Monday, January 14, 2013

Democratize The Fed

Democratize The Fed
Joe Siano

Critics of the Federal Reserve’s monetary policies complain that they are fundamentally unfair.  When the Fed creates new money, the first people to get their hands on it are the big fat cat bankers and their rich friends.  Those fortunate few are then able to spend the new dollars first.  However, by time this new money reaches Joe and Jane Six-pack, the flood of new currency will have inflated the money supply and raised prices.  Thus Joe and Jane wind up paying more for the same stuff than the fat cats bought for cheap.

The obvious solution is to get the new greenbacks directly to the average guy and gal on the street.  And the way to do that is with an innovative new Treasury Department program.
Modeled after the popular which enables Postal customers to print stamps right at home, from their own computer, will allow average Americans to print legal tender in the comfort of their homes or offices.

Each customer will receive sheaf of official U.S. Currency paper along with the software to print his or her own money.

Of course no one would be able to print as much money as they want on a whim.  That would be crazy.  So how much could the typical American household expect to print?

A good place to start is QE 3.  Fed chairman Bernanke plans to inject about $85 billion into the economy each month with no end date mentioned.  This works out to a smidge on $1 trillion a year in new money.

By using and bypassing the Fed, each U.S. household should be able to print $680 month or about eight grand a year.  But do the Gates, Buffet or even the Streisand households really need another eight large a year?  I don’t think so.

Therefore, let me propose a sharply graduated printing plan whereby the less you earn, the more you print.  Under my proposal, the richest 10% print nothing.  The next richest 10% would get about $800 per year.  That’s about enough for an evening on the town including dinner and theater for two couples.  A nice perk for a busy professionals.

However those on the lowest rung of the earnings ladder can print up to $1,700 a month or over $20K per year.  Of course this would be in addition to any welfare, food stamps, housing subsidies, unemployment, disability, Social Security, Medicare or Medicaid payments that they might be getting.  Therefore the whole $20K is found money, disposable income.   (See chart below)

With an extra $1,700 a month at their fingertips, America’s lowest earners would  easily be able to afford new car payments, a spruced up wardrobe, the latest electronic gizmos, a resort vacation timeshare and one or two Vegas getaways each year.

Talk about stimulus!  Consumption goes through the roof.

Of course the ultimate beauty of it all is that this is a totally self-funded program.   Americans will pay back the government for the software, paper and shipping costs with the money that they print up.  Need we say more?

1 comment:

Anonymous said...

I have one question: Is ignorance of history and economics required for libertarians, or merely strongly encouraged. Because it is blindingly obvious that this article is wholly unrealistic. To point out just one thing, in 1880, it was estimated that one half of the bank notes circulating in the US were either counterfeit or backed by nothing.