Money as Investment: (work in progress, rev 8)
"Jars of clay
can carry the truth.
And sometimes, maybe,
even cracked-pots;
but sometimes, sadly,
it seems they cannot."
Changes:
1. Max money appreciation rate is 5.0% (for a average productivity growth rate of 5.0%) not 10.0% as previously published . The idea overall still has promise though.
2. Gold, preferred, common stock is now accomodated in the Money Backing.
3. Interest charges now allowed for companies in which less than a 100% holding in common stock is held by the Money Backing/Capital Reserve or for which a sufficient issue of new preferred stock is not available. The purpose of loans though is the most rapid appreciation in the value of the Money not the collection of interest. Interest is to be collected from "foreign" businesses. BTW, this lines up with Deuteronomy.
4. " Interest shall be charged on Checking Account balances to be paid to the Money Backing/Capital Reserve in the form of new equity acquistions in the amount of the Money Backing/Capital Reserve 's rate of return(ROR). Thus Checking Account balances in the Bank will only retain their value. Thus, the holders of Checking Account balances will have the opportunity to use those balances but be denied any appreciation of that Money. This will both encourage savings and prevent any "free riding" within Bank accounts."
5."No Bank services or proceeds shall serve any other purpose but growth in the Money Backing/Capital Reserve. All Bank profits shall acrue in the appreciation of the Capital Reserve which is normally owned by all Money buyers via their purchase of common stock in the Bank."
.
b. initial coexistence with other type money and banking systems including FRB and fiat.
c. normal human nature.
0. Designed for maximum economic growth and general prosperity consistent with honesty/stability and saver time preference. The Money supply shall only increase through purchases of Money (preferred stock) from the Bank with common or preferred shares at current backing levels. In addition, an equal value of Bank common stock for the purpose of the 100% Reserve must be bought at the same time with identical equities. Gold is welcome since it is stable money and the honorable predecessor of this money. (It may also serve a vital role in helping to introduce this new form of money.) The Money supply shall not ever decrease (no deflation in this type money). The Bank shall redeem Money with equal distributions of identical equities and/or gold from both Bank Capital Reserve AND the Money Backing. This allows the 100% reserve requirement to be met at all times with only 1/2 the Capital Reserve. The entire Money supply can be redeemed at once or in any other manner with no loss to any Money holders, so this remains an honest model. Open market purchases shall be made with the redeemed Money to put the Money back into circulation (no deflation allowed) and to replenish the Bank Capital Reserve and the Money Backing equally and identically. The right to suspend redemptions for any reason is disallowed and would never be needed anyway. A convient, easy and thus honest redeemption policy is essential to the sucess of this model as is honesty in all things.
1. This model assumes that true savings + saver time preference -> business loans -> productivity increases -> increased aggregate output -> decreased price level -> additional true savings, etc.
2. The Bank's Money will be preferred shares in the Bank. The Money's preferred backing shall equity holdings in companies the Bank lends to or new issues of divident paying preferred stock from those companies (However, this may not be immediately occur in practice. However the bank should always work toward that goal.). Thus, new Money shall be purchased with common or preferred stock in those companies. In addition, each purchaser of new Money shall be required to buy common stock in the Bank with an equal amount of identical stock(s) to establish a 100% Capital Reserve. Capital appreciation in the Money Backing shall be sought via loans to the companies whose common or preferred stock is contained therein. Thus, loans made to companies should normally result in capital appreciation of the stocks in the Money Backing and thus the Money itself. Since equal amounts of stocks are held in Capital Reserve (to be replenished with open market purchases of equity of equal value when redemptions occur), it shall always be exactly enough to redeem the entire Money supply without loss to any Money holder.
3. Savings, according to the time preference of individual savers shall be lent out to business for investment purposes at competitive interest rates as low as Zero if the Money Backing/Capital Reserve contains 100% of the business's common stock or if a sufficient purchase of new preferred stock from the business can be contracted. (Already appreciated common stocks and older dividend paying preferred stocks in identical amounts from the Money Backing and Capital Reserve shall be sold or swapped on the open market to provide the funds.) Loans (and thus savers) shall be repaid in the Money at the fastest possible rate but at not less than the contracted expected new profits in the Money. Repayment of the loans shall commence no later than contracted. Any interest obtained shall be used exclusivily to purchase additional equity for the Money Backing and Capital Reserve identically. Collateral sufficient to cover the principle plus interest for the term of the loan shall be required.
4. Redemptions will occur by the exchange of Money for equal and identical amounts of equity and/or gold from the Bank's Capital Reserve and the Money Backing thus retaining their equality at all times at current backing level as determined by the current total market price of the equities and gold in the Money Backing in the Bank's Money divided by the Total Money Supply. The Bank will then, as soon as possible, replace the equities and/or gold identically in both the Money Backing and Capital Reserve with identical or equal value purchases on the open market. Thus the Money Backing and Capital Reserve shall always be exactly equal in composition and value.
5. This model should produce growth in aggregate output, causing drops in the price level. This in turn allows more consumption and/or saving. It is also a 100% reserve system, so it is stable. This model will produce the MAXIMUM possible growth rate per year equal to: average productivity growth per savings per year (APY) * ratio of Savings to total Money supply (SR). Example follows:
100% savings model (theoretical maximum growth rate)
Average productivity growth per savings per year (APY) = 5%
ratio of savings (R) = 1.0
growth rate = 5.0% Money doubles in value every 15 years assuming new savers/savings replace lent out Money.
6. The initial issue of Money shall occur by issue of preferred stock (Money) in exchange for either common stocks in a single company or preferred stocks in a single company. This shall set the par value of the Money in dollars. For example: 100,000 shares of preferred stock (Money) in exchange for 1000 shares of Toyota common stock at $50 per share. The initial (par) backing value is thus $50,000. For purposes of illustration, each share of preferred stock issued as Money shall be called the "Hayek". Par value shall therefore be $.50 per Hayek in this case. This is the initial current backing requirement per Hayek. Thereafter, new Money shall be sold for other stocks or gold in accordance with the current backing level. In addition, an identical purchase of Bank common stock with 1000 shares of Toyota common stock at $50 per share would be required for the Capital Reserve. As a result of productivity growth in the Money, the current backing level should normally increase over time. Note that the initial issue of the Money involves use of another Money, the US dollar. After a market is established for equities and gold in Hayeks, this requirement shall disappear. Until that happens, the US dollar shall be used to determine the value of stocks and gold within the current Money Backing and thus the current backing level. Additional issues of Money may now occur in exchange for other equities. For example, 100 shares of Honda preferred stock at $60 per share shall now purchase 12,000 Hayeks. Redemptions of Hayeks shall now be accomplished by equal and identical distributions from Capital Reserve and the Money Backing at the current backing level. Remember that an equal and identical value of Bank common stock must be purchased for each Money purchase to serve as the 100% capital reserve. Thus, the Money Backing and Capital Reserve shall always be exactly equal in value and composition. No exceptions shall be allowed. A 3% charge on New Money sales shall be for the use of Bank operating expenses. No Bank services or proceeds shall serve any other purpose but growth in the Money Backing/Capital Reserve. All Bank profits shall acrue in the appreciation of the Capital Reserve which is normally owned by all Money buyers via their purchase of common stock in the Bank.
7. Bank lending shall occur by the strategy of exchanging previously appreciated common stocks or dividend paying preferred stocks in the Money Backing and Capital Reserve identically for common stock in or new issues of preferred stock from the companies the Bank will lend to. Thus Bank lending should normally lead to appreciation in the Money Backing and thus the Money itself. Repayment of loans and dividends shall always be made in the Money. Dividends yielded to the Money Backing and Capital Reserve will be recirculated into the economy by open market purchases of new equity or gold to be distributed identically to the Money Backing and Capital Reserve. The Capital Reserve will appreciate at the same rate since it will contain equal amounts of equity and/or gold as the Money Backing. This will be maintained when redemption of the Money occurs by identical withdrawals from Capital Reserve and the Money Backing. Though the Money should appreciate in value over time, repayment in it should not be a problem since the Money supply shall never shrink. Interest rates to businesses shall be ZERO in those cases where the Money Backing/Capital Reserve owns a 100% share in the business lent to, since, in those cases, Savers facilitated by the Bank, are in effect, lending entirely to THEMSELVES. When less than 100% ownership is held, then the interest rate shall be determined in proportion to Money Backing/Capital Reserve ownership but not less the expected rate of return on the investment. All interest proceeds sahh be distributed to the Money Backing/Capital Reserve. The Bank shall never receive any intereswt nor charge loan fees. All gains achieved by the Money Backing/Capital Reserve shall be distributed in the Money Backing/Capital Reserve. The Bank will receive a 3% management charge from the sale of New Money. This will be the Bank's main income stream since dividends or appreciation in the Capital Reserve shall be distributed therein.
8.0 Interest shall be charged on Checking Account balances at the end of a recurring 31 day grace peroid beginning on the same date for all accounts to be paid to the Money Backing/Capital Reserve in the form of new equity acquistions in the amount of the Money Backing/Capital Reserve 's rate of return (ROR). Thus, Checking Account balances in the Bank will only retain their value; they shall not appreciate in value. To accomplish this, the nominal Checking Account balances will decrease by the interest penality paid. (This is not unjust because the purchasing power of the remaining Money in Checking Accounts will appreciate.) Thus, the holders of Checking Account balances will have the opportunity to use spend balances but be denied any appreciation of that Money. This will both encourage savings and prevent any "free riding" within Bank accounts. Holders of Money outside the Bank might attempt to hold Bank Money either as their own capital reserves (in the case of banks) or in other accounts. This would be deflationary and "free riding". However, this could be thwarted by numbering each bit of Money uniquely and keeping track of the last time it was in Savings. Money presented for redemption past a certain grace peroid would be discounted in value to that date. Currency, similiarly, shall not be issued, since it provides an unnecessary means for holding Money outside Bank accounts. Thus, all Money shall either contribute to growth through Savings or be charged an amount equal to the rate of growth anyway. The question then arises as to what constitutes Saving. This will vary from the poor to the rich. The poor can save relatively little and for relatively short terms while the rich can save relatively much and for longer terms. This then is how the various Saving's Plans will be apportioned: For peroids of time shorter than the shortest Savings Plan, no interest shall be charged. This should equal the longest typical household budget term for an individual which is assumed to be 1 month. Thus the Bank shall not offer loans shorter than one month. Thus beginning with One Month Saving's Plans, the shorter term Plans shall be offered to the smallest Account Owners (sumed togther in the case of multiple accounts with one owner) from the least to the greatest until the need for that term of savings was filled. The next longer term Savings Plan would pick up where the previous one left off. Eventually, only the largest account holders would hold the longest active Saving's plans. Before interest on Checking Accounts is assessed a last chance to move remaining Checking Account balances into savings shall be given near the end of the month. The Bank should attempt to remain fully loaned up assuming adequate collateral is available.
The Bank shall assume all loan losses. Savings shall be risk-free for the Savers. In the event of low loan demand, short term loans (less than 3 months) shall be provided at market rates providing adequate collateral is provided.
Acknowledgments: Impossible to list all since this seems to be the solution to the free market's need for a Money system that allows the most rapid growth without the boom bust cycle. But among them Ludvig Von Mises, Murray N. Rothbard, Frederik Von Hayek and the Austrian School of Economics
This was produced by standing on the shoulders of those giants and others and the author acknowledges that. Additional acknowledgments to be added later. The glory for this model belongs to God and the stock market He seems to have created. The beauty and implications of this model continue to amaze this author. He started just with the pupose of honesty and the highest possible performance and among other things has produced a Model consistent with the Bible's teachings on interest, savings, hoardings, investment and others. The glory, in this case at least, cannot be denied God since the Bible is His Word. Don't like the author's theology? This model will still make you rich anyway and thus you might reconsider.
A proposed 100%
reserve, equity-backed money and banking model
"Jars of clay
can carry the truth.
And sometimes, maybe,
even cracked-pots;
but sometimes, sadly,
it seems they cannot."
Changes:
1. Max money appreciation rate is 5.0% (for a average productivity growth rate of 5.0%) not 10.0% as previously published . The idea overall still has promise though.
2. Gold, preferred, common stock is now accomodated in the Money Backing.
3. Interest charges now allowed for companies in which less than a 100% holding in common stock is held by the Money Backing/Capital Reserve or for which a sufficient issue of new preferred stock is not available. The purpose of loans though is the most rapid appreciation in the value of the Money not the collection of interest. Interest is to be collected from "foreign" businesses. BTW, this lines up with Deuteronomy.
4. " Interest shall be charged on Checking Account balances to be paid to the Money Backing/Capital Reserve in the form of new equity acquistions in the amount of the Money Backing/Capital Reserve 's rate of return(ROR). Thus Checking Account balances in the Bank will only retain their value. Thus, the holders of Checking Account balances will have the opportunity to use those balances but be denied any appreciation of that Money. This will both encourage savings and prevent any "free riding" within Bank accounts."
5."No Bank services or proceeds shall serve any other purpose but growth in the Money Backing/Capital Reserve. All Bank profits shall acrue in the appreciation of the Capital Reserve which is normally owned by all Money buyers via their purchase of common stock in the Bank."
.
Assumptions:
a. competing banks each with its own particular money
backed by
its particular equities.b. initial coexistence with other type money and banking systems including FRB and fiat.
c. normal human nature.
0. Designed for maximum economic growth and general prosperity consistent with honesty/stability and saver time preference. The Money supply shall only increase through purchases of Money (preferred stock) from the Bank with common or preferred shares at current backing levels. In addition, an equal value of Bank common stock for the purpose of the 100% Reserve must be bought at the same time with identical equities. Gold is welcome since it is stable money and the honorable predecessor of this money. (It may also serve a vital role in helping to introduce this new form of money.) The Money supply shall not ever decrease (no deflation in this type money). The Bank shall redeem Money with equal distributions of identical equities and/or gold from both Bank Capital Reserve AND the Money Backing. This allows the 100% reserve requirement to be met at all times with only 1/2 the Capital Reserve. The entire Money supply can be redeemed at once or in any other manner with no loss to any Money holders, so this remains an honest model. Open market purchases shall be made with the redeemed Money to put the Money back into circulation (no deflation allowed) and to replenish the Bank Capital Reserve and the Money Backing equally and identically. The right to suspend redemptions for any reason is disallowed and would never be needed anyway. A convient, easy and thus honest redeemption policy is essential to the sucess of this model as is honesty in all things.
1. This model assumes that true savings + saver time preference -> business loans -> productivity increases -> increased aggregate output -> decreased price level -> additional true savings, etc.
2. The Bank's Money will be preferred shares in the Bank. The Money's preferred backing shall equity holdings in companies the Bank lends to or new issues of divident paying preferred stock from those companies (However, this may not be immediately occur in practice. However the bank should always work toward that goal.). Thus, new Money shall be purchased with common or preferred stock in those companies. In addition, each purchaser of new Money shall be required to buy common stock in the Bank with an equal amount of identical stock(s) to establish a 100% Capital Reserve. Capital appreciation in the Money Backing shall be sought via loans to the companies whose common or preferred stock is contained therein. Thus, loans made to companies should normally result in capital appreciation of the stocks in the Money Backing and thus the Money itself. Since equal amounts of stocks are held in Capital Reserve (to be replenished with open market purchases of equity of equal value when redemptions occur), it shall always be exactly enough to redeem the entire Money supply without loss to any Money holder.
3. Savings, according to the time preference of individual savers shall be lent out to business for investment purposes at competitive interest rates as low as Zero if the Money Backing/Capital Reserve contains 100% of the business's common stock or if a sufficient purchase of new preferred stock from the business can be contracted. (Already appreciated common stocks and older dividend paying preferred stocks in identical amounts from the Money Backing and Capital Reserve shall be sold or swapped on the open market to provide the funds.) Loans (and thus savers) shall be repaid in the Money at the fastest possible rate but at not less than the contracted expected new profits in the Money. Repayment of the loans shall commence no later than contracted. Any interest obtained shall be used exclusivily to purchase additional equity for the Money Backing and Capital Reserve identically. Collateral sufficient to cover the principle plus interest for the term of the loan shall be required.
4. Redemptions will occur by the exchange of Money for equal and identical amounts of equity and/or gold from the Bank's Capital Reserve and the Money Backing thus retaining their equality at all times at current backing level as determined by the current total market price of the equities and gold in the Money Backing in the Bank's Money divided by the Total Money Supply. The Bank will then, as soon as possible, replace the equities and/or gold identically in both the Money Backing and Capital Reserve with identical or equal value purchases on the open market. Thus the Money Backing and Capital Reserve shall always be exactly equal in composition and value.
5. This model should produce growth in aggregate output, causing drops in the price level. This in turn allows more consumption and/or saving. It is also a 100% reserve system, so it is stable. This model will produce the MAXIMUM possible growth rate per year equal to: average productivity growth per savings per year (APY) * ratio of Savings to total Money supply (SR). Example follows:
100% savings model (theoretical maximum growth rate)
Average productivity growth per savings per year (APY) = 5%
ratio of savings (R) = 1.0
growth rate = 5.0% Money doubles in value every 15 years assuming new savers/savings replace lent out Money.
6. The initial issue of Money shall occur by issue of preferred stock (Money) in exchange for either common stocks in a single company or preferred stocks in a single company. This shall set the par value of the Money in dollars. For example: 100,000 shares of preferred stock (Money) in exchange for 1000 shares of Toyota common stock at $50 per share. The initial (par) backing value is thus $50,000. For purposes of illustration, each share of preferred stock issued as Money shall be called the "Hayek". Par value shall therefore be $.50 per Hayek in this case. This is the initial current backing requirement per Hayek. Thereafter, new Money shall be sold for other stocks or gold in accordance with the current backing level. In addition, an identical purchase of Bank common stock with 1000 shares of Toyota common stock at $50 per share would be required for the Capital Reserve. As a result of productivity growth in the Money, the current backing level should normally increase over time. Note that the initial issue of the Money involves use of another Money, the US dollar. After a market is established for equities and gold in Hayeks, this requirement shall disappear. Until that happens, the US dollar shall be used to determine the value of stocks and gold within the current Money Backing and thus the current backing level. Additional issues of Money may now occur in exchange for other equities. For example, 100 shares of Honda preferred stock at $60 per share shall now purchase 12,000 Hayeks. Redemptions of Hayeks shall now be accomplished by equal and identical distributions from Capital Reserve and the Money Backing at the current backing level. Remember that an equal and identical value of Bank common stock must be purchased for each Money purchase to serve as the 100% capital reserve. Thus, the Money Backing and Capital Reserve shall always be exactly equal in value and composition. No exceptions shall be allowed. A 3% charge on New Money sales shall be for the use of Bank operating expenses. No Bank services or proceeds shall serve any other purpose but growth in the Money Backing/Capital Reserve. All Bank profits shall acrue in the appreciation of the Capital Reserve which is normally owned by all Money buyers via their purchase of common stock in the Bank.
7. Bank lending shall occur by the strategy of exchanging previously appreciated common stocks or dividend paying preferred stocks in the Money Backing and Capital Reserve identically for common stock in or new issues of preferred stock from the companies the Bank will lend to. Thus Bank lending should normally lead to appreciation in the Money Backing and thus the Money itself. Repayment of loans and dividends shall always be made in the Money. Dividends yielded to the Money Backing and Capital Reserve will be recirculated into the economy by open market purchases of new equity or gold to be distributed identically to the Money Backing and Capital Reserve. The Capital Reserve will appreciate at the same rate since it will contain equal amounts of equity and/or gold as the Money Backing. This will be maintained when redemption of the Money occurs by identical withdrawals from Capital Reserve and the Money Backing. Though the Money should appreciate in value over time, repayment in it should not be a problem since the Money supply shall never shrink. Interest rates to businesses shall be ZERO in those cases where the Money Backing/Capital Reserve owns a 100% share in the business lent to, since, in those cases, Savers facilitated by the Bank, are in effect, lending entirely to THEMSELVES. When less than 100% ownership is held, then the interest rate shall be determined in proportion to Money Backing/Capital Reserve ownership but not less the expected rate of return on the investment. All interest proceeds sahh be distributed to the Money Backing/Capital Reserve. The Bank shall never receive any intereswt nor charge loan fees. All gains achieved by the Money Backing/Capital Reserve shall be distributed in the Money Backing/Capital Reserve. The Bank will receive a 3% management charge from the sale of New Money. This will be the Bank's main income stream since dividends or appreciation in the Capital Reserve shall be distributed therein.
8.0 Interest shall be charged on Checking Account balances at the end of a recurring 31 day grace peroid beginning on the same date for all accounts to be paid to the Money Backing/Capital Reserve in the form of new equity acquistions in the amount of the Money Backing/Capital Reserve 's rate of return (ROR). Thus, Checking Account balances in the Bank will only retain their value; they shall not appreciate in value. To accomplish this, the nominal Checking Account balances will decrease by the interest penality paid. (This is not unjust because the purchasing power of the remaining Money in Checking Accounts will appreciate.) Thus, the holders of Checking Account balances will have the opportunity to use spend balances but be denied any appreciation of that Money. This will both encourage savings and prevent any "free riding" within Bank accounts. Holders of Money outside the Bank might attempt to hold Bank Money either as their own capital reserves (in the case of banks) or in other accounts. This would be deflationary and "free riding". However, this could be thwarted by numbering each bit of Money uniquely and keeping track of the last time it was in Savings. Money presented for redemption past a certain grace peroid would be discounted in value to that date. Currency, similiarly, shall not be issued, since it provides an unnecessary means for holding Money outside Bank accounts. Thus, all Money shall either contribute to growth through Savings or be charged an amount equal to the rate of growth anyway. The question then arises as to what constitutes Saving. This will vary from the poor to the rich. The poor can save relatively little and for relatively short terms while the rich can save relatively much and for longer terms. This then is how the various Saving's Plans will be apportioned: For peroids of time shorter than the shortest Savings Plan, no interest shall be charged. This should equal the longest typical household budget term for an individual which is assumed to be 1 month. Thus the Bank shall not offer loans shorter than one month. Thus beginning with One Month Saving's Plans, the shorter term Plans shall be offered to the smallest Account Owners (sumed togther in the case of multiple accounts with one owner) from the least to the greatest until the need for that term of savings was filled. The next longer term Savings Plan would pick up where the previous one left off. Eventually, only the largest account holders would hold the longest active Saving's plans. Before interest on Checking Accounts is assessed a last chance to move remaining Checking Account balances into savings shall be given near the end of the month. The Bank should attempt to remain fully loaned up assuming adequate collateral is available.
The Bank shall assume all loan losses. Savings shall be risk-free for the Savers. In the event of low loan demand, short term loans (less than 3 months) shall be provided at market rates providing adequate collateral is provided.
Acknowledgments: Impossible to list all since this seems to be the solution to the free market's need for a Money system that allows the most rapid growth without the boom bust cycle. But among them Ludvig Von Mises, Murray N. Rothbard, Frederik Von Hayek and the Austrian School of Economics
This was produced by standing on the shoulders of those giants and others and the author acknowledges that. Additional acknowledgments to be added later. The glory for this model belongs to God and the stock market He seems to have created. The beauty and implications of this model continue to amaze this author. He started just with the pupose of honesty and the highest possible performance and among other things has produced a Model consistent with the Bible's teachings on interest, savings, hoardings, investment and others. The glory, in this case at least, cannot be denied God since the Bible is His Word. Don't like the author's theology? This model will still make you rich anyway and thus you might reconsider.
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