When the Fed recovers the power to create money, there would be no excuse for government to cut taxes on the rich, who have been underpaying their taxes for generations
DENVER, Sept. 27, 2010 — The following is the last of a four-part statement by J. Moromisato.
4. The Denver Plan Solution: Money Myths are at the Root of America's Decline (Conclusion)
Few commentators have linked the decline of America with its obvious causes: Huge trade deficit, high unemployment, large national debt, collapsed financial system, and political gridlock.
The Denver Plan to end unemployment [DenverPlan.com] is a comprehensive set of eight policy proposals, emerging out of a new approach to economics [Reformed Economics]. One of its main proposals is the establishment of a Full Reserve Lending (FRL) regime (Fig. 2).
Figure 2:
http://www.ereleases.com/pic/Figure2.jpg
The problem with the private financial system, as mentioned before, is its unconstitutional power to create money; its only constrain is balancing its assets with its customers' deposits.
With FRL, all money deposits would remain in reserve, and banks would be obliged to borrow all their lending funds from the Fed. Thus, eventually, only money created by the Fed would be used here and abroad.
When the Fed recovers the power to create money, there would be no excuse for government to cut taxes on the rich, who have been underpaying their taxes for generations, nor a reason for it to borrow from private lenders, when it can do it from the Fed, at zero interest.
In addition, the interest charged by the Fed to the financial institutions, on their lending funds, would constitute another substantial source of income for the government, possibly reducing the need to increase taxes to anyone but the richest 1% or 2% of the population.
Finally, the solution to the trade deficit problems is for the U.S. government to convince all other governments, especially those that enjoy a trade surplus with us, to enter into a Balanced Trade Agreement.
In the meantime, The U.S. should announce a temporary tariff on all imports from trade surplus countries, which starting at a 10% surcharge, would gradually increase to become proportional to the size of the corresponding trade deficit. For example, all imports from China would be subject to a 10% tariff, which would increase gradually until our mutual trade becomes balanced.
(Visit http://www.DenverPlan.com for more details)
About J. Moromisato
Born in Lima, Peru, J. Moromisato became an American citizen in 1985. He has a doctorate in high-energy physics and worked as teacher and researcher until December 2004. Shortly before retiring, he returned to graduate school to obtain a master's in economics. A Denver resident, Moromisato is the author of The Origin of Wealth and Poverty (2007), The Coming Age of Freed Money (2010). And The Denver Plan to End Unemployment (Oct 2010).
Contact: J. Moromisato, (303) 321-0577
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