Consumers Can be Lenders Instead Of Spenders!

TheNightFly

We are all used to the idea of getting paid a wage or salary. We give our money to the bank, we go to the store and use our credit cards to borrow our own money from the bank, then we have to paying them back plus interest? What is wrong with this picture? Why not let consumers be lenders themselves doing exactly what banks are doing?

(Read what banks do first!)

Virtual Private Banks
First, we each need to open a bank for ourselves. We could do this simply by registering a virtual private bank with the Federal Reserve. This would be just like opening a regular bank only much simpler and without all the brick and mortar and required assets. The Federal Reserve would then manage our banks and our deposite accounts electronically. The Fed is the most qualified and the most credible for this task because that is what they are doing for regular banks.

Deposits
Now that we each have a bank of our own, we need to get people to open a checkbook account in our banks and make deposits. The single most important source of revenue for consumers are employers. Our employers could open a checkbook account in our virtual bank at the Fed. Then, they would deposit a certain amount of money into their account and that would create a reserve balance for our banks thus allowing us to lend like regular banks.

Loans
Now we can loan money based on our banks reserve balance. At every point of sale, we would be the lender instead of a regular bank. The merchant would now be the borrower. Instead of spending, we would be lending to the merchant for the cost of goods and, the goods would serve as full payment of our loan. Because we are extending credit, our banks reserve balance would not change. The money would literally be created at the point of sale, which is exactly what regular banks are doing now through our credit cards.

Interest
Merchants would now become borrowers instead of payees. As we create money by lending at the point of sale, we would be entitled to trim a little of the top as interest. As such, the Fed could collect an interest charge from every merchant at every point of sale. Instead of compounding interest over time, the Fed would just charge a flat rate of the sale amount and credit that to us by depositing it into our personal checkbook account in our virtual bank. We would literally be getting paid to shop!

Of course, the Fed would need to deduct their fees from us on occasion. And as usual, the interest earned would count as income and that would be subject to federal and state income taxes.

Side Effects
What would be side effects of this system?

1) Since we would only need to maintain a balance in reserve to buy things, we wouldn't need an income anymore. Eliminating payrolls would probably be a huge relief for businesses.

2) This would compelled most people to shop their brains out in order to generate as much interest income as possible, especially since we wouldn't be earning a wage or salary anymore, and that would be very inflationary. The Fed would have to limit our lending somehow. Lending is based on our reserve balances so, the Fed would have to restrict us to lending a certain percentage of our reserve balances each week or month or whatever time period. It would also have to be progressive; the larger our reserve balance gets, the lower our lending limit would be.

3) Employment might go up especially since labor would be virtually FREE.

4) We could also lend and borrow from each other. This opens a whole new world in personal financing. I'm still thinking about it...

EKRIUQ

Let me get this right your thinking about opening a bank, but you've got no money or assets, but people are just going to give you money and your going to employ people and give them credit cards as wages.

Good Luck.

seamus

You'll need to rethink your strategy if you plan on doing this in Ireland. The words "Federal Reserve" and "check" have no meaning here.

0utshined

Pffft. You guys just don't get it. The anonymous internet stranger is going to make me rich. Rich I tells ya!!!!!

vector

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