Wednesday, October 22, 2008

Almost Desperate Enough for a Good Idea

Lawmakers are starting to panic in light of the refusal of the financial markets to obey the media's premature hints about the end of the financial crisis. They are starting to listen to just about everything except common sense. If things get much worse, they might even be willing to listen to that (i.e., read this blog).

A CNN report on October 21 on CNNMoney.com ("Ideas for 2nd Stimulus Cover Broad Swath," Jeanne Sahadi) stated, "The drumbeat for lawmakers to do more to boost the economy is growing louder. And the chances have increased that Congress could pass a second stimulus package during its lameduck session following the presidential election."

Unfortunately, those in power are still stuck in the Keynesian paradigm. This limits the choices to tax-and-spend, or print-and-spend. They are ignoring the possibility of creating money through a properly regulated banking system for productive purposes, thereby putting currently wasted resources, excess capacity, and idle people back to work doing something worthwhile.

What is a "properly regulated banking system"? A system that embodies structural "checks and balances" (i.e., what an accountant would call "internal controls"), policed first by the industry itself, and then by the State when self-policing fails to maintain separation of function and democratic access to money and credit.

Our "Capital Homesteading" proposal would, in part:
• Use the Federal Reserve (the central bank of the United States) to finance all future capital formation through the private sector.

• Amend the definition of "qualified industrial, commercial, and agricultural paper" to include an extended term of the loan and a requirement that paper does not qualify for discounting unless extended through expanded ownership mechanisms, such as Capital Homestead Accounts, Homeowners' Equity Corporations, Community Investment Corporations, Consumer Stock Ownership Plans, Employee Stock Ownership Plans, and similar vehicles.

• Abolish the Open Market Committee and prohibit the Federal Reserve from future dealing in government bonds, whether primary or secondary.

• Abolish fractional reserve banking and mandate a 100% reserve requirement for all commercial banks.

• Prohibit State ownership of productive assets of any kind, or from owning shares in financial institutions.
Specifics about Capital Homesteading can be found in the book, Capital Homesteading for Every Citizen. An examination of the monetary theory underlying Capital Homesteading can be found in "A New Look at Prices and Money."

With lawmakers running around and stating that they are willing to try anything, it's probably about time that they decided to try something that will actually work.

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