What is the right interest rate? Most people think of that question in the terms of the Federal Reserve (FED).  I will address here how free enterprise would answer this question.  I will expound on why government should not be involved surrounding the negative effects of government price controls of the interest rate.  I will also explain how the FED can, however should not, maintain an interest rate that is not the natural balance.
Some people state that the Federal Reserve bank is free market.  That is very wrong!  It was government legislation that set up the FED.  No other person, bank or organization is allowed to do what the FED does, thus very far from free enterprise. The government allowing them to impose an inflation tax, regulate among others is also far from free enterprise.  These are government powers and even beyond powers government should have.  
The policies coming out of the FED are highly damaging.  The FED’s dual mandate is, the stable value of money and full employment.  They are failing badly on both mandates, in fact, the FED’s polices are the reason they are failing.  The dollar has lost well over 90% of its value since starting about 100 years ago.  Their efforts for full employment has done great damage by trying to control (limit) free enterprise.  The FED needs to end and allow banks to be regulated by financial Competitive Regulatory Agencies. 
So how would interest rates be set in the free enterprise system without a central planner?  Quite simply there is a desire, thus a market for saving money and a desire, thus a market for borrowing money.  The bank is a business that matches both needs and takes a cut for the very valuable service of matching and servicing the two.  There are many, but the main way a bank makes money is by paying interest to people saving money, then charges a higher interest rate from the people borrowing.  
The higher the interest rate a bank pays to savers, the more money they receive and vice versa.  The higher the rate of interest the bank charges for borrowing, the less money is lent.  Simply, if there is more money being saved than the demand for borrowing, the rates of interest for saving and/or borrowing is lowered.  If the demand for borrowing is higher than the money available from savings, the rate of interest of saving and/or borrowing is increased. Competitive forces from other banks puts constraints around all rates.  
Every bank needs to attract customers that are saver and/or borrowers.  Providing services surrounding banking are highly important to acquire and retain customers.  The competitive nature of banks is the best and most important constraint of banks behaving badly.  Regulations of banks are highly important, thus having politicians and bureaucrats having a monopoly on regulations is highly damaging.  
Having different private Financial Competitive Regulatory Agencies trying out different regulations is always how the most improvements will be made.  Without real counterfactuals, it is just an argument about whether the monopoly regulations are working.  Even when there are bad results we get, ‘it would have been worse’.  People freely making choices of where they will bank will clearly show which regulations are better.  We do not need ‘experts’ claiming that all people are restricted to only using their wisdom of regulations, the more they fail, the greater control they seek.  
So going back to the title of the blog: What is the right interest rate?  Every bank will set their saving rate and borrowing rate.  People will save or borrow at whatever bank they choose.  Competitive forces will not allow rates to differ greatly.  Quality of borrowers would have a major effects.  Services of banks would also be very important.  So just like the answer to the correct price of anything, it is the price that people are willing to pay.  
Banks with better services could charge higher interest rates for loans.  Banks that loan to people with lower credit ratings would have to charge higher rates to compensate for higher default rates, while people with good credit would be able to demand lower borrowing rates.  The examples of why interest rates would differ is just as numerous as any other product. Service, quality, proximity, soundness, reliability and regulations would all be factors that would be very important to the cost of the use of money over time.              
So how does the FED set rates?  The natural rate of the average interest rates is when the rate of saving and borrowing with a ‘service charge’ percentage for the bank, brings in enough in saving to have most of it lent out, while always keeping a percentage to operate.  For example, let’s say that $1 billion comes in at a saving rate of 4%.  The bank would have to keep about 20% in reserves to operate and then they give loans for $0.8 billion with 7% rate for borrowing.   


If a bank can borrow at 1% from the FED, they would be foolish to offer saving rates above that rate to the general population.  Much less money would be saved at 1% compared to the 4%, thus doing great harm to capitalism because capitalism needs capital. Therefore, the rest of the money would be borrowed from the FED. 
With the bank’s ability to get money at 1%, they would offer (competitive forces) loans for roughly 4%, which is much lower than the natural 7%.  This would drive up demand for loans, thus requiring borrowing more money from the FED.  Now where does the FED get the money to loan to the banks at such a low (compared to the natural) interest rates?
Just like in Quantitative Easing, the money is just created from thin air.  The value of the money can only come from one place, the existing money.  If one percent of the current money supply is added to the money supply, by just creating more money, whether printing paper or digitally, then ALL existing dollars give up 1% of their worth.  It is the only place the value/ worth of the new dollars can be acquired.  This does great damage.
The FED can have a different rate than the natural free market rate, by adding money in or pulling money out of the system.  
 
 
For decades, liberal politicians, both Republicans and Democrats have been eyeing the massive amounts of money in personal retirement accounts.  Most politicians think that money belongs to the government and thinks it is unwise to allow the people to control so much money.  Politicians and bureaucrats think that they can handle your money better then you, so they take (tax) your money and then fund a benefit for you with their control, instead of allowing you to keep your money and provide for yourself.    
Some politicians have thought of a sneaky way to control and take your retirerment or investment money.  Using fiduciary responsibility laws, bureaucrats are trying to force more retirement funds into government bonds.  Quite simply, bureaucrats have the power to decide what is responsible or what is irresponsible retirement planning.  Misusing this power is corruption, however corruption happens until someone stops it
If the treasury department is having a hard time finding buyers of new or rolling federal debt (over $19 trillion: March 2016), they could just inform money managers and pension plans that are fiduciaries, that a certain percentage of the money they manage needs to be in federal government bonds. To keep their certification or qualification as a fiduciary, they will need to push (nudge) their clients’ money in the direction of government debt.     
Bureaucrats also can use a host of legal options as well.  They could give ammunition for clients to sue their money managers in class action or bring federal criminal charges themselves.  The options of bureaucrat thuggery are numerous and always trying to stay one step ahead of the people they are trying to control. 

It does not need to be a good investment for the government to claim that it is.  Many people will wrongly conclude that reason and common sense would rule out and they could prove that they could have a responsible financial portfolio without federal government bonds.  Sorry, that is not how government bureaucrats work, they do not need to use common sense or prove their point, they are government, thus smarter and wiser by definition.    
So, what is the big deal if more of someone’s money is in government bonds, is that not a good investment?  First, that is not liberty and the people do not have to follow government edict unless they can explain why they should not.  There are numbers, stats and other data that people could show that US debt bonds are secure and a good investment, however the opposite can be concluded and demonstrated as well.  This is not a decision that belongs to politicians or bureaucrats, this a liberty issue. 
First, control: if government forces people to ‘invest’ a higher percentage of their money in government, they have control of that money.  They decide how that money is used, thus control.  If they just use it for debt, they are creating a very bad economic situation where they need to take (tax) money from people to give them their money back.  This holds all the negative disincentives the Laffer Curve, just to repay the debt.
Second, stealing: government through the Federal Reserve is stealing massive amounts of wealth from the dollars in your pocket, in your investments, in your bonds, in your pensions, in your contracts, in your salary or anything delineated in dollars.  By adding more dollars and not adding assets to match, the FED is diluting the worth of your dollars.  This is done by QE and by interest rates that are below natural balances.   
Reducing the available capital for capitalism is another great concern.  When money that is saved by the people, is taken for government debt, that money is not available for investing in homes, cars, businesses, or otherwise available as a base of capital in capitalism.   Capital is needed for capitalism and government debt taking a percentage of that capital is deleterious.   

The Lara-Murphy show is two financial professional.  While not talking directly to this point.  They do give some very relevant information that reinforces the points in this blog.    

 
 
November 26, 2015
I hope that I am wrong, however the policies we currently have, make normal ‘bubble popping’ crashes have far worse results than normal.  The 2008 crash could look mild in comparison.  What government leaders ‘know’ that just is not so, is very dangerous.  We are sitting on top of some big bubbles like normal, however monetary policy has never been this insanely dangerous.  
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When might this happen is a question that is difficulty to answer because it is unknowable.  Many are amazed that the money bubble could grow so high.  The issue is, that a critical mass of people need to have a great enough awareness of the problem before the cascade occurs. Often it is triggered by a small event that dominos a few medium size events.  A few key people in the media throw up caution flags and small snowball now begins to show true reality and the cascade begins and becomes an unstoppable force.             
How fast and how much is always a result of the primary law of economics, (something is only worth what someone is willing to pay for it).  Timing on crashes are always a knowledge and acceptance issue by a critical mass of people.  If enough people are willing to suspend believe on reality, the trading as usual can continue, however the underlying problem is getting worse and often the economy is being hallowed out beneath their feet.  Delaying the inevitable only causes the fall to be more harmful when it happens.    
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What would happen if people woke up to a realization that their dollars were now valued 10% less than the day before?  This could start a cascade that could Avalanche down in a big way.  Most other stock market crashes did not take the money down, however this is the first time in a century that within a decade the Federal Reserve quadrupled our currency base. 
Just consider, if you owned 10% of a company and you were told that company managers got carried away and keep selling 10% each to 50 people. Yes, this is illegal, however in the end you would now only own 2% of the company, as well as the other 49 people.  All stock holders lost 80% of the value of what they thought they owned.  
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About once a decade, some kind of shock to the system happens and bubbles burst.  People in-mass start to see just some of the devaluation and a cascade starts.  A new dynamic will occur during the next crash.  Rapid inflation, or better put, rapid realization of inflation that has already occurred over the last 8 years come to light.  
People will first notice gas prices jump. Then they come out of the grocery store shocked of a general 10-15% spike. They hear on the news that Japan and China stopped buying our debt and in fact demanding to cash in trillions in existing debt holdings.  The government or the Federal Reserve simply does not have that money so they begin massive QE, meaning printing up new money.
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The Fed and most people still do not realize that the new money’s value can only come from the existing dollars, thus debasing the currency further.  At this point, people are not willing to accept the true fact of how much the currency has dropped.  At the two week point, the currency is flowing in at such a rate as to keep pushing up prices and we surpass 20%.  
Gold spikes by 50% as people try to hedge their losses.  Other precious metals and collectables also see great gains.  People try to use up all their currency before it is devalued further.  Retired folks on very fixed incomes start to panic when they can only afford 70% of what they acquired just a month before.  
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People start to understand the contracts, debt, loans, investments and salaries they have, are all delineated in dollars.  These contracts and agreements in dollars very rapidly are seen as no longer making sense.  One side loves it and the other side does not.  People start breaking contracts and demanding inflation adjustments. 
Laws suits fly and ultimately the courts rule the constitution was violated by the Federal Reserve by changing the value of the currency thus changing contracts.  The damage was done and there are no remedies that can make people whole.  Employees demand that their pay be inflation adjusted, however in the middle of a crash and all other expenses escalating, companies find it impossible to keep up.  
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The Laffer Curve Page
Businesses that mostly supply ‘needs’ are having a rough time dealing with increased cost, however since everyone is consolidating  their spending on needs and even stocking up for future needs, they are making it.  Conversely, those in businesses of services of pleasure, vacation, leisure, entertainment or others in the ‘wants’ economy are losing massive business as people are panicked.  Many business models are no longer viable and many employees loss their job.   
Oversea markets quickly move away from using the dollar and start to ‘cash in’ the dollar holdings by buying real things with those dollars meaning cargo ships full of goods start to move away from our shores.  While many think that greater exports are good, one needs to realize that means we in America are doing labor for people in other countries.  Normally, this is well balanced and everything is fine, however when great amounts of foreigner quickly dump their American dollars, shocks to the system cause major problems. 
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Massive layoffs, people quitting because their pay is not keeping up with inflation and businesses just going out of business, cause the cascade of house foreclosures, business loans defaults and others debt issues cause the banks to fall in a overwhelming financial avalanche.  The housing market plummets, trapping many people from moving to better employment opportunities.  Many people take advantage of a very misguided law that allows people to walk away from a house and their underwater mortgage.  Retirement funds that were based on repayment of those mortgages loss double digit percentages.  
Because of the underlying unrealized devaluation of our currency created by long term very low interest rates and QE, the prices continue to rise and hits 30% by the end of the fifth week.  The budget deficit hits all-time highs as business profits vanish, payroll tax and income tax is reduced by a smaller workforce and many newly unemployed join the welfare rolls.  
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Blog: past QE's to pay off part of the debt
Those in the inner city and mostly on state assistance are no longer going to get the ‘needs’ with the same nominal level of benefits and increased prices, thus social unrest unfolds and calls and ‘demands’ of increased aid stress the now over budgeted public sector that is also seeing greater needs.  Greater expense for police is not in the budget and rule of law is in retreat.  
All these events exasperate all other issues listed here making everything worse and the cascade continues.  Saving rates fall, and in fact most people are emptying their retirement accounts as to not see it just loss 5% a week.   More QE is ‘needed’ to make the budget , and the leaders in congress and the Federal Reserve are clueless that the money presses running 24/7 and now at the 3 month mark making only $1,000 bills is the cause of problem.  Prices are now 50% higher and the lack of control causes more panic.     
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Link to the Haley2024 the Movement page
People on fixed income has their buying power greatly diminished and frightened into bad decisions that greatly harms them.  Most people do not know how to handle a hyperinflation, thus many end up in very bad circumstances.  Many people are starting to realize they have to live with a much lower standard of living.  
The people panic and call politicians to ‘do something’ Government in their extraordinary levels arrogance that is matched only by overwhelming ignorance attempts price controls that limits people from allowing prices to equalize to stability.  Prices always finds a way to its own level, however very often with major negative side effects if fighting price control laws.  
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Link to the CRA's page
People desire to save, remains high, however the common ways of doing that are vanishing or made illegal by arrogant government officials.  If the Federal Reserve keeps rates super low they would have to print up massive amounts of new currency to accomplish this, thus acting as a QE and continuing at a larger pace to debase the currency. At low rates, people do not want to save since heavy inflation eats away at their savings. 
If the Fed allows the interest rate to go high enough, to get enough of the money to flow into saving, the interest on the federal debt would swallow the entire budget. High debt levels really have a major effect.  It is very unfortunate that the effect of high debt is not constantly seen and realized by the people, because when the effect is hidden for a decade in bad monetary policy, the built up effect could be massive.  Ongoing adjustments, while still having bad effects, is far better than a sudden realization that totally wipes people out financially.  
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Link to the Monetary Policy Page
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Link to the Haleynomics page
In conclusion, while much of these story lines, while started here and going in a negative direction, have an unknowable finish.  One would hope that good lessons (Haleynomics) and (Monetary policy) are learned so that free enterprise can reach down and pull this economy out from the highly negative effects of government control.   
The people in government learned the completely wrong lessons after 2008, so the future lies in whether enough people can be educated correctly after wrongheaded lessons were learned in the vast majority of colleges.  Economics have so many factors that often, conclusions are forced into fundamentally misguided paradigms and errors are repeated and compounded.  This is truly a battle of fundamental beliefs of free enterprise verses politician control.        
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Blog on Price Controls
 
 
Recently, September 18, 2015 the Dow Jones dropped 290 points (1.74%).   The volatility of the stock market has been very high, having over one percent moves several times a week.  I believe this economy has been very injured by our monetary policy.  The fiscal and long term federal debt is a big player in warping the monetary policy that hampers the economy.  This Quantitative Easing (QE) and long term low interest rates hides the true value of the dollar until it is so distorted that it has to be revealed and often crashes the stock market and the economy as everyone tries to adjust. 
The first major mistake is that we have the federal government through the Federal Reserve setting prices of interest, which is price control.  Price controls always ends with higher prices, lower quality and less product.  The false ways these factors are measured belie this last statement, however true measures and recognition of where the excess cost emerge prove the damage.  The second major mistake is that the FED set the price of interest so low (roughly 0% for 7 years) that it disincentives people saving.  Lack of saving causes major problems for the person not saving for retirement and also depriving the economy of much need capital.  Capitalism needs capital.  
People’s inflation adjusted salaries are often significantly down and they become underwater in their home.  Values of long term contracts such loans, mortgages and business contracts rely on a stable value of currency.  QE and price controls on interest rates unconstitutionally change the value of the dollar and distorts very important business planning.        

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The small closed economy where it is easier to see causes and effects.
Let's look at our small closed island of 100 people and test what happens if we inject massive amounts of extra money in the system.  If there is a $100x economy a week meaning the average person brings $1x of goods and services to market, some a little higher and some lower.  Now let's say the bank starts to issue $1x extra dollar into the system every month for years. These new dollars are not backed up like the original. These were introduced as loans which pushed down interest rates.
This does several bad things. First with lower interest rates, the people are not as willing to save some money for their future. Lower interest rates incentivize long term investment not advisable at higher rates, which fails when reality happens. Without gradual inflation to match the currency inflation, the people become vulnerable to massive sudden moves in the value of the dollar.  Now merge this small closed economy with America to see the symptoms, likely results and solutions. 
So many people are holding savings in a currency that has no underlying worth. QE and low interest rates are increasing this worthless base.  When an undeniable downturn happens, like it always does about once a decade, many people will try to turn their currency into real goods and services, creating a mass realization that the value is not there.  Prices have the real possibility of a massive popping of the money bubble that was pumped up by the FED with the destructive hot air of QE and low interest rates.
This Pop could suddenly shoot prices up dramatically greatly changing negatively the value of your paycheck. This would wreck long term contracts and sink banks that are on the losing side of being paid back with currency half the value of when the loans were started. Retirement plans, including Social Security would also be on the losing side. Government statistics will under measure cost of living inflation numbers and retirees will be worse off. 

Government that messed up our banking system, will 'FIX' the problem with far greater control.  They did not learn the correct lessons from 2008 and just increased the 'Fix' that just took this economy to a more treacherous cliff with thinner trails along the edge. All the rocks we are stepping on seem be unstable and our way back has already collapsed. The FED needs to constantly use every tool in the climbing bag to hang on and the only path is up to more perilous places.  
Capitalism and free enterprise is strong enough to rescue this economy if congress will allow the American people to grasp capitalism's hand for a rescue.  In 2016, America has a choice of Bernie Sanders heavy government control that leads to more dangerous cliffs and massive problems or a Ted Cruz free enterprise approach that puts the U.S. on firm ground of solid economic growth, personal liberty and self-government.
The solution
 
 
 If you go to a small 100 person closed economy, it is easy to see the effects of counterfeiting.  Once a week, everyone brings the product of their labor to a central market place and then they do trades with currency.  Services are ordered at this time.  If there is counterfeiting, people will see the effect very quickly because that person is not bringing ‘things of worth’ to the market place.  
 People will readily see the unfairness of the counterfeiter acquiring ‘things of worth’ and not suppling goods and services.  Let’s take away or call it even, the concept of people saving and spending their saved currency, to make this concept more obvious.  People are working hard to earn their currency and the counterfeiter is not.
  As the great Walter Williams stated:  money is the representation that you served your fellow citizen, so it can demand service in exchange.  Someone just printing up currency from a printer is not serving their fellow citizen and thus mocking and destroying the currency as a medium of exchange because they are not producing anything of value on their side of the exchange. 
If the counterfeiter ‘gets away’ with this for a while, the effect will be more money than ‘things of worth’.  Some of this can be hiding with saving for a while, however if the saving level is steady, meaning people adding and spending from savings is equal, major effects are seen quickly within a small population.  Normally on trading day all the goods and services traded are exhausted.  
This means that every person bought the same dollar amount as they sold.  If you sold $100 dollars of grapes, then you bought a little of everything you needed to equal $100. The effect, when counterfeiters add dollars and did not provide any goods or services, is extra money, equal to the amount of counterfeit. 
If you have backed dollars as in the Haley2024 monetary policy, where there is stored wealth to back up the dollars, a quick audit will reveal there are more dollars than the value in the store room.  The counterfeit dollars will be identified and the product taken from the counterfeiter.  If we have fiat currency without the dollar being backed up, the percent value of the currency drops equals the old amount divided by the new higher amount of money.
In a one hundred person economy, and a single trading day, this devaluation becomes obvious quickly.  Because there is extra money left over on trading day, people would have to provide more labor for goods or services to fulfill the demand.  If counterfeit currency added an extra 10 percent on the monetary base, people would work an extra ten percent more and still only receive the same amount of ‘things of worth’ for themselves.  
This extra labor is being done for the counterfeiter at the expense of extra work for all the other producers.  Human nature will want the status-quo, of the days before the counterfeiting, of getting a certain amount of goods and service for the amount of ‘things of value’ they bring to the trading day, and sellers will raise their cost to achieve the old status-quo.  
Human nature means everyone does the same and prices rise that ten percent.  If the counterfeiting continues, the prices will also continue to raise at the same rate of counterfeiting.  The counterfeiters are in reality stealing the labor of others.  If someone chooses not to do the extra labor, they will acquire roughly 10% less goods and service for their labor they do.  That 10% goes to the counterfeiter. 
Currency that does not hold its value because of the theft of counterfeiting does not make for a useful saving instrument.  People dissuaded from saving, leads to many ills, such as the lack of capital needed for capitalism and not having savings for your retirement.  An unstable dollar is also very problematic for long term contracts for obvious reasons, which leads to reduced long term planning and economic growth.    
Just because the Federal Reserve (FED) does it, does not make it OK or moral.  The FED adding more dollars though QE or price controlling the interest rate lower than  market prices, which requires adding money as well, cause the same damaging effect to the economy.  
 We do not just have 100 people, rather over 300 million and 20 times that around the world.  Much of this can be hidden within not just thousand, but millions of financial instruments.  Much of these are hidden away and very difficult for anyone to have any understanding of how much worth is out there.  Something is only worth what someone is willing to pay for it, and people change constantly how much they value things.
All this being said, the economy is way too complex for anyone to understand.  However this small closed economy gives us the understanding of the cause of inflation, or better said the devaluation of the dollar.  We currently (2015) see similar damaging effects to our large economy and we need to understand the causes. 
The FED ‘states’ they are going to pull the money back out in the future, however that does not stop the damaging effects from happening.  In fact, if the damaging effects ripples through the economy with enough time, the value of the currency changes, the bad effects realized and pulling the money back out will have its own bad effects. 
 The bad effects do not get reversed.  Pulling the money back will create all new bad effects.  The value of the money changing is the cause of the bad effects.  Stability is the best.  Long term contracts, including employment can be awful for one side when the value drops and the other side when the value goes up.   It is very hard to lower wages of employees to match higher currency values.     
The left and the Keynesians will look at the extra work that needs to be done with the extra money and will rejoice that more jobs are being created and the 'economy growing', they totally miss the theft of real worth coming from every dollar, either paper or digital.  The left misses that they are changing the value of employment contracts, mortgages, and retirement accounts.
The left misses the point that long term business plans are hampered by unstable money.  The left misses the fact that the devaluation is often hidden until a 10 to 20% jump is realized and markets are highly negatively impacted.  The left misses the cause of the bad effect of lower saving rates.  The left misses the catch 22 dilemma created when easy money started investments that cannot produce the income at market rates. 
The left misses the low interest rate pushing up housing prices which harm the poor the most.  The left misses the fact that an economic crash which always comes from QE created bubbles hits the housing market heavy and drops housing prices, putting many middle to low income houses underwater (meaning the loan is higher than the value of the house). 
The left misses that middle to low income people lose their jobs based on wild swings in housing prices due to jobs in that sector of the economy.   The left misses the fact that large layoffs due to the wild swings push up mortgage foreclosures, leading to more catch 22 effects, when housing price fall greater due to a glut of foreclosures and thus more layoffs in the housing sector and the spill over in many other sectors as well.   
The left misses the FACT that Billions of people are holding many trillions of dollars that have no intrinsic value behind it.  Saving is theoretically a store of value that can be turned into goods and service.  Fiat money is missing that VITAL aspect of a good currency. 
 
 
Education builds a person’s potential to earn a greater income.  That is something of real worth.  Currency is backed up by a wide variety of things of real worth.  A person’s increased human capital should be considered as part of the base of currency under my monetary policy.  People who own the currency has part ownership in that educated person’s increased income.  
Under my system of multiple competing currencies, every financial CRA would decide what items of real value backs up their currency.  To understand my system you should try to gain a good understanding of Competitive Regulatory Agencies (CRA), Financial CRA's and my Monetary Policy.  The educated person is in reality trading a percentage of their life time income for increased education that leads to increased income.     

As a person is being educated, a long term durable service ability is being created and gaining worth.  A bank would recognize the value and create currency reflecting that value.  The person’s potential income becomes part of the worth that backs up the currency.  The owners of the currency would have real ownership interest in the person, exercised by the bank.
The human capital contract would state that worth is really future labor equaling the dollar (BD) value agreed upon in the loan. The future earnings is collateral.  Each bank and financial CRA would have guidelines on these.  Given that each currency would be on the trading market, everyone would determine the value of the items backing up the currency.  

Different banks and CRA’s would try many varieties of policies for those educated people not fulfilling their side of the contract by not working.  Some could mandate extra hours with CDA’s.  They could be assigned work similar to a temp agency or assign them a job.   
If a person wishes to take time raising children, certain policies would apply such as taking a percentage of pay for the wage earner in the family.  The possibilities are endless to work these out in the free enterprise system.  CRA’s have judicial authority to ensure people respect the rights of others.
 
 
The Fed is keeping the fact that they are devaluing our money hidden. This devaluation will eventually reveal itself and will most likely happen very suddenly. 
Let me give you an example that holds true for anything of value: currency, stocks, bonds, land, precious metals, businesses, etc.  While I use a termite damaged house in this example, each of these items of worth has similar issues that eats away at its value. For currency, it is lower than market interest rates and QE.  
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Termite eaten House
If you knew that a house became devalued because you saw evidence of severe termite infestation but no one else believed you and they continued to value the house as solid, then the house would continue to rise in value.  However, if it suddenly became very apparent that there was major damage and an exterminator showed evidence of widespread structural damage, then the value of that house would suddenly experience a mass realization of lower value. 
In reality, the real worth of the house was dropping every day, but since people kept buying and selling the house at a solid price, the value did not change until the realization of structural damage occurred.

There is often a time period where some people see the evidence of devaluation, but most do not.  The price can go up from significantly and then something happens that reveals the real worth and the price crashes rapidly.
Is it unwise for someone to buy a house with obvious flaws at regular prices when they have knowledge of those flaws if they think the house will continue to rise in price?  They do not want to miss out on the 80% gain in prices they might be able to attain, so they take a risk so that they can sell the house before the mass realization of devaluation occurs. When this realization occurs, the crash happens. Oftentimes, different sectors of the economy are dragged along with it.
If you bought two percent of a business and then you and all the other owners suddenly realized the person running the business sold two percent of business to one hundred people, thus giving 100 people each a 2% stake in the business or 200%.  You and the other owners would suddenly realize you and the other owners only owned 1%, thus everyone would have a sudden realization of devaluation of their worth.  Yes, you and the others could sue him and press criminal charges, however you still would only own 1%.     

The Fed is doing this with QE.  Every time the Fed introduces new money into system without backing it up, the value has to come from all the other dollars in existence.
Is There really Inflation?
QE=$772 Tax per Month per FamilyQuantitative Easing (QE) = Devalued Money
A New House as Capital for New Currency

 
 
Under my system of multiple competing currencies, every financial CRA would decide what items of real value backs up their currency. 
To understand my system you should try to gain a good understanding of Competitive Regulatory Agencies (CRA), Financial CRA's and my Monetary Policy
As a house is being built, a long term durable good is being created and gaining worth.  A bank would recognize the value and create currency reflecting that value.  The house becomes part of the worth that backs up the currency.  The owners of the currency would have real ownership interest in the house, exercised by the bank.
The mortgage contract would state that worth is really future labor equaling the dollar (BD) value agreed upon in the loan. The house is collateral if the mortgage is not paid. As the mortgage is paid off each month, the money returns to the bank, lowering the worth to the currency and adding the worth to the home buyer as equity.
Picture
Now made mostly digitally
Let’s recap: As the house is being built, worth is being established and currency is being created by banks based on that worth.  That currency pays the home builders and the ownership of the house belongs to the bank as part of the overall worth of the currency. At this time, all those that own currency from this CRA has ownership interests a small part of this house.
The bank creates a mortgage exchanging the worth of the house to future labor contracts with interest as the worth backing up the currency.  Overtime the home buyer buys all the worth of the house reflected as equity.  Every month when the money goes to the bank from mortgage payments, the future contract is reduced in value because less is owed.
The currency that was created on the worth of the house is repaid and vanishes.  The worth is no longer in currency; it is now in home equity. 
This model can work with many durable goods such as factories, cars, equipment among many other durable goods.  Each bank and financial CRA would have guidelines on these.  Given that each currency would be on the trading market, everyone would determine the value of the items backing up the currency.
 
 
I like the idea of Bit Coins, but all reliable currency must have three fundamental properties.  

First, they have to be backed up, which to say, they must have things of real value that all the currency derived from the inventory must be able to be exchanged for.  All currency should be able to be turned in, thus exchanged for the goods at a normal price and come out even.  There should be no left over currency or backed-up-inventory
Second, currency should be trusted.  Trust only comes from real investigations, in-depth research, audits and accountability.  Trust comes from real tests and openness.

Third, currency should have ease of transfer and acceptability. 
 Bit coins are missing the most important factor: they are not backed up by anything of real value.  Therefore it misses the second as well because there is nothing to audit.
They are working on the third and that will come with time and demonstration. 

 
 
The value of a fiat currency 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 fiat currency 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.  The original value of the U.S. dollar was the worth  the amount of gold in reserves before 1960 divided by the number of dollars in existence.  Even though gold was decoupled from the dollar, it remains the total assets.  The total assets is the nominator.  The number of dollars (denominator) continues to increase as the Federal Reserve continues to create more 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 extra stocks, your percentage ownership of the company continues to go down. 
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 stay the same.  It now takes 8 dollars to buy the same asset that one dollar bought in 1960.  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. 

 

    Bill Haley

    Bill Haley started Haley2024 in the spring of 2013 in an effort to do his part in restoring freedom to America

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