Posted on 03/10/2005 7:23:53 AM PST by TheNightFly
Virtual Electronic Banks
The basic idea of a bank is to first accept deposits from customers and then use those deposits as a basis for extending credit. The catch is that, instead of actually giving away their customers deposits, banks merely duplicate the money and back the duplicate dollars with the original deposit dollars. My idea is to allow consumers to do the same thing on their own.
Private individuals could open virtual electronic banks directly with the Fed. These virtual banks would be purely electronic and entirely managed by the Fed. Individuals would not have any access to or control over them.
Deposits
Individuals who choose to open virtual banks with the Fed could then appeal to their employers to open deposit accounts in their virtual banks. By depositing funds into their employee's virtual banks, employers would create a reserve balance which their employees could use as a basis upon which to extend their own credit. These accounts would be just as liquid as any regular bank account, however, by depositing funds into their employee's virtual banks, employers would eliminate the payrolls of those employees.
Credit
Consumers who have virtual banks would be creditors instead of spenders at every point of sale. Whenever they buy something, they would be extending credit to the merchant for the price of goods. The goods they buy would immediately repay them for the credit they are extending to the merchant- transactions are balanced. Because we are extending credit, our bank reserve balances would not change nor would our deposit account balances change. The money would literally be created (duplicated) at the point of sale.
Limitations
Consumption is normally limited by income. Income is normally expressed as a certain amount of money over a certain period of time. But, consumers with virtual banks would not have incomes so, the Fed would need to limit their rate of consumption by restricting the rate at which they can extend credit. In other words, the Fed would only allow consumers with vitual banks to lend a certain percentage of their deposits- their lending potential- over a certain period of time- a lending period.
There should be no problem allowing individuals with virtual banks to extend credit to themselves and each other as long as their lending potential is soley based on gross employer deposits. Otherwise, they could multiply their deposits indefinitely. This also serves to preserve the incentive to work. When people extend credit to themselves, they would only be converting their lending potential into immediate personal income. Notice that if people didn't extend their full lending potential on purchases within a given lending period, their remaining lending potential would not roll over to the next lending period. By extending credit to themselves, people would save their purchasing power. This might also expose them to income taxes so they would probably wait until just before the end of a lending period to liquidate their lending potential when it's a small amount.
The Benefit
What benefit would this have?
? The elimination of payrolls would greatly increase business profit margins.
? Reducing overhead would help small business a lot.
? Employment would increase especially since labor would be virtually free. This too would help small business a lot.
? If enough consumers chose to do this, income taxes alone would eventually become insufficient to meet government demand. The introduction of a transaction tax would probably be the only practical solution.
Sniff............
TheNightFly
Since Mar 10, 2005
Ignoring for the moment that you signed up today, and immediately posted a vanity (however articulately)...
I think this paragraph accurately sums up the first problem I have with this idea.
What the hell have you been smoking?
So this is like a perpetual motion money machine?
This is the part I have a problem with. If it's worthwhile, why can't a business do this. I do not want the fed gov't having control over my money any more than they do now.
This would benefit consumers because we could then create money at the point of sale (same as we're doing now with credit cards) without digging ourselves into debt.
I don't get it. If it's payroll-related, we are due the money anyways. So I'm still not seeing a benefit. Splain?
Worse than this. I think the "Fed" referred to is the Federal Reserve, which is NOT the Federal Government.
By contrast, at least the Federal Government is accountable to us. The Federal Reserve is accountable to no one-- except, arguably, the World Bank. How nifty is that?
Yup! All banks are perpetual motion money machines. You didn't know? Read all about it here:
http://www.howstuffworks.com/bank1.html
...and what if I want to pay my neighbor for helping me fix my fence? Or buy lemonade from the kid down the street? Am I going to have to whip out my PalmPilot and beam a "transaction" to them?
What if I go overseas and want to hire a taxi to take me across Bangledesh?
Are you going to have some sort of conversion system to actual money? Otherwise, the "virtual taxi ride" I receive instead is still going to be pretty hard on my feet.
Not sure how this washes. Businesses are still transferring funds through accounts payable that subtract from their profits-- even when they're not writing out checks.
Sure, you can rename them to something other than "payroll", but they still amount to some form of emuneration which the government will trip over itself to immediately figure out a way to tax.
Because business don't have employers, they are employers.
I am thinking of me as an employer.
Forgot the "r". Hate it when I do that.
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