Jun 23, 2012
Most people do not understand what money is or what it ought to represent. All they know is that they need more of it in their pockets. So here is a short illustration.
Walmart is the largest retailer in the world. They are in the best position to create money for America, and they could do so more responsibly than the Federal Reserve Bank.
They already do so on a small scale by issuing gift certificates which can be cashed or traded by going using them to buy their products. Those gift certificates are money, and they are backed by all the goods that Walmart sells.
What if Walmart's employees were paid 10% of their salaries in Walmart dollars, which they could use at the store in purchasing Walmart products? As the employees got used to using them, they would soon be accepted in the broader community. When the boy comes to mow the lawn, he too could have a choice of being paid in Walmart dollars or in Fed Notes.
Once this new currency was accepted in the community, they would circulate freely, because everyone would know that those Walmart dollars were backed by all the goods and services of Walmart.
That is money.
Walmart might later branch out and begin to sell gold and silver in a variety of weights. Then those dollars would be backed by gold and silver as well, but not exclusively.
This is how a nation's currency ought to work. It need not be backed by gold exclusively, as many advocate. It only needs to be tradable for whatever goods and services the people want to purchase--including gold and silver. The main difference between a government and a company like Walmart is that we do not want the government to own all the goods and services in a nation. We prefer private ownership.
We used to have money that was created by many different banks. Their currencies were paper claims on the gold or silver in their vaults. But many abused this system, because they discovered that they could issue more certificates than they could back by their assets. When people became suspicious, bank runs occurred, and the banks had to close their doors. Those bank certificates were found to be unredeemable and worthless.
This was part of the reason why the bankers established our Central Bank (the Federal Reserve). It was to prevent bank runs. At first they had plenty of gold and silver to back their bank notes. After all, banks do not stock potatoes or laundry detergent. Their products were limited to gold, silver, and mortgages, so that is what they used to back their paper certificates.
But in time, they did precisely what the banks had done before them. They printed up more certificates than they could back. It is called "fractional banking."
If we really want to give the power to create money to a private institution, we should consider giving it to Walmart. I think old Sam Walton would have agreed. They could issue U.S. Certificates (Uncle Sam Certificates).
I would only make one other requirement that Sam would have agreed with. Walmart would have to buy its goods from America wherever possible. To make that feasible, we would have to get rid of our notions of "free trade."