<![CDATA[Haley2024 the Movement - Blog on Monetary Policy]]>Thu, 22 Feb 2024 15:48:12 -0500Weebly<![CDATA[An Example of a Monetary-Currency Asset Portfolio M-CAP]]>Thu, 31 Oct 2019 20:20:24 GMThttp://haley2024.org/blog-on-monetary-policy/an-example-of-a-currency-portfolio
Anything that holds value may be deposited into a Currency Portfolio to back up the portfolio’s currency.  It is always a two-party agreement.  Thus, the CRA Currency Portfolio may accept or deny any asset.  The price of the accepted asset is also a two-party agreement.  It is a significant advantage if an asset is on a daily trading market.  Most assets that are not on the trading markets have many assessment models to determine worth.  Of course, someone else buying an asset is the best way to determine an asset’s real worth. 
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Once the assets are in the portfolio, each unit must be given a price.  These assets are collectively owned by everyone holding currency.  Each asset must be turned over in exchange for currency.  The holders of currency have the right to pick any of the assets.    
If the portfolio paid $50 for an asset and sold it for $52, the portfolio made $2 for that asset, and that is realized by everyone holding currency receiving extra units of currency.  Likewise, if the portfolio paid $52 for an asset and sold it for $50, the portfolio lost $2 for that asset, and that is realized by everyone holding currency losing units of currency.  If the asset is in the daily trading markets, the Portfolio realizes the change daily. 
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Every CRA portfolio would handle buying and selling stocks differently, yielding the value of competition.  The competition of roughly a dozen currencies would yield robust constraint on badly managed CRA Currency Portfolios. 

​Adding the Value of Precious Metals

​At least one portfolio will likely hold only gold.  Gold, silver, and other precious metals have a long history of backing up currency.  These are in the trading markets; therefore, the price is well established. 

Adding the Value of Stocks and Bonds​

Adding stocks and bonds should fit into a storeroom of a portfolio nicely.  These stocks and bonds are on the trading market, thus has a precise value, although in constant flux.  Stocks and bonds are easily transferable from owner to owner.  They can be deposited into storerooms easily at a precise price to become currency and easily switching back by exchanging currency for the actual stock or bond. 

​Adding the Value of Commodities

​Anything on the trading markets such as corn, oil, wheat, cattle, and soybean has a real and recognizable value and worth.  These commodities have precise value on the trading markets.  People hold millions of dollars in accounts where the worth is derived from real corn, oil, or cattle.  Similar to stocks, these commodities could be deposited into currency portfolios with well define contracts and property rights. 

​Adding the Value of Real Estate

​Real estate has real worth.  Real estate appraisers have a long-established history of accurately assessing real estate.  Real estate does not change in value daily but can adequately be assessed when accepted into a currency portfolio and sold out of a portfolio, as well as yearly.  The gain or loss would need to be realized periodically and, ultimately, when it leaves the portfolio. 

​Adding the Value of all Loans

​Bonds were mentioned before, but all loans could be turned into currency.  The portfolio can take anything of real and recognizable value.  Loans meet that criteria.  There would be lenders that group thousands of home loans together in Mortgage-Backed Security (MBS).  Asset-Backed Securities (ABS) are also recognized as having real worth.  Car, business, credit card, boat, personal, health care, or furniture loans have long established worth.  If a bank is giving someone $20,000 in exchange for the promise of monthly payments, that loan has worth.     

​Adding the Value of Future Tax Revenue

​Under other Haley2024 reforms, government debt will be turned into currency by having the asset of the tax revenue of a precise tax rate on a well define tax base over a defined period of time.  This is similar to government bonds; however, the difference is the total revenue from a very specific tax in a specific year. More information on this is on the Haley2024 Debt Page. 

​Adding the Value of a Secure Percentage of an Asset

 Owning an asset on the margin is a well understood and established practice in the financial world.   One side owns a much more secure and stable asset, where the other side takes the percentage with higher volatility.  Some portfolios will like the stability and offer people financial instruments that include the higher-highs and lower-lows, yielding a more stable asset for the currency. 

​Adding the Value of a Percentage of a Retail Store’s Products

​Let us say that a store has an established history of $1 million a week in sales and holding an average of $2 million of in-store inventory.  If the store needed some working capital, the store could go to one of the currency portfolios and figuratively put a specific dollar amount of future sales in the storeroom.  There are many ways to draw up that contract.  However, a certain amount of products sitting on the store shelves are literally part of the storeroom making up one of the Currency Portfolios.  A can of paint, a radish, a car, a sweater, or a bedspread could be sitting on a store shelf but technically part of a CRA Currency Portfolio storeroom. 
​An interest rate to match the cost of servicing that arrangement, accounting for the cost of the risk pool, and attaining a return on investment will all be added.  Having a dozen currency portfolios as well as millions of private investors will keep all prices honest.   If a product is bought, the currency is turned in and eliminated because the asset is no longer in the ‘storeroom.’   Contracts of a rolling line of credit are likely with terms protecting the Currency Portfolio. 

​Adding the Value of the Charity Economy

​Many people will give charitable labor hours while they are able so they may receive others doing labor for them when they need assistance.  Some people will receive aid before they make ‘deposits’ of charitable hours when they will ‘owe’ future charitable work hours.  Anyone may pay their mandatory charitable contribution with charitable hours.  There would be about a dozen Charity Economies all handling charitable hours differently as well as the combined Charitable Economy at the Charity Sector Board.  Many people will have employment insurance that is cheaper because the day after they lose their job, they will immediately start working in the Charity Economy. 
​Many loans will incorporate mandatory charitable hours if payments are late. Court-Ordered terms for late child support payments require mandatory Charity Hours.  Charitable Hours in the Charity Economy can fulfill the required payment of the military or police funding when the situation warrants.  Work done by prisoners as part of restitution can be part of the Charity Economy.  All CRA’s and RA’s would likely allow Charitable Hours to pay for CRA and RA fees.  It is hard to comprehend the magnitude and direction of unhampered free enterprise Charity Economies with extensive CRA experimentation.  A price can be put on anything, and future charitable labor hours will have real worth. 

​Adding the Value of Foreign Currency

​Foreign currency holds real value because the country of origin bought products from Americans in exchange for their currency.  They will accept that currency back in exchange for Americans purchasing products from that country.  Most Currency Portfolios will likely hold enough foreign currency from all countries in order to easily trade with them.  When Americans buy products from other countries, the other countries can take just their currencies out of the CRA Portfolio.  Of course, they have a right to take any asset from the CRA Portfolio that matches the correct amount.       

​Adding the Value of Infrastructure

​Roads, waterways, lakes, bridges, airports, water treatment plants, electric plants, the electrical grid, among other infrastructure assets, will become private entities.  Most infrastructure assets will become corporations with stocks that the general public will own.  These assets have real worth and will be on the trading markets; thus, easily added to CRA Currency Portfolios. 

​Adding the Value of the Military

​The military will become private with elected leadership directing missions and oversight.  About 50 private Military Corporations will hold all military assets.  The full worth of these military corporations is in stocks held by the American people.  Many of these stocks will be deposited in CRA Currency Portfolios.  These corporations have a steady income flow and hold real worth.  These corporations will be having daily, or weekly assessments, and the stocks will be in the daily trading markets; thus, ideal for a CRA Portfolio.   

​Adding the Value of Nature Parks

​The city, state, and federal levels of government will each have a Land and Water CRA Sector.  Each CRA at all levels will have a Rating Floor on proper levels of nature parks.  As a member of a Land and Water CRA, every citizen must pay CRA fees.  Part of those fees will fund the upkeep and improvements of nature parks.  The majority of these nature parks will be owned by private corporations with stocks that the citizens would own.  These nature parks have real worth and will be on the trading markets; thus, ideal for CRA Currency Portfolios.  These nature parks will have high Rating Floors for environmental standards and general population accessibility. 

​Adding the Value of Pockets of Freedom

​Pockets of Freedom will need some up-front cash to start.  People settling in the Pockets of Freedom will sign a contract to pay a percentage of their income for several years to compensate for the initial investment.  The up-front money will quickly create the real worth of a future income stream.  It might take a while to get the value right, but the unhampered free enterprise system within these Pockets will allow the evaluation of the proper value.  Haley2024 assumes a citizen ownership model of government.  In a real way, new citizens will need to ‘buy-in’ to their new neighborhood, city, state, and federal governments.   

​Adding the Value of Human Capital Loans

​Human capital loans or sometimes called share loans is when a financial institution invests in a person’s education in exchange for a percentage of the educated person’s future income.  Many terms can be considered, including having the college take some of the risks.  Charitable hours will likely be a mandated term if a person is without work. Broad groupings of these loans would yield an adequate risk pool.  It would be hard to imagine the broad innovation that free enterprise education along with free enterprise regulations would yield.  In the transition away from government-controlled education, trillions of dollars are at stake.  This has the potential of being the most substantial part of a Currency Portfolio through the education transition. 

​The Current US Dollars

​The US dollar responsibly disappears in the transition to the new currency.  The Federal Reserve and the federal government gives real worth in the form of gold, government land, the receipts of future taxes, loans owned by the Federal Reserve, and stocks of government-owned assets transitioned over to the private sector, as assets to match the worth of all existing dollars.  Those assets are in the CRA Currency Portfolio for the Financial CRA controlled by a part of the former Federal Reserve.    

​Closing a CRA Currency Portfolio

​When a CRA drops below 5% membership, they must close shop.  All member banks would then become members of other Financial CRA’s.  The portfolio would have a few months to divest of all its assets.  Since they will not have member banks, they would not have any currency coming in.  As the holders of currency spend money, other Portfolios would request assets.  The people that had accounts in the closed Portfolio would have a limited time to transfer their currency to their new banks.  The last asset should be bought by the last unit of currency. 
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]]><![CDATA[The Basic Workings of a Currency Portfolio]]>Sun, 27 Oct 2019 18:33:38 GMThttp://haley2024.org/blog-on-monetary-policy/the-basic-workings-of-a-currency-portfolio
​A Currency Portfolio starts out empty.  The first person puts in 10 ounces of gold, and the currency portfolio creates and deposits $15,000 into that person’s digital account.  The owner of that digital currency owns that gold.  That gold holds its value well and is very divisible.  That person buys bread, gas, and a used car with $9,000 of that currency.  The people that received that money for the bread, gas, and car are now the rightful owners of 6 ounces of that gold.  (assuming gold is priced at $1,500 per ounce)
​They may just spend that currency on other items, in which the new owners of the currency own part of the gold.  At any time, the owners of the currency may go to the storeroom and exchange their currency for their gold in the correct proportion to the amount of currency they turn in.  Whenever currency is turned in, and assets are removed from the storeroom, that currency loses value because a portfolio may only have as much currency as assets in the storeroom.  If $4,500 of currency is turned in for 3 ounces of gold, the portfolio only holds 7 ounces of gold and can only have $10,500 worth of currency issued. 
​If the gold changes value compared to the Backed Dollar (BD), which is the average of all CRA currencies, the value of each unit of currency does not change, the number of units of the currency fluctuates.  If gold increases in value by 1% compared to the BD, then that portfolio can now issue 10,605 units of currency.  Since the currency is digital, it would be easy to add 1% to every digital account. 
​If the value of gold drops by 1% compared to the BD, then the digital accounts would be lowered by 1%.  In both cases, the ownership rights stayed the same; because the digital currency is real ownership rights to a percentage of the assets in the portfolio storeroom, thus people maintained the ownership of the exact amount of gold as they did before.         
​While it is likely that enough people will desire a CRA with only gold in the portfolio to attain their own CRA, most CRA’s will add other items of real worth into their portfolios.  There would not be any problems with adding silver or other precious metals into a storeroom.  The portfolio would need to have a complete up to date list online that is fully and easily accessible.  Each item in the storeroom will be listed with quantity and price.  Each item’s unit price will be in constant adjustment to the trading markets.  Items will continuously be added to or taken away from the storeroom. 
​Staying with just precious metals for a little while longer, as $8 billion of gold, silver, platinum, and palladium are added to the storerooms, 8 billion units of new currency are added to digital currencies accounts around America.  The people that deposited the precious metals receive the currency.  Every bank that is regulated by that portfolio’s CRA will have safes with precious metal coins that any rightful owner of that currency may exchange for the trusted coins.
​If people turn in their currency for the trusted coins; those precious metal coins are out of the digital currency and not in sync with the BD, thus just coins holding a defined amount of precious metals that contain worth.  These precious metal coins may be traded with others but do not have the mandate of acceptance that CRA currencies have.  These trusted coins would likely be accepted readily into the banks to be turned back into digital currency.        
​On a daily basis, gold and other precious metal coins enter and exit the currency portfolio.  The unit price of each coin is in flux.  Therefore, the value of the portfolio is in constant flux; thus, the units of currency are also in continual flux to match the value, and that always matches the BD, which is the average of all currencies. 
​In some ways, this seems overly complicated, however, in a significant way, it is very straight forward.  There is always a precise amount of gold in the storeroom, even if it is spread across thousands of banks in America.  That gold always has a precise price per ounce in the trading market.  If you multiply the exact ounces of gold by the price of gold per ounce, you have a precise value of gold.  You do the same with silver, platinum, and palladium.  The proper multiplication and addition yield a precise value of the portfolio.  At all times, the units of currency must match the exact value of the portfolio.
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]]><![CDATA[Arbitrage Opportunities Will Keep Currency Portfolio Prices Honest]]>Sun, 20 Oct 2019 02:02:33 GMThttp://haley2024.org/blog-on-monetary-policy/arbitrage-opportunities-will-keep-currency-portfolio-prices-honest
​There would be a natural concern of a currency portfolio having the correct valuation of all its assets.  If all other currencies are mandated to accept every CRA currency, they must trust the value. 
If a portfolio lists an asset on the low side, people would quickly buy the asset on the low side and sell it at a higher price; thus, the low side is not a concern.  A portfolio would not want to give away worth and lose people using its bank and currency.  People holding a currency performing poorly lose value by losing units of currency.   
​On the high side, if a CRA list its gold at $10,000 per ounce when it is on the trading market at $1,500, it would be ‘cheating’ the entire system.  One easy solution is that when someone takes something out of the portfolio, it does not take the overpriced items.  However, that does not adequately address the issue.  There are several ways in which individuals, organizations, and other CRA portfolios can address the issue of portfolios overpricing an item. 
First, there can be a mandate that an asset in trading markets needs to be at the market price.  However, there will be many items that are not in the trading markets.  If a CRA regularly needs to sell assets at a lower price than what was listed, they will be rated low in the Rating System.  A low rating could result in a reduced valuation of a subset of the portfolio. 
​Every day, all portfolios are transferring assets from one to another, depending on how people spend their currency.  If an asset goes ‘stale,’ meaning an asset is not bought for a specific length of time, the portfolio must reduce the value of the stale asset until the asset is requested by another Portfolio.    
​Selling an asset or a set of assets short has been a long-established method of forcing an overpriced asset to a more reasonable price level.  If someone sells an item short, they need to risk their own money claiming, for example, an item is worth $90,000 when it is listed at $100,000.  Selling an item short can force the sale of the asset to reveal the true price.  If the item sells at $100,000, the person selling short loses money to the portfolio.  If the item sells below $90,000, the portfolio pays the person making the short sale.        
​The role of speculators has been significantly helpful in the commodity markets.  These people make a living studying the future price of the commodity they bet their money on.  Many new careers could be made on the speculation of assets in portfolios.     
​Maybe one method would be sufficient, or several of the methods could be used.  Other methods and there are many, could be proposed and tried.  The regulations regarding those methods would be at the Financial CRA Sector Board level.  A Rating System floor will be in place.  The methods used will increase until the ratings are high enough that prices are stable.  The goal is a low-cost method of every CRA currency portfolio being honest with their valuations.  
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]]><![CDATA[Does someone have to save before someone can borrow? Yes and No!]]>Tue, 30 Jul 2019 01:18:10 GMThttp://haley2024.org/blog-on-monetary-policy/does-someone-have-to-save-before-someone-can-borrow-yes-and-no
​The issue is regarding labor hours used to create durable goods versus consumable goods.  If the labor hours produce lasting wealth, that is real savings.  If the labor hours produce goods that are quickly consumed, the person consuming gained satisfaction; yet the goods lost value upon consumption.    
​All the labor hours creating anything of worth not immediately consumed is true savings.  It is savings until it is consumed or destroyed.  A car is consumed over ten to twenty years, so the consumption is slow.  If a new car is worth $20,000, it loses value at varying rates until it goes to the junkyard.  Whatever the ‘going price’ on the car is at any given time, is the amount of savings.  Items of worth are savings.   
​ Food producers have their food consumed relatively quickly; however, food that lasts for months or years can hold wealth until they are eaten or spoil. 
​If a farmer improves his farm over thirty years of hard work, he is building wealth, thus savings.  If a farmer uses his labor hours or buys labor hours of others to excavate a pond, landscape, and create an irrigation system, his farm becomes more valuable, thus creating worth, thus savings.  The farmer realizes the increased value when he reduces labor hours per unit of output.
​All those labor hours over the thirty years had ongoing revenue from the crops; however, the increased labor hours improving the farm increased more productive and efficient output.  At the time of retirement, the farmer sells the farm for $1 million versus his neighbor’s unimproved farm of $0.2 million. 
​The payout of the value of the farm itself was realized when someone put money on the table.  The real worth in the increased long-term productivity of the farm is real savings; it just does not turn into currency until someone exchanges currency for the farm. 
​Under the Haley2024 Monetary Policy, the farmer may choose to shop around the dozen currency portfolios to sell a percentage of his farm.  If both parties agree, the currency portfolio can create $500,000 for 50% ownership stake in the farm.  50% of the farm under the agreed-upon contract becomes part of the assets backing up the currency. 
​The farmer has the new currency in his digital account.  When the farm is sold, the currency portfolio receives 50% of the sale price.  The currency portfolio does not own half the farm anymore and must destroy the currency collected from the sale.
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]]><![CDATA[Turning Food Into Currency]]>Tue, 30 Jul 2019 00:47:57 GMThttp://haley2024.org/blog-on-monetary-policy/turning-food-into-currency
​Food has real value.  It takes months to grow food.  As someone plants seeds, worth is created.  As the crops are maintained greater worth is added.  The labor hours of harvesting the crops add to the worth.  Processing the food adds even more value.  Delivery and merchandising the food in a convenient location has real worth and adds value.  
The consumer pays for all that value, takes all that worth and consumes it.  The consumption of food has real worth to a person; however, the food no longer has value.  Everything is meant to be consumed, some things quickly and other things over many years.  This is why everyone has to keep working day after day.  ​
​Many people lend money to farmers in hopes of making a return on investment.  It is well known that every aspect of bringing products to market adds value.  Risk pools are helpful.
​‘Skin in the game’ by the primary managers and decision makers are advantageous.  Prior success and experience are valuable.  However, certain banks would likely apply the value of food in their portfolio backing up their currency.
​Under Haley2024’s Monetary Policy, people holding currency can go to any bank to exchange their currency for items of real worth such as Gold, silver, stocks, bonds, deeds to real-estate and other items that can be put into a bank vault.
​ However, the portfolio might have ownership of 20% of a grocery store’s consumable product, thus giving holders of currency the right to turn their currency into food. 
​As currency is exchanged for items in the portfolio, the currency is turned into the bank where it loses value.  When new food is produced, value and worth of that food is turned into currency to start the cycle again. 
​While food only holds value for months, the ongoing production of food yields a consistent value.  Undoubtedly a percentage of that worth can safely be turned into currency.  Having a dozen Financial CRA’s, thus a dozen asset portfolios backing up currency will yield many models and results.     
​The consumer buying the groceries gives every labor hour used to put that product on the shelf real justifiable worth.  The producers of seeds worked and were paid.  The producers of the tractors worked and were paid.  The farmhands worked and were paid. 
​The farmers worked and were paid.  The delivery drivers worked and were paid.  The food processors worked and were paid.  The grocery personnel worked and were paid.  While very complicated, all that pay needs to come from the final customer and consumer.
​ If a consumable item yields enough to pay for all the labor hours of the millions of people involved, the business is viable.  If customers are not willing to pay the necessary price to pay all the work hours needed to bring a product to market, the business model fails. 
​Losses are taken, and labor hours are directed by other people with better business models.  Currency is a service from free enterprise’s invisible hand keeping a ledger that facilitates one-sided provision, yet two-party trades at different times, at different values, and the services provided going to the universe of all traders.
]]><![CDATA[Government Debt Built into the Monetary System]]>Sun, 28 Jul 2019 00:45:30 GMThttp://haley2024.org/blog-on-monetary-policy/government-debt-built-into-the-monetary-system
In the Haley2024 Monetary System, money is backed up by things of real, recognizable, and agreed upon worth.  While a percentage of currency will be backed up with possessions, a portion will be backed up with the agreement to pay back the debt over time with future work and profits.  Loans, debt, and other agreements to pay back the money over time have real, recognizable, and agreed upon worth; thus, qualifies as assets in the CRA Currency Portfolios.     
The government’s agreement to tax citizens has real worth.  When the government has the need to go into debt, they would need to go to many of the CRA Currency Portfolios.  The government would offer as an asset, the proceeds of taxes in the future.  It is important to note that the government is not offering a specific dollar amount, they are offering the proceeds of a tax, regardless of what comes in.  When the currency is turned into the Portfolio, the currency collected losses all value because the asset of future tax revenue is no longer in the storeroom. 
For example, the state government’s contractual agreement with a CRA Asset Portfolio is the revenue from a 0.01% tax rate on sales within the state’s jurisdiction for the year 2020, in exchange for $10 million of usable currency starting in 2019.  This state has roughly a taxable base of sales of $100 billion per year.  The same 0.01% tax rate for the year 2025 might only attain $8 million of usable currency in 2019.  The same 0.01% tax rate for the year 2029 might only attain $5 million of usable currency in 2019. 
500 individual 0.01% tax agreements on sales in a particular year would yield a sales tax rate of 5%.  Every increase in tax rates would push up the disincentives of doing the taxable transaction.  Therefore, CRA tax agreements would include surcharges to the government, the higher the overall tax rate became. 
This means that contractual agreements would likely include a clause that the tax rate would be 0.01% if the total of all ‘tax assets’ is at a 3% rate and increase to 0.0101% if the total of all ‘tax assets’ is at a 4% rate.  Likewise, if the total of all ‘tax assets’ is at a 2% rate, the agreement pushes that particular asset to a tax rate of 0.0099%. 
All the assets in the CRA Asset Portfolios will continuously change in value.  These ‘government tax assets’ will be no different.  The roughly dozen CRA Asset Portfolios would compete to be the most stable and with constant, reliable growth.  The Haley2024 Monetary System has many mechanisms to force the correct evaluations of assets in the portfolios.  The Haley2024 Monetary System eliminates exchange rates by continually adjusting the units of digital currency.     
Haley2024 proposes that all federal debt be turned over to the states in proportion to each state’s percentage of GDP.  If a state’s portion of the national debt is $100 billion.  That state would need to figure out the wisdom of tax rates and the number of years for a full payoff.  The higher the tax rate is per year, the less money the CRA Asset Portfolios will give, thus constraining tax rates from increasing too much.  On the other hand, extending the tax burden too far into future years will also see diminishing returns for additional out-years.  A 5% tax rate 50 years in the future will not yield much in current currency. 
If a .01% sales tax can yield $10 million, it will take 10,000 individual .01% contracts to achieve the $100 billion.  That would equate to a 100% sales tax in the first year; however, as the tax rates increase, they would get less money per contract and not achieve the $100 billion.  They could spread the tax burden over 20 years at 5% per year, but the out years have diminishing returns; thus, not achieving the necessary $100 billion. 
It is difficult to do the math because so many factors come into play, and millions of two-sided agreements need to be made.  The result might be a 10% tax for 30 years.  Much of the government’s current debt is also owed in out years such as Social Security, thus discounting the amount of that debt as well.  There would emerge wisdom to some people to forgo government bonds in exchange for tax exemptions; however, that would only work on some easily exemptible taxes.         
When the government receives this $100 billion in exchange for the assets of future tax revenue, the state government will pay off all the debt it owes to the current government bondholders.  The government debt is switched to assets of future tax revenue to CRA Asset Portfolios. 
The individual that was compensated for the government bond would now own the same amount of digital currency in their bank.  Thousands of banks dealing with roughly a dozen CRA Asset Portfolios would compete for the business of every individual, business and organization. 
The government, individuals, and current financial instruments do not win or lose assets or liabilities with this reform.  The reform changes the structure of the financial system.  Politicians and government bureaucrats should be able to clearly see the cost of borrowing money.    
All debt-based assets in a CRA Asset Portfolio diminish as the debt is paid off.  An essential aspect of the Haley2024 Monetary System is that all currency is backed up with real assets.  The amount of money is always in flux to match the assets in the CRA Asset Portfolio.     
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]]><![CDATA[Fractional Reserve Banking Is Not Relevant Under Haley2024’s Monetary Policy]]>Fri, 11 Jan 2019 03:46:17 GMThttp://haley2024.org/blog-on-monetary-policy/fractional-reserve-banking-is-not-relevant-under-haley2024s-monetary-policy
The reason fractional reserve banking is not relevant under Haley2024's Monetary Policy is that currency is created based on the value of loans; loans are not funded with currency.  Banks can easily turn anything of worth into currency. 
In the current banking system, one of the main blind-spots of 100% reserve requirement proponents versus fractional reserve banking proponents is that loans have real value.  Too many people think that if money is lent out, less worth is in the bank.  If $20,000 was lent out to buy a car, $20,000 leaves the banks vault and a promise to pay back $500 a month for four years replaces it as an asset in the bank. 
That loan has value.  As the loan is paid off monthly, cash is going into the vault, and the car loan value drops to match.  While fiat currency is said to have no underlying value, a loan is an agreement of money resulting from real work hours, thus real worth.  The fact that loans are sold means loans have real value.        
Under the Haley2024 Monetary Policy, about a dozen Financial CRA’s each create their own currency.  Each Financial CRA decides the assets in their portfolio that backs up their currency.  While some Financial CRA’s might stick to just gold and others CRA’s might add other metals; many CRA’s will venture into stocks, bonds, real estate, car loans, house mortgages, corn, cattle, oil, business loans, among many other items.  A diverse portfolio will likely yield the most stable currency. 
There are a limited number of people and a limited number of labor hours.  A percentage of the people need to use their labor hours to create consumable items versus medium- or long-term durable assets.  Market forces mostly between the banks; however, in reality, the whole economy will constrain how many loans are issued with new currency.   
People have a choice of banks in which to do business.  If a Financial CRA regulates the banks under them poorly, their banks will lose business and switch CRA’s.   Likewise, if a Financial CRA manages their currency poorly, their banks will lose business and switch CRA’s. 
]]><![CDATA[Bank Runs Are Not Possible Under Haley2024’s Monetary Policy.]]>Sun, 06 Jan 2019 05:54:30 GMThttp://haley2024.org/blog-on-monetary-policy/bank-runs-are-not-possible-under-haley2024s-monetary-policy
Bank runs are not possible under Haley2024’s Monetary Policy because the currency is created based on the value of loans; loans are not funded with currency.  Money is in a digital account and can be used at will.  A bank run of people turning their currency in for the real items of worth in the bank store rooms equally reduce both the assets and issued currency.  
The number of units of currency always match the value of the portfolio of assets backing the currency.  A typical bank run of the 1940s saw people going to the banks to walk out with currency.  However, a bank run under Haley2024 would see people running into banks with currency and walking out with gold, corn, real-estate, stocks, bonds, among other items.  ​
There might be a problem of highly liquid items running out, and if someone wanted to own a car loan, they could.  That car loan is likely contracted to be managed by a reputable car loan business and payable over 48 months.  A person might want to own that car loan and get paid monthly; however, they are giving up currency to attain that car loan.  The bank’s purpose is to turn anything of worth into usable currency, thus liquid. 
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]]><![CDATA[What happens when interest’s rates are held down too low for a long time?]]>Sat, 03 Feb 2018 17:44:44 GMThttp://haley2024.org/blog-on-monetary-policy/what-happens-when-interests-rates-are-held-down-too-low-for-a-long-time
If people want to borrow more money, more must be saved.  There must be more money saved than people borrow.  The borrowing level and saving level are both controlled by interest rates.
People’s behavior changes regarding savings and borrowing as the interest rates change.  ​If banks offer higher interest on savings, more money will be saved.  If banks offer lower rates on savings, less money is saved.  If banks require higher interest rates for lending, less money will be lent.  If banks require lower rates for lending, more money will be lent. 
​The bank gets paid by the differential in saving rates and lending rates.  For example, the bank borrows at 3% and lends at 5%, thus gets paid the 2% for servicing the accounts.  Banks find it beneficial to leave a certain percentage of the money in the bank as a buffer. 
​If more money is saved than borrowed over the buffer, then one or both savings and lending rates need to drop.  This concept is simple supply and demand.  On the other hand, if there is more demand for lending than money saved, one or both rates need to rise. 
​Given that every bank is in competition with every other bank for both saving accounts and loans, a natural interest rate emerges for both savings and lending.  The point spread that the banks earn are also squeezed by this same competition.  Under free enterprise, all these prices are controlled by billions of decisions by millions of people, both customers, and bankers.
The Federal Reserve System dramatically interferes with the free enterprise system.  ​When the Federal Reserve holds down interest rates way too low for many years, two things happen.  First, saving rates of the people decreases.  Second, lending is increased as more loans make sense at lower rates.  The obvious question is, how do they lend more than what is saved. 
​The answer is the Federal Reserve creates the money.  The value of that money comes from shaving off a little bit of worth off every dollar in existence.  Governments used to do this with gold coins as it passed through the banks.  However, the Fed is much more efficient.     
​Decreasing savings rates lower than the natural rate is inherently bad because people need to save for retirement, a rainy day, among other things.  A high inflation rate caused by the low-interest rates creates more disincentives to save because saved money is losing purchasing power. 
Increasing lending above the natural rate, as a result of lower lending rates, pushes up prices on items usually bought on credit such as houses, cars, and business capital goods because the payments go further.  For example, if one’s salary allowed for $2,000 mortgage payments, then they are looking for a $350,000 house at 4% but only a $250,000 house at a 6% rate. The same monthly payments buy more expensive cars at lower rates. 
More businesses make sense when finance charges are lower.  Higher business finance charges ultimately are built into the price of goods at the store.  Many businesses make sense at 4% rates, however, not at 8% rates. 
Many businesses must shut down at higher interest rates as profits are swallowed by increasing finance charges.  Many homeowners can afford their home at 4% but not 7%.  If the interest rate rises sharply on an adjustable rate loan, some people suddenly cannot afford payments.  When they try to sell, they see their home value drop below what they owe and are stuck.
A car salesman's first question is how much can the customer afford per month.  Given a specific monthly payment, the salesmen would show a $30,000 car at a low rate and a $25,000 car at a higher rate.  Higher car loan interest rates push down the average car price.
The natural interest rate will fluctuate over time as well; however, seldom quickly or with substantial changes.  If there were real competitive money that was fully backed-up by assets with real value without the central bank distortions, the natural rates would govern. Sound money would drive out bad money.  ​
​The Federal Reserve claims that the balance sheet is even because they are owed the money that they lent out.  In reality, this action decreases the value of the US Dollar which is called inflation.  Quantitative-Easing (QE) is when the Federal Reserve ‘buys’ substantial assets of loans with money it does not have, thus saving from individuals, do not need to cover those loans. 
​However, the balance sheet is said to stay the same because they now hold ownership of the assets.  Often, this is hundreds of Billions of dollars of mortgages.  This QE does the same thing as lending money to banks, thus devaluing the dollar and causing inflation.  Both the lower interest rates and QE hollow out our economy and create enormous economic peril. 
​This devaluation cannot happen for long without a correction.  Often, the inflation is hidden for a long time and burst out into the economic world quickly.  Interest rates will have to go up not just to normal rates but need to go above the normal to compensate for the low rates.  The longer and deeper the Federal Reserve creates money out of thin air, the more disastrous the economic results.  The more it stays hidden, the greater shocks to the economy will result when unveiled. 
​We saw high inflation in the late 70’s.  We saw the 1987 crash.  The 1999 crises saw many businesses close.  The 2008 collapse caused a lot of pain.  We are currently (Februarys 2018) on a ten-year experiment of the Federal reserve pumping massive amounts of new money into the system by keeping the interest rate entirely too low and many trillions of dollars in asset purchases known as QE.  ​
​While official inflation rates hover at about 2%, many believe it is much higher because of how it is measured.  The more significant problem is the hidden inflation that is built into a highly complex economy.  Hyperinflation rarely happens because of current activity; hyperinflation results from past activity. 
 ​This next crash is more likely to be more severe because more money was pumped into the economy by many orders of magnitude.  A whole new generation has grown up with prices of the use of money over time, at historic lows.  60-year-olds bought their first home with 12% mortgage rates, where people in their 20’s have only known below 5% rates. 
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]]><![CDATA[The Value of Fiat Currency]]>Sun, 07 Jan 2018 20:15:01 GMThttp://haley2024.org/blog-on-monetary-policy/the-value-of-fiat-currency
The value of a fiat currency dollar is the total value of the assets that all the fiat currency can currently buy divided by the number of dollars.  The new value of a fiat currency dollar after Quantitative Easing (QE) is the total value of what all the fiat currency could buy before QE divided by the newly expanded number of dollars.  ​
​As the denominator continues to rise, and the nominator stays the same, the value of the dollar drops.  The equation is total assets divided by an ever-growing number of dollars.  Let’s compare this to stocks; if you owned one stock out of 100 stocks of a company and the company kept adding new stocks, your percentage ownership of the company continues to go down. 
​New stocks would be acceptable if the extra stocks came with adding equivalent value to the company.  It would also be fine if there is a stock split and the number of stocks doubled; however, everybody holding stocks got double the number of the now devalued by half stocks.  It is not okay to add more stocks without adding value to the company or doing a stock split and not doubling every owner’s units of stocks. 
​​The value of the asset did not change, the value of the dollar did.  This is like you owning 1 out of 100 shares of stock of a company and over 54 years; the company continues to add more stock every year until the company has 800 stocks.  You now own 0.125% of the stocks instead of the 1% you used to own. 
​ The Federal Reserve is lowering your percentage of ownership of the stockpile of gold without increasing the grams of gold.  Since 1960 the dollar has lost over 85% of its value.  Therefore, the money supply has grown roughly eight times of the 1960 amount.  The total asset base stays the same.  It now takes 8 dollars to buy the same asset that one dollar bought in 1960. 
​The original value of the U.S. dollar was the worth of the gold in reserves before 1960, divided by the number of dollars in existence at that time.  Even though gold was decoupled from the dollar, it remains the total assets.  The total asset is the nominator.  The number of dollars (denominator) continues to increase as the Federal Reserve continues to create more dollars. 
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