The New Greenback

This entry is part 28 of 31 in the series 2011B

There are a lot of different economic theories and ideas for an improved currency but one thing most thinkers have in common is this. The current system has a lot of flaws, is unstable and needs an overhaul.

So, what is wrong with the current system? Let us list a few items.

(1) Money creation is delegated to private banks instead of “We the people” through our elected representatives.

(2) The government borrows money adding to the public debt when it could create its own with no debt.

(3) The government borrows money at interest from private enterprise and other nations when it could create it’s own money with no interest.

(4) The interest rate on borrowed money, public and private, is determined by private interests.

(5) There are no effective restraints to prevent the Powers-That-Be from adding too much currency to the system causing inflation. They also have power to withdraw money from the system to create deflation which could lead to a depression.

The only current restraint is a debt ceiling that is supposed to limit government borrowing, but it may as well not be there. Congress routinely overrides it whenever it decides to borrow extra money placing citizens in greater debt.

A gold or silver standard is also ineffective for government has always found ways around their restraints and when a big crises comes along the whole metallic standard is trashed and becomes as if it never was.

So, are we doomed to a flawed money system no matter what we do?

I do not think so and here is why. We as a human race are always moving forward, making progress and perfecting that which was once flawed.

I remember when I bought my first Mac, a Mac Plus. I also bought with it the most sophisticated word processing program at the time – it was Microsoft Word, version 1.0. My new fangled computer with Word was a lot better than the typewriter I had before but it was far from perfect.

Then later they came out with version two, three, four etc. Each had improvements until we now have a program that does everything but polish your shoes. I still may not call the latest version perfect but I have to admit it does a lot more than version 1.0, and if I read the manual or Google information I can figure out how to get it to do any task within its parameters.

We have to look at the evolution of currency with the same perspective as a computer program. It may have had kind of a rough start and some versions are not as good as others, but overall we are progressing toward something that is stable and will serve us well.

Ancient Greece and Babylon had money version 1.0. Rome had version 2.0. After the fall of Rome we had version 2.5. The Tally stick was version 3.0. Creating fractional banking based on gold was Version 4.0. We experimented with several fiat systems and paper money in version 5.0 and then moved back to a gold standard in version 6.0. Finally with the creation of the Federal Reserve under gold we have version 7.0. Then when Nixon dropped the gold standard completely we moved to version 8.0 – and that is where we remain to this day.

Now some people may look at this progression and say that they think that some of these steps were not progress but this is also the case with various versions of computer programs. My favorite version of Microsoft Word is version 5 from 1992. Even so, I keep updating to newer versions to keep up and do find some things in them which are useful while others are annoying and distracting.

Unfortunately, we have not yet arrived at the equivalent of Word 5 as far as money goes, but improvements have been made that the public likes and I am sure will be retained and refined. Most of these are centered around the idea of convenience.

The impetus for the beginning of money itself was for convenience sake. Instead of trading cows for wheat it became much more convenient to trade coins. Later, paper became accepted because it was much more convenient to exchange a piece of paper than 20 pounds of silver.

The next stage in convenience is electronic money. It is much easier to buy something from a shop 1000 miles away with some type of electronic transfer than to send cash, check or money order.

Now some are experimenting with various forms of virtual money. Time will tell if this adds to convenience.

The point is this. If an innovation adds to convenience, whether it is an improvement in a car, a washing machine, a computer or money, then that improvement is here to stay.

Yes it is true there are always exceptions. Maybe the Amish would rather have a horse than a car and a pencil rather than a computer, but as a whole civilization will embrace that which adds convenience and will refuse to go backwards.

There are those who want to go back to coined money and gold backed currency but the inconvenience of doing this will make the crucial support for going backwards well nigh impossible. We might as well try and talk people into going back to the horse and buggy to save gas.

People will resist inconvenience like the plague and though this quality in the human race is an irritant to some it is overall a benevolent force that impels progress.

The results of new conveniences are rarely 100% positive. Perhaps the greatest convenience of our age is the automobile but this comes with the drawback of causing over 40,000 deaths per year in the United States alone. Does this make us want to return to the horse and buggy? Never.

How about air travel? The time savings is very convenient. But do stories of hijacks, terrorism and plane crashes discourage us? No. Convenience still prevails. Convenience always prevails.

Civilization has been shown that the transfer of money can be much more convenient than the exchanging of hard money of the old days and will demand that convenience continue or be expanded in any new version of the money system.

Has any new version of Microsoft Word dropped the spell checker? No. That will never go and neither will the ease of transferring money at the click of a button as long as there are buttons to click.

Now we arrive at the prime criteria for any new and successful money system on the horizon. It must not drop, but continue (and improve if possible) the convenience achieved with current money. One can argue the benefits of revisions of other aspects of the system but history tells us that the people do not want to drop any convenience even if there is significant risk. Any developer of a new money system needs to accept the conveniences established and work with them, not against them – include them, not exclude.

To create a new and improved money system we need to keep the conveniences attained and add two improvements.

Improvement One
Instead of giving the Federal Reserve power to create money and loan it to us at interest the government needs to take back the power to create its own debt free money given to it by the Constitution.

This money would have several advantages over the Greenback money created by Abraham Lincoln. The Greenbacks did not have universal legal acceptance. The banks were exempted from receiving them as payment for their huge government loans. They also could not be used for customs duties and imports. All these had to be paid in gold.

An advantage we have now over Honest Abe is the dollar is the reserve currency of the world and we now have the opportunity to create a universal Greenback that could have worldwide acceptance giving it power to revitalize not only the economy of the United States but be a benefit to the world.

The second advantage is our nation is not involved in a life and death struggle like the Civil War when the Greenback was created. During any such great crises the stability of currency always suffers and is sometimes destroyed. For the first time we have an opportunity to create a modern Greenback when we are not in a war of survival. Because of worldwide economic chaos the times are far from optimal but the situation just pushes the need for a solution to the forefront more than ever.

Improvement Two
The solution to a stable Greenback money system is a simple one. The State must not add more money to the system than will be supported by the value or increase in value of the goods and services in circulation. The simple rule is this. If there is too much money of any kind (including gold and silver) is added to circulation then we will have inflation. If there is too little money then we will have deflation, which is a much greater problem.

For instance, the housing crisis, which started in 2006 deflated the value of homes creating a domino effect leading to all kinds of economic woes. Imagine how bad things would have been if deflation was more universal.

So, to create stable Greenback money all we have to do each year is calculate the amount of money that needs to be released and added to the system. The next year we assess a new amount and repeat the process.

That’s a pretty simple process isn’t it? It is so simple a formula for proceeding could be programmed into the cheapest computer. The problem with making a new Greenback work then deals not with the problem of how much money to issue, but as always with the people who have the power to create it in the first place.

The solution to stable money is ever so simple a child can understand it. The State should not create or borrow too much money. The hard part is keeping these guys in line. Once a person gets a taste of spending money that seems to have an unlimited source, an addiction seems to take hold and nothing, even impending doom, seems to hold some of them back. These guys would continue to run up a tab on the Titanic even as it begins its descent into the great deep.

Are we doomed forever to have money systems that are held hostage to such human weakness?

I do not think so. For every problem there is a solution. Let us look at some.

Read This entire series. Here are the links.

Copyright 2011 by J J Dewey

Index for Older Archives in the Process of Updating

Index for Recent Posts

Easy Access to All the Writings

Register at Freeread Here

Log on to Freeread Here

For Free Book go HERE and other books HERE

JJ’s Amazon page HERE

Gather with JJ on Facebook HERE

Series NavigationA Time for All ThingsNarrowing the Focus

3 thoughts on “The New Greenback

  1. I lost you under the heading of Improvement 2. You said “all we have to do each year is calculate the amount of money that needs to be released and added to the system. The next year we assess a new amount and repeat the process.” I hardly believe that reducing the variables of the entire population’s productivity down to an equation that “could be programmed into the cheapest computer” would not be as simple as you so easily say it would be. Depending on how someone words something or what tone is given to it, anything can me made to sound simple and easy when, in reality, it is far from. Where are the logistics into getting to this equation? How do you assess the variables created by hundreds of millions of people? Hypothetically, if this were to become global, how to you assess the variables created by billions of people? More fundamentally, how do you assign number values to goods and services in the first place? After all, the amount of currency going into the system depends on that baseline.

    So yeah, saying it is simple does not make it so.

    1. The procedure for creating the right amount of money would be quite simple. We make or best educated guess and then each year you adjust the amount depending on if there is inflation or deflation. If there is inflation you release less money and if there is deflation you release more. If everything is stable you release a similar amount as the year before plus an extra amount to account for anticipated growth. You don’t have to be perfect in the amount released for corrections can be made from year to year.

  2. Through the power of the people the current money could be changed to this new Greenback system along with injecting molecular politics as well. It is simple and brilliant. Given enough steam this will permeate the consciousness of the country and then spread throughout the world and of course not without resistance from the powers that be but arduous journey will be worth the reaching the destination.


Leave a Reply

Your email address will not be published. Required fields are marked *