How can the Fed do anything to increase the wealth of the Average American? Isn’t real wealth products, property, and services?

The answer is that money itself is a product that is traded in the market place like any other product. If real value is added to the currency those who own it become wealthier.

How can value be added to the Currency?

Value can be added to the currency by making it more useful, more stable, more secure, easier to handle, making it economically self adjusting, and creating it is such a way that does harms the economy less and promotes the economy more.

How is this different from the currency that we have?

Our current currency is mostly created by the fractional reserve system via debt and being implicitly backed by all goods and services in the market. A reformed currency would be explicitly backed by as many goods and services in the market as it is cost effective to do so and not backed via debt which has many hidden costs. A reformed currency would attempt to achieve equilibrium between all markets as well as stability to the markets as a whole over time. A reformed currency would not just be a currency but a mutual fund investment of all trad-able goods and services in the markets. Owning a dollar would be owning a share of a growing economy and these shares would split and reverse split to maintain share stability to the market as a whole. This make the reformed currency much more valuable because it is easier to manage than the old currency which must split it’s effort between creating enough flowing currency to help people meet their debt obligations and creating enough flowing currency for economic growth. One interest comes at the expense of the other. The reformed currency would help people build wealth by being an investment, by being more stable, and by removing the very cheap looking but very expensive debt costs from the equations.

How do we get there?

Reform usually should be taken slowly and with appropriate transition (baby) steps. This allow people to adapt more easily to the change and not suffer for decisions made under the old system. My first recommendation is to transition from a fractional reserve system to a full reserve system by slowly increasing the federal reserve requirement on new loans. This grandfathers older loans in and allows banks to adapt. On the backside the fed will have to replace money taken out of the fractional reserve system and they can do this by creating money out of thin air and introducing it to the market by the purchase and cancellation of federal debt. This will eventually wipe out the national debt and allow the transition to a full reserve system. From there we begin to start backing the currency by goods and services in the market. This is mostly a reporting requirement that requires that expected sales of good and services be reported and recognized as backing the currency and actual sales as having baked the currency. Expectations are a future indicator and actuality a lagging indicator, between the two we can create enough currency to meet demand and adjust for reality. Reporting would start with the major transactions and the easily reported transactions and eventually move to smaller transactions as it is cost effective to do so. We do not want the costs of the reform to out way the benefits of the reform hence the careful proceedings.

How will the Average American receive this increase in wealth?

The average American will receive this wealth in the form of a nation without debt, a much higher economic growth rate, and increasing wealth in their accounts as the economy grows.