Awash in a Sea of Money — Or — Unemployed Money is not a Good Sign

 

 

I got an offer in the mail to take out a 2nd mortgage on my house yesterday.  I get offers to refinance at least once a week personally addressed to me, but the letters all have the same salutation” Dear Home Owner.  Combine these offers with the figures I hear being spent on elections, the profits banks made in the first quarter and all of the advertising for investment services and I conclude there must be one hell of a lot of money out there looking for a place to go to work.  Now for money to go to work, it simply has to earn a return, not actually do useful work mind you, but the language of money had settled on “money going to work.”

 

While I suppose it is nice to have the opportunity to increase my debt load, given the offer I received to take out a 2nd mortgage, what this sea of money looking for work tells me the unemployment rate for the average dollar is rather high (and that does not count the ones I and little old ladies put under our mattresses because we grew up with parents who grew up during the Great Depression). Under the current regime of creating money, the unemployment rate of money has generally signaled boom which is followed by a bust.  Not the attractive kind of bust an artist might sculpt for museum placement, but the kind that leaves lives shattered.  Indeed, at the present time in the US alone we have more people on the verge of homelessness despite working two or more jobs and indenturing their children. (OK, I am dramatizing it by asserting the indenture of children, but am I?)

 

That offer I got to take out a 2nd mortgage on my house is actually a desperate act by someone who holds more money than they know what to do with.  They have run out of creative ways to “put their money to work.”  So they are relying on complete strangers to think that increasing one’s debt burden is a good idea.  The simplistic economic wisdom behind putting money to work is the basis for trickle-down economics. Things will be OK if we give the rich enough money so that some of it comes our way.  Unfortunately, when it comes out way in the form of an increased burden of debt, it typically does not harm to us debtors than it helps.

 

So, by my way of thinking, it is more evidence that we need to change to way we create money.  Under the current system, we put money into the hands of those who already have it or the assets it can buy in hopes that they are greedy enough to invest some in productive activities (job creation) or that they are spoiled enough to actually buy something.  Well, it isn’t working.  So, time to put my plan into action and create money by giving it, yes, giving, to citizens just because they are citizens.  Us common citizens spend.  We get very little money, and we have had to learn to spend wisely.  However, if given a windfall, we will spend it.  Unlike the rich who insist on a return on their expenditures, we just go out and buy a beer, or a popsicle (depending upon our age and religion); to hell with the returns.

 

 

 

 

 

 

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Basic Income 11/14/17

Eddy Wilco1, a friend, sent me a link to an article on the BBC website: http://www.bbc.com/news/business-41655859 .  The article is by Tim Harford and titled Do welfare states boost economic growth, or stunt it?  It is well worth the read.  Essentially it ties universal basic income into the pattern of social welfare started by Otto Bismarck in the 1880s as a defense against Marxism.  As you know, my approach to basic income is to Democratize Money: https://www.amazon.com/dp/B0756RQRPG unlike the “universal;” no questions asked theme of universal basic income, I tied my plan for funding citizens with a basic income to citizenship and performing normal citizen duties such as voting and performing jury duty.  While Tim Harford ends by saying a universal basic income would cost a lot of money, my approach finesses that by changing how we create new money.  None-the-less the Harford article is well researched, well written and does not miss the point.  If only he had read my eBook.

One very important conclusion Tim Harford draws and one I want to emphasize isWelfare states don’t make the pie bigger or smaller. But they do change the size of each individual slice. And that helps to keep a lid on inequality.”

Respectfully, T. Edward Westen

1Eddy Winco is also my supplier of the soap his wife makes: http://winkos.co.uk/english/I have returned to daily saving with soap in a mug thanks to his wife’s soap making skills.

 

 

Paying for A Universal Basic Income In the USA

Paying for A Universal Basic Income In the USA

by T. Edward Westen, 2017

The case for a Universal Basic Income has been made in countless places. It is not my purpose or intent to review those arguments. Rather, if you are not familiar with the ongoing discussion I recommend you Google, Universal Basic Income, and read for several hours to make sense of that for which I am proposing a way to pay.

My proposal is simple. Authorize the Federal Reserve Banks to deposit $20,020 a year in every citizen’s bank account in 26 equal installments of $770 every two weeks. At the same time authorize the Federal Reserve Banks to deposit $2,000/year in the US Treasury for each citizen in the US and $2,000/year in each State and territory’s Treasuries for each citizen residing therein.

Deviating from the basic definition of a Universal Basic Income, I would have citizens required to vote, serve on juries and perform basic citizen duties such as educate their children and obey the laws. I make this requirement as I justify the payments as an extension of the rights of sovereigns to the body politic—voters in particular.

The payments to the units of government are in lieu of taxes for payments to citizens for performing their civic duty by voting can not be taxed for such a tax would be a poll tax which is unconstitutional. Payments to the states and territories should be divided among the various units of government in the states and territories: cities, school districts, counties, and any districts the states have seen fit to establish. I do not specify how the states should distribute the funds, after all, we have to have some source of discourse in politics and government or we won’t know what to have on the news.

To implement this form of payment only requires the Federal Reserve System to acquire voter rolls from the states and territories along with voters’ preference of check (mailing address required) or direct deposit (bank routing information required) information. It would probably help to have a safeguard for preventing individuals from receiving multiple payments by using some form of identification such as Social Security Number (which if you read your card is not to be used for identification, ok we change that too).

I would add several minor qualifications to this, but basically, the preceding four paragraphs is the plan to pay for a Universal Basic Income. You can go to the beginning of this blog: https://wordpress.com/post/democratizemoney.wordpress.com/2 and follow the ewntries forward and read the entries there to get the full picture. Or buy my Kindle book which gives you the same information in a little over 60 pages, after a bit of editing and the information is all in one book: https://www.amazon.com/s/ref=a9_sc_1?rh=i%3Astripbooks%2Ck%3Ademocratize+money+monetize+citizens&keywords=democratize+money+monetize+citizens&ie=UTF8&qid=1505479988

Notice the plan does not require tax money paid by some to provide a Universal Basic Income to all. Also, since most countries use a very similar way of creating money, this plan can be used anywhere.

Send this Book to Politicians — help your self to a Basic Income

Democratize Money Monetize Citizens: This short book spells out how the government can pay YOU $20,000/year, tax-free, without causing inflation. DO NOT READ THE BOOK. It will just make you mad. However, Send a Copy to every politician and elected official that you know (the price is low). Tell them there will be a test over the book the next time they run for office or reelection. Then ask them “Where is my $20,000?”

https://www.amazon.com/s/ref=nb_sb_noss?url=search-alias%3Daps&field-keywords=democratize+money+monetize+citizens

Democratize Money – The Paperback

Not withstanding that Zachary Karabell debunked the very existence of the Laws of Economics in The Atlantic, (https://www.theatlantic.com/business/archive/2013/04/the-laws-of-economics-dont-exist/274901/ ) economic laws like supply and demand, Gresham’s Law, the law of self-interest and the law of competition do exist and have an immutability to them. How money is created is not an economic law, but an institutional arrangement that has changed over time and is subject to future change.

The current monetary creation institution, fractional reserve banking, at least partially causes some empirically observable generalizations (a fancy way to say laws or consequences, without being quite so rigid): contractions (as far as recessions and depressions) and expansions (as far as booms)–the business cycle, money attracting money (wealth accumulations), poverty, and political inequality (as Boss Tweed said, he didn’t care who had the right to vote as long as he got to pick the candidates). Now, not all of these consequences of the way we currently create money are independent of one another, but they all can be ameliorated if we changed how we created money to monetizing citizens. I spell all of this out in my Kindle Book, Democratize Money Monetize Citizens A Proposal. https://www.amazon.com/s/ref=nb_sb_noss?url=search-alias%3Daps&field-keywords=democratize+money+monetize+citizens+a+proposal

Perhaps of more interest to most, is that Democratizing Money provides a way to fund a tax-free, basic income. Available in e-book and now paperback versions.

This is a book your elected representatives should read.  Tell them you will be testing them over it in each November.

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

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/