Most people do not understand where the money will come from under Capital Homesteading to provide every citizen with several thousand dollars per year of Capital Credit. If you explained that the Treasury Bond program [i.e., government borrowing] would be phased out and then the money for the credit would be available, it would be much clearer, but then many people who have done very with their T Bond investments (including my relatives) would be opposed to the concept. And we don't need more opposition.Dr. Norman Kurland, this blog's partner-in-crime, responded to this concern as follows:
Dear CESJ Member [the response has been depersonalized to protect the innocent]:
If you think government deficits are a good thing, then you like the idea that the U.S. currency is not backed by any assets, but by the power of the federal government to tax future citizens for today's expenditures. Today's currency is backed primarily by government debt. Taking into account the growing annual deficits, past deficits, and projected deficits from future entitlements due to promises made under Social Security, Medicare, Medicaid, pensions for current and retired politicians and bureaucrats (now projected to be over $56.4 trillion, or $483,000 per U.S. household), the system is projected to collapse. The debt is unsustainable. So, if you like this trend, you should advocate even higher deficits.
Under our comprehensive Capital Homesteading strategy, we would balance the budget and begin to pay off past deficits. This would be done not by cheapening the currency through inflation, but by growing the economy so that the private sector can grow faster and create real jobs. People would have more money left in their pockets to meet their consumption needs, tax revenues would increase, and everyone could begin to accumulate a capital estate on which to retire.
For those like your relatives who want to keep their savings in T-bills, the federal government (or any other government, for that matter) would no longer have the power to create new money out of thin air to meet past and future deficits. Rather, the government would have to pay higher rates of interest to persuade citizens to buy T-bills.
The interest-free money advocated in the Capital Homesteading program would not be available for non-productive loans (like government debt or consumer debt). Interest-free money would only be available for loans for feasible private sector growth that would flow through tax-sheltered Capital Homestead Accounts (like IRAs) established at local banks for the purchase of newly issues enterprise shares that would become broadly-owned.
Also — and this is important — under Capital Homesteading, the banking system would be reformed so that it would no longer be a case of the federal government guessing how much money the economy needs, then creating it and spending it. Instead, the money would be created only in response to sound and properly vetted capital projects that have a reasonable expectation of paying for themselves out of future income.
To repeat: money would not be created first, then invested. That is a virtual sure-fire way to have inflation. Instead, through the operation of the real bills doctrine, the extension of credit for financially feasible capital projects and the creation of the new money would be what Dr. Harold Moulton called "concurrent phenomena." That is, the needs of the economy would determine the amount of money created, instead of the current situation where the amount of money determines the rate of economic growth.
Again, keep in mind that government debt doesn't pay for itself. It needs taxpayer money, including taxpayers who have not even been born yet. But interest-free, asset-backed private sector debt (created through the commercial banking system backed up by the Federal Reserve in direct response to the real needs of the private sector) for feasible projects do pay for themselves out of the future earnings of the very new assets that were purchased on credit within a few years. This is nine years under our conservative projections.
No, I don't think there's a problem for people like your relatives. But we will be removing a problem for all the unemployed, under-employed, and mis-employed wage slaves, welfare slaves, charity slaves, debt slaves, and tax slaves in today's world. People need to study our Capital Homesteading proposal as a feasible way to address these problems, and (in the words of the subtitle of the second Kelso-Adler book) free economic growth from the slavery of [past] savings.
Own or be owned,