Tuesday, July 8, 2014
Idea for Monetary Stabilization of US Dollar: Use ETF Computer Technology
Latest Break Though Idea for Monetary Stabilization of US Dollar: Use ETF Computer Technology Turning Every US Dollar into a Miniature Self Stabilizing Gyroscope is Suddenly Possible Thanks to Technology Lex Loeb Contributor Network . Move over Barclay's and Vanguard Maybe the United States Treasury and the European Central Bank should be going into the ETF business. What if an ETF really did happen to contain fractional shares of US Assets and Liabilities as the basis of determining the value of the US dollar? At one time the US government had to at least pretend that it had so much gold or silver to back each and every dollar the Treasury allowed the mint to print. The paper bill was designed to replace the heavy gold coin that it represented allowing more convenient distribution and utilization of the currency. There was a conversion ratio printed on the bills originally. Some financial experts believe that the old gold and silver standards were beneficial in fostering economic growth and financial stability in the country. It was not until the presidency of Richard Nixon that the US came off the commodity ratio standard. Gold is still good for monetizing but it has limitations including a world market that wants to exact a heavy toll on governments when ever possible. Gold is not the only commodity that has enduring value. Rice , beans, wheat , potato's and land to grow them on have enduring value and can be regenerated in the case of food items not the land resources. If the US government really does have a balance sheet of assets and liabilities, it should be able to create an EFT holding spread sheet to back the US dollar. Assets would include everything from Land resources to mineral right leases , expected royalties, and most of all tax liabilities of all US Citizens including corporate entities. Would it be wrong to allow foreigners who buy US dollars to exchange dollars for the real wealth of the US Government? The EFT model provides a most amazing ability to allow a share that could be exchanged for a note to be such a small fraction of each entity owned by the US government that foreigners could not walk away anything bigger than a share of a 100-300 trillion dollar entity. Markets could allow conversion to a sliding range of values of anyone commodity based on the earnings power of a US ETF dollar share equivalent. I rather don't think tax and spend politicians will like the idea. In a perfect world , however it would act as a means of stabilizing the US dollar as a note representative of medium of exchange rather than just ink on paper. It is potentially a dangerous idea. The stabilization would occur because the Euro would also be based on very similar commodities and citizen tax liabilities. The history of monetized gold is one of inflation and deflation too. Gold is not as broadly based as a universal EFT dollar or Euro might be. The one thing that gets the the system into trouble is adding government deficit liabilities into the ETF units. This could cause a devaluation on its own, Then again if governments had to acquire gold or confiscate it to prevent or facilitate a devaluation that is no better. It does seem to be a gimmick . Paper dollars backed by gold was also a gimmick as few people bothered to make a gold exchange when the dollar was more convenient, What seems interesting is that the dollar could actually pay a dividend as an EFT share unit. Payed in what? Taxes going to the holder instead of to every sort of government program imaginable. It would be an interesting way to make government aware that it might be spending too much and even wasting public tax payer dollars, Would a currency that paid a dividend be inflationary? Maybe. The US treasury already floats and sells bonds and notes that pay a dividend and exist as accumulated government debt. The problem seems to be that the government debt is limitless. Those who believe in monetizing gold again believe that government requires spending limitations. The great thing about the monetizing dollar EFT is that the US government has substantially more assets than just taxes due. Alaska is an example of a state mostly owned by the US federal government . Alaska land can be added to the EFT inventory. That sort of asset, The European central bank might not be able to compete with and they also have more deficit spending than the US has or had. Working out actual details on how a system might work seems impossibly complex without modeling it first with computers to see if it really did have potential or would end up being yet a new monetary disaster. If dollar holders could hold dollars and spend real dividends, as would government itself in collecting many of the same dollars to satisfy tax obligations, It adds derivative complexity to the economic system. That might not be a bad thing having a dollar that is derivative of something of value. Ultimately the gold economy worked the same way. Government minted gold coins and took gold coins back in tax payments or they just took the interchangeable paper back leaving the gold in the vault and no need to destroy the note but rather to re-spend it. The US dollar is a gimick to begin with so are most currencies. One could see variations of ETF share units issued by governments. The gyroscope analogy of automatically setting the value of the units by pegging it to the component commodity prices and taxes due seems like a regulatory device or widget that could be a better stabilization tool than having an exclusvie commodity like gold represent the unit value.The US dollar is mostly a free floating value based on market exchange values verses other currencies. The US dollar represents something of value but no one is exactly sure what it's underlying intrinsic value is. .