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Poor people generally spend all their income and don't qualify for bank loans, so they have no bank debt to pay down. Poor people would save some of the money and spend the rest -- mostly in their neighborhood and virtually all within their city or region -- which restores local businesses (and landlords) to profitability.

Middle class Americans are mired in underwater mortgage debt. A household with husband and wife and an adult child living at home would get $3000/month of government-issued money, enough to make their mortgage and credit card and student loan payments.

This program amounts to a national personal debt paydown program, which simultaneously restores all of the defaulting bank loans to "performing" status. This program solves The Money Problem by bailing out all the debtors who can't pay, and the creditors who can't collect payment. Government issuance and giving of debt-free income money to everybody, enables debtors to pay and creditors to collect payment. It provides spendable incomes that businesses can collect in renewed sales and profits. The capitalist system's functioning is restored.

Commercial banks "create" the mortgage and loan money that they lend out as repayable debts. As loan principal is paid down, the money and the debt are un-created: the bank uses the debtor's bank deposit money as the loan repayment money to "extinguish" the deposit money and the loan account, so the money and the debt are both reduced in the amount of loan principal repayments.

All of the government-issued money that is used for debt paydown, would be uncreated when banks cancelled out both the repayment money and the debt. If debt paydown was required and automatic (not optional), this would eliminate about 1/3 of the $2.5 trillion per year of government-issued money. In round numbers: about $800 billion of government-issued fiat money, and about $800 billion of the economy's debts to the commercial banks, would be permanently extinguished each year this program was active.

Probably 1/3 of the total $2.5 trillion per year would be spent, much of it locally, so that would add about $800 billion per year of "fiscal stimulus" into the US economy. If people spend their money at Walmart, then Walmart shareholders and Chinese manufacturers profit from the spending. In a global free trading world, this kind of "leakage" of fiscal stimulus is practically unavoidable. On the other hand, if the US implements this kind of program, virtually every other nation on Earth will do it too to solve their own national Money Problem. So leakage would work both ways.

The US$ is the "master currency" in the global money system, and if the US doesn't lead the way, other nations can't do it.

An additional $800 billion per year of consumer spending might add about 1% to consumer price inflation (CPI inflation). The $1000/ month of "free" government money more than makes up for the "inflationary" loss of purchasing power of most people's existing money savings. The purchasing power of their savings is reduced by inflation, but the "free" money they receive adds more purchasing power than they lose to inflation.

At 1% inflation, the cutoff point is $1.2 million of money savings. If you have $1.2 million of money savings, then at 1% inflation your money is losing $12,000 per year of purchasing power. But you are receiving $12,000 per year of free, and debt-free, government-issued money. So if you have $1.2 million of money savings, you break even on this program: you lose $12,000 and you gain $12,000. If you have less than $1.2 million of savings, the program is a net purchasing power benefit to you. If you have more than $1.2 million of savings, the program is going to cost you some of your saved-up purchasing power. The program would act like a (very mild) purchasing power "tax" on large personal savings of money.

If the government money program adds 2% to CPI inflation, then the cutoff point is $600,000 of money savings. Above that, you are losing purchasing power. Below that, you are gaining. It's easy to do the arithmetic for any expected addition to the rate of CPI inflation.

Under our present bank monopoly of money issuance, commercial banks inflate the money supply by creating new credit/debt money to lend into asset bubbles like the 1920s stock and real estate bubble and 1990s tech bubble and the 2000s real estate bubble.

Financial collapse is the hangover of a credit/debt-fueled asset bubble. Borrowers/spenders owe all the "debt" and "have" all the heavily mortgaged or leveraged assets; earners/savers sold those assets and have all the "money". Debtors owe the money to the banks; banks owe the money to their depositors. The people who have the money don't want to buy the assets, except at vastly deflated prices; prices that are less than debtors owe against the assets. When debtors can't pay, banks can't pay, and the banking system collapses, like 1929 and 2008. Collapse is built into the perverse arithmetic of the commercial bank money monopoly.

Government-issued debt-free money is a "solution" to the internal negative-sum arithmetic problem of bank-issued credit/debt money: banks create money in the amount of loan principal; but banks create debt in the amount of principal plus interest. The banking system systematically adds more negative $numbers of debt payable into the equation, than it adds positive $numbers of money that can be used to pay that debt. Capitalist producers systematically add more negative numbers of prices payable into the economy, than they add positive numbers of income that can be used to pay those prices.

Capitalism's economic production and banking systems are negative sum $arithmetic equations superimposed over a value-adding real economy. The negative sum money system does not match the positive sum economic system. The addition of some net positive-sum government-issued fiat money into the equation is an $arithmetically literate solution to capitalism's Money Problem.

The final 1/3 of the money, about $800 billion per year, would be saved by its recipients. Middle class savers invest their savings in bank accounts, which they believe are "safe" investments. If the money-issuing government guarantees all bank deposits, then bank deposits really would be a safe investment, even though they pay almost no interest. But in the present system governments don't issue their own money so the banker money monopoly stands, and G20 banking and monetary authorities are planning to bail our deposits in (spend our bank deposits buying us shiny new shares in our failed bank) next time the banks collapse. Collapse is baked into the money monopoly arithmetic. So it's collapse and bail-ins, or monetary system reform that includes some government-issued fiat money.

Wealthier savers invest their savings. Additional investible money inflates the price of investment assets like bonds and stocks and rental real estate. The price of investment assets is already inflated to historic highs, because the wealthy investor class owns the lion's share of the economy's money supply.

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I spent my working life as an independent small business owner/operator. My academic background is in philosophy and political economy. I began studying monetary systems and monetary history after the 1982 banking crash that was precipitated by (more...)
 

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