Better than a clean slate
- Suppose that the fed were to issue a new kind of dollar bill which can
be used by the consumer in the normal way, but is particular in the way
that it is used by the banks. The banks can borrow this dollar to any
amount they need provided that a) they are not allowed to charge
interest on it when they credit others with its value and b) after one
year has passed the notes must physically be returned to the fed,
canelling the associated bank deficit.
The aim of this is simply to stop the banks going broke, whilst
allowing creditors sufficient freedom to withdraw their investments and
savings as they wish. The banks could no longer make a profit on
somebody else's doubts and misfortune. The pressure on the market for
investors to withdraw before the bank crashes and for new speculators
to "buy low" are both reduced by this means. And after a year, when
everyone who had doubts is satisfied, our economy is back again on an
- From: David Chester <chesterdh@...>
> The banks can borrow this dollar to anyamount they need <
Presumably at zero interest?
They would borrow as much as possible.
> provided that a) they are not allowed to chargeinterest on it when they credit others with its value <
They would loan regular money for interest as before, but would have the new money as reserves.
So this would be a subsidy to the banks.
>and b) after oneyear has passed the notes must physically be returned to the fed,
canelling the associated bank deficit. <
The banks would use the new money to make one-year loans at interest. That would be good for the shareholders of the bank. The bank gets free money that it can loan out for interest.