As we have seen in previous postings on this blog, the only sound method of money creation is to tie all new money creation to the present value of new capital formation, that is to the present value of future production. Unfortunately, virtually all new money creation by the central bank of the United States has been for government expenditures. Because government does not by its nature produce anything, this makes the new money creation purely inflationary.
The present "stimulus" package has the potential to make the present crisis even worse than it already is. By throwing good money after bad, that is, by creating money to make up for losses already incurred, the program is, in effect, inflating the currency two-for-one. While not of the magnitude — yet — of the worthless issues of unbacked currency that kicked off the German and Austro-Hungarian hyperinflation of the 1920s, creating money in this fashion has the potential to ignite a financial meltdown that makes the current one look mild.
It doesn't have to be this way. Immediately implementing a sound program of capital investment financed by the creation of new money in which all citizens can share democratically would start the long process of restoring people's faith in the economy and in the future, without relying on worthless hype and inane pep-talks. CESJ's "Capital Homesteading" proposal fits the bill exactly, with the advantage that the specific steps to be taken and programs that can be implemented are sufficiently well-described to enable any competent legislative assistant in Congress to put together a package enabling the proposal at the earliest possible date.
Of everything that has been proposed to date, Capital Homesteading is the soundest financially, and the most feasible politically. It is a national economic policy based on the binary growth model, designed to lift barriers in the present financial and economic system and universalize access to the means of acquiring and possessing capital assets. The Capital Homestead Act would allow every man, woman and child to accumulate in a tax-sheltered Capital Homestead Account, a target level of assets sufficient to generate an adequate and secure income for that person without requiring the use of existing pools of savings or reductions in current levels of consumption.
Surely such a result is better than having a fiscally and monetarily irresponsible government continue to create money to give to people who have already lost it.