Bold suggestions to reform US Dollar

As an independent thinker I’ve been studying monetary system for years. So far I’ve published my ideas mostly inside Korean networks.

This is the conclusive essence of my ideas up to date and implemented in the case of US Dollar.

1. Transform the FED into National Bank of the US

Current Fed system is a cartel of private banks hard to find such an example anywhere in the world.

New National Bank of the US is to be a independent central bank accountable only to the general public. Its main functions are :

(a) to issue and control currencies(legal tenders) including electronic money,

(b) to keep the value of national currency and debt stable to support sustainable growth of the economy,

(c) lender of last resort.

2. Replace current paper bills with newly designed NBoUS bills

This is to restrain cash hoarding. Currency is supposed to be in circulation rather than hoarded in a private vault.

Recent Data from the Fed shows that about $1.61 trillion were in circulation. The process goes like this:

(a) to prepare enough amount of new bills to replace all of the old bills and distribute this new bills to each and every depository financial institutions.

(b) to announce detail schedule for this replacement allowing at least 3 months of interim period that after then any old bills still in circulation to be nullified and strictly prohibited to be used as any type of payment and start to pay out with new bills simultanouly including ATMs.

(c) to set a maximum amount to claim new cash up to 1 million dollars and over that limit to be put into demand deposit while unlimited acceptance of old bills is guaranteed for deposit before the closing date for replacement.

(d) also to announce that the monetary authority has the discretion to do another replacement anytime after 3 years in the future.

3. Turn cash equivalent deposits into digital currency and get a new currency data integrated with tangible currency

Fed’s money stock data shows that total M1 as of December 2017 was $3.66 trillion. From there currency in circulation of $1.61 trillion subtracted, we get $2.05 trillion of cash equivalent deposits. These cash like deposits are money created by commercial banks by monetizing clients’ assets provided  as collateral into demand deposit. There is another type of deposit transferred from government as social security benefit or corporations as payroll.

A few years ago the BoE debate argued that as money was created together with debt, paying off debt is synonym of destroying money.

This notion I can’t agree at all. Banks should put the fund made available by payment of debt into circulation again as new investment or loan  rather than put into central bank account as excessive reserve balance. Looking at the Fed data, this excessive balance is $2.11 trillion which is enough to cover all the deposits on demand or checkable.

It seems to me thus that US banking system is already achieving 100% reserve if only we admit that money in the form of cash equivalent deposit belongs to each depositors not to the banks, and banks should keep this money in the form of cash in vault or reserve balance at the central bank.

The next steps required are:

(a) to diffuse the acknowledgement nationally that money kept in the cash like accounts at any legitimate financial institution is same as tangible cash, same legal tender, bearing no interest. Therefore it’s appropriate that to say cash or currency it means not only tangible one but also digital.

Also it must be acknowledged that money creation is to be managed solely by the central bank, and commercial banks are to be just intermediaries.

(b) to rename those accounts of checking or checkable savings to a simple cash account and there is no need for any deposit insurance for this.

(c) to integrate and upgrade the national payment system to secure same day settlements by applying advanced new technology like block chain.

– local payments between accounts within same institution to be settled locally

4. Realignment of national debt

Current Fed Data shows that government debt of $19.28 tn is subdivided as $16.23 tn of Federal treasury debt and $3.03 tn of state & local.

Outstanding federal treasury debt has occurred mostly by refinancing previous debts which we’ve already forgotten its original purposes or scale.

National debt, especially treasury securities(bill, note, bond) are the most trusted financial instruments because its payment in currency at the maturity is guaranteed by the U.S. government. Suggested tasks are:

(a) to treat national debt as future currency, so the price of these debt securities should be managed stable within long term inflation target.

To do so the new central bank needs to be mandated and allowed to participate in scheduled auction and secondary market to purchase and hold them

with newly created currency, which effectively increase the money stock. The logic for this scheme is that central bank has to work for the public not for a few oligarchs.

(b) foreign investors holding national debt to be regarded as quasi citizen in terms of money. So they are expected to respect our order and authority.

And also if we hold other country’s national debt, vice versa.

5. Source deduction of income tax on financial gains

Every institutions providing financial services to their customers are well posioned to collect income tax before paying out the gains.

Financial gains can be difined as money taken out from a account in exess of money put into that account.

So any interest or dividend paid into that account is tax deferred until actual withdraw of it.

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