was well aware of the effects Basil 1 had on Japan, and therefore must have been fully aware of how Basil 2 would effect the American economy.
Furthermore, just as massive borrowing to invest overinflated the money supply prior to the Great Depression, we see the FED set up the current system of derivatives trading which created an unstable economic environment requiring a reaction in terms of implementing Basil 2. This was a perfect example of the FED creating a problem, eliciting a predicted reaction and then providing the pre-conceived solution.
The FED blamed protectionism of the Hawley-Smoot tariff act and regulating trade as the Constitution requires as the cause of the Great Depression. The Civil war was fought over protectionism and tariffs. South wanting to buy cheap slave-produced goods and machinery from the East India Trading Company instead if the North. This blame of the Great Depression on Protectionism turned the Republican party that were once protectionists like Pres McKinley into advocates of free-trade. And now free trade has robbed our county of domestic industrial infrastructure our jobs, and our self-reliance.
So here we see a clear example of how an international organization like the Bank of International Settlement (central bank of central banks) policy has infiltrated and subverted traditional American values and Constitutional principals, while also greatly harming our peace and prosperity.
Overall Analysis: The elite wanted deflation before WW1 and WW2 because they wanted to buy up all the companies that would profit from the war. This time, the elite already own all the major companies. What the elite are doing currently, is buying up soverign national debt. The goal is to get all the countries in as much debt as possible to them before the end game.
According to Milton Friedman's monetarist theaory, recent money supply expansion via TARP, and QE2 that prices are holding somewhat and the current depression is not as bad as it could be. However, our dollar is no longer gold-backed as it once was, and if the dollar loses its status as the world reserve currency, because of free-trade, the US is no longer industrially, energy, or even agricultually independent, and and dollar devaluation would sink the US economy. This fact is precisely what is driving the US to enter into wars with Iraq, Libya, and Iran who were circumventing the Petro-Dollar system by selling oil to China in Euros and Yuan. Iran is now doing business with Russia in Rubles. The fiat, debt-based, Petro-Dollar system cannot tolerate major oil-producing nations selling oil in alternative currencies.
This warmongering will evenually lead to the point where the international community led by Russia, China, and Muslim nations will decide to attack the US with a massive nuclear firststrike and invasion; hoping to divide the US up forever. This is the elite's end game which they hope will end the idea of constitutional government forever.
Unfortunately, because the US is not currently economically self-sufficient, an Act like Hawley-Smoot is not going to fix things at this point. The first thing the US would be wise to do is avoid war with Iran at all costs and reform our monetary system where money creation is "merit-based" and not decided by a ruling class of economic oligarchs who buy and sell US bonds.
Showing posts with label Banking and Economics. Show all posts
Showing posts with label Banking and Economics. Show all posts
Saturday, January 14, 2012
Friday, January 13, 2012
Safety Society System
Many people want to "End the FED" but most don't know what to replace it with. This paper discusses an alternative. First to understand what to change, we need to understand exactly what about the FED is a problem. If you "End the FED" and do not address the financial instruments the FED and traditional banking has put in place over the last hundred years, then nothing will change much. Some just want to go back to gold like before, but I want to also discuss why this is not a good idea either. FED vs Gold is a false dichotomy.
FRACTIONAL RESERVE BANKING: this started when Templar Houses issued more gold certificates than the gold they had in deposit (reserve). Today, FED-member banks issue loans of $1000 for every $100 they borrow from the FED. And through derivatives, banks can leverage reserves, by lending up to 50x or 100x. The degree of leverage is called the MONEY MULTIPLIER. This is money the FED-member, to-big-to-fail, bank prints out of thin air. Other than being a total fraud, if there is a contraction in the money supply (like when the FED instituted the Bank of International Settlement Basil 2 Accords in 2007 doing the same thing to American that Basil 1 did to Japan resulting in its “Lost Decade”), a stock market crash, or a run on the bank; the bank becomes insolvent , the bank can't make loans or pay depositors and goes bust.
GOLD REDEEMABLE CURRENCY: money is just a contract that is used as a standardized certificate of exchange. It doesn't necessarily have to have value of its own, but it must be tied to something of value. But you don't want to be able to just pick up money off the ground, or counterfeit it. Gold has historically been used as money because it is rare, inert, shiny and sufficiently difficult to find. However, the drawback to gold is that is rare enough that there is usually not enough of it to provide an economic engine enough liquidity (Protocols of Zion 20:22). Gold can be horded and gold production can be manipulated just like De Beers does with diamonds. Artificial scarcity of resources opens the doors for all kinds of corruption (black markets, bribery). Gold is so rare, countries have gone to war, conquering their neighbors to get more of it to drive their economies.
INFLATION: inflation and devaluation of the currency is a hidden tax on the people, and slowly robs the laborer of the value of their savings. According to the Milton Friedman's Chicago School, monetarist theory of money; inflation is produced when the money supply exceeds the real output of the economy dM/dt (money supply) + dV/dt (velocity) = inf (inflation) + dRO/dt (real output). Also, inflation means that banks cannot hold reserves/deposits in money, and are forced to invest in financial instruments such as stocks, bonds, and derivatives that will keep pace with inflation. Consequently, stock market crashes usually trigger banking failures.
AMORTIZATION: When an individual takes out a loan to purchase a house. Even though the loan may claim to offer a 5% interest rate, this 5% seems like a very low number, but it is totally deceptive. Over the 20-30 years of the loan, the borrower will end up paying close to 2X the original price of the home. What is more, Amortization means that the bank collects all this 5% compound interest over the 30-years up front. That means the borrower builds close to ZERO equity for the first 10-20 years. Consequently, the borrower is tempted to charge the next home borrower an inflated price. If the initial home borrower can convince the next guy to take out a loan for the exact same house at an inflated price, then that additional money becomes equity or profit that can be applied to the next home mortgage. Because loans are the major moment of money creation, by definition, charging an inflated price for the same house means that the Money Supply > Real Output = Inflation.
COMPOUND INTEREST: Not all interest is bad. The Catholic Church's miss-interpretation of interest = usury and its prohibition of all interest made it so that banking and money lending was not a sustainable profession. However, in economy where inflation is controlled, compound interest is totally corrupt. Compound interest adds the interest accrued to the initial principal. This results in a hyperbolic curve where initial investments continue to compound at an exponential rate. This means, that initial investments years later can be worth many times their initial value. The problem with this is that it treats money as having intrinsic value which it does not. Additionally, compound interest can result in debt that never can be repaid. Furthermore, elite families have established Joint Stock Trusts which are owned by the family and no one individual. These Joint Stock Trusts (still legal in the City of London), are highly invested in US and other Government Bonds, and have passed down these investments from generation to generation resulting in unimaginable wealth for these elite families and totally unsustainable debt for the G20 nations. We are fooled into thinking in terms of how much our personal investments could make over 1 lifetime, in comparison to the elite who are using their family Joint Stock Trusts to generate incredible wealth from Bonds purchased a hundred or more years ago.
VALUE OF MONEY: Because money (which should just be a standardized contract), is artificially scarce, money itself has developed its own independent value. This development results in the wealthy having power over the laborer just though the possession of money. Because of scarcity, wealthy can use their money, to lend to others, on their own terms. Wealthy are given unelected economic power to decide to invest in whatever increases or maintains their wealth, position and power. If there is an invention or idea that threatens their position or power, that idea is suppressed.
DEBT-BASED FIAT CURRENCY: Paper currency is not necessarily a bad idea. Money is just a standardized contract of exchange, and shouldn't necessarily have intrinsic value in an of itself. In the FED System, fiat currency is based on its demand for bonds. Every dollar is tied to the sale of a bond. Every Federal Reserve Note is a certificate of debt that is not tied to anything of value, but it is tied to someone else's IOU. If people buy US bonds, the value of our currency increases relative to other countries. If instead, the FED just prints the money, the value of our currency falls. However, the FED only deals with a fraction of the total money supply. Additionally, all these bonds must be paid back with interest. So, even if all the Federal Reserve Notes were turned in that were ever created, the US would still owe interest to the bond owners.
It seems as we all learn more about the FED, Petro-Dollar, System, we are all waking up to the reality of what a huge Ponzi scheme it all is. The value of our currency is tied to the demand for our US Bonds. The demand for US Bonds is currently tied to countries like China and Japan who we have a trade deficit with, and who are interested in using their excess dollars to get the best price on imported oil, and other commodities that are priced in US Dollars. This Ponzi scheme falls apart when countries like Iraq and Iran decide to sell their oil to China in currency other than the USD. If China can buy oil in Euros (Iraq) or Yuan (Iran), then they no longer need to prop up the USD.
FRACTIONAL RESERVE BANKING: this started when Templar Houses issued more gold certificates than the gold they had in deposit (reserve). Today, FED-member banks issue loans of $1000 for every $100 they borrow from the FED. And through derivatives, banks can leverage reserves, by lending up to 50x or 100x. The degree of leverage is called the MONEY MULTIPLIER. This is money the FED-member, to-big-to-fail, bank prints out of thin air. Other than being a total fraud, if there is a contraction in the money supply (like when the FED instituted the Bank of International Settlement Basil 2 Accords in 2007 doing the same thing to American that Basil 1 did to Japan resulting in its “Lost Decade”), a stock market crash, or a run on the bank; the bank becomes insolvent , the bank can't make loans or pay depositors and goes bust.
GOLD REDEEMABLE CURRENCY: money is just a contract that is used as a standardized certificate of exchange. It doesn't necessarily have to have value of its own, but it must be tied to something of value. But you don't want to be able to just pick up money off the ground, or counterfeit it. Gold has historically been used as money because it is rare, inert, shiny and sufficiently difficult to find. However, the drawback to gold is that is rare enough that there is usually not enough of it to provide an economic engine enough liquidity (Protocols of Zion 20:22). Gold can be horded and gold production can be manipulated just like De Beers does with diamonds. Artificial scarcity of resources opens the doors for all kinds of corruption (black markets, bribery). Gold is so rare, countries have gone to war, conquering their neighbors to get more of it to drive their economies.
INFLATION: inflation and devaluation of the currency is a hidden tax on the people, and slowly robs the laborer of the value of their savings. According to the Milton Friedman's Chicago School, monetarist theory of money; inflation is produced when the money supply exceeds the real output of the economy dM/dt (money supply) + dV/dt (velocity) = inf (inflation) + dRO/dt (real output). Also, inflation means that banks cannot hold reserves/deposits in money, and are forced to invest in financial instruments such as stocks, bonds, and derivatives that will keep pace with inflation. Consequently, stock market crashes usually trigger banking failures.
AMORTIZATION: When an individual takes out a loan to purchase a house. Even though the loan may claim to offer a 5% interest rate, this 5% seems like a very low number, but it is totally deceptive. Over the 20-30 years of the loan, the borrower will end up paying close to 2X the original price of the home. What is more, Amortization means that the bank collects all this 5% compound interest over the 30-years up front. That means the borrower builds close to ZERO equity for the first 10-20 years. Consequently, the borrower is tempted to charge the next home borrower an inflated price. If the initial home borrower can convince the next guy to take out a loan for the exact same house at an inflated price, then that additional money becomes equity or profit that can be applied to the next home mortgage. Because loans are the major moment of money creation, by definition, charging an inflated price for the same house means that the Money Supply > Real Output = Inflation.
COMPOUND INTEREST: Not all interest is bad. The Catholic Church's miss-interpretation of interest = usury and its prohibition of all interest made it so that banking and money lending was not a sustainable profession. However, in economy where inflation is controlled, compound interest is totally corrupt. Compound interest adds the interest accrued to the initial principal. This results in a hyperbolic curve where initial investments continue to compound at an exponential rate. This means, that initial investments years later can be worth many times their initial value. The problem with this is that it treats money as having intrinsic value which it does not. Additionally, compound interest can result in debt that never can be repaid. Furthermore, elite families have established Joint Stock Trusts which are owned by the family and no one individual. These Joint Stock Trusts (still legal in the City of London), are highly invested in US and other Government Bonds, and have passed down these investments from generation to generation resulting in unimaginable wealth for these elite families and totally unsustainable debt for the G20 nations. We are fooled into thinking in terms of how much our personal investments could make over 1 lifetime, in comparison to the elite who are using their family Joint Stock Trusts to generate incredible wealth from Bonds purchased a hundred or more years ago.
VALUE OF MONEY: Because money (which should just be a standardized contract), is artificially scarce, money itself has developed its own independent value. This development results in the wealthy having power over the laborer just though the possession of money. Because of scarcity, wealthy can use their money, to lend to others, on their own terms. Wealthy are given unelected economic power to decide to invest in whatever increases or maintains their wealth, position and power. If there is an invention or idea that threatens their position or power, that idea is suppressed.
DEBT-BASED FIAT CURRENCY: Paper currency is not necessarily a bad idea. Money is just a standardized contract of exchange, and shouldn't necessarily have intrinsic value in an of itself. In the FED System, fiat currency is based on its demand for bonds. Every dollar is tied to the sale of a bond. Every Federal Reserve Note is a certificate of debt that is not tied to anything of value, but it is tied to someone else's IOU. If people buy US bonds, the value of our currency increases relative to other countries. If instead, the FED just prints the money, the value of our currency falls. However, the FED only deals with a fraction of the total money supply. Additionally, all these bonds must be paid back with interest. So, even if all the Federal Reserve Notes were turned in that were ever created, the US would still owe interest to the bond owners.
It seems as we all learn more about the FED, Petro-Dollar, System, we are all waking up to the reality of what a huge Ponzi scheme it all is. The value of our currency is tied to the demand for our US Bonds. The demand for US Bonds is currently tied to countries like China and Japan who we have a trade deficit with, and who are interested in using their excess dollars to get the best price on imported oil, and other commodities that are priced in US Dollars. This Ponzi scheme falls apart when countries like Iraq and Iran decide to sell their oil to China in currency other than the USD. If China can buy oil in Euros (Iraq) or Yuan (Iran), then they no longer need to prop up the USD.
Turns out the most of our economic system is not Constitutional. Even before the FED, how we run our economy is more according to the "wicked traditions of our forefathers". The Constitution of the United States actually holds the secrets of how to fix our economic system. Most people don't like centralized control, but the Constitution is inspired, and there are a few powers God actually saw in his wisdom that the Federal Government should be granted.
US Constitution, Article 1, Section 8: The Congress shall have Power To lay and collect Taxes, Duties, Imports and Excises, to pay the Debts and provide for the common Defense and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States; To borrow money on the credit of the United States; To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes. To establish an uniform Rule of Naturalization, and uniform laws on the subject of Bankruptcies throughout the United States; To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures; To provide for the Punishment of counterfeiting the Securities and current Coin of the United States.
ISSUING THE CURRENCY: The Constitution clearly says that the Federal Government must "Coin the money". And in case you are tempted to think "this just applies to weights and measures" and to "to make sure gold is pure and of the proper weight", the next part says that the Congress has the power to punish counterfeiting the "current coin" of the US. If there is a "current coin", then that means that the US is the one "coining" it.
I don't believe that the US money needs to be gold. Gold, copper, silver are always in limited supply and are better used as building supplies. However, using technology the US government can print money that is nearly impossible to counter-feit, also, the government using quantum encryption can use digital currency that cannot be hacked.
The key here to "coining the currency" is that the US Government via the Congress create all the US Currency in the Money Supply, and not abdicate that duty to the FED, or allow the Banks to create most of the money in the money supply via Fractional Reserve Banking.
SAFETY SOCIETY SYSTEM: Instead of protecting the currency itself by making it redeemable for a warehoused item, the Safety Society System is focused on creating a locally administered banking institution that is immune from the expected economic shocks that historically topple other banks. Full Reserve Banking, makes a bank resistant to banking runs, stock market crashes, and contractions of the money supply. I believe that if a system protects the banking institution, that system will protect the people and the value of their money.
1. US Treasury via the Congress Creates all Money in the Money Supply and regulates its value. Sufficient money is created, upon demand, at the time of loan approval.
2. US Treasury loans money to Local Banks called a Safety Society at a variable prime simple interest rate which gets passed on to the individual borrower.
3. Local Safety Society determines loan eligibility and credit-worthiness based on previous and projected employment history, income, etc. Loan eligibility criteria would be nationally standardized but locally applied.
4. Local Safety Society makes loans only on "real" assets or on the projected building of or production of a "real" asset or the mining, farming or production of a "real" commodity.
a. Credit-worthy Individuals could take out a loan on an existing home or new home construction.
b. A community could take out a loan for a museum or community aquatics center based on the projected revenue on an approved ballot initiative for a 1% sales tax.
c. A corporation could take out a loan to purchase land and drill for oil based on the scientifically verifiable oil deposits.
5. The money created for these Safety Society loans is backed by the "real" assets, real estate and "real" commodities that the loan is being issued to purchase, produce, or mine.
6. SSS loans are fee-based. Local Banks make their money to cover overhead exactly the same way they do now by charging loan origination fees and monthly service charges.
7. The borrower builds equity from day 1. If the borrower comes on hard times and misses several payments. These payments are deducted from the borrowers equity. Repossession occurs when the borrower has lost all equity in the home, building, farm, mine.
8. Other credit and banking institutions would handle other speculative "venture-capital" banking ventures. SSS would only issue loans for non-speculate real assets that could be repossessed.
9. SSS Bank deposits are not used to issue loans. SSS operates on Full Reserves, and all deposits are kept at the bank for immediate withdrawal at any time.
10. The Federal Government generates revenue based on the prime simple interest rate. This tax/free constitutes a Constitutional uniform and voluntary tax on the use of money and extension of credit. This prime interest rate would be used to regulate the value of the currency, and control inflation by removing excess liquidity from the economy.
SSS BENIFITS:
1. People want a gold-redeemable, or commodity-redeemable currency so that when the bank goes bust, they don't lose their money. But, really. Why not set up a system that saves the bank? What good is gold when the entire economy just fell apart? You can't eat gold when society just collapsed. Better to prevent the collapse.
2. SSS protects the bank from individual bankruptcy, by making sure each loan is backed by real assets and goods and commodities that can be repossessed so that the Bank can repay the US Treasury.
3. Again, this is not money "created-out-of-nothing." Loan approval is the point of money creation, and money is created by the SSS for real assets. The real assets back the money. The focus is on the banks being able to redeem their money.
4. Because money creation is always backed by a real asset, according to the Milton Friedman equation, the Money Supply always keeps pace with Real Output.. Therefore, there would be no inflation.
5. Because SSS banks wouldn't lend for Stocks, bonds, derivatives, the banks would never be left holding a bunch of worthless pieces of paper with nothing to repossess.
6. Because inflation is controlled, the SSS Bank can hold deposits as cash, and never has to invest in paper (stocks, bonds, derivatives) that carries the risk of becoming worthless.
7. Focus of the SSS bank is the preservation of value. The Laborer is not forced to subjugate themselves and enslaved themselves to the Wealthy to grant them credit. SSS is free market without the capitalist.
8. Wealthy can still use their wealth in speculative ventures separate from the SSS system.
9. Because of our inflationary economy instead of an economy focused on the preservation of value, companies must grow to keep up with inflation or die. This requires that companies ruthlessly compete against one another and after dominating the domestic market, are forced to expand overseas to keep pace.
10. All countries would be economically free to develop their own resources without international exploitation.
11. Wealthy are sill free to speculate all they want. But with SSS, the regular laborer class is protected from the risk-taking. 12. Both sides debate that neither government nor the unelected government should be controlling the economy and deciding where money goes. SSS is merit-based. That means if an individual, coorperation, or community is credit-worthy, they will have access to the money they need; created on demand.
COMPETING CURRENCIES:
Some want competing currencies in the US. But I don't see how the idea of competing currencies is in line with the Constitution's call for the Congress to "coin the currency", the "Commerce Clause", and to prosecute counterfeiting of the "current coin" How can the idea of competing currencies jive with the Constitutional call for there to be a "current coin"? How could the Congress regulate interstate commerce if every state or region had its own currency, resulting in currency wars? How could the Congress regulate the value of currency, if there were competing currencies --- well, competing.
Sunday, January 01, 2012
Safety Society/Merchantile Exchange/Bank
Discussing banking with several friends on the Internet and by email, there is another part of the Full Reserve, Safety Society that is needed to satisfy the demands for money in an economy. On one side, a healthy bank should only create money for loans for the purchase or production of a real bank-redeemable, bank-repossessible assets, goods, or commodities. On the other side, money can also be created by the Merchantile exchange side and issued for deposited, wearhoused real assets, goods, materials that can be fully redeemed or repurchased by the people. In this way, the Safety Society/Merchantile Exchange Bank separates the Loan-side of business from the Deposit-side of business and there isn't multiple parties making a claim on the same asset as would happen if you issue money and issue a loan based on the same wearhoused asset.
1. Most money in our money supply is created by a bank when a loan is issued.
2. Milton Feidman's monetarism equation shows how money supply, velocity and real output produce unwanted inflation. dM/dt + dV/dt = infl + dRO/dt.
3. The amortized loan drives inflation by collecting interest up front, the home owner does't build significant equity and then charges the next owner a higher price for an older asset. Thus money creation > real output = inflation.
4. Safety Society Bank is full reserve and separates deposits from loans. All deposits are kept 100% at the bank.
5. Loans are only issued for real assets. Never for other currency or stock or bonds (private currency).
6. Loans are simple interest and fee based. Loan origination fee is how local banks earn revenue and monthly service charge and late fees.
7. Borrowers earn equity from month 1.
8 if they miss a payment, it is deducted from equity.Default happens when all equity is lost and not after first missed payment.
9. State or federal government actually creates the money and the standardized credit worthiness criteria but loans are administered by local banks.
10. If default occurs, bank repos a real asset and can operate, rent and sell asset and repay federal or state treasury. Fed or state earns revenue by simple interest which is a voluntary tax/fee on the use of money . The interest rate would control inflation by withdrawing money from the system as needed.
11. There would always be as much money as needed for any individual, corporation, or community to borrow however much they could repay for real assets only.
12. Safety Sociey System is safe, immune from contractions and downturns in economy and from bank runs.
13. Money is no longer artifically scarce. We no longer need to use scarce gold for money because we have technology to produce hard-to-counterfeit paper currency. But we can produce as much paper as is needed for credit worthy assets.
It makes no sense to have gold-redeemable currency, but not protects the banks from fractional reserve lending and borrowing for derivatives and stock that become worthless in a recession and bankrupt the bank. What good is redeeming gold when your banking system just collapsed. Money is created when a loan is issued. So, as long as a bank makes a loan for a "real asset", then the Bank can repossess that insured asset and not lose value if a person defaults on their loan.
With a gold-backed currency, how is value maintained in the system when people default on their loans and there are multiple people making a claim to redeem the same ounce of gold? If enough people fall on hard times, then the Fractional Reserve Bank goes bust and the economic disease spreads like Contagion to the rest of the community. However, for deposits and such (which should be separate from loans in a full-reserve bank), a Bank/Merchantile Exchange could issue script money in exchange for real products, goods, and commodities. For example, An egg farmer would bring his eggs to the Bank/Merchantile Exchange/Safety Society. The Safety Societ/Mechantile would issue script/money based on those goods which could be used to purchase other goods in the Merchantile Exchange. This way the community is injected with money sufficient to re-purchase the commodities at the Store/Bank.
The Safety Society part of the bank would issue loans. Currently Banks issue loans on their reserves, or how much money they have in deposits. When a Bank loses reserved they can't loan or pay out withdrawals and everyone goes bust (like Kirkland). However, if script/money is always issued and backed up by a real asset, then the Bank and the Community is always protected. So the Saftey Society Bank would issue loans based on if the loan was going for the purchase or production of a real "credit worthy" redeemable, repossessabke good, commodity, or asset like real estate.
Loans are not made based on how many eggs are in the wearhouse at the Merchantile Exchange. Money has already been created based on the eggs. The price of the eggs, that they would be sold, would be based on supply and demand and based on retaining value. There would not be much markup on the eggs. The money issued would be almost enough to purchase the eggs back. Loans would be a totally separate mechanism for money creation instead of how the banks do now with fractional reserve lending and create double the money for each egg they have in possession.
Separating the Deposit/Merchantile Exchange-side of banking from the Safety Society/Loan-side of Banking preserves the bank's Full Reserve status and prevents there being multiple money creation on the same asset (egg), and consequently multiple parties making a claim to redeem/repossess the same asset (egg).
It would be best if interest rates and money creation and credit-worthiness criteria were standardized by the US Treasury as the Constitution requires, but the Safety Society/Merchantile Exchange could be totally decentralized and locally regulated.
You don't need to perseverate on the "egg". Substitute it for whatever non-perishable you like. The following statement seems to be the core of your economic ideology: "because when you require that others invest their stored value in some new enterprise, they will be more careful and require compensation"
1. Your system is fractional reserve. Loans are made based upon deposits. Therefore, both the investors and the loaned money holders have claim on the same wearhoused commodity.
2. You claim investment risk is necessary. I say it is not. I would like to see a decrease in the practice of money making money. My whole system is about decreasing the practice of the wealthy making money on money. Venture capital will still be necessary but the laborer will be able have access to safe, appropriately priced credit. Furthermore, The bank makes fees and interest to cover it's overhead. The government makes a Constitutional voluntary tax/fee/interest to control inflation and generate revenue.
3. When you have some kind of economic shock, history demonstrates again and again that your system's loan defaults will exceed the projected risk and your bank will be insolvent, your wearhoused wealth will disappear, and your economy will be in shambles.
4. Your historical system divides the people into classes of wealth-holders and laborers where the wealthy use their un-elected Machiavellian economic power to "carefully decide" to invest in those things that will maintain or advance their power.
5. You have never proven that my system would produce unwanted inflation nor "steel" value from the wealthy.
6. Money is not being created out of nothing. There are real assets that the bank can redeem and repossess if the loan is defaulted on. Neither side needs to lose.
7. Your wealth vs. laborer system is neither honest nor wonderful. Wealth/commodity-holders need not enslave the laborer.
8. We need not excessively put a drag on growth as your system historically does. My system which is not mine and neither is it my invention would use fees, interest, and have standardized rules by elected leaders that contol and properly regulate money creation and economic growth.
9. You are arguing for a historical system based on a local unelected oligarchy, austerity, inequality, and economic slavery. Tyranny is wrong whether it be local or global.
10. Man should earn his bread by the sweat of his brow all the days of his life and not just until he has wearhoused enough to live off the sweat of others.
Thinking about the failings of the "egg" analogy it is clear that the Merchantile Exchange would only deal with non-perishable goods and not perishable items. Therefore there would need to be a separate grocery store.
1. Most money in our money supply is created by a bank when a loan is issued.
2. Milton Feidman's monetarism equation shows how money supply, velocity and real output produce unwanted inflation. dM/dt + dV/dt = infl + dRO/dt.
3. The amortized loan drives inflation by collecting interest up front, the home owner does't build significant equity and then charges the next owner a higher price for an older asset. Thus money creation > real output = inflation.
4. Safety Society Bank is full reserve and separates deposits from loans. All deposits are kept 100% at the bank.
5. Loans are only issued for real assets. Never for other currency or stock or bonds (private currency).
6. Loans are simple interest and fee based. Loan origination fee is how local banks earn revenue and monthly service charge and late fees.
7. Borrowers earn equity from month 1.
8 if they miss a payment, it is deducted from equity.Default happens when all equity is lost and not after first missed payment.
9. State or federal government actually creates the money and the standardized credit worthiness criteria but loans are administered by local banks.
10. If default occurs, bank repos a real asset and can operate, rent and sell asset and repay federal or state treasury. Fed or state earns revenue by simple interest which is a voluntary tax/fee on the use of money . The interest rate would control inflation by withdrawing money from the system as needed.
11. There would always be as much money as needed for any individual, corporation, or community to borrow however much they could repay for real assets only.
12. Safety Sociey System is safe, immune from contractions and downturns in economy and from bank runs.
13. Money is no longer artifically scarce. We no longer need to use scarce gold for money because we have technology to produce hard-to-counterfeit paper currency. But we can produce as much paper as is needed for credit worthy assets.
It makes no sense to have gold-redeemable currency, but not protects the banks from fractional reserve lending and borrowing for derivatives and stock that become worthless in a recession and bankrupt the bank. What good is redeeming gold when your banking system just collapsed. Money is created when a loan is issued. So, as long as a bank makes a loan for a "real asset", then the Bank can repossess that insured asset and not lose value if a person defaults on their loan.
With a gold-backed currency, how is value maintained in the system when people default on their loans and there are multiple people making a claim to redeem the same ounce of gold? If enough people fall on hard times, then the Fractional Reserve Bank goes bust and the economic disease spreads like Contagion to the rest of the community. However, for deposits and such (which should be separate from loans in a full-reserve bank), a Bank/Merchantile Exchange could issue script money in exchange for real products, goods, and commodities. For example, An egg farmer would bring his eggs to the Bank/Merchantile Exchange/Safety Society. The Safety Societ/Mechantile would issue script/money based on those goods which could be used to purchase other goods in the Merchantile Exchange. This way the community is injected with money sufficient to re-purchase the commodities at the Store/Bank.
The Safety Society part of the bank would issue loans. Currently Banks issue loans on their reserves, or how much money they have in deposits. When a Bank loses reserved they can't loan or pay out withdrawals and everyone goes bust (like Kirkland). However, if script/money is always issued and backed up by a real asset, then the Bank and the Community is always protected. So the Saftey Society Bank would issue loans based on if the loan was going for the purchase or production of a real "credit worthy" redeemable, repossessabke good, commodity, or asset like real estate.
Loans are not made based on how many eggs are in the wearhouse at the Merchantile Exchange. Money has already been created based on the eggs. The price of the eggs, that they would be sold, would be based on supply and demand and based on retaining value. There would not be much markup on the eggs. The money issued would be almost enough to purchase the eggs back. Loans would be a totally separate mechanism for money creation instead of how the banks do now with fractional reserve lending and create double the money for each egg they have in possession.
Separating the Deposit/Merchantile Exchange-side of banking from the Safety Society/Loan-side of Banking preserves the bank's Full Reserve status and prevents there being multiple money creation on the same asset (egg), and consequently multiple parties making a claim to redeem/repossess the same asset (egg).
It would be best if interest rates and money creation and credit-worthiness criteria were standardized by the US Treasury as the Constitution requires, but the Safety Society/Merchantile Exchange could be totally decentralized and locally regulated.
You don't need to perseverate on the "egg". Substitute it for whatever non-perishable you like. The following statement seems to be the core of your economic ideology: "because when you require that others invest their stored value in some new enterprise, they will be more careful and require compensation"
1. Your system is fractional reserve. Loans are made based upon deposits. Therefore, both the investors and the loaned money holders have claim on the same wearhoused commodity.
2. You claim investment risk is necessary. I say it is not. I would like to see a decrease in the practice of money making money. My whole system is about decreasing the practice of the wealthy making money on money. Venture capital will still be necessary but the laborer will be able have access to safe, appropriately priced credit. Furthermore, The bank makes fees and interest to cover it's overhead. The government makes a Constitutional voluntary tax/fee/interest to control inflation and generate revenue.
3. When you have some kind of economic shock, history demonstrates again and again that your system's loan defaults will exceed the projected risk and your bank will be insolvent, your wearhoused wealth will disappear, and your economy will be in shambles.
4. Your historical system divides the people into classes of wealth-holders and laborers where the wealthy use their un-elected Machiavellian economic power to "carefully decide" to invest in those things that will maintain or advance their power.
5. You have never proven that my system would produce unwanted inflation nor "steel" value from the wealthy.
6. Money is not being created out of nothing. There are real assets that the bank can redeem and repossess if the loan is defaulted on. Neither side needs to lose.
7. Your wealth vs. laborer system is neither honest nor wonderful. Wealth/commodity-holders need not enslave the laborer.
8. We need not excessively put a drag on growth as your system historically does. My system which is not mine and neither is it my invention would use fees, interest, and have standardized rules by elected leaders that contol and properly regulate money creation and economic growth.
9. You are arguing for a historical system based on a local unelected oligarchy, austerity, inequality, and economic slavery. Tyranny is wrong whether it be local or global.
10. Man should earn his bread by the sweat of his brow all the days of his life and not just until he has wearhoused enough to live off the sweat of others.
Thinking about the failings of the "egg" analogy it is clear that the Merchantile Exchange would only deal with non-perishable goods and not perishable items. Therefore there would need to be a separate grocery store.
Monday, December 26, 2011
Problem with Gold and a Gold-Redeemable Currency
Protocol 20:22 "YOU ARE AWARE THAT THE GOLD STANDARD HAS BEEN THE RUIN OF THE STATES WHICH ADOPTED IT, FOR IT HAS NOT BEEN ABLE TO SATISFY THE DEMANDS FOR MONEY, THE MORE SO THAT WE HAVE REMOVED GOLD FROM CIRCULATION AS FAR AS POSSIBLE."
Man has been on a gold and silver standard since money was first mentioned in the Bible in the days of Abraham about 2000 BC and the Silver Shekel of Tyre. The widespread use of money fits with Revelation's description of money being revealed during the 3rd Seal or 3rd Millennium of man's mortal existence on this Earth (Black Horse).
But the Black Horse of the 3rd Seal isn't primarily about money. The Black Horse represents famine. According to the prophecy, artificial scarcity resulted in a days wages barely purchasing enough wheat or barley for one man to survive. However, luxury items like oil and wine were unaffected. The artificial scarcity of a gold-redeemable currency, has driven nations to plunder and subjugate neighboring peoples for gold for thousands of years.
I believe money should be backed by real assets as well as being fully redeemable for those assets without causing unwanted inflation. But a Constitutional money system should also not need to constrain us to the scarcity of gold, nor cause our banking institutions to be vulnerable to failure due to fractional reserve banking and periodic contractions in the money supply.
Unfortunately, I see an eventual end to the FED and a return to a gold standard. If this happens, will the US confiscates gold from the people again like it did in 1933 or will it confiscate half of Germany's gold supply that is currently being held by the New York FED? (Max Keiser)
SSS is not inflationary. Loans focus on retaining value and would not be approved for inflationary profiteering. Constitutional voluntary fee/tax would also control inflation levied for the use of national credit. Also, the SSS currency is backed by real redeemable assets. And SSS protects banks from their inherent vulnerability to failure due to commodity price fluctuations and the consequences of fractional reserve banking.
What good is it to have gold-redeemable currency when your bank fails, the curency fails, and the economy falls into a deep depression? Why not prevent the bank failure? ****Letting the bank redeem their money following an individual failure is better then letting the people redeem their money following a total banking, currency and total economic failure.*****
Don't fall for the obvious Gold propaganda that is being overplayed in both the mainstream and alternative media. Sean Hannity, Rush Limbaugh, Genesis Communication all preaching gold, gold, gold.
> Money is just a medium of exchange. As long as the parties involved agree upon what the exchange rate. If individuals are free to make private contracts with one another, then they should be free to exchange money. Money, as I see it, could be described as a standardized government contract form approved for use by its citizenry.
>
> The issues with gold is that while it is innert and lasts a long time, there isn't much of it around. This creates a problem of scarcity. And when something is made scarce, then it gets a false value associated with it. On the flip side, you don't want people to be able to counterfeit money either. That goes for the government also. However, with modern technology, we can better create paper currencies that cannot easily be counterfeit.
> Today, we really don't need gold at all because we can create a relatively counterfeit-proof currency that is equally accessible. Thus we can get back to money just being just a contract again and not treated as something of value in and of itself.
>
> I am afraid that just because the FED instituted a fraudulent, inflationary, and destructive fiat currency that we necessarily need to run away from paper back to the inequality and scarcity of gold. That said, money has to be tied to something of value. I agree that the Goverment shouldn't counterfeit either.
> I am of the opinion that it was the HUD/FHA amortized loan and other amortized loans like it that were the major drivers of inflation in our economy. Banks create most of the money in our economy and amortized loans are the tool by which banks create that money. And exactly as the Feidman macroeconomic equation predicts, the amortized mortgage (double death) creates money each time a home is bought and sold for a higher price that does not match an increase in real output. It's the same house as before, just older and now costs more but is not worth more. This is an amazing verification of the Friedman equation. (in fact this point is exactly what woke me up in 2008)
> Despite your opinion that the Freidman Macroeconomic equation doesn't apply to the macroeconomics of inflation, I think I have just shown you a clear example of how a microeconomic mismatch between money creation, velocity, and real output creates macroeconomic inflation. The Amortized Mortgage is an inflation generator by doing exactly what the Freidman equation predicts.
>
> Freidman Monetarism may be ruining this country, but it's not because the equations don't apply or don't work. The equations do apply and the system is working just as the equation predicts.
> I suggest that because the Friedman equation does apply, that it is very possible that the SSS would not produced the unwanted inflation that you are convinced it would produce. Remember, money would never be created out of nothing. Money would only br created if there was a durable good it was being created to purchase or produce. Not unlike your system. Money supply, money velocity would stay proportional to real output.
>
> Again, just like your system. The real asset and the price has been negotiated before the loan is applied for. There is no speculation. if a building is being built, the materials, land, labor etc already exists and has a negotiated price before the money is created. In this system money ceases to be the rate limiting step.
> Again, I don't remember saying this or thinking this. If inflation is controlled, simple interest, fee-based loans can compete in a free market. Anyone is free to charge more and pay more. However in the SSS, local banks make money as they do now by charging a loan origination fee and a monthly service charge. The Gov makes money by charging a prime interest rate and generating revenue on what is a Constitutionally-sound voluntary tax on the entire money supply and not just a fraction of it (could make the income tax obsolete). And then we can get rid of the useless "too-big-to-fail" mega banks who were instituted because of our short but persistent history of small bank failures.
> In the Safety Society System we don't need the unelected wealthy capitalist to decide what to invest in. Our capitalist system tells us we need those few rich guys at the top of the pyramid. In this system we have a free market without a need for the the capitalists (oligarchs). And we can still have our football stadium and aquarium.
>
> In the SSS, If an individual is credit worthy and there is a real asset to purchase, the local bank would extend the loan and the loan would be repaid with interest and fees. And when the owner resold the asset, he would have equity from day 1 such that he wouldn't need to inflate the asking price to his neighbor.
>
> Furthermore, if a community wants a museum or an aquarium, they can qualify for a loan to build the aquarium or museum. And they don't need Billionaire ultra-elite capitalists to fund these building projects. Other financial institutions would fill the niches for venture capital and other speculative activities. SSS is about being full reserve and staying safe.
Man has been on a gold and silver standard since money was first mentioned in the Bible in the days of Abraham about 2000 BC and the Silver Shekel of Tyre. The widespread use of money fits with Revelation's description of money being revealed during the 3rd Seal or 3rd Millennium of man's mortal existence on this Earth (Black Horse).
But the Black Horse of the 3rd Seal isn't primarily about money. The Black Horse represents famine. According to the prophecy, artificial scarcity resulted in a days wages barely purchasing enough wheat or barley for one man to survive. However, luxury items like oil and wine were unaffected. The artificial scarcity of a gold-redeemable currency, has driven nations to plunder and subjugate neighboring peoples for gold for thousands of years.
I believe money should be backed by real assets as well as being fully redeemable for those assets without causing unwanted inflation. But a Constitutional money system should also not need to constrain us to the scarcity of gold, nor cause our banking institutions to be vulnerable to failure due to fractional reserve banking and periodic contractions in the money supply.
Unfortunately, I see an eventual end to the FED and a return to a gold standard. If this happens, will the US confiscates gold from the people again like it did in 1933 or will it confiscate half of Germany's gold supply that is currently being held by the New York FED? (Max Keiser)
SSS is not inflationary. Loans focus on retaining value and would not be approved for inflationary profiteering. Constitutional voluntary fee/tax would also control inflation levied for the use of national credit. Also, the SSS currency is backed by real redeemable assets. And SSS protects banks from their inherent vulnerability to failure due to commodity price fluctuations and the consequences of fractional reserve banking.
What good is it to have gold-redeemable currency when your bank fails, the curency fails, and the economy falls into a deep depression? Why not prevent the bank failure? ****Letting the bank redeem their money following an individual failure is better then letting the people redeem their money following a total banking, currency and total economic failure.*****
Don't fall for the obvious Gold propaganda that is being overplayed in both the mainstream and alternative media. Sean Hannity, Rush Limbaugh, Genesis Communication all preaching gold, gold, gold.
> Money is just a medium of exchange. As long as the parties involved agree upon what the exchange rate. If individuals are free to make private contracts with one another, then they should be free to exchange money. Money, as I see it, could be described as a standardized government contract form approved for use by its citizenry.
>
> The issues with gold is that while it is innert and lasts a long time, there isn't much of it around. This creates a problem of scarcity. And when something is made scarce, then it gets a false value associated with it. On the flip side, you don't want people to be able to counterfeit money either. That goes for the government also. However, with modern technology, we can better create paper currencies that cannot easily be counterfeit.
> Today, we really don't need gold at all because we can create a relatively counterfeit-proof currency that is equally accessible. Thus we can get back to money just being just a contract again and not treated as something of value in and of itself.
>
> I am afraid that just because the FED instituted a fraudulent, inflationary, and destructive fiat currency that we necessarily need to run away from paper back to the inequality and scarcity of gold. That said, money has to be tied to something of value. I agree that the Goverment shouldn't counterfeit either.
> I am of the opinion that it was the HUD/FHA amortized loan and other amortized loans like it that were the major drivers of inflation in our economy. Banks create most of the money in our economy and amortized loans are the tool by which banks create that money. And exactly as the Feidman macroeconomic equation predicts, the amortized mortgage (double death) creates money each time a home is bought and sold for a higher price that does not match an increase in real output. It's the same house as before, just older and now costs more but is not worth more. This is an amazing verification of the Friedman equation. (in fact this point is exactly what woke me up in 2008)
> Despite your opinion that the Freidman Macroeconomic equation doesn't apply to the macroeconomics of inflation, I think I have just shown you a clear example of how a microeconomic mismatch between money creation, velocity, and real output creates macroeconomic inflation. The Amortized Mortgage is an inflation generator by doing exactly what the Freidman equation predicts.
>
> Freidman Monetarism may be ruining this country, but it's not because the equations don't apply or don't work. The equations do apply and the system is working just as the equation predicts.
> I suggest that because the Friedman equation does apply, that it is very possible that the SSS would not produced the unwanted inflation that you are convinced it would produce. Remember, money would never be created out of nothing. Money would only br created if there was a durable good it was being created to purchase or produce. Not unlike your system. Money supply, money velocity would stay proportional to real output.
>
> Again, just like your system. The real asset and the price has been negotiated before the loan is applied for. There is no speculation. if a building is being built, the materials, land, labor etc already exists and has a negotiated price before the money is created. In this system money ceases to be the rate limiting step.
> Again, I don't remember saying this or thinking this. If inflation is controlled, simple interest, fee-based loans can compete in a free market. Anyone is free to charge more and pay more. However in the SSS, local banks make money as they do now by charging a loan origination fee and a monthly service charge. The Gov makes money by charging a prime interest rate and generating revenue on what is a Constitutionally-sound voluntary tax on the entire money supply and not just a fraction of it (could make the income tax obsolete). And then we can get rid of the useless "too-big-to-fail" mega banks who were instituted because of our short but persistent history of small bank failures.
> In the Safety Society System we don't need the unelected wealthy capitalist to decide what to invest in. Our capitalist system tells us we need those few rich guys at the top of the pyramid. In this system we have a free market without a need for the the capitalists (oligarchs). And we can still have our football stadium and aquarium.
>
> In the SSS, If an individual is credit worthy and there is a real asset to purchase, the local bank would extend the loan and the loan would be repaid with interest and fees. And when the owner resold the asset, he would have equity from day 1 such that he wouldn't need to inflate the asking price to his neighbor.
>
> Furthermore, if a community wants a museum or an aquarium, they can qualify for a loan to build the aquarium or museum. And they don't need Billionaire ultra-elite capitalists to fund these building projects. Other financial institutions would fill the niches for venture capital and other speculative activities. SSS is about being full reserve and staying safe.
Tuesday, December 20, 2011
Milton Freidman Monetarism and Inflation
A friend was arguing that the Community Safety Society Banking and Loan System would generate unwanted inflation. This friend also said that the macroeconomic inflation equation did not apply or predict inflation on the microeconomic scale.
#1. MV = PQ. (money supply x velocity = price x real value
g(m) + g(v) = infl + g(y) . (growth rate of money supply + velocity = inflation + real output)
This equation says that as long as the growth rate of real output matches the growth rate of the money supply the system will not produce inflation.
#2. Mega FED-member Banks create most of the money in the US money supply through making loans via fractional reserve banking. The FED creates some money by selling bonds and then loans that money to a FED-member bank. The Mega Bank then can loan out 10 times that amount as home or business loans. Thus Banks create over 90% of the money supply out of thin air. This 10:1 ratio is called the money multiplier which was expanded (leveraged) to 50:1-100:1 via derivatives until the Basil 2 Accords (Basil 1 ruined Japan) contracted the money supply in 2007 busting the housing bubble.
#3. The HUD/FHA amortized mortgage produces inflation because the banks collect interest up front and the creditor doesn't build appreciable equity on the house unless they charge the next home owner a higher price for the same asset that has now depreciated in value or at least not changed in value. By definition, the amortized loan generates inflation. (increased money supply but not an increase in real output)
#4. The Safety Society System is a full reserve banking system. 100% of what is deposited is kept by the bank and not lent out. Banks become insolvent because they are fractional reserve and not full reserve. That means they only keep 10% of deposited money in the bank. And they don't keep the reserves as cash because of inflation but are forced to speculate and invest in bonds, stocks and volitile derivatives. If the derivatives or stocks crash then the banks lose their reserves and cannot lend and cannot pay depositors. The bank is then insolvent and goes bankrupt.
#5. SSS would have a totally separate credit and loan system from the deposits thus the depositors are not subjected to the risk of the borrowers. The SSS is full reserve and immune from stock market crashes and bank runs.
#6. The US Constitution Article 1 Section 8 says that Congess via the US Treasury is to "coin " all the money and regulate its value. Therefore, under SSS, an individual, community, corporation would go to their locally run and owned SSS to be approved for a loan to purchase or build or produce a real asset, real estate, land or commodity. The price would be negotiated beforehand and then the loan applied for. The money would then be created via the US Treasury and administered via the Community SSS. This new money doesn't need to be backed by gold because it is backed by the real asset, land, real estate, or commodity it is being used to buy, build, and produce.
#7. A gold standard is undesirable because gold is too rare, and it makes money scarce. Thus those with the gold have unelected Machiavellian power over the rest. Now that we can use technology to create paper currency that is difficult to counterfeit, we don't need to use the scarcity of gold as a medium of exchange. With paper, money can be produced and made available as much as is needed and is qualified for by credit-worthy individuals, communities, and corporations. Money would only be created in an "ask-and-ye-shall-receive" basis where value is assessed and price is negotiated and preceeds the money creation.
#8. In a perfect system, SSS would never create money that did not result in real output. Thus according to the Friedman equation, no inflation is generated. But in the inefficiencies of a real-world system there would be a small rate of inflation. Inflation can be easily controlled by taxation by the Federal Government through simple interest rates. Increased interest rates would take excess money out of the system.
#9. Local SSS would make money the same way local banks do today. SSS would charge a loan origination fee and a monthly loan service charge. These banks could operate as non-profits and collect enough fees to cover their overhead. Loan fees are how local banks make their money today as they immediately resell the loan to a bigger bank almost immediately who created the money out of thin air. If the SSS were allowed to compete, we wouldn't need the too-big-to-fail mega banks which were only allowed to back up the smaller fractional reserve banks who continually went bankrupt even in the days before the FED when US currency was gold-redeemable.
#10. The Federal Government generates revenue on these SSS loans by charging a prime simple interest rate. This Constitutional voluntary tax could supply the Federal Goverenment with all the money they could ever need because they would collect simple interest on all the money created in the money supply and not just a fraction of it as they do now. With the collection of prime interest on all money created in the US money supply, the Federal Government could do away with the involuntary income tax.
#11. In Capitalism, getting bank loans is such a bad deal, we need wealthy super-elite who amass huge amounts of money who we then turn to for loans for venture capital and for humanitarianism. We also depend on politicians for favors and pork-barrel money put into bills. If the Safety Society System were allowed to compete, and inflation were controlled, we wouldn't be as dependent on the ultra-wealthy elite or corrupt politicians to get monies for what we want to do or what we need. SSS is free-market without the capitalism. With SSS, we don't need to become financial sharecroppers and debt slaves to an ultra-wealthy elite class.
#12. SSS does not speculate or make money on money. Individuals and other financial institutions would do the business of venture capital and speculation. SSS is about being safe, full reserve, weathering any economic storm, and providing an equitable credit and loan system. Making money on money shouldn't be illegal but isn't right. Money shouldn't have any intrinsic value of itselt, it is just a contract, and its value is in the redeemable asset, good, or commodity that is backing it. In the SSS, all money is backed by something. But money should not be used to back more money creation. When money can be leveraged to make more money, it divides the people and pits the wealthy class against labor.
#13. SSS loans are simple interest, free-based loans and not compound loans that blow up exponentially. The borrower begins earning equity from the down payment and first monthly payments. In this way, with inflation controlled, the owner of the home loan doesn't need to charge the next home owner a higher price for the same home. SSS is about preserving value.
#14. Many people want to replace the FED and our current corrupt fiat currency system. But I would be careful not to act too emotionally and reactionary against what the corrupt Federal Reserve has done with paper currency. Going back to a gold-redeemable currency is not the best idea. We had this system before and we forget that the gobal elite still own most of the gold and have a De Beers-like monopoly on gold production. Thus gold prices can easily be inflated and crash just as they did beginning with the 1300's failure of the Gold Florin, up to the creation of the FED. By returning to a gold standard, the scarcity of gold would result in greatly limited economic growth potential. In a real way, returning to gold would would be like unwittingly accepting austerity measures.
#15. Others have suggested a system which requires that money-redeemable assets be sitting in a wearhouse first before money is created. However, this zero-sum system is, in the real world, slightly deflationary, and is a form of fractional-reserve lending. Also, the bank can only lend out enough money for people to re-purchase the goods in the wearhouse. So, its a kind of Merchantile Exchange and Bank at the same time. There really isn't enough money left over for other economic activity. Also, there is a problem of price fluctuations, regional price variation, and trading currencies with other banks that could make the bank vulnerable to failure. Money in this system would be very scarce, which would greatly hinder economic growth.
#16. Since the borrower builds equity from day 1, if the borrower misses a payment, the 1 missed payment does not result in the immediate default on the loan. Usually borrowers have paid faithfully for years and then come upon hard times, lost job, illness, and can't make their mortgage payments. In our current system, one missed payment means a family can lose their home and forfeit all the equity they have made. In the SSS, the borrower has equity from day one and a missed payment is just simply deducted from the individual's equity. Default does not occur until the borrower has lost all equity in the asset. The bank then would repossess, lease, operate, or resell the asset. So, the SSS loan becomes an immediate reverse mortgage at any time. In a way, it is a sort of insurance policy for the borrower and the bank. Added fees could also be assessed for missed payments if needed.
#1. MV = PQ. (money supply x velocity = price x real value
g(m) + g(v) = infl + g(y) . (growth rate of money supply + velocity = inflation + real output)
This equation says that as long as the growth rate of real output matches the growth rate of the money supply the system will not produce inflation.
#2. Mega FED-member Banks create most of the money in the US money supply through making loans via fractional reserve banking. The FED creates some money by selling bonds and then loans that money to a FED-member bank. The Mega Bank then can loan out 10 times that amount as home or business loans. Thus Banks create over 90% of the money supply out of thin air. This 10:1 ratio is called the money multiplier which was expanded (leveraged) to 50:1-100:1 via derivatives until the Basil 2 Accords (Basil 1 ruined Japan) contracted the money supply in 2007 busting the housing bubble.
#3. The HUD/FHA amortized mortgage produces inflation because the banks collect interest up front and the creditor doesn't build appreciable equity on the house unless they charge the next home owner a higher price for the same asset that has now depreciated in value or at least not changed in value. By definition, the amortized loan generates inflation. (increased money supply but not an increase in real output)
#4. The Safety Society System is a full reserve banking system. 100% of what is deposited is kept by the bank and not lent out. Banks become insolvent because they are fractional reserve and not full reserve. That means they only keep 10% of deposited money in the bank. And they don't keep the reserves as cash because of inflation but are forced to speculate and invest in bonds, stocks and volitile derivatives. If the derivatives or stocks crash then the banks lose their reserves and cannot lend and cannot pay depositors. The bank is then insolvent and goes bankrupt.
#5. SSS would have a totally separate credit and loan system from the deposits thus the depositors are not subjected to the risk of the borrowers. The SSS is full reserve and immune from stock market crashes and bank runs.
#6. The US Constitution Article 1 Section 8 says that Congess via the US Treasury is to "coin " all the money and regulate its value. Therefore, under SSS, an individual, community, corporation would go to their locally run and owned SSS to be approved for a loan to purchase or build or produce a real asset, real estate, land or commodity. The price would be negotiated beforehand and then the loan applied for. The money would then be created via the US Treasury and administered via the Community SSS. This new money doesn't need to be backed by gold because it is backed by the real asset, land, real estate, or commodity it is being used to buy, build, and produce.
#7. A gold standard is undesirable because gold is too rare, and it makes money scarce. Thus those with the gold have unelected Machiavellian power over the rest. Now that we can use technology to create paper currency that is difficult to counterfeit, we don't need to use the scarcity of gold as a medium of exchange. With paper, money can be produced and made available as much as is needed and is qualified for by credit-worthy individuals, communities, and corporations. Money would only be created in an "ask-and-ye-shall-receive" basis where value is assessed and price is negotiated and preceeds the money creation.
#8. In a perfect system, SSS would never create money that did not result in real output. Thus according to the Friedman equation, no inflation is generated. But in the inefficiencies of a real-world system there would be a small rate of inflation. Inflation can be easily controlled by taxation by the Federal Government through simple interest rates. Increased interest rates would take excess money out of the system.
#9. Local SSS would make money the same way local banks do today. SSS would charge a loan origination fee and a monthly loan service charge. These banks could operate as non-profits and collect enough fees to cover their overhead. Loan fees are how local banks make their money today as they immediately resell the loan to a bigger bank almost immediately who created the money out of thin air. If the SSS were allowed to compete, we wouldn't need the too-big-to-fail mega banks which were only allowed to back up the smaller fractional reserve banks who continually went bankrupt even in the days before the FED when US currency was gold-redeemable.
#10. The Federal Government generates revenue on these SSS loans by charging a prime simple interest rate. This Constitutional voluntary tax could supply the Federal Goverenment with all the money they could ever need because they would collect simple interest on all the money created in the money supply and not just a fraction of it as they do now. With the collection of prime interest on all money created in the US money supply, the Federal Government could do away with the involuntary income tax.
#11. In Capitalism, getting bank loans is such a bad deal, we need wealthy super-elite who amass huge amounts of money who we then turn to for loans for venture capital and for humanitarianism. We also depend on politicians for favors and pork-barrel money put into bills. If the Safety Society System were allowed to compete, and inflation were controlled, we wouldn't be as dependent on the ultra-wealthy elite or corrupt politicians to get monies for what we want to do or what we need. SSS is free-market without the capitalism. With SSS, we don't need to become financial sharecroppers and debt slaves to an ultra-wealthy elite class.
#12. SSS does not speculate or make money on money. Individuals and other financial institutions would do the business of venture capital and speculation. SSS is about being safe, full reserve, weathering any economic storm, and providing an equitable credit and loan system. Making money on money shouldn't be illegal but isn't right. Money shouldn't have any intrinsic value of itselt, it is just a contract, and its value is in the redeemable asset, good, or commodity that is backing it. In the SSS, all money is backed by something. But money should not be used to back more money creation. When money can be leveraged to make more money, it divides the people and pits the wealthy class against labor.
#13. SSS loans are simple interest, free-based loans and not compound loans that blow up exponentially. The borrower begins earning equity from the down payment and first monthly payments. In this way, with inflation controlled, the owner of the home loan doesn't need to charge the next home owner a higher price for the same home. SSS is about preserving value.
#14. Many people want to replace the FED and our current corrupt fiat currency system. But I would be careful not to act too emotionally and reactionary against what the corrupt Federal Reserve has done with paper currency. Going back to a gold-redeemable currency is not the best idea. We had this system before and we forget that the gobal elite still own most of the gold and have a De Beers-like monopoly on gold production. Thus gold prices can easily be inflated and crash just as they did beginning with the 1300's failure of the Gold Florin, up to the creation of the FED. By returning to a gold standard, the scarcity of gold would result in greatly limited economic growth potential. In a real way, returning to gold would would be like unwittingly accepting austerity measures.
#15. Others have suggested a system which requires that money-redeemable assets be sitting in a wearhouse first before money is created. However, this zero-sum system is, in the real world, slightly deflationary, and is a form of fractional-reserve lending. Also, the bank can only lend out enough money for people to re-purchase the goods in the wearhouse. So, its a kind of Merchantile Exchange and Bank at the same time. There really isn't enough money left over for other economic activity. Also, there is a problem of price fluctuations, regional price variation, and trading currencies with other banks that could make the bank vulnerable to failure. Money in this system would be very scarce, which would greatly hinder economic growth.
#16. Since the borrower builds equity from day 1, if the borrower misses a payment, the 1 missed payment does not result in the immediate default on the loan. Usually borrowers have paid faithfully for years and then come upon hard times, lost job, illness, and can't make their mortgage payments. In our current system, one missed payment means a family can lose their home and forfeit all the equity they have made. In the SSS, the borrower has equity from day one and a missed payment is just simply deducted from the individual's equity. Default does not occur until the borrower has lost all equity in the asset. The bank then would repossess, lease, operate, or resell the asset. So, the SSS loan becomes an immediate reverse mortgage at any time. In a way, it is a sort of insurance policy for the borrower and the bank. Added fees could also be assessed for missed payments if needed.
Monday, December 19, 2011
Community Safety Society Banking and Loan System
You indicated in your response that the Community Safety Society would result in unwanted inflation. I agree that inflation is undesirable. However, I am not yet convinced that the Saftey Society would produce inflation. And I would like to explore this a bit more with you.
I am not opposed to the idea of all US currency being fully backed by gold and silver. I also recognize that the banking profession needs to cover its overhead. So, I have no problem with banks issuing fee-based and simple interest loans. The Catholic Church probiltion against the collection of any interest created a credit black market in the Middle Ages that led to all sorts of abuses. (Lombards, Templar Houses, Florentine and Venetian Banks)
However, I do not believe that it is not right nor necessary for money to make money. This divides the people and pits wealth against labor. Furthermore, full-reserve banks shouldn't issue loans based on depositor's gold; even by contract: 1. extending loans based on gold deposits subjects depositors to risk by the creditors. 2. Loaning deposits is another type of inherently risky fractional-reserve system 3. According to the Constitution, only the Federal Government should have the power to coin the money and regulate its value. In our current system, fractional reserve banks create a large majority of our money. How is extending loans based on private deposits any different?
Therefore, in my opinion, If we decide to create an inflationless economy, we need a banking system that focuses on preserving the value of our deposits as well as being immune from banking failure (full reserve). At the same time, we must create a credit system where credit is so readily and equitably accessible, there is no need to subjugate ourselves to a wealthy class. To do this, It is my opinion that we need a credit system that operates independently from the deposit system.
A locally owned and operated Community Safety Society would be full-reserve. The bank would hold 100% of its deposits in reserve. Money for new loans would come from the US Treasury. This money could also be gold-backed. If an individual, corporation, or community, demonstrates credit-worthiness, then they should be granted a fee-based, low, simple interest loan to go towards the purchase of or production of real estate, real assets, durable goods, and commodities. (money never lent for speculation).
According to my very limited economics understanding, "real demand" should not produce inflation. According to g(m) + g(v) = infl + g(y). As long as the growth rate of the money supply = growth rate of real output, then inflation = 0. It's only when the money supply exceeds real output that inflation is produced.
In the Safety Society System, money is only ever created and credit extended for the projected production and/or purchase of real assets on an "ask and ye shall receive" basis. Money is never created without real demand and projected real output in some sort of Keynesian injection of liquidity.
Our current system produces inflation because the money is created first and the price comes second. In this system, price precedes money creation. An example of money creation preceeding price is the FHA/HUD amortized loan. With interest collected up front, the only way to earn equity is to charge the next buyer a higher price. Thus, this loan has money creation built into it which drives an inflating price for a depreciating asset. In the Safety Society System, a borrower earns equity from day 1 and is free to sell the asset for its real price.
In conclusion, have no objections to the Federal Government creating only "gold-backed" currency. However, we don't change our history of perpetual banking failures unless we establish a full-reserve system, control inflation, and establish an equitable and available credit system.
Furthermore, Constitutional money is more than just gold and silver, but it is about the Federal Government doing one of the few things enumerated in the Constitution; which is to coin "all" of the money and not just a fraction of it.
With such an equitable and available credit system, there would be much less need for companies to "go public", sell stock, have their boards infiltrated, and then risk getting bought out in a hostile takeover. Also, the Safety Society System could mean a great reduction or even an end to pork barrel politics.
P.S, these are a few quotes that are some of the basis for the Safety Society System. I'm not sure they are even authentic. But they make the point about the importance of controlling our currency, credit, and inflation.
"If that mischievous financial policy which had its origin in the North America Republic during the late war in that country, should become indurated down to a fixture, then that Government will furnish its own money without cost. It will pay off its debts and be without debt. It will become prosperous beyond precedent in the history of the civilized governments of the world. The brains and wealth of all countries will go to North America. That government must be destroyed or it will destroy every monarchy on the globe."
“That is simple. In the Colonies, we issue our own paper money. It is called ‘Colonial Scrip.’ We issue it in proper proportion to make the goods and pass easily from the producers to the consumers. In this manner, creating ourselves our own paper money, we control its purchasing power and we have no interest to pay to no one.”. -Benjamin Franklin
"The Colonies would gladly have borne the little tax on tea and other matters had it not been the poverty caused by the bad influence of the English bankers on the Parliament (The Currency Act of 1751), which has caused in the Colonies hatred of England and the Revolutionary War." -Benjamin Franklin.
Hopefully, the last time. I know we have beat this to death. Thank you for your responses . I think I better understand where you are coming from and I hope you understand where I am coming from. I'm not set on convincing you, I just want to feel like you understand what the concept. I am keeping an open mind but I'm happy you would take the time to discuss this issue.
I get the gold idea. Ending the FED and fiat and a return to "gold redeemable" money and a continuation of fractional reserve banking is very popular. Zeitgeist and many "white hat" are pulling for it. It seems every other commercial on the radio is selling gold. When we finally see the end of the FED and the end of the dollar, I'm sure we'll all think we just won some great battle. We've had gold redeemable currencies before.
I can appreciate your added idea that money creation be completely decentralized. Its a great idea. However, this idea could be a bit reactionary (pendulum swinging too far opposite the FED). But, I guess your bank could also be your store that made loans based on the value of its inventory. People could take out loans from the Merchantile Exchange and then return that money to the same Merchantile Exchange for whatever goods they wanted. Interesting idea.
The Merchantile Exchange Bank could have a problem I think. It seems to me that the Exchange would only ever be able to lend out the exact money to purchase the inventory in its wearhouse. If the bank can only lend out enough money for the people to buy out its inventory, how is there any money left over to do any other economic activity? How do you import anything? What do you do with price fluctuations? How would
Hopefully, the last time. I know we have beat this to death. Thank you for your responses . I think I better understand where you are coming from and I hope you understand where I am coming from. I'm not set on convincing you, I just want to feel like you understand what the concept. I am keeping an open mind but I'm happy you would take the time to discuss this issue.
I get the gold idea. Ending the FED and fiat and a return to "gold redeemable" money and a continuation of fractional reserve banking is very popular. Zeitgeist and many "white hat" are pulling for it. It seems every other commercial on the radio is selling gold. When we finally see the end of the FED and the end of the dollar, I'm sure we'll all think we just won some great battle. We've had gold redeemable currencies before.
I can appreciate your added idea that money creation be completely decentralized. Its a great idea. However, this idea could be a bit reactionary (pendulum swinging too far opposite the FED). But, I guess your bank could also be your store that made loans based on the value of its inventory. People could take out loans from the Merchantile Exchange and then return that money to the same Merchantile Exchange for whatever goods they wanted. Interesting idea.
The Merchantile Exchange Bank could have a problem I think. It seems to me that the Exchange would only ever be able to lend out the exact money to purchase the inventory in its wearhouse. If the bank can only lend out enough money for the people to buy out its inventory, how is there any money left over to do any other economic activity? How do you import anything? What do you do with price fluctuations? How would currency exchange from bank to bank? Seems like you would have to get in line for a loan. I'll have to give this some more thought.
Another idea I would love to see is to actually do as the Constitution suggests. Unfortunately, because of fractional reserve lending, we've always had banks creating a majority of our money in this country and not Congress.
I seriously think it is possible that the FED instituted a corrupt paper currency to drive us away from paper and back to gold. Thinking on the London Times comment, I think there may be something about paper currency that TPTB are hoping we miss as we run away from it.
#####"it can't have gold unless it buys it from those who produce it, or taxes it away from people. That's not a costless transaction"####
I suggested gold redeemable currency attempting to be conciliatory. But you make a good point here. I agree that the government taxing away the people's gold would add unwanted cost. So, I will repent on this idea. Let's forget gold all together.
####"True money has to be a certificate of value for durable goods in a warehouse, "####
Money is just a medium of exchange. As long as the parties involved agree upon what the exchange rate. If individuals are free to make private contracts with one another, then they should be free to exchange money. Money, as I see it, could be described as a standardized government contract form approved for use by its citizenry.
The issues with gold is that while it is innert and lasts a long time, there isn't much of it around. This creates a problem of scarcity. And when something is made scarce, then it gets a false value associated with it. On the flip side, you don't want people to be able to counterfeit money either. That goes for the government also. However, with modern technology, we can better create paper currencies that cannot easily be counterfeit.
Today, we really don't need gold at all because we can create a relatively counterfeit-proof currency that is equally accessible. Thus we can get back to money just being just a contract again and not treated as something of value in and of itself.
I am afraid that just because the FED instituted a fraudulent, inflationary, and destructive fiat currency that we necessarily need to run away from paper back to the inequality and scarcity of gold. That said, money has to be tied to something of value. I agree that the Goverment shouldn't counterfeit either.
I am of the opinion that it was the HUD/FHA amortized loan and other amortized loans like it that were the major drivers of inflation in our economy. Banks create most of the money in our economy and amortized loans are the tool by which banks create that money. And exactly as the Feidman macroeconomic equation predicts, the amortized mortgage (double death) creates money each time a home is bought and sold for a higher price that does not match an increase in real output. It's the same house as before, just older and now costs more but is not worth more. This is an amazing verification of the Friedman equation. (in fact this point is exactly what woke me up in 2008)
Despite your opinion that the Freidman Macroeconomic equation doesn't apply to the macroeconomics of inflation, I think I have just shown you a clear example of how a microeconomic mismatch between money creation, velocity, and real output creates macroeconomic inflation. The Amortized Mortgage is an inflation generator by doing exactly what the Freidman equation predicts.
Freidman Monetarism may be ruining this country, but it's not because the equations don't apply or don't work. The equations do apply and the system is working just as the equation predicts.
I suggest that because the Friedman equation does apply, that it is very possible that the SSS would not produced the unwanted inflation that you are convinced it would produce. Remember, money would never be created out of nothing. Money would only br created if there was a durable good it was being created to purchase or produce. Not unlike your system. Money supply, money velocity would stay proportional to real output.
Again, just like your system. The real asset and the price has been negotiated before the loan is applied for. There is no speculation. if a building is being built, the materials, land, labor etc already exists and has a negotiated price before the money is created. In this system money ceases to be the rate limiting step.
####"you can't create anything from nothing ... and not be inflationary"####
As I said, I agree that currency needs to represent something of value. I never said that I supported the Federal Government just printing money out of nothing as we do now. In the Safety Society System, money is backed by the real durrable assets it is being created to purchase, or being created to produce.
####"Just because the Constitution gave congress the right to coin and regulate money doesn't mean it's right "####
I say, let's follow our inspired Constitution first before deciding if it's "right" or not.
####"no cost loans"####
Again, I don't remember saying this or thinking this. If inflation is controlled, simple interest, fee-based loans can compete in a free market. Anyone is free to charge more and pay more. However in the SSS, local banks make money as they do now by charging a loan origination fee and a monthly service charge. The Gov makes money by charging a prime interest rate and generating revenue on what is a Constitutionally-sound voluntary tax on the entire money supply and not just a fraction of it (could make the income tax obsolete). And then we can get rid of the useless "too-big-to-fail" mega banks who were instituted because of our short but persistent history of small bank failures.
####"It's also wrong to say compound interest is illegal. "####
I don't remember saying or even thinking this. But if we control inflation, and simple interest, fee-based loans are available, I'm sure they would compete very well in a free market. Again, I haven't proposed making anything illegal. I just would like to see these ideas compete in a free market.
What I did say is that I don't agree that money needs to be used to make more money. I wouldn't make this illegal, my system would make loan sharks obsolete.
####"There is no free lunch on loans, much as you persist in trying to make it so."####
In the Safety Society System we don't need the unelected wealthy capitalist to decide what to invest in. Our capitalist system tells us we need those few rich guys at the top of the pyramid.
In the SSS, If an individual is credit worthy and there is a real asset to purchase, the local bank would extend the loan and the loan would be repaid with interest and fees. And when the owner resold the asset, he would have equity from day 1 such that he wouldn't need to inflate the asking price to his neighbor.
Furthermore, if a community wants a museum or an aquarium, they can qualify for a loan to build the aquarium or museum. And they don't need Billionaire ultra-elite capitalists to fund these building projects.
Other financial institutions would fill the niches for venture capital and other speculative activities. SSS is about being full reserve and staying safe.
I am not opposed to the idea of all US currency being fully backed by gold and silver. I also recognize that the banking profession needs to cover its overhead. So, I have no problem with banks issuing fee-based and simple interest loans. The Catholic Church probiltion against the collection of any interest created a credit black market in the Middle Ages that led to all sorts of abuses. (Lombards, Templar Houses, Florentine and Venetian Banks)
However, I do not believe that it is not right nor necessary for money to make money. This divides the people and pits wealth against labor. Furthermore, full-reserve banks shouldn't issue loans based on depositor's gold; even by contract: 1. extending loans based on gold deposits subjects depositors to risk by the creditors. 2. Loaning deposits is another type of inherently risky fractional-reserve system 3. According to the Constitution, only the Federal Government should have the power to coin the money and regulate its value. In our current system, fractional reserve banks create a large majority of our money. How is extending loans based on private deposits any different?
Therefore, in my opinion, If we decide to create an inflationless economy, we need a banking system that focuses on preserving the value of our deposits as well as being immune from banking failure (full reserve). At the same time, we must create a credit system where credit is so readily and equitably accessible, there is no need to subjugate ourselves to a wealthy class. To do this, It is my opinion that we need a credit system that operates independently from the deposit system.
A locally owned and operated Community Safety Society would be full-reserve. The bank would hold 100% of its deposits in reserve. Money for new loans would come from the US Treasury. This money could also be gold-backed. If an individual, corporation, or community, demonstrates credit-worthiness, then they should be granted a fee-based, low, simple interest loan to go towards the purchase of or production of real estate, real assets, durable goods, and commodities. (money never lent for speculation).
According to my very limited economics understanding, "real demand" should not produce inflation. According to g(m) + g(v) = infl + g(y). As long as the growth rate of the money supply = growth rate of real output, then inflation = 0. It's only when the money supply exceeds real output that inflation is produced.
In the Safety Society System, money is only ever created and credit extended for the projected production and/or purchase of real assets on an "ask and ye shall receive" basis. Money is never created without real demand and projected real output in some sort of Keynesian injection of liquidity.
Our current system produces inflation because the money is created first and the price comes second. In this system, price precedes money creation. An example of money creation preceeding price is the FHA/HUD amortized loan. With interest collected up front, the only way to earn equity is to charge the next buyer a higher price. Thus, this loan has money creation built into it which drives an inflating price for a depreciating asset. In the Safety Society System, a borrower earns equity from day 1 and is free to sell the asset for its real price.
In conclusion, have no objections to the Federal Government creating only "gold-backed" currency. However, we don't change our history of perpetual banking failures unless we establish a full-reserve system, control inflation, and establish an equitable and available credit system.
Furthermore, Constitutional money is more than just gold and silver, but it is about the Federal Government doing one of the few things enumerated in the Constitution; which is to coin "all" of the money and not just a fraction of it.
With such an equitable and available credit system, there would be much less need for companies to "go public", sell stock, have their boards infiltrated, and then risk getting bought out in a hostile takeover. Also, the Safety Society System could mean a great reduction or even an end to pork barrel politics.
P.S, these are a few quotes that are some of the basis for the Safety Society System. I'm not sure they are even authentic. But they make the point about the importance of controlling our currency, credit, and inflation.
"If that mischievous financial policy which had its origin in the North America Republic during the late war in that country, should become indurated down to a fixture, then that Government will furnish its own money without cost. It will pay off its debts and be without debt. It will become prosperous beyond precedent in the history of the civilized governments of the world. The brains and wealth of all countries will go to North America. That government must be destroyed or it will destroy every monarchy on the globe."
“That is simple. In the Colonies, we issue our own paper money. It is called ‘Colonial Scrip.’ We issue it in proper proportion to make the goods and pass easily from the producers to the consumers. In this manner, creating ourselves our own paper money, we control its purchasing power and we have no interest to pay to no one.”. -Benjamin Franklin
"The Colonies would gladly have borne the little tax on tea and other matters had it not been the poverty caused by the bad influence of the English bankers on the Parliament (The Currency Act of 1751), which has caused in the Colonies hatred of England and the Revolutionary War." -Benjamin Franklin.
Hopefully, the last time. I know we have beat this to death. Thank you for your responses . I think I better understand where you are coming from and I hope you understand where I am coming from. I'm not set on convincing you, I just want to feel like you understand what the concept. I am keeping an open mind but I'm happy you would take the time to discuss this issue.
I get the gold idea. Ending the FED and fiat and a return to "gold redeemable" money and a continuation of fractional reserve banking is very popular. Zeitgeist and many "white hat" are pulling for it. It seems every other commercial on the radio is selling gold. When we finally see the end of the FED and the end of the dollar, I'm sure we'll all think we just won some great battle. We've had gold redeemable currencies before.
I can appreciate your added idea that money creation be completely decentralized. Its a great idea. However, this idea could be a bit reactionary (pendulum swinging too far opposite the FED). But, I guess your bank could also be your store that made loans based on the value of its inventory. People could take out loans from the Merchantile Exchange and then return that money to the same Merchantile Exchange for whatever goods they wanted. Interesting idea.
The Merchantile Exchange Bank could have a problem I think. It seems to me that the Exchange would only ever be able to lend out the exact money to purchase the inventory in its wearhouse. If the bank can only lend out enough money for the people to buy out its inventory, how is there any money left over to do any other economic activity? How do you import anything? What do you do with price fluctuations? How would
Hopefully, the last time. I know we have beat this to death. Thank you for your responses . I think I better understand where you are coming from and I hope you understand where I am coming from. I'm not set on convincing you, I just want to feel like you understand what the concept. I am keeping an open mind but I'm happy you would take the time to discuss this issue.
I get the gold idea. Ending the FED and fiat and a return to "gold redeemable" money and a continuation of fractional reserve banking is very popular. Zeitgeist and many "white hat" are pulling for it. It seems every other commercial on the radio is selling gold. When we finally see the end of the FED and the end of the dollar, I'm sure we'll all think we just won some great battle. We've had gold redeemable currencies before.
I can appreciate your added idea that money creation be completely decentralized. Its a great idea. However, this idea could be a bit reactionary (pendulum swinging too far opposite the FED). But, I guess your bank could also be your store that made loans based on the value of its inventory. People could take out loans from the Merchantile Exchange and then return that money to the same Merchantile Exchange for whatever goods they wanted. Interesting idea.
The Merchantile Exchange Bank could have a problem I think. It seems to me that the Exchange would only ever be able to lend out the exact money to purchase the inventory in its wearhouse. If the bank can only lend out enough money for the people to buy out its inventory, how is there any money left over to do any other economic activity? How do you import anything? What do you do with price fluctuations? How would currency exchange from bank to bank? Seems like you would have to get in line for a loan. I'll have to give this some more thought.
Another idea I would love to see is to actually do as the Constitution suggests. Unfortunately, because of fractional reserve lending, we've always had banks creating a majority of our money in this country and not Congress.
I seriously think it is possible that the FED instituted a corrupt paper currency to drive us away from paper and back to gold. Thinking on the London Times comment, I think there may be something about paper currency that TPTB are hoping we miss as we run away from it.
#####"it can't have gold unless it buys it from those who produce it, or taxes it away from people. That's not a costless transaction"####
I suggested gold redeemable currency attempting to be conciliatory. But you make a good point here. I agree that the government taxing away the people's gold would add unwanted cost. So, I will repent on this idea. Let's forget gold all together.
####"True money has to be a certificate of value for durable goods in a warehouse, "####
Money is just a medium of exchange. As long as the parties involved agree upon what the exchange rate. If individuals are free to make private contracts with one another, then they should be free to exchange money. Money, as I see it, could be described as a standardized government contract form approved for use by its citizenry.
The issues with gold is that while it is innert and lasts a long time, there isn't much of it around. This creates a problem of scarcity. And when something is made scarce, then it gets a false value associated with it. On the flip side, you don't want people to be able to counterfeit money either. That goes for the government also. However, with modern technology, we can better create paper currencies that cannot easily be counterfeit.
Today, we really don't need gold at all because we can create a relatively counterfeit-proof currency that is equally accessible. Thus we can get back to money just being just a contract again and not treated as something of value in and of itself.
I am afraid that just because the FED instituted a fraudulent, inflationary, and destructive fiat currency that we necessarily need to run away from paper back to the inequality and scarcity of gold. That said, money has to be tied to something of value. I agree that the Goverment shouldn't counterfeit either.
I am of the opinion that it was the HUD/FHA amortized loan and other amortized loans like it that were the major drivers of inflation in our economy. Banks create most of the money in our economy and amortized loans are the tool by which banks create that money. And exactly as the Feidman macroeconomic equation predicts, the amortized mortgage (double death) creates money each time a home is bought and sold for a higher price that does not match an increase in real output. It's the same house as before, just older and now costs more but is not worth more. This is an amazing verification of the Friedman equation. (in fact this point is exactly what woke me up in 2008)
Despite your opinion that the Freidman Macroeconomic equation doesn't apply to the macroeconomics of inflation, I think I have just shown you a clear example of how a microeconomic mismatch between money creation, velocity, and real output creates macroeconomic inflation. The Amortized Mortgage is an inflation generator by doing exactly what the Freidman equation predicts.
Freidman Monetarism may be ruining this country, but it's not because the equations don't apply or don't work. The equations do apply and the system is working just as the equation predicts.
I suggest that because the Friedman equation does apply, that it is very possible that the SSS would not produced the unwanted inflation that you are convinced it would produce. Remember, money would never be created out of nothing. Money would only br created if there was a durable good it was being created to purchase or produce. Not unlike your system. Money supply, money velocity would stay proportional to real output.
Again, just like your system. The real asset and the price has been negotiated before the loan is applied for. There is no speculation. if a building is being built, the materials, land, labor etc already exists and has a negotiated price before the money is created. In this system money ceases to be the rate limiting step.
####"you can't create anything from nothing ... and not be inflationary"####
As I said, I agree that currency needs to represent something of value. I never said that I supported the Federal Government just printing money out of nothing as we do now. In the Safety Society System, money is backed by the real durrable assets it is being created to purchase, or being created to produce.
####"Just because the Constitution gave congress the right to coin and regulate money doesn't mean it's right "####
I say, let's follow our inspired Constitution first before deciding if it's "right" or not.
####"no cost loans"####
Again, I don't remember saying this or thinking this. If inflation is controlled, simple interest, fee-based loans can compete in a free market. Anyone is free to charge more and pay more. However in the SSS, local banks make money as they do now by charging a loan origination fee and a monthly service charge. The Gov makes money by charging a prime interest rate and generating revenue on what is a Constitutionally-sound voluntary tax on the entire money supply and not just a fraction of it (could make the income tax obsolete). And then we can get rid of the useless "too-big-to-fail" mega banks who were instituted because of our short but persistent history of small bank failures.
####"It's also wrong to say compound interest is illegal. "####
I don't remember saying or even thinking this. But if we control inflation, and simple interest, fee-based loans are available, I'm sure they would compete very well in a free market. Again, I haven't proposed making anything illegal. I just would like to see these ideas compete in a free market.
What I did say is that I don't agree that money needs to be used to make more money. I wouldn't make this illegal, my system would make loan sharks obsolete.
####"There is no free lunch on loans, much as you persist in trying to make it so."####
In the Safety Society System we don't need the unelected wealthy capitalist to decide what to invest in. Our capitalist system tells us we need those few rich guys at the top of the pyramid.
In the SSS, If an individual is credit worthy and there is a real asset to purchase, the local bank would extend the loan and the loan would be repaid with interest and fees. And when the owner resold the asset, he would have equity from day 1 such that he wouldn't need to inflate the asking price to his neighbor.
Furthermore, if a community wants a museum or an aquarium, they can qualify for a loan to build the aquarium or museum. And they don't need Billionaire ultra-elite capitalists to fund these building projects.
Other financial institutions would fill the niches for venture capital and other speculative activities. SSS is about being full reserve and staying safe.
Thursday, December 15, 2011
Monetary and Economic Solution for the World
Dear Ben,
I was listening to one of your recent interviews, and I was just amazed at your description of a monetary a banking solution. I have been thinking exactly along the same lines. I especially liked your comments on gold and gold production; how it can be and is manipulated just as easily as fiat currency. (eg 1300's Florentine banking failure). I have been making these same arguments.
1: Gold and gold production can be and is manipulated just as easily as fiat currency. (eg 1300's Florentine banking failure).
2: Money and Credit need to be created by the US Treasury and administered locally based on projected production of commodities and not what is already warehoused.
Critics in the media are a dime-a-dozen, but it's rare to hear people talk about solutions. I wanted you send you my thoughts with regard to a US Constitutional-based banking and Monetary System called the "Safety Society System."
ENUMERATED PRIVILEGE
According to Article 1, Section 8 of the Constitution the Congress of the US is charged with the duty, privilege, and responsibility to "coin" or create the money as well as borrow and lend based on the credit of the United States. So, knowing that "coining" money is part of the duty of Congress, I wonder just how much our Senators and Representatives know about how our economy works. With the passage of the Federal Reserve Act in 1913, the Congress has abdicated this sacred responsibility to a privately owned central bank. Now, it's time for Congress to take this privilege back.
MONEY SUPPLY
The money supply is broken up into constituent parts (m0-m3). Many opponents of the Federal Reserve System advocate a return to a gold standard where circulating money (m0-m2) must be backed by gold and other precious metals. Unfortunately, as you are already well aware, the same "special interests" that own the banks own the domestic gold production with a DeBeer's-like Monopoly. But, in addition to backing circulating money with gold, a large portion of the money supply could be backed with land and and other "real" assets, commodities and durable goods. To protect gold production, Congress may need to regulate domestic gold production by exercizing anti-trust legislation in addition to giving back to the states Federal Lands and the corresponding mineral rights.
MONEY CREATION
Instead of allowing the mega-banks to create 90% of the money supply via Fractional Reserve Lending, why not allow the US Treasury create/coin all the money in the money supply? Why not cut out the super-mega, too-big-to-fail banks and allow non-profit local and banks direct access to US Treasury capital for the purpose of issuing simple-interest, fee-based loans for credit-worthy borrowers, for non-depreciating assets like land and real-estate, commodities and durrible goods? Under such an equitable, risk-free system; capital is no longer an artificial scarcity and the unelected, ultra-elite, banking corporatocracy who control huge capital pools no longer wield Machiavellian power over the rest of society.
SAFETY SOCIETY
Therefore, I propose the creation of local and state non-profit "community safety society" banks. These locally controlled and administered institutions would have direct access to US Treasury capital for the purpose of issuing simple-interest or fee-based loans for non-depreciating assets such as land, and real-estate purchases. These "safety societies" would generate revenue for the Federal Government and to cover overhead costs by charging a loan origination fee, as well as modest monthly loan servicing fees (simple interest).
Under the "Safety Society" System, any citizens who can demonstrate regular employment and income can qualify for a loan. Groups, co-ops, and corporations can qualify for business loans to purchase and develop land. Communities can pass referendums for a sales tax increase and qualify for larger loans based on the projected tax revenue.
Many monetary solutions which call for a commodity-backed currency require the commodities to be wearhoused before the money is created and the loan extended. In the Safety Society System, money is created and loans extended for projected growth and production.
AMORTIZATION AND INFLATION
The benefits of this system are that home and business owners will be able to build equity immediately unlike the FHA/HUD amortized loans we have now that collect interest up front. Amortized loans are a major driver of inflation because the only way to earn equity in the first 10 years is for the price of the home to go up. So, you have a 10-year-old home that is now $30,000 more expensive. Consequently, the amortized loan has been a major contributer to the devaluation of the dollar since 1934.
LOW RISK
I claim that such an equitable lending system would protect our "safety society" bank from risk by only issuing simple-interest/fee-based loans for non-depreciating assets. In the event that a borrower (citizen, co-op, corporation, community) were unable to make a payment, that missed payment would be deducted from the equity in the property. In this way, the loan would operate as an instant reverse mortgage at any time. Therefore, missed payments actually become extra revenue for the Federal Government Foreclosure would not occur until the borrower had lost all equity in the asset unlike today when a bank has the right to foreclose after 1-2 missed payment resulting in the borrower forfeiting any and all equity in the property.
REVENUE
Currently, the Federal Government only collects revenue (prime interest) on a fraction of the money created because the Federal Government only creates a fraction of the money supply in the system. Under the "Safety Society" system, all new money created would generate revenue. Under our current system, the FED generated less than 50 Billion dollars a year. The "Safety Society" collecting 1% fee on all new money creation could generate trillions via an equitable and voluntary taxation of the people.
INFLATION CONTROL
An important aspect of the "Safety Society" Banking System is its ability to control inflation but immediately respond for the need for liquidity in the economy. When capital is plentiful, and individuals can pay cash and not borrow, new money will not be needed and not created. On the other hand, when capital is in short supply, money can be created and loaned interest free as needed.
FULL RESERVE BANKING
The non-profit "Safety Society" Banking System would be a type of full reserve banking. The Bank would borrow from the US Treasury 100% of what it would lend. Accordingly, customer deposits would not be used to make new loans, but could be kept at the bank in electronic form until withdrawn making "Safety Societies" immune to failure following a "run" on the bank. Full Reserve "Safety Societies" would also be immune to stock market crashes and economic downturns that cause banking assets to lose value, leading to the loss of fractional reserves, which then leads to the inability of banks to make new loans or reimburse depositors.
VENTURE CAPITAL
Under our system, our "Safety Societies" would reduce but not eliminate the need for businesses and communities to raise money via the sale of stocks and bonds. Stock and Bond sales would be unnecessary because no-interest loans could be easily obtained. However, despite the cheapness of capital, the "Safety Society" would never be used to loan money for the purchase of stock, bonds, or other speculative financial instruments. "Safety Society" monies cannot be used to generate other money, but only can be used in exchange for "real" assets with non-depreciating value for at least the life of the loan. Stock sales may be brokered by other institutions and private individuals to raise capital for more speculative endeavors such as for the purposes of research and development and business creation. Government programs will also continue to assist with these capital needs as they do currently.
RETAINING VALUE
The goal in our full reserve "Safety Society" banking system is not to use capital to create capital. In our system, the US Treasury under the direction of the Congress creates money, so there is no need for money to create money. The main goal in our system is to maintain the value of the money that has already been created and implement an equatable economic and monetary system where money is backed by real assets, where the money supply can be expanded as needed; eliminating artificial scarcity, and where economic power is returned to individuals and communities, and not consolidated into the hands of an unelected money masters. Under the "Safety Society" Banking System, the people will no longer be economic sharecroppers to a small minority of elite capital controllers and special interests.
Best Regards,
David D Brosnahan MD, MS
dbrosnahan@gmail.com
Martinez, GA
I was listening to one of your recent interviews, and I was just amazed at your description of a monetary a banking solution. I have been thinking exactly along the same lines. I especially liked your comments on gold and gold production; how it can be and is manipulated just as easily as fiat currency. (eg 1300's Florentine banking failure). I have been making these same arguments.
1: Gold and gold production can be and is manipulated just as easily as fiat currency. (eg 1300's Florentine banking failure).
2: Money and Credit need to be created by the US Treasury and administered locally based on projected production of commodities and not what is already warehoused.
Critics in the media are a dime-a-dozen, but it's rare to hear people talk about solutions. I wanted you send you my thoughts with regard to a US Constitutional-based banking and Monetary System called the "Safety Society System."
ENUMERATED PRIVILEGE
According to Article 1, Section 8 of the Constitution the Congress of the US is charged with the duty, privilege, and responsibility to "coin" or create the money as well as borrow and lend based on the credit of the United States. So, knowing that "coining" money is part of the duty of Congress, I wonder just how much our Senators and Representatives know about how our economy works. With the passage of the Federal Reserve Act in 1913, the Congress has abdicated this sacred responsibility to a privately owned central bank. Now, it's time for Congress to take this privilege back.
MONEY SUPPLY
The money supply is broken up into constituent parts (m0-m3). Many opponents of the Federal Reserve System advocate a return to a gold standard where circulating money (m0-m2) must be backed by gold and other precious metals. Unfortunately, as you are already well aware, the same "special interests" that own the banks own the domestic gold production with a DeBeer's-like Monopoly. But, in addition to backing circulating money with gold, a large portion of the money supply could be backed with land and and other "real" assets, commodities and durable goods. To protect gold production, Congress may need to regulate domestic gold production by exercizing anti-trust legislation in addition to giving back to the states Federal Lands and the corresponding mineral rights.
MONEY CREATION
Instead of allowing the mega-banks to create 90% of the money supply via Fractional Reserve Lending, why not allow the US Treasury create/coin all the money in the money supply? Why not cut out the super-mega, too-big-to-fail banks and allow non-profit local and banks direct access to US Treasury capital for the purpose of issuing simple-interest, fee-based loans for credit-worthy borrowers, for non-depreciating assets like land and real-estate, commodities and durrible goods? Under such an equitable, risk-free system; capital is no longer an artificial scarcity and the unelected, ultra-elite, banking corporatocracy who control huge capital pools no longer wield Machiavellian power over the rest of society.
SAFETY SOCIETY
Therefore, I propose the creation of local and state non-profit "community safety society" banks. These locally controlled and administered institutions would have direct access to US Treasury capital for the purpose of issuing simple-interest or fee-based loans for non-depreciating assets such as land, and real-estate purchases. These "safety societies" would generate revenue for the Federal Government and to cover overhead costs by charging a loan origination fee, as well as modest monthly loan servicing fees (simple interest).
Under the "Safety Society" System, any citizens who can demonstrate regular employment and income can qualify for a loan. Groups, co-ops, and corporations can qualify for business loans to purchase and develop land. Communities can pass referendums for a sales tax increase and qualify for larger loans based on the projected tax revenue.
Many monetary solutions which call for a commodity-backed currency require the commodities to be wearhoused before the money is created and the loan extended. In the Safety Society System, money is created and loans extended for projected growth and production.
AMORTIZATION AND INFLATION
The benefits of this system are that home and business owners will be able to build equity immediately unlike the FHA/HUD amortized loans we have now that collect interest up front. Amortized loans are a major driver of inflation because the only way to earn equity in the first 10 years is for the price of the home to go up. So, you have a 10-year-old home that is now $30,000 more expensive. Consequently, the amortized loan has been a major contributer to the devaluation of the dollar since 1934.
LOW RISK
I claim that such an equitable lending system would protect our "safety society" bank from risk by only issuing simple-interest/fee-based loans for non-depreciating assets. In the event that a borrower (citizen, co-op, corporation, community) were unable to make a payment, that missed payment would be deducted from the equity in the property. In this way, the loan would operate as an instant reverse mortgage at any time. Therefore, missed payments actually become extra revenue for the Federal Government Foreclosure would not occur until the borrower had lost all equity in the asset unlike today when a bank has the right to foreclose after 1-2 missed payment resulting in the borrower forfeiting any and all equity in the property.
REVENUE
Currently, the Federal Government only collects revenue (prime interest) on a fraction of the money created because the Federal Government only creates a fraction of the money supply in the system. Under the "Safety Society" system, all new money created would generate revenue. Under our current system, the FED generated less than 50 Billion dollars a year. The "Safety Society" collecting 1% fee on all new money creation could generate trillions via an equitable and voluntary taxation of the people.
INFLATION CONTROL
An important aspect of the "Safety Society" Banking System is its ability to control inflation but immediately respond for the need for liquidity in the economy. When capital is plentiful, and individuals can pay cash and not borrow, new money will not be needed and not created. On the other hand, when capital is in short supply, money can be created and loaned interest free as needed.
FULL RESERVE BANKING
The non-profit "Safety Society" Banking System would be a type of full reserve banking. The Bank would borrow from the US Treasury 100% of what it would lend. Accordingly, customer deposits would not be used to make new loans, but could be kept at the bank in electronic form until withdrawn making "Safety Societies" immune to failure following a "run" on the bank. Full Reserve "Safety Societies" would also be immune to stock market crashes and economic downturns that cause banking assets to lose value, leading to the loss of fractional reserves, which then leads to the inability of banks to make new loans or reimburse depositors.
VENTURE CAPITAL
Under our system, our "Safety Societies" would reduce but not eliminate the need for businesses and communities to raise money via the sale of stocks and bonds. Stock and Bond sales would be unnecessary because no-interest loans could be easily obtained. However, despite the cheapness of capital, the "Safety Society" would never be used to loan money for the purchase of stock, bonds, or other speculative financial instruments. "Safety Society" monies cannot be used to generate other money, but only can be used in exchange for "real" assets with non-depreciating value for at least the life of the loan. Stock sales may be brokered by other institutions and private individuals to raise capital for more speculative endeavors such as for the purposes of research and development and business creation. Government programs will also continue to assist with these capital needs as they do currently.
RETAINING VALUE
The goal in our full reserve "Safety Society" banking system is not to use capital to create capital. In our system, the US Treasury under the direction of the Congress creates money, so there is no need for money to create money. The main goal in our system is to maintain the value of the money that has already been created and implement an equatable economic and monetary system where money is backed by real assets, where the money supply can be expanded as needed; eliminating artificial scarcity, and where economic power is returned to individuals and communities, and not consolidated into the hands of an unelected money masters. Under the "Safety Society" Banking System, the people will no longer be economic sharecroppers to a small minority of elite capital controllers and special interests.
Best Regards,
David D Brosnahan MD, MS
dbrosnahan@gmail.com
Martinez, GA
Friday, September 02, 2011
Capitalism = Capital Fascism
I am an Emergency Physician and not an Economist. However, the past couple of years I have been studying a bit of economic and banking physiology and pathophysiology. After some limited study, it is my informed opinion that the patient (US economy) is about to decompensate. However, it is not too late to save the patient. Just like the ED, if we were to unite together to institute some agressive banking and political interventions we could prevent a CODE BLUE.
It seems we have all been fed a false dichotomy of communism vs. capitalism. It is like noone can think of another way to do business. Our textbooks seem to expect us to pick our favorite flavor of tyranny.
Nazism= national fascism= ruling class makes the rules
Communism=social fascism=ruling class makes the rules
Capitalism=capital fascism=ruling class make the rules
With capitalism, we have decided that those with the money (special interests) should make all the rules. This is satan's version of the "golden rule". He who has the gold makes the rules. Reality is that Capitalism is a usury-based economic system where wealth called capital is made artifically scarce, and then is leveraged to enslave others. The money elite made up of a class of unelected capital holders use their economic power to make even more money and power.
Money elite in a usury-based capital fascist system influence politics and the economy by deciding what to invest in. Often, these decisions are made based on what will make them the most money but also on who and what they can best manipulate and control to maintain their power. Consequently, many decisions are often made to maintain their power and control which may be at odds with what is best for others and the nation as a while. The money elite ofter see themselves as too big and important to fail.
I am not saying money is bad. I am not saying simple interest is bad. What I am saying is that WE could fix this nation tomorrow by first individually repenting of our many sins (demoralization) and then applying a few constitution principles (ideological subversion).
1. Congress would create and issue all money which would stop the artificial scarcity of credit and control inflation.
2. Local Safety Society Banks would issue loans based on simple interest (loan origination fee and monthy service charge). Local banks would extend credit to worthy individuals, institutions, corporations, and governments ( the more people in a government or institution, the larger the loan they would qualify for)
3. Protect and build domestic infrastructure, manufacturing, and resources.
4. The money created by congress and lent by local banks would be backed by the "real" assets the money was lent to create or purchase. Only "real" assets could be deemed credit worthy.
5. Banks would opperate on full reserves and never lend deposited money. All money lent by the Safety Society would be created and issued by Congress.
6. Other kinds of private finacial institutions could deal in venture capital and other speculative investments. Safety Societies would not deal in speculative investments.
[This gets rid of fractional reserve banking, the business cycle, prevents banking failures, and controls inflation]
Capitalism or Capital Fascism claims an ideological struggle against Big Government making the rules. It claims that instead of big goverment making the rules we should have big business and big capital holders making the rules (special interest). This is part of the false dichotomy. Those involved with this "war on big government" propagate the lie that we should just "let the market work". We all should know how much market manipulation there is and nearly every aspect of the market is artificial.
Letting the markets work would be to allow the buyer and producer to negotiate a price without any intermediary or external interference e.g farmers market. This may not be efficient, but it is free.
War on Poverty => Big Gov.
War on Drugs => Big Gov.
War on Terror => Big Gov.
Capitalism = War on Big Goverment => Big Business
What we need in reality is to tear down the tower of Babel with smaller government and smaller business and smaller banks, etc.
I am a supporter of a Free Market Economy. I am not a supporter of Capitalism. Capitalism does not equal Free Market. There is no such thing as "free market capitalism". Capitalism is an economy based on the aquisition of capital where money aquired by individuals is leveraged to gain more capital and power in the system. Consequently, the whole basis of capitalism is based on inequality. The whole basis says that we would rather have people with the "capital" make the rules than have government make the rules.
If you are wealthy and have capital, then you have considerable unelected machiavellian power in our economy to decide who and what you will invest in. Capitalism is unequal by definition. The system benefits certain few individuals who constitute and unelected olygarchy.
Horatio Alger "rags to riches" myths propagate the lie that anyone who works hard enough can become one of the elite, and that those people up there earned the right to rule over us. The system benifits from casino psychology where we support an unfair system because maybe, just maybe our number will come up and we will become one of the ultra-rich elite.
In reality, the system is a good-ol-boys network where inventors and scientists and entrapeuners hardly ever profit from their discoveries. Many discoveries are suppressed, inventions are shelved, and local companies are absorbed by mega-multinationals.
It seems we have all been fed a false dichotomy of communism vs. capitalism. It is like noone can think of another way to do business. Our textbooks seem to expect us to pick our favorite flavor of tyranny.
Nazism= national fascism= ruling class makes the rules
Communism=social fascism=ruling class makes the rules
Capitalism=capital fascism=ruling class make the rules
With capitalism, we have decided that those with the money (special interests) should make all the rules. This is satan's version of the "golden rule". He who has the gold makes the rules. Reality is that Capitalism is a usury-based economic system where wealth called capital is made artifically scarce, and then is leveraged to enslave others. The money elite made up of a class of unelected capital holders use their economic power to make even more money and power.
Money elite in a usury-based capital fascist system influence politics and the economy by deciding what to invest in. Often, these decisions are made based on what will make them the most money but also on who and what they can best manipulate and control to maintain their power. Consequently, many decisions are often made to maintain their power and control which may be at odds with what is best for others and the nation as a while. The money elite ofter see themselves as too big and important to fail.
I am not saying money is bad. I am not saying simple interest is bad. What I am saying is that WE could fix this nation tomorrow by first individually repenting of our many sins (demoralization) and then applying a few constitution principles (ideological subversion).
1. Congress would create and issue all money which would stop the artificial scarcity of credit and control inflation.
2. Local Safety Society Banks would issue loans based on simple interest (loan origination fee and monthy service charge). Local banks would extend credit to worthy individuals, institutions, corporations, and governments ( the more people in a government or institution, the larger the loan they would qualify for)
3. Protect and build domestic infrastructure, manufacturing, and resources.
4. The money created by congress and lent by local banks would be backed by the "real" assets the money was lent to create or purchase. Only "real" assets could be deemed credit worthy.
5. Banks would opperate on full reserves and never lend deposited money. All money lent by the Safety Society would be created and issued by Congress.
6. Other kinds of private finacial institutions could deal in venture capital and other speculative investments. Safety Societies would not deal in speculative investments.
[This gets rid of fractional reserve banking, the business cycle, prevents banking failures, and controls inflation]
Capitalism or Capital Fascism claims an ideological struggle against Big Government making the rules. It claims that instead of big goverment making the rules we should have big business and big capital holders making the rules (special interest). This is part of the false dichotomy. Those involved with this "war on big government" propagate the lie that we should just "let the market work". We all should know how much market manipulation there is and nearly every aspect of the market is artificial.
Letting the markets work would be to allow the buyer and producer to negotiate a price without any intermediary or external interference e.g farmers market. This may not be efficient, but it is free.
War on Poverty => Big Gov.
War on Drugs => Big Gov.
War on Terror => Big Gov.
Capitalism = War on Big Goverment => Big Business
What we need in reality is to tear down the tower of Babel with smaller government and smaller business and smaller banks, etc.
I am a supporter of a Free Market Economy. I am not a supporter of Capitalism. Capitalism does not equal Free Market. There is no such thing as "free market capitalism". Capitalism is an economy based on the aquisition of capital where money aquired by individuals is leveraged to gain more capital and power in the system. Consequently, the whole basis of capitalism is based on inequality. The whole basis says that we would rather have people with the "capital" make the rules than have government make the rules.
If you are wealthy and have capital, then you have considerable unelected machiavellian power in our economy to decide who and what you will invest in. Capitalism is unequal by definition. The system benefits certain few individuals who constitute and unelected olygarchy.
Horatio Alger "rags to riches" myths propagate the lie that anyone who works hard enough can become one of the elite, and that those people up there earned the right to rule over us. The system benifits from casino psychology where we support an unfair system because maybe, just maybe our number will come up and we will become one of the ultra-rich elite.
In reality, the system is a good-ol-boys network where inventors and scientists and entrapeuners hardly ever profit from their discoveries. Many discoveries are suppressed, inventions are shelved, and local companies are absorbed by mega-multinationals.
Friday, April 22, 2011
1340's Lombard Banking Failure
Deut 23:19-20 Thou shalt not lend upon usury to thy brother; usury of money, usury of victuals, usury of any thing that is lent upon usury: Unto a stranger thou mayest lend upon usury; but unto thy brother thou shalt not lend upon usury:
The Bible forbids lending anything to a countryman or fellow citizen upon usury. The Catholic Church interpreted usury as referring to interest. Therefore, any Christian was forbidden from collecting any interest whatsoever on the loan of money, food or substance to another. I believe equating usury with simple interest is an unfortunate misinterpretation of scripture. The reality is that 1. money as a medium of exchange is required for city living. 2. business and agricultural development relies upon credit for liquidity. 3. businesses that specialize in extending credit must be allowed to cover their costs. 4. forbidding simple interest (loan origination fee or monthly service charges) would starve an economy of credit and liquidity.
The consequence of the Catholic Church forbidding the collection of simple interest together with usury meant that honest Christians could not afford to involve themselves in the business of banking and credit. On the other hand, Jews were not under the same constraints. Jews also observed Deut 23, but because most of their business was with Christians, they interpreted "brother" to mean a fellow Jew. Christians were "gentiles","heathen" and "strangers." Therefore, there was no prohibition in the Bible for collecting usury from them.
Accordingly, most early bankers were Jewish. The first midevil banks were called Lombards, which were simply pawn shops. People would take furniture, plow, land deeds, or whatever they had of value to the Lombard and sell it. If they later wanted to redeem the pawned item, then they had to repurchase the item from the Lombard at a higher price. In reality, the pawned item was used as collateral for a loan which was repaid with considerable interest attached.
Because of the need for credit, Lombards became an instant success, and the owners became instantly wealthy. Before long, Lombards began to engage in more traditional banking. Citizens would deposit gold, diamonds, and other precious things at their local Lombard. However, in France, about the time of the First Crusade in 1099, the Jewish Lombards were thrown out. In their place, the Catholic Church established a system of Templar Houses which were run by the Order of the Knights Templar.
Templars were a monastic order with a duty to redeem Jerusalem from Muslim occupation, as well as protect pilgrims who wished to visit the Holy Land. Because protecting the pilgrims valuables from robbers was very difficult, Pilgrims would deposit deeds, gold and valuables at their local Templar House, and receive in return a ciphered document recording the value of the deposited items. The pilgrim could then make withdrawals at any Templar House along the pilgrim routes in Europe and Palestine.
It was at this time that Fractional Reserve Lending begun. Templar Houses and Lombards began making loans by issuing gold certificates which could be redeemed for actual gold in deposit at the bank. Bankers learned quickly that they could issue many more gold certificates than the actual gold they had on hand, and collect much more in interest and usury that way.
Templar Houses in France and Lombards in Italy began making sizable loans to local and national governments and began to weld significant political influence and power. While the local bank operators were often Jewish, the mid-level bookkeepers needed to be literate. Therefore, in a time when literacy was uncommon, the Jesuit Order of the Catholic Church controlled most of the Lombard and Templar bookkeeping. These midevil banks would broker deals with local and state governments to supply credit in exchange for control over local mining, mineral rights, agricultural and industrial production. Local banks slowly privatized most government, industry and agriculture in an area. Banks would often even privatize the collection of taxes as part of the "conditionalities" associated with the loan repayment instead of collecting usury.
Like the Teutonic Knights establishment of Prussia, the Knights Templar wanted to establish a similar Independent state in France or take over France entirely from King Phillip IV. To aid this, the Templars came up with the myth that they the order had excavated and discovered a repository of Jewish genealogy under the Temple Mount in Jerusalem. According to geneological records, the Templars claimed that Jesus of Nazareth was married to Mary Magdalene and had born offspring. The Order had identified the descendance of this Royal Blood Line or "Sangre Real" and intermarried them into a rival French Dynastic Family, the Merovingians. The Templars hoped that King Phillip's Divine Rite, wouldn't stand up to the literal blood of Christ Christ.
King Phillip didn't take this threat to his power lying down. King Phillip initally requested that the Pope disband the order upon which the Pope responded, "I'm the Pope and you can't tell me what to do, and beside, those guys are making me a lot of money." In response to that, King Phillip kidnapped, imprisoned, murdered several Popes and then had his childhood friend Clement V installed as Pope. Then on Fri. Oct 13th, 1307, he arrested many Templars, tortured them, and used their confessions to convince Clement V to disband the Order in 1312. After the Order of Knights Templar was disbanded, King Phillip IV seized all Templar assets in France.
Surviving Templars in France fled to Scotland, Germany, and Italy. The Pope then transferred Templar assets outside of France to a sister order, the Order of St. John Hospitaller or the Order of Cyprus, Crete, Rhodes, and Malta. Banks in Italy continued to flourish, being directed by what is called the Venetian Black Nobility or "Neri Guelphs". The Hospitallers controlled shipping in the Mediterranean from ports in Cyprus, Crete, Rhodes, and Malta and maintained a trade monopoly not unlike the Ancient Phoenicians, the East India Trade Company, or Walmart. In those days, trade monopolies were maintained and enforced by militarism and piracy.
Midevil banks traded many commodities, but the most important was wool, and woolen cloth. Fine and long woolen tunic, robes, and capes were a sign of status in medieval Europe. England served as a prime location for raising sheep which became increasing controlled by Italian banks. However, King Edward III (Misser Edward) revolted against the Bardi and Peruzzi banks, by defaulting on their loans in 1342, and boycotting wool in favor of cotton.
However, the real shock to the Florence Banks and the economy came as a result of the operations of the Venetian Banks. Venetian Banks in league with the Mongol Khans, looted China of all her gold and switched China from a gold to a silver standard. Venice shipped as much silver over to Europe as possible, while introducing gold into Europe and converting Europe's silver standard to gold. By shipping in gold from China, and exporting silver, gold value fell, the Florence banks went bust, and the European economy feel into a deep depression being starved of liquidity and credit and beginning the 100-years war between England and France.
The Mongol-Khans then swept through Eastern Europe spreading Bubonic and Pneumonic Plague beginning in 1347. War and disease reduced the population in Europe by half. During this time in Italy, the Renaissance was supported by the Guelphic deMedici banking family who were also of the Order of Malta. Finally, the 100-years war ended with the Fall of Constantinople 1453.
The Bible forbids lending anything to a countryman or fellow citizen upon usury. The Catholic Church interpreted usury as referring to interest. Therefore, any Christian was forbidden from collecting any interest whatsoever on the loan of money, food or substance to another. I believe equating usury with simple interest is an unfortunate misinterpretation of scripture. The reality is that 1. money as a medium of exchange is required for city living. 2. business and agricultural development relies upon credit for liquidity. 3. businesses that specialize in extending credit must be allowed to cover their costs. 4. forbidding simple interest (loan origination fee or monthly service charges) would starve an economy of credit and liquidity.
The consequence of the Catholic Church forbidding the collection of simple interest together with usury meant that honest Christians could not afford to involve themselves in the business of banking and credit. On the other hand, Jews were not under the same constraints. Jews also observed Deut 23, but because most of their business was with Christians, they interpreted "brother" to mean a fellow Jew. Christians were "gentiles","heathen" and "strangers." Therefore, there was no prohibition in the Bible for collecting usury from them.
Accordingly, most early bankers were Jewish. The first midevil banks were called Lombards, which were simply pawn shops. People would take furniture, plow, land deeds, or whatever they had of value to the Lombard and sell it. If they later wanted to redeem the pawned item, then they had to repurchase the item from the Lombard at a higher price. In reality, the pawned item was used as collateral for a loan which was repaid with considerable interest attached.
Because of the need for credit, Lombards became an instant success, and the owners became instantly wealthy. Before long, Lombards began to engage in more traditional banking. Citizens would deposit gold, diamonds, and other precious things at their local Lombard. However, in France, about the time of the First Crusade in 1099, the Jewish Lombards were thrown out. In their place, the Catholic Church established a system of Templar Houses which were run by the Order of the Knights Templar.
Templars were a monastic order with a duty to redeem Jerusalem from Muslim occupation, as well as protect pilgrims who wished to visit the Holy Land. Because protecting the pilgrims valuables from robbers was very difficult, Pilgrims would deposit deeds, gold and valuables at their local Templar House, and receive in return a ciphered document recording the value of the deposited items. The pilgrim could then make withdrawals at any Templar House along the pilgrim routes in Europe and Palestine.
It was at this time that Fractional Reserve Lending begun. Templar Houses and Lombards began making loans by issuing gold certificates which could be redeemed for actual gold in deposit at the bank. Bankers learned quickly that they could issue many more gold certificates than the actual gold they had on hand, and collect much more in interest and usury that way.
Templar Houses in France and Lombards in Italy began making sizable loans to local and national governments and began to weld significant political influence and power. While the local bank operators were often Jewish, the mid-level bookkeepers needed to be literate. Therefore, in a time when literacy was uncommon, the Jesuit Order of the Catholic Church controlled most of the Lombard and Templar bookkeeping. These midevil banks would broker deals with local and state governments to supply credit in exchange for control over local mining, mineral rights, agricultural and industrial production. Local banks slowly privatized most government, industry and agriculture in an area. Banks would often even privatize the collection of taxes as part of the "conditionalities" associated with the loan repayment instead of collecting usury.
Like the Teutonic Knights establishment of Prussia, the Knights Templar wanted to establish a similar Independent state in France or take over France entirely from King Phillip IV. To aid this, the Templars came up with the myth that they the order had excavated and discovered a repository of Jewish genealogy under the Temple Mount in Jerusalem. According to geneological records, the Templars claimed that Jesus of Nazareth was married to Mary Magdalene and had born offspring. The Order had identified the descendance of this Royal Blood Line or "Sangre Real" and intermarried them into a rival French Dynastic Family, the Merovingians. The Templars hoped that King Phillip's Divine Rite, wouldn't stand up to the literal blood of Christ Christ.
King Phillip didn't take this threat to his power lying down. King Phillip initally requested that the Pope disband the order upon which the Pope responded, "I'm the Pope and you can't tell me what to do, and beside, those guys are making me a lot of money." In response to that, King Phillip kidnapped, imprisoned, murdered several Popes and then had his childhood friend Clement V installed as Pope. Then on Fri. Oct 13th, 1307, he arrested many Templars, tortured them, and used their confessions to convince Clement V to disband the Order in 1312. After the Order of Knights Templar was disbanded, King Phillip IV seized all Templar assets in France.
Surviving Templars in France fled to Scotland, Germany, and Italy. The Pope then transferred Templar assets outside of France to a sister order, the Order of St. John Hospitaller or the Order of Cyprus, Crete, Rhodes, and Malta. Banks in Italy continued to flourish, being directed by what is called the Venetian Black Nobility or "Neri Guelphs". The Hospitallers controlled shipping in the Mediterranean from ports in Cyprus, Crete, Rhodes, and Malta and maintained a trade monopoly not unlike the Ancient Phoenicians, the East India Trade Company, or Walmart. In those days, trade monopolies were maintained and enforced by militarism and piracy.
Midevil banks traded many commodities, but the most important was wool, and woolen cloth. Fine and long woolen tunic, robes, and capes were a sign of status in medieval Europe. England served as a prime location for raising sheep which became increasing controlled by Italian banks. However, King Edward III (Misser Edward) revolted against the Bardi and Peruzzi banks, by defaulting on their loans in 1342, and boycotting wool in favor of cotton.
However, the real shock to the Florence Banks and the economy came as a result of the operations of the Venetian Banks. Venetian Banks in league with the Mongol Khans, looted China of all her gold and switched China from a gold to a silver standard. Venice shipped as much silver over to Europe as possible, while introducing gold into Europe and converting Europe's silver standard to gold. By shipping in gold from China, and exporting silver, gold value fell, the Florence banks went bust, and the European economy feel into a deep depression being starved of liquidity and credit and beginning the 100-years war between England and France.
The Mongol-Khans then swept through Eastern Europe spreading Bubonic and Pneumonic Plague beginning in 1347. War and disease reduced the population in Europe by half. During this time in Italy, the Renaissance was supported by the Guelphic deMedici banking family who were also of the Order of Malta. Finally, the 100-years war ended with the Fall of Constantinople 1453.
Subscribe to:
Posts (Atom)
