Wednesday, February 10, 2016

Forget the Dollar, Say Good-Bye to Gold: Now Is the Time For the Numero

In response to my post: Is the US Fed Truly Evil? A Dialog Between a Goldbug and a Bank Apologist, a reader remarked that what is needed is form of money less easily manipulated than either gold or fiat currency.

In response, I described the perfect — and perfectly practicable — monetary unit, the Numero (pronounced with a long "e"), in a post entitled The Numero: Beyond Gold and Fractional Reserve Banking.

Now, as the World again teeters on the brink of a financial disruption that will enrich a handful of billionaire speculators, disrupt economies and hurt ordinary folk throughout the world, it is time to return to the need for an impartial, self-regulating monetary system such as existed when gold and silver were everywhere the monetary standard, and all paper instruments were convertible to precious metal. The Numero provides the perfect basis for such a system, but with many advantages over gold: it can neither be stolen nor can it be used for corrupt purposes, and it costs essentially nothing to create.

Instead, today, we have a infinitely manipulable monetary system under which countries strive to take advantage of trade partners by stealing their jobs with undervalued currencies or by getting stuff free by printing wads of worthless paper, while stealing from their own citizens by currency debasement.

China and other Asian nations have long been in the job-stealing business with undervalued currencies, the US and other Western nations have long been in the business of printing worthless paper to cover their expenses.

As a result, resentments build up. China is a currency manipulator. The US rips off the world for $trillions-worth of oil and manufactured goods by virtue of its exclusive right to print the world’s reserve currency. Smaller countries, do what they may, are constantly in danger of economic disruption due to the tidal forces created by currency market manipulation and intervention.

But there is a simple solution, a return to a gold-exchange-standard-type system established under the Bretton-Woods Agreement, but without the absurd waste of energy and resources that a gold-based system entails as it drives the mining of a metal destined for permanent storage in a steel-and-concrete-lined vault.

As I have already explained, such a system can be based on an entirely cost-free resource: namely, the set of cardinal numbers. Named the Numero, each unit of currency would have a unique whole number. Existing currencies would be converted to the Numero at the current exchange rate with either gold, or the US dollar or, the price of a Big Mac, or a basket of commodities, manufactured goods and services.

If the US dollar is taken as the initial standard, then every US-dollar-account balance will be unchanged except in the designation of the currency, which will now be the Numero not the US dollar. Balances in other currencies would be exchanged at their rate of exchange with the US$ on the designated date of conversion.

Now we would have an electronic currency that cannot be counterfeited, costs nothing to create, and can be traced every moment through a global network of computers that record the ownership of every single uniquely numbered currency unit.

As with a gold-backed currency, the Numero cannot be printed unilaterally by the government of any country, since not only would that amount to fraud upon the trading partners of that country, but because such fraud would be immediately identified, since each new currency unit would have a unique unauthorized number.

The Numero, like gold, would automatically adjust international trade balances toward zero, since countries with an international trade deficit would run short of currency, which is to say, would experience a contraction in money supply that would depress prices and increase international competitiveness. Conversely countries with a trade surplus would experience an expansion in money supply that would increase prices and decrease international competitiveness.

Other benefits of the Numero include the prevention of financial theft, money laundering, bribery and corruption, since stolen, laundered, or illicitly gained funds would appear with their identifying numbers and their source, in the account of the receiving party where they could be immediately identified.

As the global economy expands, or contracts, the supply of Numeros could be modified automatically by adjusting every Numero bank balance by an appropriate factor. Thus if the world economy grows by 0.25% per month, every Numero bank balance would be credited each month with an addition of newly minted (i.e., authorized and uniquely numbered) Numeros equal to 0.25% of that account's balance, in accordance with the Biblical principle that "to those that have, more shall be given." Conversely, "from whom more shall be taken away" in the event of a global contraction.

As for lending, banks would have to make do with funds deposited with them, instead of creating booms and busts by printing money, as they are free to do now, without regard to prevailing economic conditions or the fundamental needs of the economy.

The above is based on a post of September 24, 2012.

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