Re: treasury notes vs gold standard


<orangatang1@xxxxxxxxxxxxxx> wrote in message
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On 9 Dec, 07:52, "Andy F." <never.m...@xxxxxxxxx> wrote:
<orangata...@xxxxxxxxxxxxxx> wrote in message

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By treasury note I do not mean debt backed notes such as federal
reserve notes. I believe the general concensus is that debt backed
currency is insane.

No, that isn't the gewneral consensus at all.

I mean fiat treasury notes, backed by nothing.
Thomas Edison, arguing against the creation of the federal reserve
system, discribed them like this -

"If our nation can issue a dollar bond, it can issue a dollar bill.
The element that makes the bond good, makes the bill good, also. The
difference between the bond and the bill is the bond lets money
brokers collect twice the amount of the bond and an additional 20%,
whereas the currency pays nobody but those who contribute directly in
some useful way. It is absurd to say that our country can issue $30
million in bonds and not $30 million in currency. Both are promises to
pay, but one promise fattens the usurers and the other helps the
people."

The difference is that people hold bonds as a long term investment, so
issuing bonds is less likely to cause inflation.



For practical reasons this type of currency is preferable to a return
to a gold standard. Firstly a huge amount of currency is held by
foreign govts. How to change the currency we use now to a gold
standard without sending huge quantities of silver or gold overseas?

Secondly a fiat treasury note would allow us to destroy the repulsive
fractional reserve system.

Why do you think the banking system is 'repulsive?' How would treasury
notes
help to destroy it?

banks are permitted to lend around far more money than they hold in
assets.

That's nonsense. Banks aren't allowed to operate unless they meet the
capital requirements - i.e. their assets have to be greater than their
liabilities.


Robert anderson, eisenhower's treasury secretary, put it like
this

'Banks are different from other lending institutions. When a savings
and loan association, an insurance company, or a credit union makes a
loan, it lends the very dollar that its customers have previously paid
in. But when a bank makes a loan, it simply adds to the borrower's
deposit account in the bank by the amount of the loan. The money is
not taken from anyone else's deposit; it was not previously paid in to
the bank by anyone. It's new money, created by the bank for the use of
the borrower."


But people don't borrow money just to have it sitting in their account.They
borrow it to spend it. When they spend it (e.g. by writing a check) the bank
has to pay up to clear the check. So in practice a bank can't make a loan
unless they have the reserves to cover it.


not supprisinly the power to set the reserve requirement, the
proportion of money that banks may lend compared to how much they have
in assets, is too important to be set by government. it is set instead
by the privatly owned federal reserve.

banks are the source of the vast majority of all inflation. also, when
the economy contracts, they cause deflation and recession too.

first they inflate the money supply. they offer easy credit, such as
mortgages at five times anual incomes, repayable over fifty years.
this causes inflation and a boom. next, they tighten the money supply.
loans are not renewed. this causes deflation and a bust. now they can
buy up assets for pennies on the dollar. we call this process the
business cycle.

That's just a bizarre fantasy. What really happens in a 'bust' is that
people default on their loans and the banks lose money.

with a fiat currency, not controlled by the privatly owned federal
reserve, we could impliment an act similar to monetary reform act
which was endorsed by nobel prize winning economist milton friedman.

http://www.themoneymasters.com/mra.htm


Some details from that:

"in this latter, unlikely event, the Secretary of the Treasury is hereby
authorized, in the absence of any other, specific authority, to add a fixed
percentage surcharge to income taxes for that period, equal to the sum of
excess withdrawals..."

So you'd give the Treasury the right to raise income taxes without
consulting Congress. Great idea.


"Sec. 11. INTEREST. The initial rate of interest payable on Treasury
Department Deposits shall be equal to the average yield on three-month
Treasury bills during the preceding quarter. Thereafter, it shall be
adjusted quarterly in accordance with changes in the average yield of
ninety-day commercial paper over the preceding quarter."


In other words, banks could deposit money with the Treasury and
automatically get paid interest out of taxpayers' money.
How is that any better than having a national debt?


Also, when did Milton Friedman endorse this proposal?



.

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