Freedom's Vision - Monetary Reform Outline...

KEY CONCEPT: Deleveraging the bogus "paper economy" gives the world an opportunity to turn the deflationary forces of clearing out the leverage into a counter force and directional change. Our world economy is built on an unsustainable platform of debt and leverage. One way or another, this over-leveraged system is going to be replaced by something else. Those who believe in the march of human freedom have a historic opportunity to guide humankind into a new money system which is sustainable because it is just.




The outline presented below is simply a starting point. No one can possibly have all the answers and therefore we are very open to input and suggestions to improve this program and to flesh it out. Coming up with the right answers is a process, and even during implementation will require adjustments. Your constructive help is requested. Once the possibility becomes clear, YOU must take action to ensure its implementation!

There are THREE KEY PROPOSALS that form Freedom's Vision, a return to a stable, productive, and prosperous United States:

1. Monetary Reform - We must replace our unjust, debt-backed money system and cleanse debt and derivatives without creating severe inflation or deflation; without creating a supreme "moral hazard;" and without crashing the entire global economic system in the process.

2. Political Reform - We must exclude large special interests from political decision-making. Removing this influence will accomplish a great deal in ensuring that the quantity of money remains under control and that politicians can go back to working and thinking on behalf of the people, not just in the short term, but also in the long term.

3. Future's Vision - A Direction for the Future - A change of direction is clearly needed. We are rudderless, and without proper goals to move forward our economy and society will continue to drift. While we feel this is desperately needed, we are focusing on the first two for now. When successful with the other two, the third will follow, but we need to be thinking about direction now!

Below is a partial list of benefits that may not be so obvious from reading through Freedom's Vision. This plan, taken one piece at a time, is as simple and as close to our current system as it can be while still producing the benefits described below. There are many other issues that could be addressed, like tax reform, but those issues will be easier to manage once monetary and political reforms are enacted:

1. Avoid the disaster about to unfold - regardless of how we get there, by inflation or deflation, the math of debt that underlies our currency does not work. This would break that math and preempt the negative events that are going to follow should we fail to take action.

2. No more debt backed money for our Federal Government. Lower taxes and more productivity result.

3. Direct and immediate relief for people in debt, accomplished in a way that's fair to everyone including those who are not in debt and without creating excessive price inflation, deflation or a giant "moral hazard."

4. Direct and immediate compensation for those who are savers and have been damaged by past practice.

5. Relief for States, almost all of whom are in deep debt trouble.

6. Cleanses the banks and financial businesses of unserviceable debts and derivatives and would ensure that they stay that way. All banks would survive the transition, immediately benefiting from improvements in our citizen's balance sheets. The same process would be used to cleanse other financial like businesses.

7. Businesses, both large and small, would immediately benefit from our citizens and the banks improved balance sheets.

8. Unfunded liabilities would immediately get better with zero percent price inflation.

9. Limits on special interests would separate their money from politics lessening the pressure to continually increase the quantity of money. This allows long term decision making. Special interests associated with the banking, oil, defense, food, insurance, and other industries would no longer have their huge pull. Thus politicians would not have to focus on spending our resources on special interests, but instead on the interests of the people. Budget pressures would decrease as a result.

10. States would exercise more control over their own destiny. Lower taxes on the state level, more productivity. Low cost money would become available to repair and upgrade current infrastructure and to build the infrastructure of tomorrow's commerce.

11. The powers possessed by the central banks would be greatly diminished freeing our country and others from their methods of control via debt, now even issued worldwide by the IMF. Countries would no longer be working to pay central banks interest. Instead they would work to develop their own rule of law. Their productive labors could be used to improve their own infrastructure, to feed and cloth themselves, and to build a future for themselves. In other words, they need to be taught how to fish, not simply given a fish and asked to pay it back forever and ever.

12. No price inflation eroding away future savings. People who take on reasonable debt could once again make progress towards paying it off.

13. Massively supports education, underpinning progress so that we may continue to lead the world in innovation and the production of meaningful technologies.

14. Provides a national mission - focused on creating the energy and infrastructure of the future. REAL and meaningful economic growth would ensue and massive new employment would result.

Why the American Party and What are the American Party Papers?

a. Democrats and Republicans receive campaign money from special interests and are paid with the current debt-backed money system. Therefore working within the current two parties appears difficult from the inside.

b. As you will see, our solutions are outside of the current Republican/ Democrat box. Our goal is to get these solutions implemented, not merely to shape a discussion.

c. Monetary reform must work in concert with political reform or it won't be sustainable over long periods of time.

d. Reform and money to support this effort must come from the PEOPLE in order to achieve buy in.

e. The people need a source of unbiased truth telling - Freedom, truth, and transparency are principles that the people will immediately recognize and respond to.

f. The American Party Papers concept comes from the Federalist Papers that were written largely by Hamilton and Madison regarding the intent of our Constitution. The foundation of these concepts needs to be explained and discussion should follow. We welcome anyone to submit well thought out arguments for or against the proposals submitted herein so that a dialog may begin to flow.

g. SWARM POLITICS is our way to achieve small victories one at time. Those victories will grow and turn into a populist movement.

h. Freedom is the overarching principle.

MONETARY REFORM:

(the word "politician" below includes all elected and appointed government representatives on all levels of government, including judges and members of the military. The term Congress generally means the entire legislative branch unless the power is already specifically Congress's. Exact legal wording still required).

A. Deleveraging debt and derivatives creates the OPPORTUNITY to reform the money system so that future dollars are spent into existence on the National level thereby eliminating Treasury debt.

i. The deleveraging process will create deflationary forces, and thus inflationary forces must balance during the transition.

1. The "moral hazard" was created when debt and the quantity of money were allowed to grow out of control; our plan simply returns us to a workable system and a future of stability and prosperity.

2. Reforming the monetary system is a balancing act, especially while transitioning from the current system to a new one, but it will be dynamically stable after the transition.

FEDERAL LEVEL CHANGES:

Ultimately Congress has the Constitutional responsibility and authority to enact, change, or abolish the procedures below - that is the rule of law. Since these proposals are ushered in by a populist movement, the power and wishes of the people should not be forgotten or ignored least the people be forced to act again.

A. The Federal Reserve System must be either reconfigured or abolished. The goal is to get rid of the national debt and to spend non debt-backed money into existence instead of paying private banks interest on deficits that they labor to expand.

i. Twelve Federal Reserve Banks functions replaced by State Banks using the model of North Dakota.

ii. The free markets set interest rates - they would be completely market driven. The government could lend money under certain conditions to the private or state banks at a fixed interest rate less than the rate set by the market (for example, market rate minus 2%).

iii. As credit dollars are removed, they are replaced with new Treasury notes. This replacement needs to occur at approximately the same rate that leverage is removed from the system via the removal of debt, derivatives, and the reinstitution of limits on fractional ability. There must be a final transition date where treasury debt no longer exists. What will then be left is a mix of "REAL" non-credit backed money and credit dollars from the banking system which are limited. This transition will eliminate the current Federal Debt. However, it does not eliminate State, lower governmental, corporate, or personal debt and thus some "credit dollars" will remain, the ratio of "real" to "credit" dollars, however, will be substantially reduced. Paying off Treasury debt means that both foreign and domestic holders of Treasury bonds and notes are paid back with dollars. They then are free to use their dollars as they wish.

B. We must create an Independent Panel (IP) responsible for controlling the QUANTITY of money. Congress would apportion where the money goes, but they would agree that the Independent Panel (IP) would control the QUANTITY (not the same as a "balanced budget," the IP would provide a spending target range that Congress would agree to stay within). This IP could be located within what we now call the Fed, but the internal structure would be much different in that the panel would consist of seven panel members, one of which would act as Panel Director (PD). There would also not be the current 12 reserve banks (their functions would move to State Banks). This panel must be completely independent and without influence from all other agencies. The composition of this panel is not critical as they have a single mission, a single tool, and can easily be held accountable for meeting or not meeting their goals.

1. The IP would have a single mandate in regard to quantity; that is to adjust the money supply to produce ZERO PRICE INFLATION - the supply of money would adjust up or down to meet this mandate. This would allow the economy to expand with REAL economic growth, population growth or to absorb shocks. It would also present a MANDATORY mechanism to remove excess money and to prevent PRICE inflation - stable prices are the goal, the center of the operating envelope. The IP would receive their data from the IDP (Independent Data Panel), but would remain isolated from them.

In this way the cost to build a $200,000 home today would be $200,000 twenty years from now. People could actually make progress on their mortgages again and their savings would not be eroded away. There will be no advantage to either saving or spending in regards to PRICE inflation, only the time value of money at free market interest rates would be a consideration.

Panel members shall be selected by State Governors whose states are drawn at random via a lottery. Seven state Governors choose the initial seven panel members who are confirmed or denied with Congressional hearings. Should a state's candidate be denied, another lottery will be held to replace them. All such vacancies will be filled in this manner.

One way to ensure the IP stays neutral and meets their mandate is to remove and replace the panel Director should PRICE inflation occur at +/- 3% for two consecutive quarters (+/- 4% during declared national emergency or war). The remaining panel members vote on and choose their own Director. Should PRICE inflation or deflation continue outside the range for two more consecutive quarters (4 total), then three of the remaining panel members will be removed by the new director. Otherwise there are no term limits for panel members and no stated qualifications. However, they must meet the rules proposed in the section separating special interests from government.

The IP has access to a $2 trillion Treasury Reserve Account (TRA) to absorb emergencies such as acts of war or Katrina like disaster situations as outlined in the TRA section below.

C. We must create an Independent Data Panel (IDP) to replace all government agencies, and portions thereof, that generate economic statistics. They will be completely independent, by law, from all other agencies including the IP. The IP will rely on their data to make quantity adjustments. The new agency would have the following mandates:

1. Compile and track all data necessary to monitor and to adjust the economy. The IDP will not have input into quantity, timing, or path of money input. This panel must be completely independent and without influence from all other agencies, including the IP.

Their most important product will be monitoring price data that the IP will use to make adjustments to the quantity of money. They must take into account the price level of all major asset categories including stocks, bonds, commodities, real estate, food, goods, and services (the IDP bears ultimate responsibility to ensure accurate and timely measurements, and will not make their calculations in the same manner as current CPI or PPI).

Gold, for example, will be included as one of the commodities in determining price movement. If gold were to rise, the inflation reading would rise and the Independent Panel's appropriate response would be to begin tightening the money supply.

Any time the quantity of money only expands with no subtraction, then the quantity will eventually get out of control and that means that faith will eventually be lost in the money. That's not freedom, that's just silly. Likewise, never allowing your money supply to expand is the other side of silly. A lasting and stable condition is found in the middle.

2. Complete transparency is one of several, yet ultimately the final check and balance:

i. ALL data is made available to the public, free of charge.

ii. NO ONE, individual, firm, or politician is to have access to the data before the public. This prevents the insider advantage and again is a check and balance on those collecting and disseminating the data.

iii. Method of data collection and raw data MUST accompany all reports.

3. Statistics shall be separated and reported in three categories:

i. Raw data.

ii. Timeless data - methods shall be developed to report data in such a manner that the methods of calculation can be repeated and reported consistently over time. This ensures that future generations can compare apples to apples.

iii. Modern data - these are data that can be improved and changed over time. However, all such changes shall be completely transparent and shall always be presented with the raw data and with access to the way in which the statistic is compiled and calculated.

D. The IP would oversee a research branch that works for them to develop and lead meaningful research into economic cycles using the scientific method based on empirical studies. This will be given national priority and will be an ongoing program to understand how monetary adjustments can work to foster price stability alongside real economic advancement.




F. The Treasury will have a new, non-debt backed, Treasury Reserve Account (TRA) emergency fund in place at the beginning of the transition. It will be funded with $2 trillion dollars and the account will be locked with no access to the funds authorized, in or out, except for the following conditions:

1. Surplus revenue from tax or from the collection of interest payments shall be deposited in this account. In this way the account can grow in size, but in the event funds are used to bring it below the initial level, funds must later be replenished by the Treasury at the IP's direction in the manner described below.

2. The funds may be used for EMERGENCY use (such as a Katrina like situation) when a national emergency is declared either by the President or Congress. The Treasury shall replenish the funds at a rate requested by the IP. The IP will be responsible to ensure that PRICE targets are maintained, however they would receive an additional +/- 1% latitude before mandatory replacement rules apply. These funds may not be used to loan or otherwise bail out any private firm under any circumstance.


3. The funds from the TRA can be released by the IP in addition to the amount required to produce zero price inflation in a time of war ONLY when the following three conditions are met. Once funds are spent, the fund must be replenished over a duration not to exceed twice the duration of the declared war:

i. The war must be officially declared by Congress.

ii. The goal of the "victory" in the conflict must be spelled out furnished to the IP and made public.

iii. A plan backed by the military and by Congress to achieve this goal, both militarily and politically must exist and be presented to members of the IP who shall verify its existence to the public.

Once these conditions are fulfilled, then the IP will release all emergency funds necessary to engage said declared war.

These requirements only apply to the release of EMERGENCY TRA funds, and do not preclude Congress or the President from engaging our troops as their powers allow. However, doing so without the emergency funds may temporarily pull funds from the rest of the economy and/or upset the balance of inflation deflation as managed by the IP. Spending more funds in an emergency will require the IP to pull funds should PRICE inflation occur. It may not, but it could be a problem thus the Treasury Reserve Account.

4. The IP can use the funds in the TRA in addition to their zero price target in order to achieve economic smoothing solely at their discretion in terms of amount and timing. (*See footnote 1)

5. Funds drawn from the TRA for emergency or for war shall be replenished back to the Treasury by the IP over a time period of twice the duration of the declared emergency as necessary to keep PRICE inflation from occurring. However, should price inflation not occur, then new non-debt backed money may be issued by the Treasury at the IP's discretion to replenish the TRA over the same recovery time period.

There will need to be a TRANSITION PERIOD lasting approximately two years, in order to phase out of the current system and to implement the new one:

A. At the beginning of the transition, the following will occur:

i. Usury limits restored, no more than 12% interest allowed (the highest pre 1980 state usury limit). No one will be able to charge more than 12% APR for any loan of any duration. This immediately begins to provide relief for over indebted citizens as their payments come down.

ii. New bank and lending limits, similar to Glass-Steagall, will be placed into effect. As the transition proceeds, fractional reserve ability will move back to a strict 10 to 1 maximum ratio and limits on derivatives will be imposed.

iii. At the end of the transition, individual bankruptcy laws will be modified to allow the discharge of unsecured debts, as the law formerly stated.

B. INDIVIDUALS - The first step during the transition is to RETURN THE PAST TWO YEARS OF INCOME TAX TO INDIVIDUALS. Citizens who filed returns would receive the HIGHER of their past two years income taxes paid or an amount equal to $7,000 per family member per year. Individuals need the opportunity to repair their balance sheets, the same as governments and banks.

i. Money must be used to pay down debt, revolving debt first, secured debt second.

a. Revolving credit lines will come down as that debt is paid down. Accounts zeroed will be closed, but if all credit card accounts are paid off in this manner, then, at the individual's discretion, they may keep one credit card account open at no more than half its previous limit. This does not preclude someone from obtaining new lines of credit providing they qualify, meeting new bank standards and regulations.

b. Individuals without debt must hold funds in SAVINGS, access to half the funds available in one year, the other half the following year, or as allowed by the IP during the transition - they could quicken this or extend it depending on price behavior during the transition.

This will clean individual balance sheets and infuse a large sum of money into the banks making the entire system more solvent. With a big portion of revolving credit bills gone, consumers will have more of their income to spend and save. This will help almost all businesses and will allow the velocity of money to increase.

Question: What would this do for YOU? Please take a look at your tax returns for the past two years, look at your exemptions and multiply times $7000 per year. Compare that to your Form 1040A line "This is Your Total Tax" or your 1040EZ line "TAX." The higher amount would be refunded to pay down debt if you have any as spelled out above. How much of your revolving and non revolving debts would this pay down? How much per month of your income would this free up? Please send your anonymous testimonial to time4changenow@comcast.net so that we may evaluate this amount and the constraints placed on it. Also, these testimonials would give us material to share the condition and experience of others - Thank You!

C. Private Banks - All banks entering the transition period are GUARANTEED to survive the transition. Remember, they were helped tremendously by individuals paying down debt. Personal balance sheets are repaired FIRST, this helps the banks and then they go through the following procedures...

a. ALL banks will go through a special onetime bankruptcy court, starting with the smallest banks first:

i. Judges follow rule of law checklist evaluating all debt and derivatives. All that do not have backing that meet standards are defaulted and it disposes of the assets in accordance with the rule of law. This will cause cross defaults UP the chain which will be cleaned out later as the larger banks pass through the process.

ii. Healthy and Smaller banks and credit unions will likely be unaffected. As banks pass through the process they come out ready to do business in the new system. Largest banks cleansed last will result in smaller large banks.

iii. Procedure will reestablish 10 to 1 reserve ratio. That is a maximum of $10 can be lent for each dollar on deposit, but in no case shall the amount of UNSECURED credit exceed the amount of marked-to-market assets held by the bank. Other limits were applied via a return to Glass-Steagall.

b. DERIVATIVES are a special case. The following rules regarding derivatives will be applied:

i. No derivative may trade that is not exchange traded, marked to the market nightly, and against which the exchange is a central counterparty. Nightly mark-to-market must require the posting of margin for all positions that are in the money short to the full extent they are so, plus additional risk margin, adjusted nightly, in CASH or exchange-marketed securities. An exchange must publish bids, offers, last trade, size (open interest) and keep registered the counterparties in all transactions without preference or discrimination, and must operate with assignment and exercise handed by lottery, as is done with the OCC and CFTC today. Position size limits must be published and enforced. All derivatives that are "custom" and cannot be so listed must be de-constructed into standardized exchange-traded derivatives.

ii. All exchange operators shall be non-profit corporations and their books of account shall be open to inspection by all persons at any time.

iii. No entity may both make a market in a given financial product and also execute trades for its own book in that same product, without exception.

This will allow existing futures and options to trade along with CDS, provided the writer was good for it and could prove it. This would remove nearly all of the unbacked speculation that is occuring now.
Again, repairing personal balance sheets will take much of the risk out of the remaining legitimate derivatives.

The phase in of derivative restrictions will occur at a rate during the transition to help control the amount of leverage in place - these restrictions will pull down a lot of leverage. No payments shall be transferred to any counterparties - they will be frozen. Any attempt to front-run this transition will be reversed by the courts and penalties applied.

D. States - Treasury will provide funds equivalent to one year's worth of each state's revenue:

i. 50% of those funds will pay down current state debts easing the state's debt burden.

ii. The other 50% will be used to fund initial start up of each state's STATE BANK, based on the model of North Dakota (http://www.banknd.com/about.jsp).

a. All state tax monies are deposited in this bank.

b. 10 to 1 fractional reserve maximum on DEPOSITS which are backed by taxing authority and by vast assets, making these banks some of the most sound banks in the world - would exceed all other banking requirements.

c. Banks will support other commercial banks within state.

d. Banks will provide low or no interest loans to state for infrastructure projects.

e. The bank would generally support private people only by providing capital and working with private banks. These banks will meet or exceed all other banking requirements and be limited in a very conservative manner.

f. The advantage to the state is that they can get low or no interest loans and they can earn interest that goes to the people of the state instead of the central bank. These banks would generally be prohibited from lending directly to the public, but could perform a regional banking function supporting and regulating local banks much as the regional reserve banks do now.

iii. In addition to the above funds, State governments will be given initial funding from the Treasury to create a reserve fund equal to 10% of their annual budget. This money will be deposited and held in the State bank as the state's reserve fund. Each state must develop a plan under which such funds can or cannot be used. Their plan MUST include a strategy to replenish the fund without federal aid and without raising new taxes for that purpose. Shrinking the size of government or saving from current taxes is the only method allowed to rebuild the fund once any of these funds are spent. Thus there will be no new taxes allowed in any form if funds are used from the reserve until the funds are returned. Governments need procedures to get them to size themselves for the bottom of economic cycles, not the top. This is the same thing that happens to businesses, and why conservative companies survive economic downturns and overly aggressive ones do not.

E. Businesses - Already helped by people whose balance sheets are cleansed, some large businesses may be counter party to defaults that occur in special bankruptcy court or may contain derivatives and otherwise act as a financial company.

i. Those that carry derivatives or act as financial companies would be sent through the same process as banks to remove bad debts and derivates.

ii. State Banks would help to provide adequate capital and funding to commercial banks that in turn would now be healthy enough to resume lending, especially to small businesses. Businesses would have customers again who are not saturated with debt, especially if other "mission statement" type of programs are created to provide direction and meaningful jobs to consumers.

F. Social Security - numbers would immediately get better with zero percent price inflation:

i. It is acknowledged that social security was not properly financed at inception as all generations require subsequent generations, regardless of size, to fund them. Yet, it would not be fair to eliminate this program for those who have donated to it their entire working lives and thus the program will be maintained going forward, but with the following limitations:

1. There will be no future payment increases, keep in mind that overall PRICE inflation will be controlled to be zero. This move alone will get the program close to being solvent all by itself. A stable non-inflationary environment makes this possible.

2. Tax collections will be rolled back to year 2000 levels and cannot be raised above that level.

3. Current age restrictions will be kept in place and cannot be changed.

4. $1 trillion will be placed in a new Treasury Social Security Reserve Account (TSSRA). This account will work to absorb the impact of generational size shifts. If such a shift should ever become so extreme as to wipe clean this account, then no amount of social security payments will be made in excess of receipts. This account will be allowed to build up over time as budget surpluses occur, and is off limits to everyone except the IP who is responsible for allowing withdraw to the Social Security Administration. In other words, no more comingling of funds to make the general budget appear better than it is - a practice known as "robbing Peter to pay Paul."

G. Medicare - Gets better with these changes similarly to Social Security. Medicare is a huge unfunded obligation approximately six times the size of Social Security. It is very inefficiently administered and causes many economic distortions. However, a stable and non-inflationary environment going forward will stop the compounding of unfunded liabilities and will make the program far closer to being solvent.

Therefore, the Legislative branch will be allowed 5 years to come up with a plan to phase it out of existence and to replace it with a program that costs NO MORE than the current Medicare program. Such a program should be a safety net and NOT a socialized medical system.

i. A $2 trillion fund will be established to ensure that expenses are covered with current shortfalls and to cover variations in the size of future generations for the replacing program.

ii. Congress's new plan must match future expenses with incomes that cannot exceed today's tax levels, lower taxes are preferable.

iii. Medical and insurance companies will be limited by the rules separating corporations from state. This will work to drive prices down more than any other action in the long run. Each office that regulates these industries shall have a method to hear industry concerns.

H. GSEs and FHA - programs will be frozen and allowed to wind down. Mortgage lending would return to commercial banks backed and supported by state banks. All future internal operations shall be run by the collection of debts owed and the funds otherwise received shall be retuned to the TRA as they come in. No program shall be enacted so as to artificially raise the price of home values, thus making them less affordable. State chartered banks will be able to pick up slack, supporting other commercial banks with their newly deposited funds.

International Implications - The implications for other countries who do not accomplish the same cleansing at the same time are serious. We would encourage and support other countries to run the same procedures at the same time, but would not intervene on their behalf unless invited to do so.

I. The non debt-backed dollar would strengthen dramatically over the rest of debt-backed currencies worldwide. Recommendation is to freeze currency exchange rates during the transition period, but this would not have to be done if enough other countries agreed to transition at the same time.

J. Banks and businesses going through special bankruptcy in the U.S. will create international cross-defaults. Therefore teams will be established to consult with nations around the world at THEIR request. The best outcome is that all nations run the same procedures during the transition period. They would enjoy the same benefits and it would create a stable outcome at the end of the transition.

K. There are special considerations for countries that use our dollar as their currency. Transitioning those countries would also need to be addressed.

*Footnote:

1. The restriction is that any funds used for that purpose must be returned to the TRA within a time period of the following 4.3 years (half of an 8.6 year cycle, or as determined by the IP research branch). This will not be attempted until the end of the transition period and only will be attempted in concert with their research branch regarding the studying of the timing and size of injections/subtractions. All funds used for smoothing MUST be added or subtracted in the next up/down cycle, their cumulative sum shall equal zero and the effect on the overall TRA account shall be none.

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Bill Still's movie "The Secret of Oz" is a must see movie to understand the history of our money. His line, "It's not WHAT backs our money, it's WHO controls the QUANTITY" really opened my mind to the possibilities outlined below. My hope is that those who have not seen the movie yet will do so, it will give the ideas that follow more meaning. You can get his movie at the following link - "The Secret of Oz."