Hi, We already have the system in place for a house-backed currency. Banks are already issuing house-backed currency. However, they trick us into signing over our home and paying them 1.5 times the value of the mortgage in interest alone all for some simple accounting services. How could an accountant ever justify collecting 12 monthly payments a year totaling $15,000 for something we could do with a piece of paper and pencil and 10 minutes a month. Hopefully everybody knows about fractional reserves and how bogus. We all know that the real way to keep our economy healthy is by making sure the mortgages are secure through down payments, income to debt ratios, and debt to equity ratios. These things were abandoned by banks years ago.
What makes a money sound? It needs to be backed by actual wealth. We all know that wealth can be anything but there are characteristics that make gold better than everything else. Lew Rockwell points out Ideal characteristics of money in his documentary "Money, Banking and the Federal Reserve" as that it has to be valued widely, durable, easily divisible, limited in supply, and have a high value to weight ratio, making them easily transportable.
Lets examine these characteristics and see how the modern world has been able to overcome these limitations. First of all, they have to be valued widely. Of course everybody needs houses. Are they durable, yes. Granted, fire and tornados can destroy them, however insurance can secure the owner doesn't experience a loss and a natural disaster only affects a tiny percentage of the houses. Easily divisible, no but when a person issues currency based on his house, just like paying back a loan, they set a schedule to buy back the currency each month for a specified amount of time. If a person cannot keep on the buyback schedule, their house is turned over to a third party for liquidation. After all the expenses are paid and all the outstanding currency is bought back, the remaining money is then returned to the person who defaulted. They are then ineligible to issue new house backed currency for 5 years. So this new house backed currency would be on top of a base money supply, unchanging and backed by gold. It is already limited in supply, you cannot simply go out and collect houses, they have to be built with real labor and materials. Value to weight ratio is irrelevant because you will always be dealing in the paper currency that the house backs.
Isn't creating money bad? We aren't creating money. Money is anything that people will accept knowing they can use it later to trade for what they want. If the paper is backed by the house, then it isn't creating money, we are just issuing receipts for the house.
How is this not fractional reserves? Because every piece of paper (or digital equivalent) is backed by part of the house. Fractional reserves is if we have a house worth 100,000 and we issue 200,000 of new money. Title companies already make sure there aren’t multiple claims on a house; they can also make sure we don't issue new money more than once. Appraisers can make sure the proper value of the house is assessed.
Isn't 0% interest an artificially low rate and therefore a bad thing? Yes, but this isn't 0% interest. This isn’t interest at all. We are not borrowing from the banks. We are issuing our own currency backed by our homes and the banks are just serving as our accountants.
What about bidding the price of homes up? What about people going crazy, buying multiple homes, using them to rent out? People will still need to qualify based on their income. They won't buy them for rental property because who will they rent them out to, why rent when you can own and have every cent of your payment building equity.
Bottom line is, banks are issuing money backed by our houses and loaning it to us. When in reality they should be issuing money on our behalf and charging simple fees for their accounting services. All other banking functions will be fee based. Fractional Reserves must be abandoned. We need to have a gold backed base currency (if someone argues for FIAT currency issued by the Treasury I wouldn't let that be a deal breaker, we would just have to somehow prevent them from printing any more), then new currency can be issued and retired as needed backed by houses (with the proper regulations such as down payments, debt to equity ratios and debt to income ratios). Of course we would have to replace nearly the entire congress with 3rd party candidates. That won't happen until they ban together and send one candidate for this purpose. One term is all we need. to get this pushed through. Then resolving all the country's other problems would a walk in the park.
Contact me with your thoughts. Criticisms are welcomed? If you can say it better, please let me know. Help me develop and spread this idea. Let me know who else has proposed this in the past so I can read up on their ideas. My email is JGPosner@yahoo.com.
"How could an accountant ever justify collecting 12 monthly payments a year totaling $15,000 for something we could do with a piece of paper and pencil and 10 minutes a month."
You are forgetting that the bank makes the previous owner of the property give up his title and go away. If you could do that you wouldn't need the bank.
another small adjustment. The interest rate is the discount in value of future money. The owner of the money can use that money to buy something now, or loan it to me, in hopes of buying something in the future after I pay him pack. Stuff now is more valuable than stuff in the future...by about 6% per year at prevailing markets...
and...lets say that I'm tired of this currency and convert it back. In a gold standard, somebody gives me x ounces of gold. In a house standard, do I come crash in your living room for however long I like? Maybe I can tow off your shed?
You forgot one thing: Fungibility
Bad luck being allotted "parts" of tents and barns, instead of mansions and skyscrapers, no?
DBratton: "How could an accountant ever justify collecting 12 monthly payments a year totaling $15,000 for something we could do with a piece of paper and pencil and 10 minutes a month." You are forgetting that the bank makes the previous owner of the property give up his title and go away. If you could do that you wouldn't need the bank.
Thanks for the note, I will have to make myself a little clearer on this point.
The owner would give up his title and go away. As long as there are no other claims on the property, the previous owner can do whatever he wants with the property. The title company will make sure there are no other claims. The only thing special about a bank is that the government has granted it permission to create this money out of thin air. Fractional Reserves will have to be done away with the new money would be backed 100 percent by the house.
You see, I wouldn't issue JoeDollars, they would be real dollars. Just like Wells Fargo doesn't issue WellsDollars, they are real dollars. When I say buy back the money I issue and retire it, I just stated it this way so people can draw the parallel between gold smiths issuing receipts for the gold they own and a home owner issuing receipts for the house they own. We (or the institution representing us) would actually be issuing US Dollars created out of thin air, and as we earn money and pay it back, the loan would go back into the same thin air from which it came.
Does this make sense? Did I answer your question? Please reply again if this still isn't clear.
corpus delicti: What makes a money sound? It needs to be backed by actual wealth. We all know that wealth can be anything but there are characteristics that make gold better than everything else. Lew Rockwell points out Ideal characteristics of money in his documentary "Money, Banking and the Federal Reserve" as that it has to be valued widely, durable, easily divisible, limited in supply, and have a high value to weight ratio, making them easily transportable. You forgot one thing: Fungibility Bad luck being allotted "parts" of tents and barns, instead of mansions and skyscrapers, no?
Thanks for pointing that out. That's right, gold is great because the ounce of gold can be traded for any other ounce of gold in the world. I'll have to add Fungibility.
We can get around this issue because no one will ever redeem the money for parts of my house, an appraiser will determine the value of the home (just like is done today), a safe percentage of that value will be created. If I am unable to repurchase and retire the money at whatever predetermined rate, then the whole house gets sold, all fees and the remaining of the money outstanding is retired and the leftover gets returned to the guy who defaulted.
I could have said pay back the loan instead purchase and retire my currency but I wanted people to see that this is actual new money backed by a house, just like money used to be backed by gold. I think I may be confusing people with this so I might have to draw this comparison in the beginning and from then on refer to it as a loan. I state it this way because I know that a 0 percent interest rate raises flags because that would be artificially low so I wanted people to see that it wasn't a loan and that it was actually your own money being issued backed by your own property.
Thanks again for the input.
Greg: and...lets say that I'm tired of this currency and convert it back. In a gold standard, somebody gives me x ounces of gold. In a house standard, do I come crash in your living room for however long I like? Maybe I can tow off your shed?
Hi Greg, it seems that everybody is hung up on the idea that my currency would be different then a normal dollar. I am definitely going to have to explain that better. Please refer to my reply to corpus delicti. The last paragraph in my reply to DBratton also addresses this but in a slightly different way.
Thanks
Greg: another small adjustment. The interest rate is the discount in value of future money. The owner of the money can use that money to buy something now, or loan it to me, in hopes of buying something in the future after I pay him pack. Stuff now is more valuable than stuff in the future...by about 6% per year at prevailing markets...
Good point. In addition to addressing your point, I'll discuss all reasons for interest to head off possible future questions. Interest is charged to compensate for loss of opportunity (which is your point), also to compensate for risk, and to account for inflation. When a bank has money, it could invest it or loan it to me, why would it ever loan it to me for free if it could invest it and earn a return on that investment. However, banks generate 90% of the money supply out of thin air. Before I signed the loan papers that money didn't even exist. There are ways banks can create this money and use it even if I didn't walk through the door but that is a flaw in the system that will go away once this sinisterly deceptive Federal Reserve System is abolished. As for risk, creating money out of thin air shouldn't involve any risk however there is a little because when new money is generated into the system, there is a series of deposits and loans that take place over a couple weeks time before the total amount of new money is completely created, (however I heard that banks can get around this with some creative accounting). And once the Federal Reserve Bank is abolished, we will be able to maintain a steady money supply so inflation won't be a factor.
Let me know if there are any flaws in my logic. Thanks.