Democratize Money now in e-Book format at Kindle

Kindle notified me that Democtrize Money is an e-book that is now ready for purchase. https://www.amazon.com/s/ref=nb_sb_noss?url=search-alias%3Dstripbooks&field-keywords=Democratize+Money

The paperback is still not ready, but the e-book is. Notify everyone on your contacts list on email, twitter, blogs, and smoke signals if you still have them. Indeed, if you have a phone call your friends and gossip about it, and ask them to notify everyone on their contact list and eventually we will find the one reader who is interested in how to get an annual, tax-free income of $20,000. The book lays it all out for that reader, including all the arguments he or she will need to convince others. If enough people read the book and realize that this is the way to pay for a universal #BasicIncome instead of continuing to give the rich more money, we just could get a movement started (Reference here Arlo Guthrie’s Alice’s Restaurant for what kind of movement) or dialogue that could get us into a more democratic place economically. Please spread the word.

 

 

democratize money a font book cover.jpg

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Revisiting Fractional Reserve Banking

Revisiting Fractional Reserve Banking

by T. Edward Westen, 2017

I allege here that fractional reserve banking is one of the underlying causes of the boom and bust cycle we quaintly call the business cycle.

Let us start with an example. Suppose there exists an economy with $300 cash and one bank which has $100 that it can lend and $25 more dollars in reserve. It lends it to a borrower who used the money to buy a long term asset (an asset which will hold value without significant depreciation for say 100 years). The borrower repays the bank $10/month plus internet. The bank stays fully loaned out so it immediately lends the $10 to another borrower who also buys a long term asset with his loan proceeds. He pays the bank back at $1/month plus interest. Each month the bank lends money to borrowers who always purchase long term assets. So at end of 10 months, the bank has $100 in outstanding loans which have created $259.37 in assets in the 10 months the bank has been fully loaned out. I assume the interest on the loans goes for overhead and the like and is not invested in loans. If the bank invests it in loans the assets created by those loans would have been worth more than $259.37 at the end of ten months.

100

10

10

10

10

10

10

10

10

10

10

10

1

1

1

1

1

1

1

1

1

1

11

1.1

1.1

1.1

1.1

1.1

1.1

1.1

1.1

1.1

12.1

1.21

1.21

1.21

1.21

1.21

1.21

1.21

1.21

13.31

1.331

1.331

1.331

1.331

1.331

1.331

1.331

14.641

1.4641

1.4641

1.4641

1.4641

1.4641

1.4641

16.1051

1.61051

1.61051

1.61051

1.61051

1.61051

17.7156

1.771561

1.771561

1.771561

1.771561

19.48717

1.948517

1.948517

1.948517

21.435688

2.143569

2.143569

23.579257

13.579257

259.37383

27.158514

Loan Amount, Payments toward Principle, Total of Assets Purchased with Loan Proceeds. Each column represents one month. Each row represents loans beginning with the load amount and the payments to the bank follow.

There are a couple of ways to look into the future given this scenario.

FIRST, let us suppose in the 11th month of this example that the fellow who borrowed and paid off the first $100 loan needs or wants to sell his asset which is still worth about $99. Let us further suppose the asset’s owner finds a buyer willing to pay the $99, the worth of the asset. The buyer goes to the bank for a loan. The buyer offers the asset that he or she is about to purchase as collateral. However, at this point in the banks lending cycle, staying fully loaned out, the Bank only has $27.16 to lend that month.

SECOND, let us suppose none of the borrowers over a five period (6o months) need or want to sell assets and the bank continues to stay fully loaned and its borrowers continue to invest their loan proceeds in assets with a 100-year life. In this case, borrowers have amassed over $5,556.24298 in long term assets. Notice the assets decided by the total currency in our system is, $5,556.24298/$300, is able to cash out only 5.4% of the assets assuming we can use all the currency in the system, which of course we can’t for $100 of the currency is loaned to borrowers and $25 is in bank reserves. Now given that the average amount the bank has available to lend in any given month is $29 or 0.5% of the total assets purchased in the preceding 5 years.

NOTE that the consequences in both situations are the same: assets lose value simply because there is not sufficient currency available to cash them out at their depreciated value. When there is insufficient currency (a lack of people with money willing to buy at a given market rate) be we say the market is over valued and a market correction results in, sometimes a drastic, revaluation of assets held in the economy to lower values.

Yes, the scenario is simple and not at all like the real world. However, it does illustrate that the business cycle, the cycle of expansion and contraction in a never ending cycle is largely caused by a fractional reserve banking system allowing assets to be purchased and not allowing for sufficient currency to allow their owner sell them except at a loss.

It is also noteworthy that the base money supply is also based on debt. Perhaps if the base money supply were based on citizen sovereignty, democratizing money or monetizing citizens, the business cycle would be at least flattened a bit.

Democratize Money to Provide a Basic Income for All

basic income is a periodic cash payment unconditionally delivered to all on an individual basis, without means-test or work requirement.” (http://basicincome.org/basic-income/ )

The ongoing discussion about Basic Income out in the ether takes place under several names: Basic Income, Guaranteed Annual Income, Citizen’s Dividend to name the most obvious. If one googles any of these terms one will get a plethora of hits. Two websites that are particularly rich in information are http://basicincome.org/ and http://www.universalincome.org/ . I have read some of what is out there; and, what I have read lays out reasonable arguments for providing all a basic income. What seems to be the issue that holds it up from becoming reality is the question of how to pay for it. I have stayed back from that discussion up to now. However, democratizing money, as described in this blog beginning with the first of the 27 blogs to precede this entry is a viable way to pay for or fund a universal basic income, at least in the United States of America. The only catch is that democratizing money requires citizens to vote, serve on juries and perform normal citizen duties. So, it has a condition.

We, America and the world economy, is approaching a point where the current economic growth (expansion or period of a bull market, the terms are not quite equivalent but close enough) will come to an end. All growth cycles do. Economic growth cycles end partially because of the way money is created. We create money by putting new money in the hands of those who already have money or have a sufficient probability of having income over a period of time to pay off a loan. You see, money in the US is created by debt. Every dollar in every wallet, bank account or piggy bank was created by debt instruments. For a full treatment, you will find Banking and Currency Texts, or the other entries in this blog detail how money in the US is created by debt instruments. Or google it.

The role money creation plays in the ending of a growing economy is that for any reason whatsoever investors, entrepreneurs, consumers, bankers and even my grandmother decide that the economy is weak, over heated, or the like. When that happens, people stop borrowing money. When borrowing stops, currency creation stops. Recall the end of the Bush administration when the economy came to a stop, the Bush Administration pumped money into banks (they practically forced financial institutions to take money to invest). Unfortunately, the financial intuitions did not invest (loan). No new debt means there is no new money.

The slow down of borrowing will happen, it always does. The last slowdown caused a lot of pain for the average citizen and practically nothing but a decline in the rate at which those with money increased their money supply—only a slowdown for the wealthy.

Historically, the rich have convinced us that money into their hands creates jobs and thus results in income for all. Its name is “trickle down economics.” Pay attention here, “trickle” is exactly what happens, if you and I are lucky. Unfortunately, they are largely wrong. This is not an effective way to stimulate economy—a rising tide does not rise boats that are not seaworthy (the poor drown instead of getting richer).

Historically consumer spending is responsible for over 70% of economic acclivity in American. So, I would argue that the way to stimulate an economy that is not creating enough money through borrowing is to put money in the hands of where it will do the most good—in the hands of citizens and not just the wealthy.

I would argue a citizen who is one part of the sovereign deserves an equal shot at full participation in the economy along with every other citizen who is a sovereign. Democratizing money provides that and pays for itself. BBesides democratizing money is the only way of paying for a periodic cash payment . . . delivered to all on an individual basis, without means-test or work requirement.” that does not take money from one person to pay another.  https://democratizemoney.wordpress.com/2016/05/01/one-reason-private-money-should-be-excluded-from-politics/