Re-financing Our Government
Robert H. Williams
Assets = Liabilities + Owners Equity. I begin with this simple equation. Its simplicity belies its complexity and importance in our world today. It is arguably the most powerful equation in the world. Even E = MC2 pales in comparison to the power held by the basic accounting equation. From the child operated lemonade stand to the office of a multinational corporation, this basic economic equation is the measure of success or failure in the world today. Its application in all of humankinds endeavors determines the economic well being of every human on the planet in some manner. It is the heart of our capitalist economic system. Our democratic capitalistic system of governing a society has proven itself to be the most resilient, reliable and fairest form of government on the planet. It has provided its citizens with the highest standard of living and is responsible for the fastest technological growth in history. Even those few communist states left are incorporating the accounting equation into their societies because it works. It works to reward individual and collective effort in a more fair and equitable manner than any other method yet devised.
Yet, we do not model our government itself upon this equation. I ask, why not? It is the heart of our society. It is the foundation upon which we determine the success and taxability of individuals and organizations to support our government. It has proven its success through time, yet is not used by the very government that espouses its use and preaches of its merits. I ask again, why not?
There are readers who will say that our government does base its accounting on this basic accounting equation. I ask them to show me where in the federal budget is the value for owners equity of each citizen, for the asset of good will, for the asset of our military might which insures our peace, for the asset of our standing as world leader in many areas, and for the value that others place on America that they would risk their lives to get into our country. These are just a few of the assets America has that is not valued in our budget process.
Every company has a value for good will and a value for all equipment and ideological resources. Putting a value to ideas and concepts is not new. Copyrights and patents have been around for quite a while. Where is Americas good will given a value in our budget? Where is Americas role as peacemaker of the world given a value? How much value do the citizens of Europe (W.W.I & W.W.II), South Korea and Kuwait owe the United States for restoring their freedom and peace? Where in the budget process is that value tabulated? Not just the costs of people, machines, fuel and ammunition; but the value of freedom itself and the good will we earned in freeing these people. Ask the people of these countries if they value that freedom and the answer will be a resounding yes to the question. Why do we not value it among ourselves and in our budget?
I believe we should begin setting and tracking the value of Americas good will among the world and with her own citizens. We should increase owners equity for every American born by the potential that person gives to the society at large. We should give appreciable value to assets that continue to produce results for society. For every Space Shuttle built and operating, the ideological results over the lifetime of the vehicle outweigh its cost. For every F-117A Stealth Fighter there is a huge ideological value increase in world peace ( just ask Saddam!). Yet as Americans, we look at these two vehicles as contributing to our national debt! We view them as drains on our society for taking funds away from other areas of human service rather than the value producing assets that they really are. Our national budget spent money on these and similar vehicles. Money that we supposedly did not have. We, and our children, now owe that money spent producing these things. Who do we really owe the money to? The answer is that we owe ourselves. Yet in owing ourselves, we refuse to incorporate the intrinsic value of the items we purchased on credit. We are like a boy borrowing money from Dad to buy a lawnmower to earn money doing lawns, only to mow all our neighbors lawns for free.
I submit that our government and our society is the richest on the planet. We need to re-value our way of paying for government. We need to incorporate the value of our ideology, our democratic form of government, our national treasures, our role as peacemaker and world leader, our role in space leadership and our role as protector of our own citizens by valuing each one with a certain amount of owners equity. If we do this, I believe we will see that we have a huge, huge asset and equity resource abundance; and not a huge national debt that we owe ourselves. We will see that we have already earned the equity and funds needed for all the future growth we wish. We will see that if we spend money wisely, the money we spend will produce more growth and wealth in new areas and provide new opportunities for asset and equity growth. We will see that our government can operate at a profit!
I am not the first to propose that our government operate as a business, and I hope that I am not the last. The accounting equation, which is the benchmark of success of all businesses, offers the best, and proven, way for us to pay for government. We must use all the resources of the accounting equation, and not just portions of it. We must evaluate and track the intangible assets our country has and produces every day.
For this system to work I believe that money itself must be removed from the commodity marketplace. With the World Bank system, there exists a mechanism whereby all countries can evaluate the comparable net worth of each country against each other and thereby determine exchange rates. We must allow the accountants of government to set the value of money, not speculators. As each country needs more cash, funds would be issued from the World Bank if that country had sufficient assets. The country could earn funds performing good will deeds for other countries, or even for their own citizens. The very concept of money is a human invention for a more convenient method of exchange of assets among ourselves. It is easier to sell my vegetables for coin and then purchase a wagon, than it is to trade the vegetables for the wagon; especially if the wagon maker already has enough vegetables. With the World Bank setting the monetary value of a unit, all other countries money can be valued against that unit. Revaluation of the ratio could take place periodically to reflect that countrys behavior and net worth in relationship to its peers.
An idea of this magnitude will of course be fraught with difficulties, dissension and conflict. It does not mean the idea itself is unworkable or unworthy. Every goal worth achieving is difficult. Some say that the more important the goal, the more difficult it will be to achieve it. I believe that to be the case, but the worth of the final product is worth anything we must go through to get there. If these ideas are implemented, we will have a net worth surplus that will allow humankind to grow into the 21st Century at an astounding rate that will create the opportunities for more growth beyond anything we can now imagine. We would be able to just do the things we wish. Build Space Station Freedom and it becomes an appreciable asset producing wealth as a stepping stage to the Moon, Mars and beyond. It will have a value that will continue to produce wealth long after it is completed! If we turn only 25% of our military-industrial complex into mass producing space machines of various kinds, we will see an ever increasing return on our investments. If we build the trail to the stars, our people will produce unimaginable wealth as they set out and colonize the heavens. Again the nay-sayers will say how do we pay for all this ! ! ? ? I say they miss the entire point of this paper. By the mere fact of being able to currently do all this, we have already paid for the continuation of the effort. We have already earned the assets needed to expand and continue. As these new assets are converted, they in turn earn more assets.
As we place in service machines or human service organizations, these earn assets in their operation. We currently do NOT track these assets in our budget process. Everyone says Social Security is going under. Where is the intrinsic value of the system itself calculated and considered? Where is the asset of peace of mind knowing that a system exits for taking care of us when we cannot? Even human service agencies have a asset of good will that is not taken into the accounting equation. If it were, then things would balance. There would be a more realistic evaluation of its true worth to the society.
I do not know all the answers, nor all the questions yet to be raised; but I do know that full implementation of the accounting equation is mankinds best hope for future growth and stability. It is a proven concept that would solve a multitude of our problems by allowing funds to be spent on solving them. By actually solving the problems, those funds would earn assets that could be converted to more funds via the World Bank. We could earn profit by solving problems, taking care of our people, and growing into the future as a planet wide society.
We are already linked across the globe in many more ways than the average person realizes. Universal acceptance of the accounting equation would allow governments to provide for their citizens needs without undue and unfair tax burdens. If taxes were limited to operational costs of government, not capital expenditures, then taxes would more fairly reflect what each citizen uses of its government services. If the government properly takes care of its citizens and allows growth of itself and its citizens, then it will earn more, and be able to do more for itself and its citizens.
I ask my government, The United States of America, to again take the lead in world affairs. Embrace for itself the concept that is at the heart of its own society. Take the necessary steps in our own budget process needed to fully implement the accounting equation. Tell the world that we are freezing monetary exchange rates at some level, and then remove our money from the commodity marketplace. We will determine the value of our own money, not speculators and gamblers. We took ourselves off the gold standard, we can do this too. I ask that you do not undervalue the many assets America has that are not currently tracked within the budgetary process.
Make sure that every American born has a value in their ownership of the country. Make sure that America is rewarded for the role of world leader in the many areas that we are. Make sure that we are given due credit for saving the many different peoples of the world from war and starvation. Make sure our country is given credit for being the most desirable marketplace in the world. Make sure that our children will be able to travel into the heavens as easily as going across town. Make sure that we will always have the means to produce more resources for future expansion without over-taxing the citizens that future expansion is meant to serve. Make sure that our future resources will produce more growth and benefits to the citizens of America and planet Earth for all time.
Assets = Liability + Owners Equity. I hope there will be much debate over the ideas expressed in this essay. I hope for the future of humankind that the equation will be fully applied to all governments as it has been so successfully applied in businesses across the globe. For in incorporating this proven growth equation into the running of human affairs, humans will find that they have already earned the resources needed to expand into the future with confidence, hope and wonder. May the future bring profit and prosperity to one and all.
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I begin by addressing the concerns pointed out to me by various people after they have read and considered what you have just read in the introduction. Dr. Withington, my Macro-Economics professor from PSUC was first concerned about giving politicians the power to arbitrarily set the good-will values of Americas assets. My answer is that in reality they already do. By using taxes, law and regulatory mechanisms, their very function acts upon all our nations resources in some manner. I only propose that they be given a much better, more historically proven and more widely accepted mechanism to use along with the present system, even as it is being re-designed. Capitalism is based on the financial profit model of economic activity. We must give our government the competitive edge it needs to efficiently run a society. For that is the job description of government. How much has our governmental administrators and political leaders participated in setting the costs, and therefore some of the value of our national assets? They have been doing it before we became a nation, as we grew and crawled onto the world stage, and now as we stand lead character in the play of life on Planet Earth. Giving government the full financial tools available under capitalism will finally give everyone a handle on the numbers, and easily force a balanced budget by the very nature of the capitalistic double- entry accounting system. By explaining the budget in terms of incoming and outgoing funds only, we are doing a disservice to the effort, growth, products and quality-of enhancement that the incoming-outgoing created; and under-valuing the human resources it took to create that growth. If we explained the government increased the share value of each American citizen, we could show that government has been run efficiently enough to directly benefit the citizen. That value is considered important enough for government as a stockholders share value is important to the CEOs of the Worlds businesses. Its time we finance society from an additional prospective besides taxation. We must increase the citizens value beyond a mere taxing source of unlimited funds. A proven capitalistic point of view opens all societys horizons. Its not impossible, unsound, or unworkable; its merely difficult.
I harp again on the same point that as a citizen, I am a stakeholder in Government Inc. There are many current successful examples in turning public operations such as schools, prisons and other facilities over to private enterprise. Even the U.S. Post Office is funded separately from the regular budget process in that it must raise its own funds for all its operations. It receives not one single tax dollar from the Federal Government, yet must give the Government free service! Isnt that a load?? (Check this fact out. 4-21-95)/
The government values its citizens monetarily only for its ability to squeeze tax revenue from them. There is no value given to the intrinsic value the government itself receives for its existence because of its citizens. Besides taxation, the government must have citizens to govern. That value to government must also be monetarily considered in the budgetary process. As a citizen of the United States of America I feel I am worth more to my country, my culture, my community and my family than what I will pay the government in taxes in my lifetime. This value is a human resource capital that can be financially accessed and made manifest by an enlightened, empowered, and informed government. As a citizen I should be valued more than a taxable and expendable slave. I should be able to trust my government to take good care of me as its citizen and stakeholder. Should I be merely thankful that my Presidents troops arent running wild through the streets as happens in other countries? Or should I expect that the richest, most powerful, most economically desirable social system (based on capitalism!) and its democratically elected government should be able to find a way to finance building and maintaining this social system for the long haul, and to constantly improve upon the lives of its stakeholders. Thank the voters for their taxes by giving their lives economic value beyond the taxes they pay. Use of the flat tax rate is probably the best idea to come out of the taxing debate going on, and on,...
Consider this scenario by taking for fact that all currency exchange rates are maintained by the World Bank based on various factors such as net worth, gross domestic product, government expenditures, net export ratio, share price of its citizens stakeholder value, gross profit or loss from governmental operations, International good- will value from contribution of resources to United Nations undertakings or operations, amount of cash reserves vs. demand deposit ratios at a national level, and probably other factors that the experts will think are relevant. Exchange rates would no longer be set by speculators and high-stake gamblers with the ebb and flow of the Worlds economy. Given this fact, poor countries could help out with UN missions, such as in Haiti, Yugoslavia, Kuwait, and many other areas is the world. They would be able to borrow or finance economic development and creation of jobs and supply of goods and services for their population. It would become economically beneficial for the government to try and keep its citizens within its borders to increase their stakeholder value, this in-turn may help increase their exchange rate within the World Bank and increase its economic status among the nations of the World, and increase the standard of living for its citizens. We must as a planet make it easier and more economically beneficial for efficient governments to increase the standard of living for its citizens. If the United States could lead the way in this economic revolution of financing governmental operations, the amount of our exports and domestic job creation would increase greatly.
And we would have rampant inflation! Thats another thing I can hear coming from economic theorists. I would then agree that if the supply curve remains a sharply up-sloping curve, then as demand rose with the extra income, the price level would also rise. The economic theorists fail to consider that as labor rose, the supply curve would sharply flatten out to a near horizontal position because we would have the capability to produce as much as we wished in the short term. In the long term, we would ultimately use all of planet Earths resources and the economic supply curve would then return to an upward slopping curve in the face of diminishing supplies. But if we used the increased supply capacity to create and produce capital goods and the infrastructure to go beyond Earths resources, then the supply curve would remain near horizontal in long-term as well. By using full advantage of all the technological data, capabilities and resources, we could make this Planet a much better place for everyone, if we only had the money to do it. Long-term financing based on all of a countrys assets, including its population, is using a proven capitalistic accounting system to fairly assess and govern a society and improve the standard of living for that countrys citizens.
By using the United States Federal Reserve system of controlling money supply and price, a fair, equitable, manageable and flexible means of foreign exchange of currencies between governments and businesses doing the work of International governing and commerce, is possible through the World Banking system. It will not be easy, it will be controversial, it will be fraught with a multitude of problems and squabbles over arbitrary values, just as GATT and NAFTA had its proponents and detractors, so too will this idea (I hope!). And as GATT and NAFTA are now law, I pray this idea will come into being and help shepherd humans into space on a massive scale as the whole planets standard of living, educational and training levels are increased, expanded and fulfilled.
Again, the more difficult the endeavor, the higher the rewards when accomplished!
Inflation could also be controlled by using the reserve requirements that our own Fed uses, along with other mechanisms such as interest rates to Central Banks, inter-bank loans and other devices that will be inherent in the new system. As this stable system of economic reward is adapted, multi-national corporations could more quickly and easily alleviate the supply problems that cause the high inflation as demand rises, but where supplies are short, that we have seen recently in many countries.
Consider, using standard economic graph models, if we are able to provide unlimited supply with increasing demand, the long-term supply curve could actually begin slopping downward to the right and deflation could result.
Consider an efficiently run government able to operate at a net profit from overall operations World-wide. Their citizens all have economically productive jobs that enhance their societys standard of living and they are also able to purchase nearly anything they wish, within reason, without fear of inflation, knowing their total taxes will be 17% of their wages, and know that their ability to find a job, or retrained for another is nearly guaranteed. They know that their familys health will be looked after, their streets, homes and loved ones will be safe. Is Utopia impossible, or is it within reach by merely making a financial leap of faith to a proven system of accounting for the work of life.
Will all this mean the creation of a new World Dollar (Yen, Mark, Pound, etc.)? Maybe, if that is the best way to solve exchange controversies. How much do we value a life in the United States to a life in Haiti or Cuba? Averaging out insurance policy values is unrealistic for small countries where few citizens have such things. The problems and details will be many, but workable. We must undertake this task tenaciously and never let go of the goal. That final and ultimate goal is to find a way to finance government in a capitalistic manner that does not depend solely upon taxation of its citizens, but includes the value created by the very nature of its efficient operation. The financial and governmental bureaucratic bodies that exist today can find a way to do this. It is do-able and beneficial to all stakeholders. I urge action and dialogue on this ASAP!
As a society, the average person seldom thinks that money is money, only because everyone agrees that it is. If we all stopped believing in the system, it would collapse. Money is money and is used as a means of exchange because we all agree, as a species, that this way is better than the pre-historic barter system of survival. But, as a species, we currently base the value of our moneys on the goods and services we produce and consume. We are just beginning to realize that it is this vast and ever increasing production and consumption which is polluting and poisoning us and our planet. How much will all our collective currencies be worth as we choke in polluted air, drink the poisons in our waters, eat the mercury and lead in our fish, watch the acid rain watering our tomatoes, and feel the suns increased radiation from a depleted ozone layer? How much are we going to "charge" our grandchildren for the world we pass on to them?
Sometimes I really believe that as a species, we need a good slap up-the-side-of-the-head to awaken us to reality. I remember that being done to me when I needed it as a wayward youngster. I thank my mother, and especially my father, for that stern treatment when my own behavior was a danger to myself, or others. The more one watches the news on a daily basis, and remembers; the more one realizes that humanity is in tough shape lately. We find ourselves on the verge of such wondrous possibilities that even science fiction writers could not even imagine; yet we do not stand on the edge in peace and prudence, but in disharmony and discord. And I find that the ultimate reason, is the false valuation of the almighty buck! The dollar, franc, yen, rubble or whatever. Somewhere along the line in the invention of Capitalism, a product became more important than a person. A product is not useful or productive, if not used, appreciated, or benefiting a human person. A can opener is just an odd shaped piece of metal, unless it is used by a person to accomplish its purpose. The value of the person in opening the can is not considered in determining the value of the can opener. Seems like convoluted reasoning, I know; but, think. Make the mental switch in your head that says: A tool, product or service has absolutely no value unless it benefits another person, and that other person is an integral part that is needed for the definition of the product, tool or service.
Now, given the hypothetical, and common sense, premise that the person who benefits from a product is necessary in determining the value of that product; it is logical to conclude that the value of our currencies must also take this valuation into consideration also. For given the fact that currency values are based upon goods and services produced by a country, the people who are needed to consume those goods and services have a value in the process that is not presently considered. Some economists are going to argue that labor by people is included in GNP, and thus people are considered. Since not everyone works, there are consumers who are unemployed, those receiving government transfers, the very young and very old, and even the potential consumption value of the labor pool itself; is not considered into GNP. Thus, given the premise that consumers are needed and have value; they are not valued in determining the strength of our currencies. This same rationale applies to all currencies, in all countries, all across the globe. Like I said before, somewhere along the line in the invention of Capitalism, a product became more important than a person. Put in this context, even common sense says that a person is far more important than a product such as a can opener.
Where am I going with all this, if you are still with me? To the solution, to the answers, to the truths, to the better future that is possible if we can simply have faith in ourselves. If we simply believe in, and give value to, the human spirit.
Medicare will go broke before the 21st Century gets here, Social Security recipients will outnumber those who will be working when the Baby-Boomers retire, Medicaid will balloon beyond any ability to pay for sky-rocketing medical costs through taxation alone, and the interest alone on the National Debt is 20 percent of our current Federal budget. These are just some of the reasons why the current system cannot continue in its present form without causing a complete and catastrophic collapse of the economic systems of the world. For as the United States economy goes, so goes the rest of the world to a large extent. If our economy goes through a drastic decline, then the entire world-wide monetary system might collapse from lack of confidence. Our market is the most sought after market in the world. Yes, there are emerging and promising new markets in Asia, Russia, and other regions; but, it is still the U.S. Market that producers want to sell to most of all. Because we have the highest standard of living of the industrialized nations, our people have a unique culture that is the envy of the world, despite our economic problems. If our system collapses from the weight of high taxes, reduced government services, less resources for the masses and other troubles ahead; the rest of the worlds economic system will not be able to sustain itself without the purchasing power the American Market brings onto the world stage.
The problems and troubles of our poor planet and the trials and tribulations of the humans upon it, seem to be accelerating at an ever increasing pace and intensity. We see the dangers and hear the warnings; yet the old behaviors go on and on. So many bi-polar conflicts go on with-in government, in our private lives, in our societal relations with one another, between the governed and the governing, and between the nations of the globe. Sometimes I think it will take a final apocalypse for nature to give humanity that much needed slap up-the-side of the head to awaken us to the reality that our current behavior is detrimental to ourselves and our planet. It may be the only way for everyone to see clearly that we must base our economic activity around the value of our lives and our spirits, rather than only on the products we produce and consume.
There is a truism in macro-economic thought, theory and real-world practice, and that is the rate of growth of national output will be directly related to the percent of GNP devoted to investment. Another fact is that investment in the education of our labor pool and our citizens has unquestionably increased the productivity, versatility, skills and overall value of our labor force. This has also allowed us to increase our GNP. Both types of investment between plant and equipment capital and investment in human capital is needed for continued growth of our economy. Can society count on private companies to investment in these areas where such investment will not directly effect their own profit margins and internal returns on those investments? No, that is the job we have given to government; to invest in areas that benefit society as a whole. For this is part of the definition for government, to invest in its citizens.
This idea of currency valuation will require eventual international acceptance to work properly for all humanity. America could lead the way alone, we are powerful enough to do it; but international cooperation within the IMF and World Bank would be more stable and effective. This subject is explored more fully in Chapter 2.
Why the money-changers need to be thrown from the temple again!
This chapter explores the way in which speculators and gamblers are presently setting the value of the worlds currencies. Explored are the various economic theories that purpose to use valid mathematical models. What is shown is that these models are based on faulty presumptions of economic activity; and are more based on "gut" reactions to that activity and imagined buying habits of the various countries for the short term.
Currently the exchange rates are set by investors, brokers, and financial money players who collect, buy, and sell nations currencies based on expected GNP, or consumption factor of each nation. These expected expenditures on imports and exports, as part of that GNP at a particular point in time, whether present, near, or long term are what the investors in currencies base their buy or sell decisions on. By going to an accounting system where an individual country has a current net value, currencies must be tied to that value. With a framework upon which to adequately value aspects of a nation, net value and net worth can be calculated and adjusted as to growth, or decline. This framework is the accounting equation again, Assets = Liabilities + Owners Equity.
Every year there are numerous occasions where the U.S. Government, and other nations, have had to enter the currency exchange to prop-up the dollar, yen, mark, or other currency to stable and realistic levels. Why is such action always necessary periodically? The current system is flawed and needs to be replaced with a more stable evaluation of all nations currencies. I think its time to apply some common sense to international exchange of commerce. Its past time we took back the power to set the value of our country, our products, our services and our identity. The international gambling investors, out for quick profit without regard to financial, and national, consequences, have had their day. It is time for governmental leaders to step forth and embrace a plan that puts the value of a nation in the quality of life provided to their citizens. To base the value of a nation on the health of its population, its human and natural resources; in addition to its capacity to consume and produce a GDP.
This is why the money-changers must be, once again, thrown from the temple. Using the accounting equation will allow all governments to properly provide for their citizens care, thus increasing the net value of that country. Periodic accounting through the IMF and World Bank would insure a stable, proven and in-place vehicle to allow transfer of funds from country to country. This is already being done for international loans and other international interests. Adding on to the existing system would be the easiest transition to institute an international system of valuing nations, based on the accounting equation.
Here one would say that there is no way to get all the nations to agree on valuations, and thus currency values and net worth. You would be right, but, it is possible to get nearly all the richest countries to agree. As in America itself, in the world of nations most of the wealth is held by a relative few. If the major players agree, there is a strong possibility that this will work. With such a system in place, there is a limitless amount of potential for good, for all humanity. So many businesses, and us, as individual humans and our social groups; are becoming vastly globalized to an amazing degree. By 2001, the Internet will probably reach nearly all of the planets population in some form It is time we put a value on human life; and hold countries accountable for the quality of life they provide their citizens. It is time we had a stable international system to do commerce around the globe. Its time humanity got slapped-up-the-side of our heads and awakened to our potential. Common sense and the accounting equation, a great international balancing mechanism where countries compete to keep their citizens healthy and happy.
With the current method, investors try to guess how much each country will export and import, and where, when and terms of such transactions as to deciding which and how much currencies will be needed where, and when. Like any other commodity, such as pigs, corn, soy beans and cattle; value is determined by supply and demand. The capriciousness of the pure capitalistic market for such commodities has no compassion, no care in consequences of precipitous actions; that is why humans invented the social structure of government to properly provide goods and services that pure capitalism does not. Thus, government, and not capitalists, should set the value of such a vital product as our money. I do not want the value of my money bought and sold like grain, beef or other products. The value of my money represents the value I have earned and contributed to my country, my community, my family, and my own industriousness as a human upon the planet.
With every country trying to open its markets to some type of business commerce, the accounting equation is getting more and more widespread acceptance. Making the mental switch and adopting it to governmental operations can be achieved by the majority of people within the few countries who hold most of the worlds wealth.
As you will see in a latter chapter, all current commodities markets, investment vehicles such as bonds and certificates, stocks and accounts need not change. Money would still be able to be invested in governmental bonds earning a pre-set rate of return, much as is done now. Individual interest rates will still be able to be set by governmental, institutional and private banks. Making the change would not drastically change the operations of any of the banking system.
The more one considers the idea, the more one sees that, although much needs to be worked and agreed on; there will be very little change initially to how the business of life goes on. Change will come as we wisely use the assets we have to adequately take care of our citizens and enrich our lives as humans in this solar system.
How money is created presently, and for whom.
This chapter explains the present system of money creation based on the concept of fractional banking begun in 1913. It explains that most of the money created to finance our debt has not resulted in the creation of a substantial increase in Capital for future GNP production; but, has been mainly used as a tool for acquisitions and mergers of existing Capital. Thus, our children and grandchildren have fewer machines, tools, and other Capital resources to produce the goods and services they will need to effectively and efficiently run tomorrows American society. Our Constitution gives the power to create money to the legeslative branch of our government. Congress lent that power to the commercial private banking industry in 1913. I use the word lent here purposely because it would be unconstitutional for Congress to forever give away one of its constitutional powers without a constitutional amendment. The 1913 banking laws were not such, thus the ultimate power to create money still resides with the federal legislative branch of America. The same branch that sets forth our tax rates, and passes tax laws.
"Fractional Banking" is an economic term referring to the concept of how our commercial banking system is regulated and how its rules are defined, both collectively and on an individual banking institution basis. For every dollar you or I put into a bank, the bank has been lent the power to create anywhere from 85 to 96 cents in new money. Now, what have they done with that new money?
Well, one must give Capitalism its due; it has created the most affluent standard-of-living on the planet. But has it done all it could for the poor and uneducated? Given that Omaha Nebraska is fast becoming a model for showing that Corporate Socialism is good for the bottom line, I wonder why more companies are not making that same effort for their employees welfare. Such a concept has proven itself to be good business, yet more do not embrace this enlightened business methodology. Individual greed for the executive few who do not do enough for those that cannot do for themselves is the stark reality the world economic system is currently in. True Capitalism is the enemy of Life. For Life implies health and wellness, along with sickness and eventual death. If you are sick and cannot work, Capitalism will let you rot and die upon the streets. Stark reality, happening all over this planet. If I were an Alien-being watching over the Earth, I would do all I could to keep this uncaring, warring and barbarous species on its own ball of space rock. If they cannot take care not to kill outright, or by neglect, those of its own kind; then how can the species be trusted in the Galactic Neighborhood? Once again I point out a fairly obvious question no-one seems to have asked our government. Is the reason we havent been back to the moon because we havent been allowed to by the present ocuppiers?
The digression above is necessary to address what we, as a collective species, could do with wealth created by the legislative branch of the federal government to establish humanitys presence in large numbers upon, in and near the orbit of our earth and moon. Commercial bankings record of what was done with the new money leaves much to be desired. Weve had to bail the system out many times, and it is continuosly racked with scandals, decade after decade. Yes, America does have a high standard-of-living, but we also have abject poor, sick, elderly, young and innocent lives threatened with death and lingering illnesses, hunger and starvation, and homelessness and spiritual oblivion. Capitalism is NOT doing enough, collectively, to solve these social problems. Taxpayers can no longer foot the entire bill for cleaning-up after, managing complex elements of, maintaing intricate support systems for, and governing all the necessary elements within a society of humans collectively calling themselves a country or group of people. Some of that new money being created MUST be used to finance government, not simply used to consolidate capital within an ever-widening gap between the many and the few.
So far, the banking industry has NOT been charged any fee for this right they have temporially lent. In-other-words, they have not been paying any rent for this power to create new money. For the most part, the industry has lent the new money to businesses to expand markets, or more recently; simply to acquire control of existing resources and to cut payroll. Imagine that, your large corporations borrowing huge sums of money, thus making it harder and more expensive for you to get a loan, to use that new money to throw you out of a job in a downsizing move to increase near-term bottom-line profit, thus increasing executive bonuses and kick-backs; oopps sorry, kick-ins. A real good use of that new money that was created by you depositing your last paycheck dont you think? Actually, I think it is a dumb, wasteful and dangerous use of new money. Unfortunately, it is the reality that a large portion of the ?????Trillion dollars in new money our pumping economy creates each year is used in EXACTLY this manner. And the number is increasing, rapidly. In such an economic climate, cost-of-living rises while real wages drop and we get an errosion in the standard-of-living we collectively experience as different groups of people fall into their own economic niches. The majority of those niches are less well off than their predecesors in real-purchasing power. At the same time, costs associated with governmental operations rise as more and more people become dependant upon the collective system to care for them because they cannot physically or mentally earn the economic means for their survival and care. Capitalism is failing them.
Government cannot realistically keep taxing fewer and fewer people more and more to cover increasing costs. Government MUST take care of its indigent citizens. It is as valid a responsibility as protecting them from foreign enemies. Are not hunger and homelessness equaly foreign enemies to be errradicated from our midst? Isnt ignorance and bigotry equaly undesirable, yet both have been known to be cured by simply educating our people to a higher level of intellgence. Opening a mind should come with opening our eyes. Natural and part of Life, the ultimate definition of being human. Feeding and educating the entire planet is not out-of-reach. We simply lack the collective will to set our minds to do it, because under pure Capitalism, it is not the curent thinking that it is economically viable and economically do-able.
Well let me point out that commercial banking has invested in some pretty shady and less lofty endeavors since 1913; sqandering probably quin-trillions of dollars throughout banking history. Losses simply written-off the books, or more hurtfully for us, paid for by us taxpayers! What more could have been done to collectively care for the needy if that money had been used for their care? Could we have settlements not only within the inner solar syatem, but around Jupiter and Saturn?
I previously used 85 to 96 cents figures because the amount of any dollar you or I deposit into the bank must be kept by the bank on-hand. Meaning they cannot lend out more than a fractional-reserve that depends upon national economic policy issued by the Federal Reserve Board and the individual banks lending history. That history includes not only the amounts of loans, but type and asset collateral put forth for those loans. Thus the rate is variable from bank-to-bank. But most often the range is between 4% and 15% of liquid assets may be lent-out as new money. We all know of the scandalous stories of connected people getting bank loans they never seem to have to pay back. They simply decalre bankruptcy later-on, letting banks and taxpayers take title to worthless swamp land; only to buy it back at public auction for 2%-5% of its real value. How many trillions of dollars in new money has been sqaundered this way across the country? How many space stations, moon outposts, and martian probes could we have built with such trillions?
Giving value to new money without inflation.
This chapter addresses the big boogie-man of macro-economic philosophy from either side of the aisle. Economists have rightly been concerned throughout all their actions to control and reduce inflation as much as possible. Even common sense dictates that a course of spiraling-up, and sky-rocketing prices of all goods and services, will undermine and destroy even the strongest of nations and greatly devalue her currency. This chapter shows how the mechanisms of fractional banking can be adjusted to control the growth of the money supply, yet also provide the needed funds to properly take care of Americas citizens. For once again, that is Governments primary responsibility; to properly take care of its people.
Why T-Bills, bonds, stocks, securities and savings will remain
viable and stable investments.
Here it is shown that all the present investment instruments we now have will remain as they are. There is no need to change these items to implement the new re-financing plan that is proposed. Stock prices will still go up or down and continue trading as is presently done. T-Bills and bonds will still be issued by the Treasury. Securities and savings will still allow investors a safe place to store their money and be given the opportunity to earn interest on their investments in the economic system. None of these means of future investment need be changed one single bit from what they already are.
Why it all balances in the T-Accounts.
This chapter uses various examples to show how funds are generated to provide services by Government to enhance the quality and value of life of its citizens. It shows how this can be anti-inflationary and actually work to make the dollar stronger and more robust in its value. It is this chapter that shows how it is possible for us to leave our children a better world than exists today. Here it is shown that it is possible, and financially feasible for us to provide an environment where our children will be able to lead better lives, with more productivity, better and more diverse products and services, and all at a cheaper price than we are presently paying.
The future is not impossible, only difficult.
In this final chapter, the whole concept is brought together to point out all the possible benefits the American people, and the World as a whole will realize from the purposed re-structured financing of governmental operations. If we as humans can make the mental leap of faith needed to put value on the lives of our fellow humans, and base our economic system on that value; then the future we have in front of us is truly only limited by our collective imaginations. We will realize that we have already acquired the necessary resources to accomplish any goal we set before ourselves.