Introducing Anti-money

 

 

 

 

 

 

 

 

 

 

 

For every action, there is always an equal and opposite reaction. For every proton in the universe there is an electron, and for every asset there is a liability. It is a fundamental law that everything in the natural and financial world has counterbalance to it. Everything except one: money. There is money and there is debt, but that is just another form of money. Because there is no counterweight to money, we are forced to circulate it through inefficient mechanisms such as taxation and asset purchases and sales to fund government programs and control the rate of inflation. Every dollar earned is then taxed by some amount, collected by a government agency, appropriated by another, spent on the salaries of government employees and contractors, and then taxed again. This is a convoluted and unnecessary process filled with fraud, deathweight loss and toxic incentives.

Instead of collecting existing money to fund government operations, we propose the government replace taxes with anti-money. Anti-money, much like antimatter would have the effect of destroying any money it comes into contact with. For example, an anti-money bill for 500cr. would be paid with $500, which would then disappear into thin air. Since over 90% of money in circulation is virtual and the vast majority of people don’t pay their taxes with currency, this would be a very quick and easy process.
There are two main benefits to abandoning the current tax system in favor of anti-money. The first one being is that it would necessarily make the tax code more streamlined and transparent as there would be fewer steps required in the process. The second benefit is that it would provide an automatic monetary stabilizer for the economy. Assuming that government expenditure stays constant through the business cycle, the amount of anti-money created would fluctuate in a counter cyclical way.  
When the economy is booming and profits are high and unemployment is low, the amount of anti-money created increases to cool down inflationary pressures. In turn, when the economy is in recession, the quantity of anti-money created decreases, in effect, creating a form of monetary stimulus.Because most money created in modern economies comes from private borrowing and lending, the government normally has limited tools to affect short term changes in the money supply. When the Federal Reserve, for example, tries to inject liquidity in the financial system in order to counter-act deflationary pressures from money being destroyed by defaulting loans, it’s not always clear that the money makes its way into the real economy. As we have observed in the last few years, banks and other financial institutions are sometimes content to sit on excess reserves, in effect negating part of what the Fed is trying to do.A possible alternative to an indirect injection of liquidity in the financial system to avoid a deflationary spiral is anti-money. When there is a smaller amount of money being destroyed by anti-money because fewer people have jobs and fewer businesses make profits, there is an automatic increase in the money supply through government expenditures. This increase in the money supply counter-acts the deflationary forces which arise during a recession, such as decreasing loans, increasing defaults and lower money velocity.
Frequently asked questions 

1. How would the government borrow within a system using anti-money?

Instead of issuing bonds, the government would be able to issue anti-money contracts to private and foreign investors. These contracts would stipulate that investors would destroy a nominal amount of money today and receive dollars back in principle and interest in the future. This would reduce the amount of anti-money which needs to be matched by taxpayers while keeping the government budget and inflation rate constant in the short term.

2. Wouldn’t such a system encourage the government to spend too much and create a lot of inflation?

While keeping monetary policy insulated from political motivations has been essential to keeping a strong currency in the past, it does not follow that an anti-money system would necessarily break that relationship.

The Fed, for instance, could continue to be in charge of creating money for the government, supplying only how much it deems fit to meet the inflation or nominal GDP targets set by Congress. If the government were to demand a budget that were to exceed such targets, the Fed would provide funds only up to the point where it doesn’t infringe on its mandates, asking the government to create more anti-money in the form of loans or taxation to bridge the gap or to explicitly change its targets. In theory, the Fed rejecting a budget proposal on grounds that it would violate its inflationary/NGDP targets is no different than the Supreme Court throwing out a law on the grounds of its Constitutionality.While such a situation could create a potential conflict of interest, it is worth noting that monetary policy has always had such conflicts, starting with the Fed’s dual mandate of full employment and price stability. As the date of this post, the Federal Reserve is the largest single owner of Treasury bills, holding approximately 45% more US debt than 2ndplace China. It is hard to overlook the potential conflicts of interest and political incentives which may arise in such a situation.

3. What if the government wanted to cut its budget or pay down its loans without creating deflation? 

If the government were to cut its spending in real or nominal terms, there would many ways to prevent monetary contraction, the easiest of which would be a decrease in the amount of anti-money collected or a sending everyone a tax rebate. On the issue paying back the national debt, assuming that everything else is kept constant, the government would have to create additional anti-money to balance out the newly-created money that’s paid back to its creditors.

4. What would be the rates of anti-money that each individual/corporation would have to pay?

Anti-money is compatible with any model of taxation, may it be flat or progressive, at the individual or corporate level on either income or sales.

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5 Responses to “Introducing Anti-money”

  1. Donna says:

    I’m so happy to read this. Appreciate your sharing this greatest info.

    • Harshidha says:

      Read Mises and Rothbard, folks.From 1800 to 1900 the USA developed radpily and for that period had no central bank and dollars were redeemable in gold. The general price level fell slightly in that century (which this author would call ‘deflation’), but I think you’d have a hard time proving that people had less wealth in 1900 than in 1800. A decline in general prices simply means that you can purchase more with each monetary unit. The dollars are more valuable. Sure, a company might show a lower number as a profit, but this is irrelevant if the purchasing power those dollars represent has increased. The same goes for wages. If your salary was cut to $2,000 a year but the price of a new car was $500, you wouldn’t be complaining.Unfortunately the FED has been devaluing the dollar since 1914. In that time the dollar has lost 95% of its value. Basically, allowing money to be created by fiat (i.e. thin air) means that there will be more money but no additional output in the economy. As a RESULT, prices rise in nominal terms. Everybody has more money, but there’s no more wealth.If wealth could be created by printing money, Zimbabwe would be the richest country on the planet right now.The federal reserve has been radpily creating money recently. The newly-created money has gone to banks, but the banks are not lending it out for a couple reasons. 1.) The FED is paying the banks interest on it. 2.) The banks see many customers as a repayment risk right now. Essentially, current conditions are acting on the newly-created money as if there was an increase in the reserve requirement percentage. Because the banks are holding the money, it is obviously not in circulation. Because it is not in circulation, it cannot have an effect on the prices of goods and services in the economy. So for now, the recession, which is really a clearing of malinvestment, is forcing prices downward as people try to realign the capital structure to reality by adjusting how much they save and spend.However, once the banks start lending out all the money printed up by the FED, we will see high rates of price increase (“inflation”).The government doesn’t mind inflation because it is the biggest debtor and it gets to use the newly-created money first. In other words, Uncle Sam pays lower prices. By the time the new money filters down to the average person through wages, the price increases have already taken effect throughout the economy. Since there is a lag between the time when prices increase and when the average person gets to use the new money, what occurs is the destruction of wealth and savings because you have to spend a greater portion of your income to continue purchasing the same things you did before. Savings is the foundation of capital. Capital produces the goods we consume.Check out mises.orgYou don’t need to be an economist to understand what’s going on right now.

  2. These days of austerity and also relative anxiousness about running into debt, many individuals balk up against the idea of making use of a credit card in order to make purchase of merchandise or even pay for a vacation, preferring, instead to rely on this tried as well as trusted technique of making settlement – raw cash. However, if you have the cash there to make the purchase completely, then, paradoxically, this is the best time for you to use the credit cards for several reasons.

  3. Deniz says:

    , what WWII did was take 12 million men out of the labor pool and force them into srivece overseas. As a result, unemployment dropped to essentially nil. However, the workers and families who did not go abroad to fight could hardly consider themselves better off since virtually every industrial product was rationed. Food, steel, rubber, silk, aluminum, and countless more materials were dumped into producing airplanes, tanks, jeeps, bombs, bullets, and uniforms. These goods had no civilian use, i.e. they were strictly consumption goods, which is true of all government spending. To believe that war is good for an economy is to believe in the broken window fallacy made famous by Bastiat. (Not famous enough, apparently.) By the previous poster’s logic, we should see boosts to the economy every time a hurricane levels a coastal city, or every time an earthquake causes extensive structural damage requiring billions to be spent for repairs. The more destruction, the more must be spent to repair it. Using this reasoning, we should carpet bomb our own cities! Then there will be reconstruction work for everyone and our economy will boom!Yes, war is good for some industries, but at what expense? In the example of bombing our own cities, we could expect the demand for construction jobs to skyrocket. However, what could those workers have been producing if they didn’t have to REPLACE the destroyed capital (buildings infrastructure)? Thus one should ask, if WWII had NOT occurred, what wealth would have been created instead? In lieu of building fighters and tanks and guns and bombs, American industries could have built cars, tractors, houses, radios, toys, and appliances. All of these contribute to the wealth of a society. What wealth was created by the bullets and bombs?World War II did not end the Great Depression. Rather, the END of WWII marked the end of the Great Depression. After the conclusion of the war, the government lifted all of the economic restrictions and allowed capital creation to continue in a way that government interference in the form of public works had prevented for the prior 16 years. Furthermore, the rationing of supplies meant that people had little choice but to save money. Savings is the basis for capital. Capital is the basis for future consumption.As for public works programs, they do not create wealth. They merely take money from some people and give it to others, minus a hefty fee for the bureaucracy of course. Paying people to dig ditches in the desert does not create wealth, unless you subscribe to Marx’s labor value theories.I beg you all to check out mises.org. You will then begin to realize how much your Keynesian economics courses have led you astray from sound economic reasoning.

  4. Gabriel says:

    in the previous post. It’s not “one huge flaw in your theiss” on the face of it, just maybe you have made a historical blunder?As for the various theories of “the real economy” versus the banking system, to my mind this is part of the nonsense that has got us to the current stage of the crisis. Sure there are people who control huge pools of financial capital, but they live in the same economy as everyone else. They will continue to mobilize that money as suits them and if that means they toss the United States government (via treasury dumping) under a bus then that is exactly what will happen.Jim Sinclair gives an interesting view on the hyperinflation. He is adamant that it can happen in a contracting environment where wages are declining. I think this also goes some way to address the argument by Lyle Burkhead “You can’t have hyperinflation unless wages keep pace with prices.”Actually, this is spliting hairs I think, the real question this: Will confidence in the dollar collapse to the point of no return?This is not a mathematical problem based on the velocity and/or quantity of money, this is a basic problem of confidence! The dollar is not the only currency in this condition either, the entire international monetary order is in doubt. For one thing the businessman cannot rely on his national currency as an adquate and stable unit of account. Huge distortions have been created and are in progress: massive fraud (direct bailouts, insider trades in zombie banks, naked shorts, leverage of fractional reserves) and massive volatility.I think the answer is yes, the dollar (and GBP) has reached a point of no return. Regardless of the numbers the outcome will be a dramatic drop in the buying power of the dollar. The big funds and the smart money will buy gold and tangibles of necessity. The commodity sector will recover from deleveraging and demand will stabilize just as supplies are starting to dwindle.As for the people of the USA, “the public”… they will fall back on a primitive domestic economy, where once they commanded the real wealth and output of other nations they will now be generating producing their own basic goods. I have no doubt that they will be forced by the politicians to accept some form of fiat money, but for the most part it is fanciful to expect that the public will have any desire to hold dollar balances when they finally experience the inflation that is building in the system.

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