Chapter 74 - The Solution

The solution has many areas and includes:

How we generate money and credit?

Who may generate money and credit?

How money and credit are released into society.

How we remove excess money from society.

How we maintain the purchasing power of money.

How to remove money from society without destroying commerce.

How we ensure that business has access to money so that it can conduct business.

How we ensure that unpayable debt does not occur.

How we ensure that usury does not impoverish the less well off.

How we store wealth for a rainy day without destroying the ability of money to enable transactions.

How we encourage entrepreneurship at all levels to ensure that employment is available.

How we make the system immune from collapse.

How we stop abuse and monopolization of money creation?

How we stop political influence by those with greater amounts of money?

How we prevent speculative bubbles.

How do we reverse the trend where more effort is put into making money from money than is put into making the products and services that create a better life.

How we ensure equitable distribution of all facilities provided by nature, including air, water and land, without one group taking gaining an advantage by superior wealth, strength or borrowing power.

How we ensure that common property is cared for and not miss-used, degraded or destroyed. This includes air pollution, sea pollution and water pollution, litter, waste, public faculties damaged or overused, forests depleted and many more items.

How we make sure that young couples can obtain secure housing.

How we provide income for retirees.

How we provide accommodation for retirees.

How we give people a sense of ownership of their nation by owning their own property.

How we ensure that there is neither an undersupply of employment or an oversupply on employment.

How we ensure that money is spread evenly over a nation. This is the reason that capital cities grow as that is more employment available in the cities.

Component One - Glass-Steagall

The simplest and most urgent component of the solution is a set of Glass-Steagall rules. Glass-Steagall was an arrangement where banks must declare whether they are investment banks or commercial banks. This makes a bank declare whether it are going to be an Investment Bank and engage in speculation with their client's money or act as a Commercial Bank. Many people blame the 1999 scaling back of the Glass-Steagall Act for the 2008 financial collapse.

Commercial Banks deal with 'commerce' and tend to be local in nature. These 'high street banks' lend into the local area, which meets the needs of local business which in turn helps local employment and development. They also operate the payments system between their clients and the clients of other banks.

Investment Banks are speculative in nature. They invest their client's money to make money for the client. They profit by the commissions from making money for their clients. Unfortunately, investment banks have started to invest the bank's money for the profit of the bank. These investment banks also tend to get heavily involved in 'Derivatives'. Goldman Sachs alone has a 'Derivatives' exposure of $44 000 billion dollars. [740]

Glass-Steagall would bring a complete separation of commercial banking from investment banking. This would ensure that the activities or a collapse of any investment bank would not harm the commercial bank system, with its payment system and support for the Real Economy. The risky activities and financial gambling carried out by investment banks would harm no-one but themselves and their risk-taking clients.

This would maximize the chance that the payments system and the savings of the common people would survive a collapse of the Investment Banking System. Government protection would only support the Real Economy and the system of Commercial Banks. This would also encourage commercial banks to return to the past practice of investing in the local economy. Investment funds would then tend to stay in the Real Economy, and the funds would support small businesses, family farms and manufacturing enterprises. Financial bubbles tend to be fueled by excessive investment by the speculative activities of the investment banks. By removing support for failed investment banks, the citizens would not need to bail out errant speculative banks and there would be a greater tendency for investment funds to go to the more secure local economy creating jobs and local development. Without Glass-Steagall, there is a tendency for Commercial Banks to invest in the same risky speculative financial gambling carried out by investment banks for perceived greater returns. Unfortunately, this takes investment money away from the local Real Economy. In the event of a financial crisis, the close nature of the commercial and investment banks has caused the government to bail out all big banks for fear of bringing down the Real Economy and the payments system. Separating the two banking areas and supporting only the commercial banks would cut the tendency of investment banks to rely on taxpayer-funded bailouts to survive their risky investments. The commercial banks would invest in the local economy and local investment in local industries and businesses would become a more reliable area for investment. Currently, a crash of any one major investment bank could bring down local banks. This is not a scenario that one would like to contemplate. Previous historical collapses have caused population falls of the order of twenty-five percent. Our only proven and politically available solution is a Glass-Steagall separation of banking. The world Derivatives situation makes a collapse ever more likely.

Additional Restrictions

In addition to the Glass-Steagall laws, I recommend an additional restriction on a banking licenses that the bank may not trade for its own profit. The banking license only allows for trading for profit for its clients from which it earns commissions and fees. Any existing investment section should be hived off into a separate company that should not be owned by the bank. Banks may own assets as part of their business but should not trade these assets. Some time limits to ownership should be instituted so that asset purchases are not purchased for short term profit.

Component Two - National Public Bank

The next effective component of the solution is the institution of a public bank. A public bank is a bank that is owned and operated by the government on behalf of the people. National, state and regional public banks are also recommended, as well as a National Development Bank. With a government public bank, all departments, including the taxation department operate their finances through the national bank. The great advantage of a public bank is that any money owed by the government is owed to a government bank. All interest accrues to the government and the money was created at no cost to the government. This makes the debt somewhat irrelevant. It is effectively pulling the bluff on private banks. Government debt is owed to the government. If the government does not wish to pursue the debts, the debt can just sit on the books and the interest can simply accrue. In some instances, lent money can be treated as a grant. Another benefit of your National Public Bank is that where the government needs increased funds for special purposes including infrastructure and defense financing, the loans are financed by the National Public Bank. This puts a brake on profligate spending by adding a second level of analysis by banking personnel.Your National Public Bank assists common-sense by analyzing proposed government infrastructure projects to ensure that the infrastructure projects are a worthwhile investment for the nation and not vote-catching splendors. Because the government owns the National Public Bank, the government owes the money to itself. The debts are somewhat irrelevant. Any profit from the paying of interest accrues to itself. Thus, usury has not occurred and unpayable debt has not been created. The government, through the National Public Bank, can direct the spending to where it is most beneficial for the nation. The infrastructure component of the National Bank could be hived off in the form a National Development Bank.

Component Three - National Development Bank

The role of a National Development Bank is to provide financing to promote economic and social development at all levels in a nation. The financing ranges from very large infrastructure projects all the way down to SMEs and micro enterprises. The National Development Bank helps by providing large amounts of financing to growing and productive sectors of the economy. Projects should include bridges, railways, ports, canals, solar energy and even include communications networks such as the internet. Projects should generally be judged on their enhancement of national business efficiency and competitiveness.

Component Four - State Public Banks

State banks finance the operations of the state. All state departments operate through a state public bank. State banks also support local regional credit unions and local banks. The usual example I give is as follows: Imagine that you are starting a new state. A migrant moves into your state and walks into the state public bank. He asks for $10 000 to buy a sausage machine so he can earn a living. Our State Bank says to him " If we lend you $1000 000 at 2% interest, will you build a sausage factory?" By this means, the state will have a sausage factory, a significant employer and food for all the other migrants moving to the state. All the state did was lend money that it created at no cost, and gained significant state development. It is the best way of developing the state. Do not forget that business needs money before it earns income.

The Public banks have written into their charter that they are not allowed to lend for speculation including speculation on land and property. They must lend in a manner to assist homeownership, all aspects of farm business including start-ups and entrepreneurship, experimental farm efforts, small, medium and large business in the state including business start-ups and small business entrepreneurship. They may not lend for any business or activity considered harmful to the health of the nation or environment.

Component Five - Community Banks

The next component of your solution is Community Banks. These can be backed and financed by the State Bank. They assist in providing finance to local businesses and individuals. Their local nature gives the a unique insight into the financing needs of the local community.

Component Six - Micro Credit

Imagine a school child comes up with an invention. The child is too poor to make his quadcopter aerial surveillance unit with a temporary stun gun for tracking feral cats that are devastating the local native fauna. The local council has a children's bank to help. The council officer arranges for an old retired machinist to volunteer to make the parts and a retired electronics guru completes the quadcopter and a retired businessman sets up a business and a young man starts selling aerial surveillance to the council for spotting and stunning feral cats in bushland. The system is sold or licensed worldwide producing great local employment and status. The electronic tracker locates the stunned cat to check that it is a genuine feral cat. 'Problem solved' as we say. This can only happen with the availability of local microcredit and support services available to anyone in the community. It is possible to word this into the charter of the National Development Bank or into the charter of the State Bank.

Component Seven - Alternatives

Alternative Currencies

This is a sideline and non-essential component of the solution. Alternative currencies are currencies that have restricted usage in a local area or in a restricted environment. Alternative currencies aid local business by allowing local currency to flow freely around the local district. Never forget that the value of a $20 note is not the face value of the note but is the sum total of all the transactions enabled by the note. Money flowing around a local community aids the local community. National currency does not always spread evenly throughout the nation, creating a money shortage in some areas. Local money can be useful to fill this shortage. Local money can only be used locally, as it does not affect the nation but allows local trade, thus filling up the local void.

Alternative Currencies also acts as a buffer when a national currency collapses. To this end, the currency may be linked to the national currency but better is might be linked to some other measurable value which might be hours of work or energy or any commodity that has a meaningful value. This value could even be a dozen eggs or a loaf of bread or a combination of items. In the event of a collapse of the national currency, the Alternative Currency needs to be decoupled from the national currency. Legislation needs to be added to facilitate any local area creating its own local currency.

Crowd-Funding.

Greater flexibility in the money supply may be provided by crowdfunding techniques for local projects. For example: a local farmer wishes to purchase butter making equipment. The farmer could apply to a local organization by means of an advert and local people can lend through the local crowd-funding organization to the farmer. The butter making machine would enhance local output and local employment. By this method, local money is invested locally.

Gold and Silver

Legislation should be enacted to enable Gold and Silver to be used as money and emergency money at their current exchange value. These metals need to be made legal tender. This has some similarity to the local public mints enabled by past sovereigns.

In the preparation for a financial collapse, a mechanism needs to be in place so that some continuance of trade occurs using gold and silver coins. Persons should be encouraged to own precious metal in defined weights that can be used as payment at their current value. It is not a perfect solution as gold has a habit of being hoarded by the affluent.

Component Eight - Encourage Home-Ownership

End Taxpayer Subsidies to the Rich.

Prevent land price rises by ending subsidies to the well off, through the tax system, to buy so-called investment properties. Either stop negative gearing or revalue the properties each year. Most businesses have to delay tax deductions on purchased items through a process called depreciation. This is unfair on businesses as the money has already been spent. They may own the asset, but the asset is not useable income in the normal sense. Yet investors are treated more favorably. They get a tax advantage and their asset is not valued, revalued or appreciated by a mathematical formula as with depreciated assets. The effect is to give a significant advantage to investors that is not available to home purchasers nor business operators. This means that a purchaser subsidized with a government tax perk can outbid young couples and families.

Land Ownership for All

All people born in a country have the right to reasonable land ownership in line with their needs for a reasonable price. The most effective way is to keep the house prices down. As most houses are bought using bank loans, it is the loan process that determines the value price of land. The price rises to the amount a bank deems the buyer is capable of paying interest from income. House and land prices are dependent upon:

The average wage in the district.

The current interest rate.

House prices rise to take the bulk of a person's income as interest. Buyers will bid the house prices up to the limit of affordability, which means that it will take the bulk of their affordable income. A better destination for their money is a land tax in a government bank account. Land Tax will reduce speculation and land prices. It will reduce the magnitude of the economy-damaging income tax and sales tax.

Transfer Fees and Stamp Duties

Remove land transfer levies. They are counter-productive.

Downsizing

The downsizing by elderly persons assists the availability of the young to obtain housing.

Component Nine - Recognize that Debt Cannot be Cancelled

Recognize that debt cannot be canceled without collapsing our payment system. This is commonly known as Jubilee. The concept of Jubilee is that debts should be canceled under certain circumstances. The concept goes back to the Jubilee as described and practiced in biblical times. Debts were canceled each fiftieth year with a great celebration and, at the same time, various other freedoms were reinstated. The big Jubilees included the freeing of debt slaves and more. To show why Jubilee will not work in the modern money system I need to recall some national banking figures.

The reason that a Jubilee cannot work is because a Jubilee demands that all debt is canceled, wiped, erased, on a Jubilee day. This creates a problem as the debts are listed as assets on the bank balance sheet. To wipe the debt would be to wipe out the banks as their assets disappear. Much as many like curse the banks, the modern world actually needs their fabulous money payment system. Just watch the efficiency of a teller in a bank and compare this to the bumbling inefficiency in handling money is the average small and medium business. No-one matches the efficiency of the bank payment system. We cannot operate without banks and the level of sophistication, innovation and efficiency is more likely to come from private organizations. Government organizations tend not to be innovative and progressive and tend not to be efficient with small transactions. They tend to be slow to take up innovation and technology.

Repayment of Debt

Debt cannot be canceled but it can be repaid with fresh government money. To pay off debt to banks using existing money is an impossibility as there is insufficient existing money to do so, and any attempt to do so would destroy the circulating medium. However, the government could create fresh money and use this to pay off the government portion of the debt. There are three ways of doing so:

Create large denomination coins or cash currency notes and use these to pay off debt.

Create a National Public Bank totally owned by the government. Use this bank to lend the money to the government for the purpose of paying down the debt.

Create a digital version of currency as true digital money and use this to pay off debt.

Component Ten - Education.

Stop finance influence in the syllabi of economics courses. The best explanation of this is given by 'Kick It Over' at kickitover.org

Change school mathematics syllabi so that the teaching of compound interest includes the impossibility of paying the interest. When I was a mathematics teacher, I taught compound interest, but I did not spot that compound interest was biblical usury renamed and the textbooks do not teach the mathematical logic that the debt becomes unpayable when aggregated for the whole nation. It is not payable partly because there is less money than debt and also because any attempt to repay the debt would cause the removal of the essential circulating medium.

Teach business entrepreneurship in schools through practical selling procedures at local markets and similar projects.

Teach the nature of money and that Bank Credit is a substitute for money.

Student loans are not dischargeable in bankruptcy. They should be made dischargeable

A nation needs trained people to operate efficiently. Without trained people the nation will never be competitive. The government makes a profit from trained people through increased tax collection, besides the increased productivity and increased tax collection from a more efficient industry. Young students live in comparative poverty during their student life in comparison to their working school friends. Students should be funded for their contribution. The debt hangover from education adversely modifies their persona and progress through life.

Component Eleven - Stop the Bias Toward Corporations

Stop financial influence in politics.

Stop corporate avoidance of tax.

Prevent the stacking of government banks and government departments with bank employees in what is usually referred to as 'revolving door' arrangements.

Patents are a limitation of human rights. Excessive use of patents damages progress and business and pushes work overseas.

Stop the use of lawyers as a means to destroy and 'wear-down' smaller entities through corporate warfare.

Stop predatory practices.

Stop subsidies to corporations.

Keep the war industry at bay.

Be aware that superannuation funds and compulsory savings are slush funds for corporations whilst small entrepreneurs have no access to this compulsory saving.

Compulsory savings can be used as collateral for house loans and business development. What is the point in a compulsory savings scheme when the best thing to have at retirement is your own home.

Component Twelve - Control the Banks

Increased transparency so that bank clients can see what industries their bank supports. Customers may wish to know whether they are assisting in unwanted wars or inappropriate industries. many would wish their money to be lent locally so that it enhances the local area and creates employment.

Make financial institutions liable for damage hurt and suicide of farm enterprises. This includes farm suicide. Business failure through recall of loans.

Restrict the availability of loans for speculation. This can be done by regulation or through the tax system. Tax on unearned income should be far higher than on earned income, perhaps by a factor of three.

Institute homeowners protection.

In 1933 President Roosevelt introduced legislation to stop home and farm foreclosures, with the reasoning that homeownership was needed as a 'guarantee of social and economic stability' The Australian Federal Government passed the War Precautions Act 1916 to stop foreclosures. Every state in Australia enacted legislation during the Depression to stop home and farm foreclosures. The Federal Government passed the Farmers' Relief Act, which provided money to the states for the relief of farmers. The intent was to protect the Common Good by ensuring debtors were not crushed by creditors.

It is still necessary for homeowners and farmers to be protected from the predatory actions of banks. Banks can increase interest rates at will and cause farm foreclosure. The farm is using land provided by nature to produce food for the city folk. The viability of a farm depends on its ability to pay interest to a bank rather than its ability to produce food. The price of houses is dependent on the availability of work in the region, so work is the factor that determines whether one can move into a town. The availability of work depends upon the economic activity of the nation which depends upon the money supply of a nation which is dependent on the lending habits of the banks. Thus, a cutback caused by banks allows banks to foreclose. It is not in the nation's good to allow bank initiated evictions that were caused by a bank-induced recession.

Ban most derivatives. For the most part, they are unnecessary and allow banks to use devious deceptive practices that are not to the benefit of society.

The central bank gives the illusion that banks are controlled. It is an myth. It is an agent of collusion that covers for the dominance of Bank Credit as the major component of the money supply. It is too easily stacked by past employees of the banking industry. It is propagandized by the common statement 'Keep the central bank free from political influence.' This is a euphemism for control by private vested interests.

Ban short selling.

Allow gold and silver to be used as money. Not as a backing for money but as an alternative. It cannot be wiped out by a collapse of the banking system.

Banks should not invest for their own profit. They should lose their banking license if they invest for their own profit. If a bank wishes to trade for its own profit, it should be split off into a separate company which does not have a bank license.

Break the banks into units that are not to big to fail. Large projects can be financed by public banks or consortiums of banks as was commonly done in the past.

Create regional stock exchanges so that small local business can expand. A stock exchange takes money from those that don't know what to do with it and gives it to those that will do something productive with it. This reduces hoarding.

Bank of England 2014

"Is it difficult to believe that the Central Bank with the blunt instrument of interest rate control can control private corporation lending habits. As inflation continues to flourish, their control appears to be a carefully controlled myth. ...

Creating money in the form of cash notes is illegal and called counterfeiting, however creating money that is equivalent to cash and lending it to people is apparently legal." [741]

James Rickards

"The solutions to this systemic risk overhang are surprisingly straightforward. The immediate tasks would be to break up large banks and ban most derivatives. Large banks are not necessary to global finance. When large financing is required, a lead bank can organize a syndicate, as was routinely done in the past for massive infrastructure projects such as the Alaska pipeline, the original fleets of supertankers, and the first Boeing 747s. The benefit of breaking up banks would not be that bank failures would be eliminated, but that bank failure would no longer be a threat. The costs of failure would become containable and would not be permitted to metastasize so as to threaten the system. The case for banning most derivatives is even more straightforward. Derivatives serve practically no purpose except to enrich bankers through opaque pricing and to deceive investors through off-the-balance-sheet accounting." [743]

James Rickards

"These solutions involve breaking big banks into units that are not too big to fail; returning to a system of regional stock exchanges, to provide redundancy; and reintroducing gold into the monetary system, since gold cannot be wiped out in a digital flash." [743]

Component Thirteen - Forex

Betting against your currency is a hostile act. Forex is for exchange of currency. Speculation is deadly to your nation.

Short selling is selling an item that you do not have and purchasing the item after the event in time to hand the item to the purchaser. Ban all forms of short selling. Ban the purchase of stocks and related products with anything other than real money. Leveraging and borrowing for purchases should be banned. The practice absorbs manpower and is dangerous to stability of the nation.

Put a heavy tax on any stocks, shares,bonds or financial instruments sold within one year.

Component Fourteen - Government Debt

Ban the government from contracting debt from private interests. The major current problem is that the government uses privately created 'Bank Credit' to pay its bills. It does not use its own cash currency. Until such time as it creates digital money, the government needs to create a government-owned public bank which then enables it to create Bank Credit. Bank credit is the product of double entry accounting and is only created with matching debt. However, the debt is less relevant when it is owed to the government.

Never forget that the government has the authority to create the money of the nation so government debt is entirely un-necessary. A government should never be in debt for its own currency.

The Government is Capable of Creating Digital Money

Digital money can be in two forms. One is a digital balance which is suited to debt based money, the other is in the form of Digital Units created in the same manner as cash currency. Government has always created money in units which previously has always been in some physical form. So the government would create units ranging from one dollar to one billion dollars all with digital serial numbers as is the practice with cash currency. The balance system should not be considered as money as it is a measure of money owing and even allows fractions of a money unit such as $0.0000123. This is not a money system, this is a credit system listing amounts owing.

The government would spend its freshly created digital units by giving its digital units with an encrypted serial number and a digitized image of centrally known compression algorithm. Each digital unit is owned by its current holder and a record of transactions is attached. A network independent computers would hold updated ownership details as fresh information came in, much like the domain name settings for web pages. Verification of ownership could be checked by anyone who wishes to do so.

Component Fifteen - Nationalise the Central Bank

Nationalise the central bank. Ensure that the central bank is both owned by the treasury and under the control of the treasury and ensure it and the treasury are not stacked with temporary appointments from the private banking industry. Only under such circumstances can the treasury be sure that the money issuing is not a puppet of private corporations. Some central banks are owned by the government and some are owned by private banks. Ownership does not necessarily indicate control. My daughter's car is owned by me but I have no control over it. Central banks exist to legitimize the debt banking system which is supported by political parties that benefit from doing so.

Component Sixteen - Only the Government Should Create Money

Government will move to create its own money through a combination of the Treasury and a National Public Bank and possibly the Central Bank if it is wholly owned and controlled by the treasury. This money is spent into circulation on government expenses and public projects. With a combination of the treasury and the national public bank, treasury bonds are progressively purchased back thus eliminating the bulk of the national debt.

It is entirely inappropriate for a government to issue interest bearing bonds to individuals when the government has the authority to create the money. It is inappropriate to borrow money and even more inappropriate to pay interest on money that the government has the authority to create. It is idiotic for the government to borrow its own money.

It is necessary to recognize that the needs of business are different to the needs of citizens. Businesses need money before they can create income. Government spent money does not provide the capital needed for business. If the money supply were limited to a government injected supply, it would tend to be inadequate and erratic. This was true in years gone by, when sovereigns had a monopoly on the supply of money. Sovereigns spent lightly for public purposes but created and spent rapidly for military purposes. The supply under such circumstances does not match the needs of the citizenry and even less so for traders. Some alternative method of local money expansion is needed. Sovereigns often enabled local mints to issue coinage on an as needs basis from precious metal. Witness the era of cathedral building. The modern equivalent is the high street bank (aka Commercial Bank) which extends credit, which acts as money, on an as needs basis. Unfortunately this creates unpayable debt. The needs of business are catered for by this lending, but when applied to consumer items and houses, the unpayable debt becomes unsurmountable. Money needs to be fed into the money supply in sufficient quantities to prevent citizenry scurrying to the moneylenders for their need for money.

This incudes currency and digital money. The government will create and issue paper and coin currency through the treasury. The government will create digital currency through the treasury. This will consist of of paper notes with serial numbers in denominations of $1, $10 through to $1 billion. These will be stored in a vault. Each will have an image of known compression algorithm, and a digital signature recorded on the treasury computer. These will be spent into society and the ownership transferred to the recipient. Ownership of a note is recorded in transactions attached to the digital cash ('dash'). Ownership data is primarily attached to the digital note but also recorded on a network of authorized computers nationwide. this network of computers gradually updates ownership as information flows in.

This also means that lenders can only lend out money that exists. This effectively means that the reserve requirement rises to one hundred percent. The banks then only on-lend money that exists, to the populace. They may borrow digital notes from a National Public Bank. This enables the central bank or the National Bank, at last, to have some control over the volume of money in the nation. It also allows some control over where it is lent. Loans for asset driven speculation that are likely to produce boom-bust bubbles can be restricted. Loans for business development can be augmented.

'Positive Money'

The Proposals of 'Positive Money' are similar to this. Positive Money is an organization with a significant presence, in the UK, that proposes that only the government should create money. Their reasoning is slightly different to mine. Their main line is that only the government should create the money of the nation because that is the rightful place for money to be created and that a good computer system can know exactly to whom every pound is owned. They don't mention that the loans that the banks make will still create more debt than the total of this government money and that the aggregate of these debts will be unpayable and uncollectible. However, it is still appropriate that 'only the government should create new money', rather than the free-for-all of current bank lending practices. Current practice inflates money supply which alters the value of assets including land, dwellings and shares which leads to asset inflation and bubbles. It also inhibits the growth of business as credit to business is restricted and rents and land prices are pushed up. These high rents make business uncompetitive against businesses in other countries elsewhere that have more plentiful land and are yet to succumb to the usury of land.

Component Seventeen - Taxation

Implement Land Tax. Land tax is a tax on the main natural resource of the nation. Land is essential to almost all activities and should not be monopolised by the portion of society with better access to finance. Land is extremely popular and citizens will pay high proportions of their income to obtain it. Land was provided free by nature for all living things to use in harmony. Our younger generation has been dispossessed of the opportunity to own land or property due to their lower income and educational debts. Land tax would take the advantage away from speculators.

Demurrage tax is a tax on the holding of money. Hoarded Money creates a few problems:

It removes money from the essential circulation that enables the Real Economy.

It has the potential to turn a mild financial crisis into a serious financial crisis. If high inflation occurs and interest rates fall, vast quantities of Hoarded Money may suddenly enter the circulating medium adding inflammable fuel to the inflation situation.

Under the current money system in excess of 95% of money originates as a loan. The debts associated with these loans magnify with interest to exceed the loaned money by a factor of two or three. Interest is payable on the loan by other than the person holding the money. For each $1000 in circulation, the associated interest can amount to somewhere between $150 and $300 per annum.
Demurrage on money held for more than a period of perhaps one month should attract a tax of perhaps one percent per month. In the event of a financial collapse, demurrage should be applied to all holdings of money, including currency, and the rate increased.

Sales tax for most items should be reduced to zero. Sales tax should only be used to discourage pollution, degradation and wastage. Sales tax on labour should be reduced to zero. Many businesses supply services to the government, yet they have to pay sales tax before the government has paid the business. Tax collection times must be in line with government payment times. There is a bizarre situation under accrual accounting where tax is due to the government before the government has paid the money on which the tax is due.

A Transaction Tax should be implemented on all transactions at about $1 per $1000 (0.1%) or less. This is much less than the current sales tax of $100 per $1000 and income tax of about $300 per $1000. Individuals already pay private transaction fees to banks on general transactions and credit card transactions. The Transaction Tax is same as a Robin Hood Tax except that it is applied to all transactions.

Income tax will be reduced for individuals. Tax on earned income will be taxed at a lower rate than unearned income.

Current business income tax is calculated as a profit tax rather than the income the business owner removes from the business for the purpose of feeding the family. The main culprit is the depreciation of purchased assets. Money has been spent to magnify the business but tax mercy is not allowed until many years in the future.

Businesses with fluctuating annual income have no method of smoothing the cycle. If a business owner makes $50 000 one year and $0 the next year, the business pays a higher tax than in a situation where he earns $25 000 each year.

Give business flexibility in paying tax. Encourage business to expand and employ through the tax system.

Expanding businesses may delay tax or be excused of tax.

Be aware that reducing income tax rate often gives a higher tax collection.

The influence of taxation rate on the taxation collected. https://stats.oecd.org/Index.aspx?DataSetCode=REV and LibertyWorks.com

Taxation Australia.

Taxation Components USA.

Be aware that under the current scenario where 95% of the money supply is Bank Credit, balanced by excessive quantities of debt, interest is the main method of reducing the money supply and loans are the only way of increasing the money supply. Government spending will increase the money supply, not because they are spending but because it involves borrowing which creates more Bank Credit.

Component Eighteen - Be Prepared

Ensure adequate fuel storage. Fuel storage should carry 120 days fuel supply. Australia has less than 30 and 60 days. [1310][1311]

Ignore the street fighting so that all effort can go into securing food supply. Get the army to:

Protect the food stores.

Protect the farmers.

Protect the freight companies.

Prepare for demurrage tax on cash currency. Perhaps all council offices to have cash embossing and stamping at an official rate which may be 1% to 10% per month depending on the level of inflation.

Councils to organise planting assistance.

Councils to organise local money backed by silver certificates to allow payment of farmers.


[740] www.silverdoctors.com/infographic-9-biggest-banks-derivative-exposure

[741] Bank of England. Quarterly Bulletin 2014 Q1. Money creation in the modern economy.

[742] James Rickards, The Death of Money: The Coming Collapse of the International Monetary System