Yesterday we looked at some of the
basics of monetary reform, i.e.,
things that have to be done to get the money and credit system working properly
for the benefit of everyone, not just a State or private sector élite. We continue today with the rest of the list,
and thereby end our series that we culled from the draft of the revised edition
of Capital Homesteading for Every Citizen
that we’ve been working on. So, to
finish —
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| Capital credit from your local commercial bank. |
5. All new currency issued by the Federal
Reserve to meet the discount needs of its member banks under the Capital
Homestead program should be subject to a special 100% reserve requirement, thus
creating a 100% asset-backed reserve currency. (This new money would be backed
by Federal Reserve promissory notes issued to rediscount [purchase] bills of
exchange from member banks representing the present value of new business
assets financed under the program, and collateralized with capital credit
insurance and reinsurance. Proceeds of the loans made by member bans and
rediscounted at the Federal Reserve would be used to purchase new equity
issuances and safeguarded by highly-motivated borrowers disciplined by
ownership incentives.) This added level of accountability to shareholders would
simplify the policing role of the Federal Reserve and help guard against misuse
or abuse of their discount privileges by the member banks.
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| "Trillions for Production! Not One Cent for Speculation!" |
6. The Federal Reserve should be
specifically prohibited from purchasing or rediscounting paper representing any
non-productive uses of credit (such as U.S. Treasury Notes, consumer loans,
loans for speculating in commodities or securities, unfriendly leveraged acquisitions,
local and State government debt, etc.)
or other uses of credit that do not encourage broadened capital ownership and
competitive markets. However, as already stated, existing savings (i.e.,
“old money”) freed up by the lower tier of the new credit system would remain
available at market rates for high-risk ventures, capital credit insurance
reserves, consumer finance, speculation, and other non-productive uses of
credit, as well as future public sector borrowings.
7. A “Federal Capital Insurance Corporation”
or FCIC could be established, on a self-financing basis, similar to MGIC or FHA
home mortgage insurance (but removed from political control), to offer
commercial insurance to bank lenders against the risk of default on Capital
Homestead credit and to offer, for a premium paid by the new owners, some “down-side
risk” portfolio insurance. These risks could be spread even further through reinsurance
facilities established by the private sector.
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| Restore the worker and family owned business. |
8. To reestablish the American economy
on a sound basis as fast as possible, the amount of annual credit to be rediscounted
each year by the Federal Reserve under the Capital Homestead program should
meet 100% of the estimated $2 trillion added each year in new plant and equipment, new
infrastructure, and new rentable space by the U.S. private and public sectors.
Spreading access to ownership stakes equally among Americans, each person could
be allotted around $7,000 annually in Federal Reserve-rediscounted capital
credit to invest in the capital growth of the U.S. economy. A family of four
could offer contracts (bills of exchange) of up to $28,000 annually for Capital
Homesteading investments, which (when accepted by a commercial bank) would
create money to finance new capital formation without reducing their household
budgets. Assuming the projections are sound, a child born today and his or her
future spouse would be able to retire on independent combined dividend incomes
of more than $100,000, while receiving combined dividends during the
accumulation process of more than $3 million.
Each year the credit voucher allotted
to each voter could be adjusted to the nation’s projected capital requirements
for that year. (Note that this would be a voucher allowing each “Capital
Homesteader” to obtain credit by offering properly vetted contracts — bills of
exchange — to a commercial bank, not
the credit itself.) Higher allotments of low-cost production credit might be
provided to farmers, in order to keep America’s agricultural lands in private
hands, particularly younger farmers, and to maintain present high levels of food
production.
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