Gubernatorial candidate's revolutionary money plan holds the key to solving the looming financial disaster

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Re: Gubernatorial candidate's revolutionary money plan ...

Theoretically, base money is high powered money since most of it will be deposited in checking accounts which enables banks to apply a money multiplier to that amount in lending more money.  For example, if $100 dollars is deposited, the potential growth, through multiple loans, is shown below:

Note that at a 10% reserve requirement (money multiplier) an original deposit of $100 may grow to close to $1,000 (almost 10:1) through fractional lending that occurs in multiple banks as the money is loaned and redeposited.  But is this really happening?

The above Federal Reserve chart shows that the actual money multiplier has fallen below 1.  And since 1985, the high point tipped at around 3.1 which I think represents a ration of 3.1:1 or a reserve requirement of roughly 30%.  If the money multiplier has fallen below 1, then it appears that the reserve requirement has risen above 100% which would mean that fractional lending is no longer taking place.

If I am correct with the above explanation, then the old rule of thumb money multiplier expressed as 10:1 (10% reserve requirement) has not been valid since at least 1984.  So, what is going on?  I think we are seeing two forces in the economy that dictate the amount of new debt money that may be created from base money (M1):    

First, my understanding is that bank regulators primarily look at two important ratios to determine if and how much money banks may create as loans:

  1. Capital Ratio - is the ratio of a bank’s capital (equity) to a risk-weighted sum of the bank's assets.  I think the weightings are 0 for reserves, 0 for government securities, 0.2 for loans to banks, and 1.0 for ordinary loans.  The BIS (Bank of International Settlements) has established a minimum capital ratio of 8% but I am not sure if it is currently used by the Fed.
  2. Leverage Ratio - is the ratio of a bank's equity to the unweighted sum of its total assets.  I think the required minimum is 3 - 10%, depending on the size of the bank.  The reserve ratio is the ratio of a bank's reserves (deposits at the Fed plus vault cash) to its demand deposits, i.e. checking deposits.

(A) = Assets, (C) = Capital, (L) = Liabilities, (R) = Reserve ratio

When a bank issues a loan, it's assets (A) and liabilities (L) increase equally.  It's reserve ratio (R) decreases (R/L) but the capital remains the same (C = A - L) which causes a reduction in the capital ratio (C/A).  Banks with an adequate capital ratio may lend without enough reserves.  If a bank has a profitable lending opportunity, it will issue the loan and then borrow reserves later if needed.  The net effect being, that banks can create nearly as much as they want by borrowing reserves.

When interest is paid out of a deposit within the bank, L decreases while A and R remain unchanged - an increase in both the reserve ratio and the capital ratio. If the borrower pays interest from an outside source, A and R increase while L remains unchanged - again, both the reserve ratio and the capital ratio increase.

Second, I think we have hit peak debt in that there are no longer enough willing and worthy borrowers to keep the pyramid scheme going.  This is evidenced by the following measures of M1, M2 & M3:

Conclusion:

The only way the U.S. and it's people have any chance of avoiding the greatest depression ever and massive defaults is by spending debt free money into the economy.  As I said earlier, private and public debt (I don't think this includes state and local government debt) totals around $58 trillion but our TOTAL money, not all liquid, is around $14 trillion for a $44 trillion shortfall (not including interest).

As we know from the Crash Course, the exponential growth of debt prohibits us from borrowing our way out of debt but yet it is the only way to create new money in our debt based system.

Unless someone can show where my logic is wrong, I think it becomes self-evident that our debt money economy is in dire need of some debt free money.  The question then becomes, how is it to be issued...I like the Davis Plan which more accurately is the Byron Dale plan; for every state in the country. 

When you consider that our GDP is only around $15 trillion while we have a shortfall of $44 trillion (not including unfunded liabilities); I think it is safe to say that even if every state began infrastructure projects with debt free money, it alone would not be enough to stave off our debt problems.  But it would be a good start.

Thanks CM and all for a great discussion!

Larry

PS: Doc Peters, I will try to address your specific questions shortly...

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Re: Gubernatorial candidate's revolutionary money plan ...

Larry,

I am actually with you until your conclusion.  I fear adding debt free money will merely perpetuate the current injust system, when what is really needed is some sort of debt repudiation.  I am sorry but anyone that was stupid enough to loan money to to a system that was already deeply underwater is going to need to take a haircut on those loans.

The piper must be paid, let just make sure this time we are not throwing the little people under the bus bailing out the banks.  I fear we might have missed the best opportunity for systematic change by doing bailouts to the 2008 meltdown.

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Re: Gubernatorial candidate's revolutionary money plan ...
Thomas Hedin wrote:

ccpetersmd,

Thank you for writing back but I do have to ask did you read the entire article? I tried to answer both of your above questions in it.  If the answers I provided are not clear enough in the article I'll clarify those, but you'll have to take the time to read the entire article.

Yes, I read the entire article, and then read it again, in case I had missed something. Perhaps I am just being obtuse, but I don't see how my above two questions were specifically answered.

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Re: Gubernatorial candidate's revolutionary money plan ...

This has been a really interesting discussion! I have learned much, though still feel there is much I do not understand fully enough.

I was intrigued by goes211 suggestion regarding debt repudiation. Here's a link to an interesting article by Murray Rothbard from 1994 regarding this same issue:

http://mises.org/article.aspx?Id=1423

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Re: Gubernatorial candidate's revolutionary money plan ...

ccpetersmd wrote:

True, the "money" created is supposed to be destined toward the creation of a tangible good for the community, so I can understand (what seems to me to be) the misperception that there has been no inflation, as while the money supply has increased, so has the overall value of the community. But, the "money" created still had no basis in an actual or future product of the community. 

Chris,

From my perspective, the new money is endowed with value from the materials used and human productivity in upgrading transportation systems.  I disagree with your statement "...the "money" created still had no basis in an actual or future product of the community."  Better and safer transportation systems can make future commerce more efficient which could serve the community for many years.

ccpetersmd wrote:

Wouldn't this "money", existing within the world with the banking system we all know and love, continue to expand?

I think there are two parts to this question.  First, we are destroying money every day through principal debt repayment so all of this money would eventually be destroyed through existing debt repayment.  We're short at least $44 trillion (debt - M3) which is becoming a giant vacuum sucking money out of the economy at an alarming pace.  I don't see how; even if every state initiated the Davis Plan, it would be enough to quench the existing debt (the U.S. GDP is around $15 trillion I think).

Second, let's say the plan were expanded to include money to get everyone in the U.S. off the electrical grid via clean and sustainable energy alternatives generated on site.  By the way, the U.S. power grid is in need of a massive overhaul or we will see more and more frequent black and brown-outs.  The cost will be staggering, by far the biggest civil engineering feat in our history.  And, it is very inefficient - distribution losses alone run between 5-7% and the average generation efficiency is only around 45%.  I would keep the current grid system as it is an engineering marvel but it was not designed to handle the current load.  With the load diminished, it would be viable to maintain it for remote electric automobile recharging and selling excess production into the grid.

Anyways, the cost could theoretically put more money into the economy than is coming out as debt repayment.  So in this case, your question of an expanding money supply becomes important.  Granted, it would take several years to ramp up production and to allow the labor/engineering force to acquire the necessary skill-sets.  And another five to ten years to fully implement.  Never the less, your point is valid if the Byron Dale/Davis Plan were greatly expanded. 

The "off the grid" program I described above must have a finite end and goals, it should not be perpetual.  Eventually, our 100% "temporary" debt money supply would begin to have an increasing percentage of "permanent" money.  I don't foresee borrowing stopping altogether as businesses require venture capital and lifestyles don't change overnight but once we have enough permanent money, much of it can be recycled as new loans with the benefit accruing to those who save and invest rather than banks simply creating it for free.  Banks would become money brokers rather than creators.         

ccpetersmd wrote:

First, recognizing the truth that most money is already loaned into existence, whether through fractional reserve banking, government debt spending or quantitative easing, I anticipate that you agree that this "Davis Money Plan" would also be an example of money being "loaned into existence" (albeit without the expectation that the "loan" would be repaid)? Second, is your argument that this plan is a good idea based upon the presupposition that it would supplant the existing means of money creation, such as fractional reserve banking?

The Byron Dale/Davis Plan alone would not come close to eliminating the need to borrow from banks and for banks to create new money.  Our money system is perishable by design so that we must always borrow new money to offset the money destroyed which is a catch-22 in that the debt grows exponentially. 

I would immediately end the unfair privilege of banks creating new money and would instead require that they get all new money from the Treasury and pay interest or an issuance fee.  There would be no fractional lending and Federal income and employment taxes could be reduced or eliminated through the new revenue stream.  Banks could also borrow the money they lend from their customers and work off a differential like other businesses that incur costs for the products that they re-sell.

ccpetersmd wrote:

Am I correct in assuming that you would propose the "Davis Money Plan" in lieu of our current system, rather than in addition to it? If so, I think it might have some merit, but, again, I am not expert enough to judge.

I also agree that deflation is a more immediate concern than inflation, but suspect that at least some of this "deflation" may be useful "resetting" of an inflated system. I think most of us on this site agree that continued growth is neither sustainable nor desirable. Our only hope may be that this necessary unwinding occurs as smoothly as possible. Trying to re-inflate the system, whether through the Fed, the government, or this plan, seems to me a bad idea. Thoughts?

The Byron Dale/Davis Plan could compliment our current system and help mitigate the coming "greatest depression" to some small degree.  My preference would be to use programs like this to build a more sustainable system but ultimately, at least for some years to come, other means must be found to create new money.  I mentioned above that I think all new money should come from the U.S. Treasury but I would not have them directly distribute any of it.  I think the distribution should be kept in the private sector (banks) and through state programs like the Byron Dale/Davis Plan.  

goes211 wrote:

I fear adding debt free money will merely perpetuate the current injust system, when what is really needed is some sort of debt repudiation. I am sorry but anyone that was stupid enough to loan money to to a system that was already deeply underwater is going to need to take a haircut on those loans.

goes,

If other states followed the Byron Dale/Davis Plan, it could provide some relief for the current system but I would hope that people would then see the folly of giving private banks a monopoly to create and control our money.  Which part of the debt and how much would you suggest be repudiated?  How would you implement such a program?

Respectfully,

Larry

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Re: Gubernatorial candidate's revolutionary money plan ...
DrKrbyLuv wrote:

Which part of the debt and how much would you suggest be repudiated?  How would you implement such a program?

Larry,

You were not supposed to call me on that.  It is a very difficult thing to do in anything in a way that approaches being fair.  If we are talking government debt, how about something like a small amount (in the $10's of K ) that everyone gets back 100% on and the rest get a sliding scale scale kind of like a progressive income tax.  If you did not own debt, large debtors would be willing to sell you theirs at a discount and both would benefit from a larger return.  Maybe some of the people that take the largest haircut could get some portion back as credits against future tax liabilties.  As for the private debts, the haircut would need to be more uniform and then go through some form of bankruptcy as necessary to get debt down to levels that might  be able to be repaid. 

I am totally aware that this will never happen.  This is far to painful of a course of action to do unless there is no other choice.  I am pretty sure that we are locked in a suicide course that can not be pulled out of until the people see the current system completely breaking down before their eyes.  We are still a ways away from that so status quo will be the easy and obvious course of action.

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Re: Gubernatorial candidate's revolutionary money plan ...

To ccpetersmd

 

Yes I was writing to Cris M.

 

I will try to answer the questions that you asked of Larry and Tomas.  Let’s start where you said “ “ the money created still had no basis in actual or future product of the community”.  This would not be true because all that money with my Plan would be earned by some one that had produced some thing of value to some one else.  After it was earned it would be spent to buy something that some one else had produced with their knowledge and labor combined with some raw resource of the earth, or someone like you else would earn that money by providing a serve that someone was will to pay you for.  That is one of the best parts about wealth produced money, everyone earns it.  No one gets any money without producing some like they do with a loan.     

 

‘‘Wouldn't this "money", existing within the world with the banking system we all know and love, continue to expand?”  Yes that could be true if people wanted to just keep borrowing more.  But you are not considering a couple of the most important points.  The people would not be forced to borrow to have money in circulation and if some of the people pay down their debt money would be extinguished.   

 

That is the reason for the plan to wash a lot of the debt out of the system but to still have money in circulation.  Yes I would like to stop the banks from creating money, but before you can do that you have to have some other money in circulation.

 

 

You stated: I anticipate that you agree that this "Davis Money Plan" would also be an example of money being "loaned into existence"  Here again you show that you don’t understand the plan, you are reading it with a preset mind set.   The Davis plan as nothing to do with loaning money into existence.  The Davis plan is all about earning money into existence.

 

You stated: is your argument that this plan is a good idea based upon the presupposition that it would supplant the existing means of money creation, such as fractional reserve banking? No that is not the case at all the plan is based on putting money into circulation that can be used to pay the interest on the loans that are out there not without shifting the debt over to some one else.  You must understand that when all money is loaned into circulation as it is now there is no way to create the money needed to pay the interest the loans.  Yes you can pay the interest on a loan but only if you shift debt to someone else.

 

You stated: Am I correct in assuming that you would propose the "Davis Money Plan" in lieu of our current system, rather than in addition to it?  Here you half right the Davis Money Plan is to be an addition to the current system until we get enough debt free money in to circulation so that there will not need the need to borrow.  If we get the interest of or the system and a lot of the taxes most everyone will be able to obtain the money they need without the need to borrow.

 

You stated: Trying to re-inflate the system, whether through the Fed, the government, or this plan, seems to me a bad idea. Thoughts?  We are not trying to  re-inflate the system we are trying to deflate the system in a way that will beneficial to the people.  The only way to do that is to get the interest and taxes of the system so that so many non producers are living off the producers.

 

I hope that has answered you questions.  If not please call me at 952-925-6199.

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Re: Gubernatorial candidate's revolutionary money plan ...

Thanks to Larry and Dale for directly answering my questions; your efforts are very much appreciated! I'll have to re-read your posts several times to attempt to understand the fully, but I thank you for taking the time!

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Re: Gubernatorial candidate's revolutionary money plan ...

To Chris M

 

Thank you for your reply.  I have a few questions and a few comments that I would like to ask and comments on what you wrote.

 

I will begin with your comments on base money; I have heard it called high powered money.  I have never heard it called hot money before.  Just goes to show that a person can hear something different and learn something different all the time.  I agree that the 12 Federal Reserve Banks create new money to buy debt.  From that point I am not sure what you are saying.  Are you saying that when the 12 Federal Reserve Banks buys Treasury bonds (debt) and other business securities (debt paper), that debt goes away and no one have to any debt and no one has to pay interest on that debt any more? 

 

Does this base money have a physical form like Federal Reserve Note or is some of it just numbers on a ledger.  Are you saying that Base is not a promise to pay from a bank?  That Base money is a wealth based debt free money?

 

Here is what John B. Henderson Senior Specialist in Price Economics writing for the Congressional Research Service said “Federal Reserve open Market operations affect the creation of money.  If the Federal Reserve open market account purchases U.S. Treasury bills, which aren’t money, from a bank as a “dealers”, it pays by crediting the account of the seller at a Federal Reserve Bank; this is not instantly money, but new reserves which permit the commercial banking system to make more loans and create more money.” It is my understanding they call it high powered money because when the banks have it they can create around nine time that much check book-money.  But if it moves into the hands of the people it is only worth its face value.

 

“The Federal Reserve role as lender of last resort is activated at the discount window, where depository financial institution can take the initiative of borrowing reserve in order to fund shortfalls in their cash positions form any cause, including profitable lending.”

 

That is why Russell L. Munk states:” that the action creation of money always involves the extension of credit by private commercial banks.”  

 

 

Moving on to where you said that “all money in bank accounts is not credit money.  Some of it is base money”.  The words “All bank deposits are a form of credit.  Basically, they represent amounts owed by banks to depositors. They come into existence by an exchange of bank promises to pay customers for the various assets which bank acquire-currency, promissory notes of business, consumer, and other customers, mortgages on real estate, and Government and other securities” that was a direct quote from the 3rd edition of The Federal Reserve System’s Purposes and Functions published by the Board of Governors of the Federal Reserve System.  That is why all the money in checking accounts is a liability of the banks.  The banks have never put anything in the checking account except their promise to pay.

 

It is true that Federal Reserve notes are legal tender and bank deposits are not, but all money is credit money.    “Federal Reserve notes are issued by the twelve Federal Reserve Banks pursuant to Section 16 of the Federal Reserve Act of 1913.  A commercial bank which belongs t the Federal Reserve System can obtain Federal Reserve from the Federal Reserve Bank in its district whenever it wishes, but it must pay for them in full, dollar for dollar, by drawing down its account with its district Federal Reserve Bank.

 

The Federal Reserve Bank in turn obtains the notes from the Bureau of Engraving and Printing in the United States Treasury Department.  It pays to the Bureau the cost of producing the notes.  The Federal Reserve notes then become liabilities of the twelve Federal Reserve Banks.  Because the notes are Federal Reserve liabilities, the issuing bank records both a liability and an asset when it receives the notes from the Bureau of Engraving and Printing and therefore does not show any earning as a result of the transaction.  

 

In addition to being liabilities of the Federal Reserve Banks, Federal Reserve notes are obligations of the United States Government.  Congress has specified that a Federal Reserve Bank must hold collateral equal in value to the Federal Reserve notes which that Bank receives.  The purpose of this section was to provide backing for the note issue.  The idea was that if the Federal Reserve System were ever dissolved, the United States would take over the notes (liabilities) and would also take over the assets.  The notes are a first lien on all the assets of the Federal Reserve Banks, as well as on the collateral specifically held against them.”   Source a personal letter to me from Russell L. Munk Assistant General Counsel, Department of the Treasury, Washington D.C.

 

Then you wrote “as I understand the Davis Plan, the idea is to essentially create base money at the state level by having state banks issue credits that are not intended to be paid back.”   That is not the idea at all.  It appears that you like so many other looked at the Plan with a lot of preconceived ideas that was not found in the plan.  The plan is to create money based on the wealth created by working people.  Not to create credit in any form.  Money that is not a liability to any one in any manner.  What you call base money is just another way to say debt.  Base money is not debt free money.  We only want to create wealth money.  You talked about “free money”.  There is no such thing as free money when one has to work to get it.  It is only free money when one gets to use one’s promise to pay (that can’t be paid and gets to buy everything you want with it) that what the banking system does, the banking system gets everything for free!  The people have to work to produce everything and the banks get to take it for nothing.  To produce any and everything it takes three things combined at the same time, knowledge, labor and raw resources of the earth.  All we want to do is create money base on that production with out creating debt to any one.  Under this plan there can be no creation of money without a corresponding increase in real physical wealth.

 

It seems that because you have never seen a wealth money system you believe such a thing can’t be.

You wrote:

But if I am a bridge contractor and I am paid in these Davis Plan dollars, which land in my bank account, they are FRNs.  I could take out actual hard currency if I wanted to, or not, it doesn't matter.  Bank accounts, by definition, hold FRNs.  Period.  Nothing else.  I am unaware of any rules in the Federal Reserve Act that authorizes states to create FRNs and I don't see the relevant parts in the constitution either.  The legal ability does not exist.  Imagine if the Davis Plan called for intaglio presses to be bought and for actual FRNs (hard currency) to be produced.  Do you think the feds would have a problem with that?  Yes?  Me too. 

Here we totally disagree; the facts are that commercial bank accounts have nothing at all to do with FRNs.  The commercial banks do not create any of them.  They don’t hold very many of them in their vaults.  They don’t loan any of them.  The  people never use them in any large dollar transactions.  They are never use in transactions between banks.  People would use no more of them after the Plan went into effect than people do now.  If the banks wanted or needed any more of them they would buy them from a Federal Reserve Bank just like they do now.  People can only get them from a commercial bank by buying them from the bank with checkbook money that has been created by a commercial bank.  Very few people do that now and they would not do any more of it after the plan went into effect.

 

Yes, I believe that Federal Reserve Bank people would have a problem with state banks creating wealth based debt free money.  However, unlike you I don’t think they could do anything about it.  The Federal Banking system and their laws have nothing to do with the state banking system.  There are no laws what so ever dealing with wealth based money only debt based money.

 

I believe you make some very bold passionate statements that you clearly believe.  However, I did not see any creditable facts to back up your statements.  For an example your stated “that you were a harsh critic of the federal governments ability and tendency to print” (money) implied not stated.  It is a very provable fact that the government prints no money.  It prints up lots of bonds bills and other debt securities, but none of these are money by the Treasury’s own statements.

 

Byron

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Re: Gubernatorial candidate's revolutionary money plan ...
Chris Martenson wrote:

But if I am a bridge contractor and I am paid in these Davis Plan dollars, which land in my bank account, they are FRNs.  I could take out actual hard currency if I wanted to, or not, it doesn't matter.  Bank accounts, by definition, hold FRNs.  Period.  Nothing else.  I am unaware of any rules in the Federal Reserve Act that authorizes states to create FRNs and I don't see the relevant parts in the constitution either.  The legal ability does not exist.  Imagine if the Davis Plan called for intaglio presses to be bought and for actual FRNs (hard currency) to be produced.  Do you think the feds would have a problem with that?  Yes?  Me too. 

Byron Dale wrote:

Here we totally disagree; the facts are that commercial bank accounts have nothing at all to do with FRNs.  The commercial banks do not create any of them.  They don’t hold very many of them in their vaults.  They don’t loan any of them.  The  people never use them in any large dollar transactions.  They are never use in transactions between banks.  People would use no more of them after the Plan went into effect than people do now.  If the banks wanted or needed any more of them they would buy them from a Federal Reserve Bank just like they do now.  People can only get them from a commercial bank by buying them from the bank with checkbook money that has been created by a commercial bank.  Very few people do that now and they would not do any more of it after the plan went into effect.

Byron,

I have heard you make this argument before but unless I am missing something, I don't buy it.  I know that you have brought legal proceedings against banking / government institutions about monetary payments, but I still don't see what you are driving at.  Do you deny that checkbook money is fungible at par with FRNs?   Do you expect this relationship to change in the future? 

If you agree that checkbook money is fungible at par with FRNs and will likely remain that way forever, at best you are making a distinction without any real difference when you say that commercial banks can create checkbook money but have nothing to do with FRNs.  At worst it could be argued that you splitting hairs or being disingenuous.

However, if you don't think that checkbook money is (or will remain) fungible at par with FRN's, can you explain how you think this will happen?  I assume this distinction is not just some FDIC delay during a bank run.

__________________________________________

One more question.  By what metric can we judge the Davis plan as being successful?  If it is just Minnesota's unemployment going down or roads improving, would it be possible that those gains come at others expense?  How would the results of the Davis plan be quantitatively ( not mechanically ) different than if Minnesota bought a printing press and paid counterfeit cash for the projects that it was going to spend checkbook money on?

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Re: Gubernatorial candidate's revolutionary money plan ...

To goes211

You stated:

"If you agree that checkbook money is fungible at par with FRNs and will likely remain that way forever, at best you are making a distinction without any real difference when you say that commercial banks can create checkbook money but have nothing to do with FRNs.  At worst it could be argued that you splitting hairs or being disingenuous."

I agree that a person can go to a bank and buy FRNs and pay for them dollar for dollar with checkbook money but only if you don’t try to buy too many of them and only if not too many people try to do it at the same time. 

 

I have a personal letter from the Board of Governors of the Federal Reserve System dated September 28, 1999 that states in 1999 the total currency in circulation was $506 billion and that the Federal Reserve Board staff estimate that two-thirds of all currency in circulation is held outside the United States.  That means there was only about $168 billion of FRNs in circulation in the United States and most of that was held in bank vaults.  That same letter said the checkbook money in circulation was $607 billion.  I don’t think that much will change on that front.  If any thing with some many companies going to direct deposit I doubt if the printing of FRNs have any where near kept up with the creation of checkbook money.  So if we created some more I doubt if anyone but a few bankers would even notice the difference except as the interest and taxes begin to go down most people would notice that their pay checks go farther.

 

These are the facts that I use to back up what I say or write.  Why it I never see any of there kinds of facts to back up what others say.  All most people do is just repeat some thing that some one else said that is not grounded in any facts.

 

You say I have "one more question.  By what metric can we judge the Davis plan as being successful?  If it is just Minnesota's unemployment going down or roads improving, would it be possible that those gains come at others expense?  How would the results of the Davis plan be quantitatively ( not mechanically ) different than if Minnesota bought a printing press and paid counterfeit cash for the projects that it was going to spend checkbook money on?"

The quantitatively difference is whether one owns or one owes.  There would be no mechanical difference. If you don’t understand the difference between owning things owing on everything I don’t know what else I can say.

 

Byron  

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Re: Gubernatorial candidate's revolutionary money plan ...
Byron Dale wrote:
goes211 wrote:

"If you agree that checkbook money is fungible at par with FRNs and will likely remain that way forever, at best you are making a distinction without any real difference when you say that commercial banks can create checkbook money but have nothing to do with FRNs.  At worst it could be argued that you splitting hairs or being disingenuous."

I agree that a person can go to a bank and buy FRNs and pay for them dollar for dollar with checkbook money but only if you don’t try to buy too many of them and only if not too many people try to do it at the same time. 

Isn't this true of most every physical object.  If I walk in to a Grocery store with $300,000 that has milk for $3 a gallon, do you think that I will walk out with 100,000 gallons of milk?  In this respect, requesting physical notes work like purchasing most other products.  This even more  understandable in the fraudulant, fractional reserve, fiat world we live in.  Back when notes were supposed to be redeemable in specie, this the action was even more obviously fraudulent.

Byron Dale wrote:
goes211 wrote:

One more question.  By what metric can we judge the Davis plan as being successful?  If it is just Minnesota's unemployment going down or roads improving, would it be possible that those gains come at others expense?  How would the results of the Davis plan be quantitatively ( not mechanically ) different than if Minnesota bought a printing press and paid counterfeit cash for the projects that it was going to spend checkbook money on?"

The quantitatively difference is whether one owns or one owes.  There would be no mechanical difference. If you don’t understand the difference between owning things owing on everything I don’t know what else I can say.

Byron  

I understand the difference between owning something and owing something but I consider your use of the terms in this context to be rather misleading.  You admit the Davis plan is mechanically indistinguishable from counterfeiting.  If I were the state I would certainly enjoy having the right to create notes for free and exchange these notes for things of value.  Of course the state is nothing but a group of elites that claim the right to rule over us for various reasons.  At this point they don't even feel the need to follow their part of the so-called contract ( the US constitution ) that grants them these limited powers.

I am certainly against renting fiat money from the banking system and I agree that it is ridiculous to pay rent for something that the owner does not even own.  This is especially true when the object we are renting only has value because the government says it does. 

What a strange world we live in.

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darbikrash
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Re: Gubernatorial candidate's revolutionary money plan ...

Good points all around, but I am put off by the dismissive response on the subject of metrics.

People experienced in managing development projects (projects in any field that differ substantively from prior art) know that measurement methods, and the ability to measure, is more important than the concept being put forward. Much time, energy, and emotion always surrounds the initial concept or idea, usually by the inventor. Impassioned debate, lengthy discourse and feasibility argument dominates the landscape of the new development project, all centered on the concept, the big idea.

Experienced management knows to ignore this (as there is no winning) and to focus on the measurement method, creating a “sandbox” wherein these ideas and concepts can be “prototyped” in a controlled, non threatening fashion, all the while being measured for efficacy.

This is critical, as without this ability to measure, the project success is shrouded in doubt and any results turn to yet more arguments about how to subjectively interpret any outcome- usually to the benefit of either the most vocal stakeholder or the inventor.

Many development managers will simply say, no measurement = no project. And with good reason.

So, to amplify the question of goes211, how is this endeavor to be measured?

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Re: Gubernatorial candidate's revolutionary money plan ...

To goes211

you wrote "You admit the Davis plan is mechanically indistinguishable from counterfeiting."  

Where did you get that impression?  I simply said the mechanics of the Davis Plan would be the same as what the banks are now doing; the only difference would be that the bank would spend the money to pay for production.  Not loan the money at interest creating a debt unpayable in money, payable only through the taking of the borrower property. 

Why are you so dead set against debt free Money?  The only reason that I can think of is that you must be a banker who is great personal benefit from this system. 

 

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Re: Gubernatorial candidate's revolutionary money plan ...

To darbikrash

You stated 

"Many development managers will simply say, no measurement = no project. And with good reason.

So, to amplify the question of goes211, how is this endeavor to be measured?" This endeavor will be measured when we see the total debt go down, imployment goes up, people having saving without drying up the money supply and lots of stress goes out of people lives.

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Re: Gubernatorial candidate's revolutionary money plan ...
Byron Dale wrote:

This endeavor will be measured when we see the total debt go down, imployment goes up, people having saving without drying up the money supply and lots of stress goes out of people lives.

Mr. Dale thank you for acknowledging my comments. I trust you know I post with constructive intent- I think we all want the same thing here.

In the context of the proposed Davis plan, I do find your response to be a bit in the abstract. Precisely how do you intend to measure, document, and compare the attributes (before and after) mentioned in your response?

1.)   Total debt before and after enactment of the Davis plan or a test case with similar protocol.

2.)   Employment figures, before and after, keep in mind the rich history of politicians rigging employment numbers to suit their agendas, how will you insure that your numbers are not questioned.

3.)   People having savings that are demonstrably increased solely due to the effects of your initiative and not attributable to some external factors.

4.)   Less stress in peoples lives. You may well be right with this one, but I’d suggest removing it from your list as it will prove to be impossible to document.

I’m gathering from your responses to this issue that you do not consider these things terribly important, and perhaps to be self evident and not worthy of any significant discussion or predictive planning. I think this is a mistake, because if you succeed (and especially if you do succeed) your efforts will be trivialized, challenged, and discredited by those who stand to lose the most from this type of initiative.

May I suggest a starting point is to create unassailable baseline numbers for the status quo for all attributes that you predict will be impacted by the Davis plan. You cannot succeed if you try and present conclusions a priori, you will need to show data before and after. Additionally, you may well find that coming up with the measurement techniques and the data to support whatever outcome occurs will be the hardest part of the exercise (as it so often is).

A reasonable argument can be made that if you cannot measure the results of a program, than you really didn’t do anything. The first corollary to this statement is if measurement data is used, and it is called into question, we can have the same result. Failure to anticipate this onslaught in the face of a potential success will prove to be very hard to overcome, with respect to credibility and any subsequent scale up.

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Re: Gubernatorial candidate's revolutionary money plan ...
Byron Dale wrote:

To goes211

you wrote "You admit the Davis plan is mechanically indistinguishable from counterfeiting."  

Where did you get that impression?  I simply said the mechanics of the Davis Plan would be the same as what the banks are now doing; the only difference would be that the bank would spend the money to pay for production.  Not loan the money at interest creating a debt unpayable in money, payable only through the taking of the borrower property. 

It might have something to do with me asking the question

"How would the results of the Davis plan be quantitatively ( not mechanically ) different than if Minnesota bought a printing press and paid counterfeit cash for the projects that it was going to spend checkbook money on?"

and you responding

The quantitatively difference is whether one owns or one owes.  There would be no mechanical difference.

No mechanical difference sounds a lot like mechanically indistinguishable in my book.  Then you go on to ...

Byron Dale wrote:

Why are you so dead set against debt free Money?  The only reason that I can think of is that you must be a banker who is great personal benefit from this system. 

Another bad trait of some soverign money supporters is that they assume bad faith if you disagree with their conclusion.  As I have stated many times before I agree with your premise about the current system, I only disagree with your proposed solution.  If people would read what I actually write and if there were not literally dozens of threads on this subject that one needs to read through to find various points about this topic, people might see that I am not entirely in disagreement.

Would it be fair to ask why you are such an advocate of central control for our money system?  You merely want to take power away from the banking system and give it to our so-called elected leadership.  You clearly have a lot more faith in them than I do.

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Re: Gubernatorial candidate's revolutionary money plan ...

At Byron's request I'm linking this flow chart because people here had asked for a better explanation of how this money plan would work.

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Re: Gubernatorial candidate's revolutionary money plan ...

To goes211

You wrote 

"Would it be fair to ask why you are such an advocate of central control for our money system?  You merely want to take power away from the banking system and give it to our so-called elected leadership.  You clearly have a lot more faith in them than I do."

As you can clearly see from the flow chart above I do not want to give new powers to elected leadership I want the people to have the power.  I just want the elected leadership to work for the benefit of the people and for honest commerice.

I do think that the power to create money for their personal profit should be taken away from bankers. 

 

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Re: Gubernatorial candidate's revolutionary money plan ...
Byron Dale wrote:
goes211 wrote:

"Would it be fair to ask why you are such an advocate of central control for our money system?  You merely want to take power away from the banking system and give it to our so-called elected leadership.  You clearly have a lot more faith in them than I do."

As you can clearly see from the flow chart above I do not want to give new powers to elected leadership I want the people to have the power.  I just want the elected leadership to work for the benefit of the people and for honest commerice.

I was being somewhat facetious when I asked that question because I know where you stand on the issue.  I was trying (unsuccessfully) to show that your statement that if I am against sovereign money, I must be in the tank for the bankers was not fair because it was equivalent of me accusing sovereign money supporters of being in favor of more concentrated government control. 

It seems my attempts at subtlety are rarely successful.

Byron Dale wrote:

I do think that the power to create money for their personal profit should be taken away from bankers. 

Now that is something we both agree upon.

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Re: Gubernatorial candidate's revolutionary money plan ...

darbikrash wrote:

Mr. Dale thank you for acknowledging my comments. I trust you know I post with constructive intent- I think we all want the same thing here.

In the context of the proposed Davis plan, I do find your response to be a bit in the abstract. Precisely how do you intend to measure, document, and compare the attributes (before and after) mentioned in your response?

1.) Total debt before and after enactment of the Davis plan or a test case with similar protocol.

2.) Employment figures, before and after, keep in mind the rich history of politicians rigging employment numbers to suit their agendas, how will you insure that your numbers are not questioned.

3.) People having savings that are demonstrably increased solely due to the effects of your initiative and not attributable to some external factors.

4.) Less stress in peoples lives. You may well be right with this one, but I’d suggest removing it from your list as it will prove to be impossible to document.

I’m gathering from your responses to this issue that you do not consider these things terribly important, and perhaps to be self evident and not worthy of any significant discussion or predictive planning. I think this is a mistake, because if you succeed (and especially if you do succeed) your efforts will be trivialized, challenged, and discredited by those who stand to lose the most from this type of initiative.

May I suggest a starting point is to create unassailable baseline numbers for the status quo for all attributes that you predict will be impacted by the Davis plan. You cannot succeed if you try and present conclusions a priori, you will need to show data before and after. Additionally, you may well find that coming up with the measurement techniques and the data to support whatever outcome occurs will be the hardest part of the exercise (as it so often is).

darbikrash,

Fantastic post...I agree this would be very helpful in taking an abstract sounding program and to quantify expectations in terms of dollars, employment and a budgetary projection.  Stuff people can more readily understand rather than potential alone.  You really got me thinking about my state and how I might better present the plan to my legislators.  Here are some crude numbers that hopefully ballpark what we're talking about; this would need refined of course.

The plan being discussed here was originally intended to fix Minnesota's structurally deficient bridges which is really a national problem:

Bridge collapse points to national problem (2007)

The Minnesota bridge that collapsed this week is just one of 73,518 "structurally deficient" bridges across the country that state and federal inspectors have deemed in need of significant repairs. While the total failure of a busy bridge is shocking, the problem of deteriorating bridges and not enough money to fix them all is well-documented.

At the time of the collapse Aug. 1, some lanes of the 40-year-old span of Interstate 35 over the Mississippi River in Minneapolis were closed while construction workers made surface repairs. But there were several flaws that in 1990 landed the 458-foot bridge over the Mississippi River on a list of "structurally deficient" structures compiled by the Federal Highway Administration (FHWA).

U.S. Transportation Secretary Mary E. Peters also called on states to immediately inspect any steel deck truss bridges similar to the I-35 structure.  Former Pennsylvania Gov. Tom Ridge (R), in an interview on MSNBC's Hardball Thursday (Aug. 2), predicted that every governor now would order similar inspections for all major infrastructure.

The tragedy highlights a nationwide problem of deteriorating bridges -- as well as roads -- that states and the federal government are struggling to maintain in the face of fast-rising costs of construction and the shrinking value of gasoline taxes.

More than 26 percent of the nation's bridges were rated either structurally deficient, meaning the Minnesota bridge and more than 73,000 others were in need of major repairs, or "functionally obsolete," a group of 79,427 bridges deemed no longer adequate for the amount of traffic they carry. It would cost an estimated $9.4 billion a year for 20 years to bring all of the existing bridges up to date, according to the American Society of Civil Engineers.

$9.4 billion / year for 20 years would total $188 billion nationwide and I don't know what amount applies to Minnesota alone.  The big question is if these bridges are unsafe, can we wait 20 years to fix them?  The reason for the delay is probably due to funding restraints.  If Minnesota were 1/50th of that amount it would be approximately $3.76 billion.  If it were a three year project, it would be around $1.25 billion per year.

Bridge collapse points to national problem (2007) continued...Bridges are just one piece of the transportation network strained by long-term neglect, a steady increase in the number of drivers, a stagnant source of funding and rampant inflation of road-building costs, according to a March 2007 study by the American Association of State Highway and Transportation Officials (AASHTO).

The biggest hurdle to improving roads is that federal gasoline taxes, which pay for more than 45 percent of the nation’s transportation infrastructure, have not been raised since 1993 and are not even sufficient to cover the spending in the 2005 federal transportation law. While gasoline prices have skyrocketed to more than $3 a gallon, federal taxes to support road work have not because the 18.4-cent federal tax is added on each gallon -- not each dollar -- of gas sold. Federal gas taxes will fall $11 billion short of planned road projects by 2009, but the gap could be as big as $19 billion the following year, AASHTO found.

A longer-term problem is that the cost of building and fixing roads has grown rapidly in recent years. Between the last gas-tax hike in 1993 and 2015, construction costs will have increased by more than 70 percent, according to AASHTO. Federal gas taxes would have to go up at least 3 cents by 2009 and 7 cents more by 2015 just to maintain the current highway system and keep pace with the fast-rising cost of roads, the association estimates.

Ridge told Hardball: "There's not a governor and state legislature on an annual basis that doesn't go through the political torment and anguish every year about how to pay for these things. Everybody knows there's a need and everybody is kind of reluctant to raise taxes."

If the national shortfall is currently $19 billion a year and Minnesota's share is 1/50th, that would be $380 million per year.  I'm not sure what the total is as only the deficit is listed but let's assume the total is twice that amount or close to $760 million per year.

This work would just repair existing infrastructure while we know modernization of transportation systems is greatly needed in the U.S.

States Make the Case for Building Essential Transportation Capacity (AASHTO)

Workers with a 30-minute commute lose nearly three full work days a year sitting in traffic. In large cities like Los Angeles, delays exceed 60 hours a year.

As the evidence shows, travel is greatly out-distancing available room on the roads. A series of new reports, Transportation Reboot: Restarting America's Most Essential Operating System, by the American Association of State Highway and Transportation Officials (AASHTO), makes the case for increasing the nation's transportation capacity. State transportation leaders have identified their most urgently needed capacity expansion projects that are critical to rebuilding the economy and keeping a competitive edge worldwide.

"Our first report, Unlocking Gridlock, shows that we are experiencing system overload," said John Horsley, AASHTO's executive director, at a news conference today in Texas to release the report. "While congestion levels declined with the recession, congestion is now returning, costing millions in lost time and productivity. Capacity increases are needed in transit, rail, and particularly in highways."

"Even with strategies to reduce traffic and improve transit, highway system expansion is critical," said AASHTO President Larry "Butch" Brown, director of the Mississippi Department of Transportation. "If most or all of our capital investment were made in system rehabilitation and little to none in adding needed capacity, road conditions would improve, but traffic would grind to a halt."

Transportation Reboot: Does AASHTO support investing more in transit? Absolutely. States today actually invest more in transit than does the federal government. In 2007, states spent $13.3 billion on transit, compared to federal funding of $10.7 billion. AASHTO supports doubling of transit ridership by 2030 and increasing federal transit funding by 89 percent.

Does AASHTO support investing more in intercity passenger rail? Of course. State departments of transportation have called for investing $50 billion during the next six years to expand intercity passenger rail service.

Total State and Federal expenditures on transit total around $24 billion per year.  Let's double that amount to $48 billion for both transit and highways improvements and Minnesota's share at 1/50th would be $960 million per year.

Now for State totals:

  • Three Year Bridge Safety Program, $1.25 Billion/Year
  • Highway Repairs, $760 Million/Year 
  • New Transit Systems and Highway Improvements, $960 Million/Year 
  • Total Program $2.97 Billion/Year/State

No doubt these numbers need massaged for each state but I think we are seeing the magnitude of the plan's potential.  Employment projections and future budgets could be added to better define the expected impact.  Another element not discussed in my simple estimate is the tax benefit of spending this much money into the state economy at the grass roots level (productivity).

Larry

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Thomas Hedin
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Re: Gubernatorial candidate's revolutionary money plan ...

Larry,

Can you embedd this video here for everyone to watch.  It's Leslie Davis and he was just interviewed on Almanac on PBS here in town.

 

 

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