How to fix an economy

When looking at the economy today there is a problem, a big problem with rising debt, rising cash supply and rising inequality. The risks of a currency crash is growing. Entrenched politics and policy is showing little leadership in terms of the greater community. When looking into similar situations from the past, a more dominant and totalitarian government rises from the ashes when currencies crash.

One technique for problem solving is to visualize the goal. Do not worry about how to get there or any problems that may exist, just focus on the finished product. The path will open up once you know where you want to go. So where do we want our currency to go?

I want to go to a stable economy.

In trying to learn from the mistakes currently being made, anyone having the right to print money ends up abusing this ability and eventually crashes the economy. As a population does grow, the currency supply does need to grow with it and in the past the gold standard has worked well. In today world there is a lot of practical advantages with digital currency, but as with notes and coins the trust, security and integrity must be there.

When it comes to what backs a currency and binds its increase or decrease, I do propose that we use the population. As the community grows, more money is needed to facilitate all the required trades. As the population decreases less money is needed.

As for exactly how much money is introduced as someone is born and taken out as they die I am not sure. As a rough starting estimate $1 Million per person, but it depends on how much money a person will go through in there life, how much money they need at any one time and what range of prices we want to use for products, services and assets. To find the right value will take a lot of research, calculations and modeling.

I do consider a currency as the property of the people, so as new money is introduced or taken away it is first a part of the government budget before being spread amongst the population. Having a currency backed by the people does not mean the people become property should currency issues arise, it means that the currency is the property of the people.

The current system currently going between the Federal Reserve, Treasury and the Banks is creating mountains of easy money as fees and percentages are taken at each step of the chain. The cost this is having on the community is unsustainable and one way or another it will end. If as a community we cannot find a way out, then we will be lead out. I very much doubt there is one system that everyone can agree on, but if there is a way that many can agree on it is a start.

I am always open to good ideas.

a reply to: kwakakev
Fixing this economy properly is something that is way over my head. Getting people to accept the fix is not going to be easy, especially the ones who have more to lose because of the fix. Just happens that these people are in power in this country and their organizations have great political influence.

I can't influence any politicians, they aren't allowed to go against the system. They have rules they need to follow just like the rest of us.

a reply to: rickymouse

They have no plan, no vision, no options. Give the politicians that and yes it still may fail, but it is a chance. What is there to lose apart from some time and a bit of hope. We are not all micro chipped just yet.

a reply to: kwakakev

The biggest issue I see is the current inequity of labor, or willingness to contribute.
While I as well as others may be willing to forgo SOME of our hard-earned assets in an attempt to equalize things, my willingness will decrease dramatically if there's not a corresponding requirement to work and contribute to society if you are able to (a very, very small percentage won't but that's OK).

a reply to: kwakakev

Your in Australia? Why would you care about the direction of the US economy or currency? Maybe you're an expat working in Australia. Odd. I say that because I've made a ton of money trading the Aussie currency which is very strong and very well managed by the Aussie Reserve Bank, so if you're in Australia, no worries mate! Hoard Aussie Dollars and its all good!

"So where do we want our currency to go? I want to go to a stable economy."

As to the US economy and currency, it doesn't make any difference whatsoever what "we" want. The currency, the economy are owned, operated and controlled by the monied elites; the Federal Reserve Bank and its member banks like JP Morgan, Chase, etc. They answer to the big money interests in the hedge funds and other central banks and multi-national corporations.

As for the future? See the movie Bladerunner. The rich get richer, the poor get poorer. The rich live in the clouds high above the pollution and disease and the rest live at street level with no hope for any better future. It is, what it is.

We could have the natural system of voluntary, consenting exchange of goods between two parties, for their own mutual benefit without the outside threat of force.

What's that system called again?

Fundamentally, there are only two ways of coordinating the economic activities of millions.
One is central direction involving the use of coercion – the technique of the army and of the modern totalitarian state.
The other is voluntary cooperation of individuals – the technique of the marketplace.
– Milton Friedman

a reply to: TonyS

Yes I am in Australia. The effect from the 2008 global financial collapse was felt here, not as bad as some other places around the world but we got hit. If the US does go junk status the world is going to feel it due to its global reserve currency status. Where ever these US notes reach will know all about it. Is is not just the US ass on the line, although the US will cope the biggest hit. The effect on the world is going to create a right bloody mess.

1. There is nothing wrong with the economy , well at least not for the people that have control over it and who wrote the legislation that created the world economies. The largest corporations and oligopolies are making great profit margins and the .05% are getting farther away from the rest of us. The economy is working the way they wan't it.

2. The economy will not be fixed for the masses as long as the people that have the power to create and pass the legislation are being purchased by the highest bidders (lobbyist).

3. The economy is a symptom of a corrupt congress being controlled by the lobbying highest bidders.

The fix : don't waste your time solving the symptoms: economy, oil, health industry,etc go after the main issue. Nothing is being done in the benefit of the people (consumer) all the laws are for the benefit of the oligopoly corporate controlled industries.

I'm going to sidestep the evil this group or that group, and look at nature instead. We reached peak sweet crude in 2005. We reached peak conventional oil in 2012. The US saw per capita peak in energy consumption following the energy crisis in the 70s. Everything you see is a reult of people going berserk within their respective class and position of authority or lack there of, since.

Now we are facing peak gas and coal later this decade. We'll also be facing a climate nightmare as the century plays through. Nobody has any answers because solving one problems causes another. You solve the energy problem then will deal with overconsumption problem, which leads to accelerated ecological decay already at the brink. You pull back consumption too long or steep and all classes are hurt under our power hierarchal model. Nobody wants to let go, and yet most know deep down this won't last forever. Oh, the humanity!

a reply to: interupt42

One of the aims of this thread is to try and define or describe the type of economy or currency you want. What ever way the economy goes there is going to be problems. If you do not consider options for currency framework a main issue, what works better for you?

originally posted by: kwakakev
a reply to: rickymouse

They have no plan, no vision, no options. Give the politicians that and yes it still may fail, but it is a chance. What is there to lose apart from some time and a bit of hope. We are not all micro chipped just yet.

No plan is better than what we now have. Now if congress shut down for six months, things might get better.

a reply to: kwakakev

Well, it must be nice to live in Australia.

I understand your point and concern and I honestly don't know where this will all end. But something tells me it isn't going to end quite like we'd be inclined to think, meaning...I'm not to concerned about it. Here's the deal. The "US Dollar" is both, the world reserve currency, meaning countries across the world hold US Dollars in reserve to use in trade, buying and selling manufactured goods, food, commodities, etc. That's because...the US Dollar is the preferred currency for trade. It is the trade currency simply because there's so much of it available. But in reality, all that world trade is conducted by currency transactions communicated by computers. That means, in many respects, the US Dollar is a near "virtual" "digital" currency. I think the US Dollar will continue to be the trade currency for the foreseeable future. Why....because its easy. Think of what a headache changing to another trade currency would be!

But wait, there's more....suppose for a moment the World Bank said, they would create a currency for trade purposes based upon the value of a basket of currencies. How would they price anything in terms of the new "World Dollar"? I mean by that, we're looking at an incredibly complex problem of valuation and every country in the world would want the World Dollar to trade at parity to the US Dollar because....all the world's countries hold hundreds of trillions of US Dollars in their Central Banks. So this thing starts to resemble a dog chasing its tail.

It gets worse from there however. When I said it starts to resemble a dog chasing its tail, I mean it this way. The value of the US Dollar is, more or less, based upon the sum total value of goods and services produced in the US. If you go to a World Dollar valued on the value of a basket of currencies, then its real value is the value of the combined value of the goods and services produced by the countries whose currencies are part of the basket! Imagine what happens then. First, who does the daily calculation of what the "value" of those underlying economies is? The World Bank? But they don't control the economies of those countries.

So, at the outset, lets use this example. The world adopts the "World Dollar". Your Australian Reserve Bank, (which I quite admire by the way), is holding say 10 Trillion US Dollars and is told they are to be exchanged for 10 Trillion World Dollars. I can pretty well predict that the sharp people in charge of your Reserve Bank is going to say, "uh, no thanks, we'll turn in our 10 Trillion of US Dollars for 11 Trillion of your World Dollars to hedge against a decline in the value of your World Dollar". Well, I can guarantee you other Sovereign Central Banks will say the same thing! What does that build in? A devaluation of the value of the World Dollar from the very outset. Now, when the Euro was created it came in at par to the US Dollar and then lost value and then increased in value versus the US Dollar and now is worth something like $1.34 US. Much the same might happen with the new World Dollar, but I think it will be plagued by problem of its "real" valuation based upon a "basket" of underlying currencies. And that problem creates the opportunity for another bigger problem, i.e., the creation of a world wide inflationary wave! If the World Dollar falls in value, the cost of everything that Australia exports would go up in value versus the value of the World Dollar. Meaning that day 5, oil is priced at $110.00 World Dollars and on day 6, oil is priced at $120.00 World Dollars because in overnight currency trades, the World Dollar loses value. Pretty soon, you've got an inflationary wave washing over the whole world! But, more importantly, it plants the seeds for the whole thing to blow up! So, for example, an Australian Oil company prices oil at $120.00 World Dollars a barrel, Japan might well say, "uh, no....how bout we pay you $110.00 US Dollars?"

Is this to say the US Dollar will be the world reserve and trade currency forever? No. It may well be replaced one day. But I posit that when it is, it will be replaced by a "Dollar" based upon the value of an underlying commodity, like Oil or Coal or Uranium. But...most likely a "Petro Dollar". Or...we might see multi-systems develop within huge trading blocks, like with Russia/China. So rather than being formally replaced by some unaccountable world bureaucracy like the World Bank, it would simply be phased out or run in parallel with other "trade" currencies.

You can't fix something that's broken by design. Let it crash and rebuild a better one from scratch.

a reply to: TonyS

An International reserve currency status is only as strong as the international consensus behind it. The US dollar in terms of world reserve currency is on the decline. While a war policy has help keep some consensus through fear with the smaller nations, it has also fractured other consensus through distrust with the larger nations. As long as the USD does hold its value then it is an easy trade and it will remain. If hyperinflation starts then value is no longer stable and trade becomes harder.

At the moment, any ideas about a world currency looks to be quite an organic mix of policies, arrangements and agreements. On the global stage no nation trusts any other nation or single global entity to manage their economy. The markets look to best define the concept of a global currency through foreign exchange at this time. In terms of defining a global currency through a basket of currencies it is a fair and reasonable way to share the risk and balance the power struggle. As for how practical a global currency is, it can help simplify some multinational accounting but the world is not ready at this time.

As for what commodity is used to back the next USD has problems as those that own the market of that commodity also have superior influence over the currency and economy. Another option has been a basket of commodities, but then how is this measured and valued? It does become open to political influence like measuring inflation as how value is assigned can be very subjective and dynamic amongst market forces.

Once the world knows how to build and run a stable economy then I do see an increased chance of a global currency emerging through peaceful means. With the rise of many different currencies it does allow the world to try out many different ideas and look for a better way.

A nations currency only needs to be a small subset of the actual value of that nation, enough to facilitate trade. Cars, land, gold, paintings and other assets is where most of wealth of a nation is. Money helps us trade it and establishes the common value. This is why I believe having a currency tied to the population of a nation is one option worth considering.

a reply to: ArchAngel_X

Just because a car comes out with a defective part we do not scrap the entire car, we just have a recall and fix the broken component. The issues of trade are complicated and integrated, I do not want to break any more than is necessary to keep things running.

The Federal Reserve act of 1913 is one design that receives a lot of criticism. The dropping of the gold standard in 1933 is one move that took away a lot of monetary restraint. For the USD to be a global reserve I see there would have been a lot of demand for it as the gold could not keep up with all the global trading going on. Instead of the US money supply just having to just look after the US, it had to look after the world as well.

As of now there are trillions in reserves all around the world. When force has to used to keep up currency demand it does look to be reaching its limit. With economic activity now the justification to continue with money printing it is the wrong tool for the job, the issue is currency distribution not currency supply.

originally posted by: kwakakev
a reply to: interupt42

One of the aims of this thread is to try and define or describe the type of economy or currency you want. What ever way the economy goes there is going to be problems. If you do not consider options for currency framework a main issue, what works better for you?

Its not that I don't consider the currency framework a significant issue but it shouldn't be the main issue at this time.

The reason I say that is , because in order to establish a currency framework you need politicians and regulations involved.

Right now our politicians and the regulations they create primarily benefit the lobbyist (highest bidders). Hence you can't get any thing resolved for the benefit of the masses until you get the millions of dollars being thrown at congress under control.

So if you establish a new currency under the existing system it will be of no benefit to the masses but to the people who create ,draft, and endorse the laws which are the highest paying lobbyist. You will be back to step one as they wrote the existing policies and they will create the new policies.

In order to fix the economy and every other issue effecting the US along with the world , you need to diminish the monetary influences that elected officials get from the few people with the cash.

Under the existing system , regulations are not created for the benefit of the consumers ,or the masses , nor humanity but rather for the benefit of the Oligopoly lobbyist who draft and endorse the regulations that our congress robo signs.

My focus would be in creating an economy where technology is used to ensure that congress/elected officials can listen to their constituents without the constituents having to throw money at them.

If the masses got an equivalent voice as the lobbyist: do you think that net neutrality would be undone, do you think anti consumer labeling of GMO products would be passed, do think we would be involved in all the world crisis, do you think we would try to make our standard of living drop in order to do business with countries who endorse slave labor ?

All those things were done because the wrong people have control and the few wrong people stand to benefit from those regulations while the rest of us carry them.

a reply to: interupt42

The effects of lobbying does present a shameful political mechanism akin to legalized bribery. There is very much a place for specialized insights and understanding into complex social and governmental issues, but having money legally ruled as free speech has the government being lead by the market and not leading it.

How I do view congresses practical ability to instigate currency reform is similar to how PNAC viewed its police state reform - 'without some catastrophic event the ability to affect change will be a slow one'. The lead up to the 2008 global financial collapse was clearly in the media with plenty of warnings around all based on clear and simple economic advice, give out loans to people who cannot pay it back and they won't.

Now similar warnings are building, print too much money and it becomes worthless. For congress to act it must be lead by the market. If the market elite is able to get past its own competitive self interest and realize that their worth is based on the national worth, then pressure for currency reform can build and cut off the next collapse before it happens. Otherwise we will have our catastrophic event that will force change, we have all seen just how fast things can change in a day.

Considering the currency issues going on at the IMF at the moment, if the US is to redesign its currency there will be a lot of international review going on. The situation and implications with the US global reserve status does leave all nations as interested stakeholders to any redesign. In the current political environment the possibility for legislation blow out, discussion grid lock, special interest subversion and host of out issues making the situation even worst is a possibility.

One way to side step a lot of this is for the federal reserve board members to get together and make the decision that currency production will no longer be an arbitrary whim or reactionary response to market forces, but based on the population as a whole. I do expect resistance from those use to the flow of easy money. If economic restraint cannot be achieved then what will rise out of the currency collapse will be a long, slow and hard road with much uncertainty.

a reply to: kwakakev

Interesting post. I'd say we're pretty much in agreement.

You wrote: "This is why I believe having a currency tied to the population of a nation is one option worth considering. "

I don't understand that; what does it mean?

a reply to: kwakakev

You said: "If the market elite is able to get past its own competitive self interest and realize that their worth is based on the national worth, then pressure for currency reform can build and cut off the next collapse before it happens."

Uh, isn't going to happen. The "market elite" will never get past their own competitive self interest. And their worth isn't based upon the "national" wealth; its based upon trade volumes, high currency trading, etc. Not that it matters, because even if a portion of their wealth is based on the national wealth of the US, if they see the national wealth declining, they'll just short that play and make ever more money. Put more bluntly, they don't have any interest in the welfare or wellbeing of the US. They're floating above the landscape at 30,000' and trading on their computers. So are the huge multi-national corporations. For them, the US is just a tax and license jurisdiction and a place to park patents. If the tax situation gets outa hand, they move. TransOcean moved to Switzerland; another offshore drilling company moved to Dubai.

I could expound on this a whole lot more; I used to work for Exxon Mobile and I've talked with their senior management. I know how they think. As far as the monied and corporate elite are concerned, the US is the ultimate "fly over" country. Its just a market or markets to them. That's one of the biggest problems with US American politics; you don't see wealthy, talented "doer" type people in public office. They prefer to buy Congress, the White House, etc. They don't want to get their hands dirty and have to dig down into the weeds to fix problems. In fact they've figured out how to profit from the problems. They make money whether the fortunes of the nation are up or down.

You wrote: "The situation and implications with the US global reserve status does leave all nations as interested stakeholders to any redesign. In the current political environment the possibility for legislation blow out, discussion grid lock, special interest subversion and host of out issues making the situation even worst is a possibility."

In the world of the great womanizer, Bill Clinton, I feel your pain. I feel the pain of all the world's residents who somehow feel they have some vested interest in what happens in the US. I feel that pain because I'm here to let you know that as far as the political scene in the US is concerned, its only going to get worse, much, much worse. The game of politics in the US has become one of "rob the bank and get the hell outa Dodge while the getting's good". Everyone's looking to make a killing and get their wealth and themselves out before the big collapse. Politics and especially high office like Congress is just a path to stolen wealth and perks and offshore bank accounts through political connections. There's gridlock in Congress and always will be because to do nothing is the surest way to stay in office for the longest time. The longer they are there, the more loot they make off with.

a reply to: TonyS

What I mean by having the currency ties to the population of a nation is similar to how the the currency use to be tied to the reserves of gold when the gold backed standard was working. This means that the volume of currency distributed amongst society is directly based on the population. As the population that uses the currency grows, so does the amount of currency in circulation. The hard part comes in when the population that uses the currency declines, it will take a lot of restraint and discipline to also decline the volume of currency. Doing so will keep prices stable.

Having the currency backed by something that cannot be easily manipulated will provide a lot more confidence and certainty.