End Paper Money, Big Drug Deals & Save US economy

In reply to another post, but off thread, I posted essentially the follow and want reactions.

(1)Banks to have mainly electronic money (except some coins - see point 2). The Fed continues to regulate quantity of credit, money, etc. as now. All bank records up dated daily and available to anyone on line, but identity of account owners is available only to law enforcement, with court warrant, after "good cause" to suspect crime.

(2)New small $1 coins circulate, and typical man's pants pocket can hold $50 worth.

(3)Existing paper money to become void on fixed schedule as follows:
All bills (not bonds and treasury notes, etc.) greater than $1000 in 3 months and all printing of new paper money terminates immediately.
All $1000 bills in 6 months.
All bills <$1000 & >$100 in 1 year
$100 bills in 2 years
$50 bills in 3 years
$20 bills in 4 years
$10 bills in 5 years
$5 bills in 10 years
$2 bills in 15 years
$1 bills in 20 years

The "under ground economy" (cash payments) is huge but totally untaxed. The tax bill of honest tax payers could be reduced by approximately 1/3 it it were taxed, as it would be if all transactions left an electronic record. Those records, like IRS records, should not be available to the public only the IRS. We don't want wives to know how much the mistress is collecting in cash, etc.

There are many more dollars in circulation (or in coffee cans etc.) outside of US than inside of US. Time must be provided for their holders to spend them, or perhaps convert to other currencies, but as no one wants to just hold dollars, this option will disappear prior to “voiding date.”

This plan will greatly boost US exports, help get US out of debt, and may even prevent the collapse of US economically.

It certainly will end the hard drug problem, as the risk of large scale buying from Columbia, Afghanistan, etc will be too great, if done via "electronic money" and physically impractical if the drugs lords are to be paid in the new $1 coins.

Crime will not end, but less people will be killed. Only the more intelligent criminals will get very rich via computer crimes, but most will get caught eventually, especially if the try to spend beyond their legal incomes. If they do not spend illegal gains, but only acculate large electronic credits, this could be only a minor crime (or not even a crime?) as it is only "stored bits" in bank's computer they can brag about to their friends. (Might keep hackers harmless ocuppied - a game for them.)

 

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Electronic money could also wipe out tax evasion.

 

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Yes - I have added a final comment after your post relative to crime in general.

 

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Aside from the fact that there are NO $1,000 bills or larger,

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there is still one major flaw that cannot be overcome by this proposal. You neglect to consider (or are just unaware) of the ease of electronically transferring money all around the globe by using banks in other countries - particularly what's referred to as "off-shore" banking. Money already "vanishes" into the Bahamas, Bermuda, Cayman Islands, etc. every single day of the year.

 

And what about the people who don't have computers? How can you pay them? ...with credit card balances? What of people who don't trust banks or credit cards?

The personal debt in the USA is something like $3 trillion dollars ....and you want to create more of it???

Baron Max

 

wrong on both points.
I have seen a publicly displayed, well guarded, and registered to owner, a bank, $100,000 paper bill. I think there are $50,000 ; $20,000 ones as well as quite a large number of $10,000 ones.

True, money even electronic money can (and must be able to) move to foreign countries. If it could not, all trade would stop and the greatest depression in man's history would rapidly begin. However, this is a “double entry” book-keeping system. You may not see the increase in country X credits for mister Y, but you sure will see the US bank debit to his account.

 

there is another couple of downsides
a) not everyone uses credit cards so some of us like to have cash so we know EXACTLY what we have to spend and dont make an ass of ourselves when we get to the counter
b) what exactly do you do when the EFT goes down? close up shop?

 

Forget about what you've seen - here are the actual facts:

"Currency notes of denominations above $100 are not available from the Department of the Treasury, the Federal Reserve System, or the Bureau of Engraving and Printing. On July 14, 1969, the Department of the Treasury and the Federal Reserve System announced that currency notes in denominations of $500, $1,000, $5,000, and $10,000 would be discontinued immediately due to lack of use. Although they were issued until 1969, they were last printed in 1945.

These notes are legal tender and may be found in circulation today; however, most notes still in circulation are probably in the hands of private numismatic dealers and collectors. If you are interested in purchasing these larger denominations, it is suggested that you contact private dealers or collectors who are usually listed in the classified section of the telephone directory under the headings of “Coins” and “Hobbies.”

Time for an apology perhaps, Billy? It's been a long time since the las one was printed in 1945.

Then you seem to be missing the point in that it's really only a "single entry" system. Once it leaves the US account the trail goes dead. And it's already quite easily to make off-shore transfers in small, seemingly insignificant amounts, from many different - apparently unrelated accounts - in a single 24-hour period. And it can easily be done so as to avoid detection.

Overall, a good idea - but it's very easy to beat.

 

It was shortly after WWII that I saw the $100,000 bill. It may have been a special issue, part of the celebrations marking the end of the big notes in 1945? Thanks for the information.
Treasury also discontinued the 30 year bond about 10 years ago, but it may be back again? Do you know?

I agree with all this while paper money exists, but you seen to be missing effect of the "void dates." - The physical dollars will all come back into the banking system prior to void dates - or only be useful for impressive lighting of cigarettes. Any electronic dollars that leave banking system you agree would be recorded, but you think that their accountability is then "lost."

Lets try to lose it:
Assume the electronic dollars are used to buy foreign currency (Either paper money of foreign bank deposit credits - it makes no difference in the long run.) perhaps to buy and import sugar (OR DRUGS).
Someone or bank, who sold that foreign currency, has ability to recreate records in US bank by purchase of US made goods or buying US electronic dollars. (In all probably he just had US account and the bits were transferred to it, never left system to reenter.) In second case, if it is possible for the bits to some how leave the system, accountability is immediately re-established as they re-enter. In first case, assume seller of foreign currency did so because he ordered US made MF tractors. MF puts the credit back into the bank accounting system. The new US electronic MONEY HAS NO INTRINSIC VALUE. It can not even light a cigarette! It is only desirable as it can buy goods and services, now or in the future. I.e. we tried to lose track by buying foreign currency, but we have failed. Perhaps you know a better way?

The fundamental problem you must solve to get rid of the accounting is that the seller of the foreign currency wants to receive US money, but that only comes in bank system bits, except for small amounts in coins after the "void dates."

However, someone could come to NYC with foreign currency and need to create new US money bits in the bank system. This is effectively a loan by the bank against the security of the foreign currency, like it was a car or house etc. and would continue to be subject to Fed controls on the creations of money, just as house loans etc are.

The US can also easily require all new bank credits established by foreign currency - i.e. without a corresponding debit in the account system - to be explained to help stop global corruption, non US crime, etc. The bank does not even need to hunt for a "corresponding debit". It is already known -just a transfer of credits from A to B within the banking system except in the case of foreign money deposits.

The only other way that B can get credits without A losing exactly the same is if the bank decides to advance credit (lend purchasing power, make a loan) by changing a few zero bits in its data bank to non zero ones. This for example might permit a Brazilian airline to buy a 747. The Bank may even agree that the loan is cancelled by the airline's Brazilian bank crediting it with Brazilian Reals in their bank.

Brazilain Reals being available as paper money, some Bank CEO, could come to Rio, and fill his suitcase with them and have happy vacations in Rio for the rest of his life, but no Brazilian CEO could come to NYC and fill his suitcase with dollars, that no longer exist. I.e. again - you cannot really get money out of US easily as you suggest, mainly because it does not really exist outside of the banking system.

I tried about to show above that it can not be done, but perhaps I am wrong.

If easy to get electronic money out of US without corresponding cost - tell me how. (Perhaps I can apply your method now and get rich.)

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You're welcome. By the way, I meant to cite the source for that information - it came from the Bureau of Engraving & Printing (BEP) on this webpage:

http://www.moneyfactory.gov/section.cfm/5/42

Yes, the sale of 30-year bonds will resume in 2006.

Yes, it's actually quite easy and already being done for the purposes of avoiding income taxes. One flaw in your approach is that you seem to think the money would, for some reason, have to be eventually transfered back into U.S. accounts before being spent here. Not so. If I was a drug dealer and wanted to legitimize my cash, I could - for example - buy a large apartment building with a cashiers cheque drawn on my account with the bank in Zürich.

Again, assuming I'm a big drug kingpin who wants to live and operate inside the U.S. Here's an easy way to accomplish that. Simply have my pushers deposit their cash proceeds (they will need "front" business, of course, to handle the electronic money. Restaurants, vending companies and service companies work well already for that purpose.) in individual bank accounts. Let's call those various banks and their accounts A-Z which will give us 26 total accounts (this is a small example, you could double or triple that if you wish).

Beginning on the first day of the month, each account is instructed to transfer - electronically - various amounts ranging just on both sides of $2,500 into matching, receiving accounts in off-shore banks. They are also instructed to repeat this process every 10 days. That amount, averaging $2,500 but never exactly, is small enough to pass under the radar without raising any questions. And each individual account has no relationship to the other accounts at either end of the transactions except that the originating accounts will feed a specific account for brief period of time before being changed.

The connections will be invisible (just as they are today) and at the end of the year I will have exported a little over 2 1/4 million dollars using just this little example. All I need do is double it to handle close to 5 million.

And when I need a new shipment of cocaine, I just order $5 million worth from a coffee-export company in Columbia and pay for it - electronically - from those remote accounts. The money need never come close to U.S. shores again after it initially left there (and continues to leave there).

 

Have the government issue everybody a "dollar cash card" which would be like an atm card. There is no need for coins. The problems only arise at locations were financial transactions occur but phone service does not exist. Those are not many locations. Give them phone service or make those people drive to town to do business.

Have the governments computers track the movement of every penny and the movement of products through upc bar codes or some other tracking system.

Legalize drugs so that they don't become a medium of black market exchange the way tv depicts cigarrettes to be in prison. Let drugs sell at reasonable prices. But make it a serious crime to buy drugs or alcohol for others. Post the personal drug and alcohol purchase information online to discourage overconsumption and to enable people who care to intervene. The computer could schedule interventions by social workers for people overconsuming. The computer could also ration people right to buy drugs and alcohol. This way at least casual users could be removed from the drug black market.

Then say goodby to street crime because it will disappear.

Say goodby to car thefts.

We would need less police. Less security guards and less alarms and locks. The money saved could be spent elsewhere.

Get rid of income taxes. Property taxes and sales taxes could pay for everything. Say Goodbye to the fortunes in money and time spent on tax preparation.

Put into every adult citizen's cash account, $15 a day and $600 at the beginning of the month. This negates the regressiveness of sales taxes and property taxes. This also has other benefits. Goodbye panhandling and the guilt of wondering if the panhandler will be able to eat if you don't give. Any Vincent Vangoghs out there without a kind brother will now be able to do their art.

Goodbye social security and welfare. People will be poor but they will be able to survive. The cost of running these programs will be saved. Social security was not originally meant to support middle class lifestyles. Goodbye strike insurance. Goodbye anxiety about becomming homeless if you get sick.

Goodbye farm subsidies. Income is now stabilized by welfare if your farm is a family farm rather than a huge heavily leveraged farming opperation.

Have sales taxes on financial transactions. Long term investors provide better guidance for corporations than short term investors do. There are too many human hours being wasted searching for short term financial gain. This adds nothing to the economy. Buying low and selling high only helps the economy if the thing being bought is also moved from a market in which it was abundant to a market in which it is scarce. That is the difference between speculation and arbitrage.

The possible benefits of electronic currency are so overwhelming that it is hard for me to believe that I won't see the change over to electronic currency happen in nations with good phone systems like the USA during my lifetime, but then it is hard for me to believe that the USA did not adopt the metric system thirty years ago.

The obstacle that must be ovecome is fears about the loss of privacy. Why does privacy matter? Answering my own quesion, privacy matters because everything you do and say can and will be used against you even if you are not doing anything wrong. Until democracy is perfected it will be to dangerous to give up privacy, because without privacy we will never be able to restore democracy if we lose the democracy. Until democracy is perfected we will always be at risk of losing our democracy.

Democracy is much more valuable to us than the benefits electronic currency would be because it is democracy that limits blatant corruption and theft by mafia like politically connected people. The main reason why poor nations are poor and rich nations are rich is differences in how much corruption was tollerated in the nations over the last few hundred years. Just as communism destroys the incentive for the majority of the people to work hard and be creative producers of goods and services, corruption also destroys incentive to work hard and create. In both cases you don't get to keep the fruits of your labors.

 

If you really believe that the government would abide by that, you’re an idiot. If you give the government that capability of monitoring everything that everyone buys, they will happily use it and abuse it. Frankly, the fact that some people choose to buy and use drugs doesn’t nearly justify the loss of privacy. I’m supposed to allow the government to monitor anything and everything that I purchase simply because some people use drugs? No thanks…

Here’s an idea – the government could recognize that people have the right to do what they want with their own bodies and legalize drugs, rather than take away everyone’s privacy so that they can more easily take away our rights to decide what to do with our own bodies.

 

You've not thought that through enough, Nasor. The problem arises that people have a tendency to over-use (abuse) drugs, including alcohol and put others at risk when they do so. Probably the clearest example of this is child abuse at the hands of drugged parents and the number of innocent people killed each year in traffic deaths where drinking and/or other drugs were a contributing factor.

 

I don’t think that you should take away people’s rights because of what they might do. There are already laws against child abuse and drunk driving – by all means enforce those laws, but don’t take away people’s freedom just because they are statistically more likely to commit a crime, but haven’t actually done anything yet.

Obviously other people (like you) disagree with me on this, and prefer to surrender freedom for safety. Difference of opinion, I guess…

 

However, there are lots and lots MORE deaths from accidents by SOBER drivers than impaired drivers. So should we not allow sober people to drive because of the high accidental death rates?

Baron Max

 

Well, wait a minute. Those people who disagree aren't giving THEIR freedoms, but the freedoms of those who are suspected and "might" commit crimes, acts of terror, etc. That's a big, big difference, don't you think?

Baron Max

 

Yes, that's true but are you saying the problem isn't worth the effort of trying to control it? Consider these two facts alone: In 2001, over 40% of fatal automobile accidents were alcohol-related; More than one-third of all fatal traffic accidents in 2001 involved at least one person with a BAC over 0.08.

So you believe we should just ignore it since 40+% isn't a significant number in your opinion, Max?

 

I do not even think the money can leave - it exists only as bits in US bank computers. It will not fit in a suitcase! The purchasing power can leave, by using the "bit money" to buy foreign currency. I.e. those bits are "zeroed" in your account and added to the account of the previous owner of the foreign currency, or if he has no US accounts, and only want to pay for his Boeing 747, those bits are transferred to that Boeing account in US bank.

If he has neither US bank account nor the desire to buy anything in US, why would he give you the foreign currency for nothing in exchange? You will need to find someone (Or some firm acting as intermediary for someone) who does have either a US bank account or desire for something in USA, including services by US firm.

As I said before the US bank bits can not leave banking system, and have no intrinsic value, (can not even light a cigarette, remember?) No one or no firm is going to give foreign currency up for nothing. Transfer of US bank bits, (electronic money) to foreign accounts is not possible. If you want an account in a foreign bank, you must buy foreign currency.

You are stuck in an old thought pattern where foreigners would accept US paper dollars as they knew someone would pay them the local currency they need in the foreign grocery store etc. to get those dollars they had no direct use for. That other foreigner knew he could find still a third, etc. to accept the dollars, but eventually some foreigner had to exist who actually wanted to buy something from the US to make all the dozen of hands that the paper dollars passes thru first willing to accept them in the long circulation chain. This chain can not exist if the paper dollars do not exist.

That ultimate foreigner in a long chain might (prior to my plan) be 30 years into the future, as often foreigners felt more save with dollars in the coffee can. I.e. they willing accepted dollars only as a "store of value", especially in countries that had a history of run-a-away inflation, but this use/ desire for dollars is killed by the "void dates" of my plan. Only one who want to use the dollars for purchase, not "store value", will sell you the foreign currency you need to move purchasing power (not bit dollars) out of the US.

The exchange for US purchasing power for foreign purchasing power is what can circulate. The bank bits can not circulate outside of the US bank system. They will always have an owner, who can be identified, if the courts are presented with cause to issue the "dollar search" warrant, just like your house can be searched now, with police showing reason to courts as to why it is likely to be part of a crime.

Others have also not understood - there is no new loss of privacy, or freedom etc. No new government control, only the power to regulate the money supply, which the Fed already has. All banks are required by law to make their deposits available daily on-line, but the owner's ID is not available, only a number, like a Swiss bank account number, is available on line.

The IRS, FBI, CIA etc. all have computers that visit bank sites daily to see if there is strange activity that probably indicates a crime, terrorist plot, etc. If found, then they go to court for "money search warrant" to get the ID of owner of the numbered account.

There is really nothing new in what I am suggesting, other than paper money ceases to exist, and new smaller dollar coins come into existence to tip the waiter, pay cab driver, buy a pack of gum, etc with. Credit cards will be in even greater use. Few will carry enough coins to grocery store to pay cash for their groceries, etc. Credit card companies should also put on line their ID-less account activity if they delay more than a day (I doubt they ever do) in puting their activities into the banking system.

I must quit reply now. Perhaps will get to rest later, but hope you understand what I am suggesting better now and realize that the money remains in US with full accountability, potentially available by court order at all times, only the pruchasing power can leave in the form of purchased foreign currency (or purchased credit in foreign bank), not the electronic money, the non zero bits - they remain is some US bank.

PS likewise, no one in US will give you an apartment building unless he has use for The Swiss franks or is paid in US bit dollars. You must buy dollars to pay to it. This a symmetric system. US is using only "bit dollars." - Buy some from someone (or intermediate firm) that has use for Swiss Franks. - Your "casher's check" is useless in US. Again you are victim of the old thought pattern. Dollars do not circulate outside of US and Swiss Franks do not circulate in US. Only purchasing power can be exchanged.

Final Summary: In many ways what I am suggesting is an efficient, flexible, "bartter system" with a "transaction record" available under court order.

 

All horrifying privacy issues aside, I think there's another major problem with this: you would quickly ruin the dollar's exchange rate with other currencies. Since you wouldn’t be able to move to dollars out of the country, anyone wanting to do business with a foreign company would have to purchase foreign currency in the U.S. to make payments. Currently anyone buying something from another country can pay with dollars, because dollars are honored anywhere in the world and practically serve as an unofficial second currency in many countries. That would end if you couldn’t move dollars out of the country, and the value of dollars relative to other currencies would rapidly fall as everyone who needed to buy something from another country starting trying to convert their dollars to Euros, or whatever.

 

The mark of the beast, that without it, one cannot buy or sell.

-MT