Sunday, June 29, 2014

Problem of Poverty: Safety Society System

Most people on this planet are poor and can barely scape together enough food to survive.  Change is difficult because the current economic system benefits only a few, but those few are in positions of power and are disinclined to make changes. In Socialist/Democratic countries, the poor also benefit and also have a similar conflict of interest. I appreciate the many personalized ideas to combat poverty but I feel it is a bit like rearranging the deckchairs on the Titanic.  Our current debt-based system is unsustainable.

The #1 thing to combat poverty is the Gospel of Jesus Christ.  But it's more than just believing in Christ but believing and following Christ's commandments.  The 2 biggest sources of poverty are 1. illegitamacy and 2. substance abuse.  Government has taken over the welfare business and prints checks but doesn't address virtue issues which are the cause of poverty. James 1:27 says that pure religion is welfare and virtue. Government welfare symptomatically alleviates sufferings on the short term but doesn't treat the root cause and tends to "enable" and lead to dependance.  Religion needs to take its job back and start doing it.  Separation of Church and State?  The State needs to get out of the business of religion but this will only happen when religion does its job and State welfare is no longer needed.

In addition to the Gospel of Jesus Christ we also need an equitable economic system.  We learn from the Doctrine and Covenants the United Order where all things are "common" (NOT in common- Acts 2:44) provides for both wants and needs (D&C 51:3).  Basic needs should always be provided liberally. The Bishop as Judge in Israel determines what is needed.  However, when it comes to wants, those are not given without labor. Instead of giving eveyone their wants for free, the United Order would invest in able-bodied people and help them develop job skills so that they can be productive and self-reliant. The United Order would teach a man to fish at the same time give him a fish.  The disabled would also have their wants, but they would rely on gifts and hand-me-downs (Luke 3:11)

End of Bretton-Woods
It seems apparent that we are likely, at some point, to see the end of the current Bretton-Woods System.  While the FED can continue to print money at its current pace for more years.  It seems apparent that our current debt-based system has likely reached a point of no return. 

The end of Bretton-Woods (likely following world war and not collapse) offers a great opportunity to suggest a replacement economic system.  Many people dislike the current global private central banking system but don't know what to replace it with.  I fear if the honest in heart do not suggest an honest system, another less-equitable system will be provided for us and readily accepted by the masses following some sort of crisis. 

End to Poverty
Also, an equitable economic system could be implemented in any nation to provide a strong currency as well as micro, middle and macro credit.  In addition to programs that address individual spiritual and temporal matters, a macro-economic system is necessary as part of a comprehensive solution to the problem of poverty. 

Safety Society System
The History of the US has been one financial panic or economic depression after another.  Banks operating on fractional-reserve principles are inherently unstable. A proposed replacement system would be both full-reserve and constitutional.  I will attempt to describe the basics of the Safety Society System (SSS):

1. Fractional Reserve Banks fail for several major reasons.  A. because of inflation banks hold reserves in stock/bonds or historically gold/silver whose prices can fluctuate via manipulation and speculation.  When banks loose their fractional reserves via "run" or "crash, the bank becomes insolvent and fails. Depositors are then exposed to the risk taking of speculators because deposits are loaned out and not kept in the bank (mostly virtual money).  Accordingly, a stable bank must be full reserve and inflation must be avoided.

2. Article 1 Section 8 US Constitution states that the US Congress (via Treasury) should "coin" (print or virtually create) currency and regulate its value (no inflation). Currently FED member banks create majority of money by Fractional Lending.  When a big (FED-member) bank borrows $1-million from the FED, they can make $10-million or more in loans (money multiplier and leverage). When the loans are repaid the bank collects $20-million and repays the FED $2-million.  This cheats the American people out of earning prime interest on 90-percent or more of money creation.  Local small bank serve as agents or brokers using Big-bank money and earning loan-origination fees.  With stable local banks, and the Federal Government doing its constitutional duty, we would no longer will need the mega-banks.

3. The Safety Society System (SSS) is Full Reserve.  Money is created federally, but loans are administered locally.  Local SSS Banks are non-profit but cover overhead as local banks do now through loan origination fees.  100% Deposits are kept in reserve.

4. MxV = PxG (money supply x velocity = price/inflation x real growth)
Loan origination is the major point of money creation.  SSS Money can be created "on demand" by the US Treasury as the real need arises in the economy.  Too much money = inflation.  Not enough = deflation.

5. National Currency will prevent currency wars. Money can be created "on-demand" upon loan approval, qualification and origination. The right amount of money supply controls inflation according to M.V=P.G.  Repaid loan money (mostly virtual) is returned to the US Treasury and retired out of circulation.

6. SSS banks are non-profit and administer loans from US Treasury and earn money via loan-origination fees as local banks do now.   Loans are made with new US Treasury Money only.  100% deposits are kept in full reserve. Depositors money is never subjected to the risk taking of the lenders.  There can never be a "run" on full-reserve SSS bank.

7. US Treasury collects simple interest on loans. These fee-based loans: A. regulate the value of currency by making borrowing easier or harder depending on interest rates. B. generates "voluntary" Federal Government revenue instead of income tax. C. Creates an advantage for the saver over the borrower. (Federal Revenue based on tariffs and simple prime interest)

8. SSS loans would only be issued for things of real value: i.e. land, natural resources and real estate.  Business loans would be made via crowd source and venture capital but not via the SSS. SSS only lends for land, buildings and mining natural resources.

9. Credit-worthy Borrowers repay and earn equity from day 1.  Missed payments are deducted from equity in an instant reverse mortgage process. Default only occurs when the borrower has lost all equity.  This serves as mortgage insurance.  If default occurs, the bank repossesses a real asset and not a worthless stock or derivative or other worthless speculative financial instrument.  You could never borrow from an SSS bank and invest that money in the stock market.

10. Communities who wish to build a hospital, aquarium, city pool or park may pass a ballot referendum approving a 1% sales tax.  Based on projected revenue, a loan is approved and construction on the city aquarium begins.

11.  "All Things Common": Price of product or service is not based on supply and demand (scarcity) but instead is based on the quality and quantity of labor  involved to produce the good or service.  Backing for money is land and real-estate and natural resources.  Any country could implement the SSS because every country has land, can build houses, and has natural resources.

12. National tariffs would protect domestic industry and manufacturing resulting in "real cost discovery." You can buy imports but you will pay a little more for them unless there is no domestic market already.  Tariffs would provide "voluntary" revenue for the federal government instead of an involuntary income tax.

13. SSS Loans are fee-based, simple interest loans.  SSS Loans would not be inflationary and not be amortized or charge compound interest.  Repaid loan money is immediately retired from the system by the US Treasury.

14. Separate crowd-funding and venture capital systems would supply business loans beyond land, natural resources, and houses/buildings.   SSS economy focuses on saving the bank and not focused on individuals being able to redeem currency for something else after the economy has collapsed.  If the banks stay healthy, the currency will remain healthy.

15. Because if the amortized FHA loan, home sellers feel the need to charge the buyer more than they themselves purchased their home for (equity).  Rising home price is a major source of inflation.  A home that is 10-years old should not necessarily be worth $30,000 more.  SSS would favor preserving asset value and preventing inflation.  SSS Home owners earn equity from day 1.

The point of the Safety Society System is to create a full-reserve financial system where citizens can deposit their money with full confidence. SSS is immune from failure and serves as a local loan broker on behalf of the US Treasury who creates 100% of the money and not just a fraction.  The Federal Government is protected from loan defaults because any missed monthly payments are deducted from equity.  Default occurs when all equity is lost.  But then the Federal Government has a real asset to repossess instead of a pile of worthless, toxic paper securities.

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