Dear Mr. President:
I am writing to propose that congress make a formal currency revaluation of the U.S. Dollar at the end of this year that will have several positive effects:
- It will create an unprecedented economic boom.
- It will reduce the economic clout of foreign drug lords.
- It will wrest considerable power from the Federal Reserve banking cartel, and return it to the U.S. Treasury.
- It will correct the effects of seven decades of gradual inflation.
- It will mean that our currently laughable Penny and Nickel will again have value and meaning.
- The U.S. Treasury will again make a profit through seignorage. (Presently it costs more than two cents to mint each Penny. But with a revalued Dollar, the cost will drop to less than 1/10th of cent. Likewise, it costs more than 8 cents to mint each Nickel. The difference (seignorage) would again become a profit to the government, as it should be.
- The U.S. Treasury will have the opportunity to issue U.S. Treasury Notes that will circulate side-by-side with Federal Reserve Notes. Issuing new currency that is not debt-based will both reduce the National Debt and foster economic prosperity.
Knock A Zero Off
My proposal is simple: Knock a zero off the Dollar.
You can accomplish this by meeting congressional leaders, and making a formal legislative proposal. This currency revaluation should be timed for the end of the calendar year. As of January 1st, 2019, it will take 10 of the currently circulating Dollars to buy one of the new Dollars. All electronically-held Dollars would be re-valued instantaneously. This would include all bank deposits. The prices of all stocks, equities, bonds and goods would be revalued as of January 1st, 2019.
The only exception to the revaluation would be for holders of circulating coinage and postage stamps with printed Dollar or fractional amounts. (They would be the beneficiaries of a 1-to-10 value windfall.) However, the holders of postage stamps marked “Forever” (which now constitute more than 95% of uncancelled stamps in circulation) would not benefit, since Forever Stamps would be revalued overnight.
A new stock of paper currency with a substantially outwardly-different appearance would have to be printed in advance, and distributed throughout the banking system and held with a firm embargo date to begin circulation on January 1st, 2019.
Then Comes The Boom
The subtle psychological effect of a 10-for-1 currency exchange will be profound, sparking a huge economic revival that will last for more than a decade.
Think about the implications of revaluation:
- Instead of costing $2.90 a gallon, gasoline will be priced at 29 cents a gallon.
- Instead of costing $3 a gallon, milk will be priced at 30 cents a gallon.
- Instead of costing $26,000, a typical new car will cost $2,600. (To compare: The sticker price of a 1965 Ford Mustang was $2,734.)
- Instead of costing $2, a bridge toll will be 20 cents.
- Instead of costing $1 or $1.25, a candy bar will be 10 or 12 cents.
- Instead of costing $10, a movie ticket will be priced at $1.
- Instead of costing $700 to $900, a typical men’s tailored suit will be priced at $70 to $90.
Again, the subconscious psychological effect of the revaluation will be enormous. The prices of goods and services will seem low, so people will buy more. They will buy more cars, bigger houses, more dinners out at restaurants, and more of just about everything.
The genuine need for revaluation is considerable and overdue , given the gradual inflation of the U.S. Dollar. A typical retail item that cost just $1 in 1950, now costs $10.08. And something that cost $1 in 1913 now costs $24.53. Rightfully, instead of debasing our coinage as we did in 1964 (replacing 90% silver coins with silver-plated copper tokens), we should have revalued the Dollar at that time. So now is our opportunity to at least partially set things right.
Without revaluation, within a few years the U.S. Treasury will be forced to start making all coins out of stainless steel or plastic. (The penny and nickel already now cost more than their face value, to produce.)
Yes, Its Been Done
There have been many precedents for 10 for 1, 100 for 1, or even 1,000 for 1 revaluations around the world in the past century. However, most of these were acts of desperation, in times of mass inflation–mostly in small, economically weak countries. But to make 10-for-1 currency change in an economic powerhouse like the United States during times of fairly low inflation would be tremendously positive. The prestige of both the United States as a nation and of the U.S. Dollar as a currency unit would be greatly increased. (On the Forex, it would cost 12 Euros, to buy One Dollar! Thinks about that.)
The logistics of issuing a new circulating currency might initially seem daunting, but they really aren’t. This is because only around 7% of the “Dollars” in circulation are in tangible printed or minted form. The other 93% of the “Dollars” are electronic ledger entries that can be revalued with a few keystrokes. No muss, no fuss.
Now, on to the legalities and logistics of a revaluation:
- Replacing the paper currency could be done very quickly and with minimal expense because the revaluation would require only 1/10th the volume of the now-circulating paper currency to be printed. (A new $20 bill would have the purchasing power of $200 in current dollars.) The Bureau of Engraving and Printing (BEP) could produce enough of the New Style currency in just a few months—well in advance of the transition date. These could be stockpiled at the regional Federal Reserve banks before December, and then sent out to local banks in sealed bundles in mid-December.
- Domestic holders of old style currency will be allowed one year to exchange their old bills for the new bills (at a 10 for 1 ratio.)
- Overseas holders of old style currency will be allowed two years to exchange their old bills for the new bills (at a 10 for 1 ratio.)
- The few remaining domestic holders of old style savings bonds will be allowed five years to exchange their old bonds. (Or have them overstamped and have a holographic security sticker attached.)
- Holders of all circulating coinage–which represents less than ½ of 1% of all Dollars in circulation–would not be required to make any exchange. (They would have an overnight windfall.) But coins represent less than ½ of 1% of all currency in circulation.
- Holders of postage stamps marked “Forever” (which constitute more than 97% of un-cancelled stamps in circulation) would not benefit, since Forever Stamps would be revalued overnight. (Instead of being worth 49 cents each, Forever stamps would be formally revalued at 5 cents each.)
- Holders of the few un-cancelled postage stamps with printed Dollar or fractional amounts would not be required to make any exchange (They would be the beneficiaries of a purchasing power windfall.)
- Holders of un-used money orders and travellers checks will be allowed one year to exchange their old ones for newly-denominated ones (at a 10 for 1 ratio.)
- In cooperation with the BEP and Treasury Department, the Federal Reserve will issue the new currency into circulation. Banks will gather all of the old style bills, bundle them, and be credited by the BEP when they are received for destruction.
- To meet the new demand for coinage (since small coins will again have value and meaning), the BEP must embark on a program to double or triple its annual coin production. American miners and metals refiners would benefit from expanded BEP contracts. But since the coins themselves will be unchanged in their markings and metallic composition, the circulating coins will be unaffected by the revaluation. They will simply gain 10 times their purchasing power on January 1st, 2019. Imagine a cup of coffee at Starbucks costing 20 cents. What a concept!
- The new style currency could have advanced anti-counterfeiting features, similar to the new series of Swiss Franc notes.
A Few Challenges
Granted, there will be a few challenges. These include:
- The operators of vending machines and coin changing machines will have retooling costs, to install new optical bill readers. But these costs would be much less than the costs of them installing new mechanical coin gauges, if the metallic composition of coins were changed. (And, with gradual inflation that will become a necessity soon, unless our nation revalues its currency.)
- Although toll bridges and highways have largely switched to E-Pass transponders and credit card payments, and few of them are still set up to collect tolls with paper currency or coinage. A national “no toll holiday” lasting for the months of January and February would be announced, easing the transition to new toll-tallying equipment.
- There could be sporadic shortages of some coins for a year or two. But countless numbers of home Piggy Banks will be emptied and spent into circulation, this problem will be largely self-correcting.(When 10 cents will buy a soda or candy bar, all of those “forgotten” coins tucked away at home will again see the light of day.)
- Some businesses and governments operate on fiscal years, rather than calendar years a January 1st currency reform will complicate some tax calculations for the transition year.
- Special arrangements for currency trade-ins would have to made in countries like Ecuador, East Timor, El Salvador, Marshall Islands, Micronesia, Palau, Panama, Turks and Caicos, British Virgin Islands, and Zimbabwe that have partially or fully Dollarized economies.
Seize The Day
This is an opportunity to make the Dollar Great Again, and thereby help make America Great Again, Mr. Trump. This may go down in history as one of your greatest legacies. Seize this opportunity!
James Wesley, Rawles
Novelist, Rancher, and Blogger
And every Dollar on a wage will be 10 Cent?
Wages down by 90% (in nominal Dollars) as well. Working people don’t win. People with big stashes of US coin (like Kyle Bass) will do fine.
Silver and Gold American Eagles will hold their purchasing power. A Silver Eagle purchasing power will be much closer to face value ($1) than currently.
The Treasury ought to drop 2 zeros and monetize all of the gold and silver US coins of history at face value for tax-paying purposes. The longer fiat paper redemption time internationally will tend to pull “left over” older currency out of the USA after the year is up, leading to slight deflation (or less hyperinflation than would otherwise occur due to QE2infinity). This is going to hurt US Dollar using small business people all over the world who use USD as a savings vehicle outside of the banking systems.
This is a topic that I lack understanding in… what does that do to wages?.. If a guy making gizmos, is making 25.00 an hr from his boss, and gizmos are now selling for 10.00 instead of $100.00… does the guy take a pay decrease to 2.50 an hr? isnt his mortgage and all his bills still reflecting a 25.00 an hr wage? what spurs the credit card companies to drop his balance??
and wouldnt that create a new group of bridge jumpers?
Also, how would this work in super narrow markets like utilities? or the communication industries? Civilization as we know it relies on both.. what would force them to lower prices?
I think Government would have to step in and force them to price accordingly.
Yes. No business would continue to pay you $50,000 annually in a revaluation such as the author proposes. You would make 5,000, in line with the revaluation.
No, this card carrying economist doesn’t see how this benefits the average Joe, other than pocket change meaning something. I suppose manufacturers of coin purses would see a short-term boost in production to meet the new demand for something to carry change in…
How would this effect pension payments, SS, et all? If I follow this idea, a pension check of $666, would be just $66. Am I wrong, what contractual agreements, car payments, mortgages and credit cards.
On the face of it, it sounds fantastic, yes, I pumped .29 gas for a friend, and remember a new car costing between $2000-3000.
Am I incorrect?
JR- I was in the vending business for ten years. Bill acceptors are reprogrammable now with just a software update; the notes would need be the same size as the dimensions of a $1 and $5 bill however. Coin mechanisms are slightly more complicated, but if the new coinage were of a standard cataloged size (and the coin acceptor companies have standard sizes for most of the major international coins) it’s just a reset of DIP switches in most cases done by the route person. Additionally, the move to card-only vending equipment is gaining momentum, further mitigating the issues associated with the thesis.
we could go back to the gold standard and stop printing worthless paper.
You’d think that would be the evident solution.
“you’d think that would be the evident solution”
that would depend on what your goals are. if you goal is to loot and steal and lock up everyone in permanent debt, then the last thing you’d want is a gold standard.
Employers would immediately slash wages at 1:10 rate, so the purchasing power of individuals wouldn’t actually increase. Also, any contract (mortgage or auto loan) would still be denominated in pre-revaluation dollars. There is no law that can force a lender to renegotiate contracts. I suppose the Fed could require all lenders who receive federal backing such as FDIC to revalue loans or risk losing Federal funding….
Congress can revalue your contract to reflect NewDollars, just as Gold Clauses were revoked in contracts early in the 20th Century. No visible asset is safe as long as Congress is in session.
LO,
The wage decrease from $25 to $2.50 would maintain the same buying power so there would be no change in valuation.
If this were to occur as JWR describes those holding a large stash of circulating coinage would benefit by having their coin stash become worth 10 times it’s current value, so a dime would now have the buying power of a current dollar.
Not changing the value of coinage is common during past currency devaluations.
LO,
The wage decrease from $25 to $2.50 would maintain the same buying power so there would be no change in valuation.
If this were to occur as JWR describes those holding a large stash of circulating coinage would benefit by having their coin stash become worth 10 times it’s current value, so a dime would now have the buying power of a current dollar.
Not changing the value of coinage is common during past currency devaluations.
I’m a huge fan of JWR, but this doesn’t seem well thought out. For instance: Do foreign governments who owe $50 Billion US dollars get to drop a zero off of their debt? Does the U.S. get to drop a zero off of it’s own debt which is largely held by the American people (then Japan second and China third)? Or how about the debts it owes to other countries (trade deals)? Do we really think the world will accept the U.S. simply dropping a zero? I’m not an expert, but this doesn’t seem like a plausible voluntary move. This is what countries (banana republics) do when they have no other choice, and people are rioting in the streets!
It’s all relative, and therefore a meaningless manipulation! LO has nailed it .
If it were truly possible to adjust all the factors at the same instant, then the only real value is to holders of large amounts of physical coins. The only advantage will be to lawyers who negotiate changes in employment payments.
If this is such a great idea, why do we only see it done by nations whose economies are circling the drain?
A better idea might be to shoot all lawyers, everywhere! Offer a bounty, fifty dollars per live lawyer, one hundred dollars per dead one. This would quickly show benefits across the world.
I share Retired cops’ thoughts. Thank you. Also, I think this idea of JWR’s does hold some merit. It would be an excellent start at economic stability. I DO get it.
This may seem logistical, but it would cause RIOTS because of public perception that they have been hood winked!
“public perception that they have been hood winked!”
well, they should get un-hoodwinked. the dollar is not under the control of the united states or any constitutional entity, rather the fiat debt dollar is the private property of a consortium of foreign banks, so they can do whatever they want with it.
heh. “render unto caesar” ….
@retired cop.
Why shoot “all lawyers” instead of “all communists”?
While you’re hunting lawyer bounties, you should probably avoid the combat vets who went to law school on the GI Bill, if you want to collect. 😉
Jay,
The shoot all lawyers comment was meant as both a recognition of all the extraneous cost and complication they bring to every facet of life and as a hat tip to Billy Shakespeare.
As for lawyer vets, they are like everyone else, some good and some bad. Doesn’t mean I don’t appreciate their service.
Without strict and comprehensive wage and price controls by the Federal Government across our entire economy (which historically have been miserable failures) a revaluation scheme of this magnitude would accomplish only one thing; chaos. As tempting as it is to try and wipe out decades of bad policy in one fell swoop, it is not reasonable to believe that this can be done without tremendous disruptions to our economy. We got in this mess incrementally, and that’s how we’ll get out again too.
Small changes that lessen government control over the economy are the way forward. Allow the market to work to produce the wealth we need to solve our debt problems.
Reintroduce honest money (100% commodity backed, redeemable notes) like we had before the Civil War and let it compete with FRNs, don’t mandate any changes or any deadlines. Let individuals choose for themselves what will best serve their interests (don’t have government pick winners and losers).
No single scheme (central planning) can match our collective intelligence and wisdom (free market) as a people.
Nope. Classic case of backwards thinking. If as a small business owner I charge $5.00 for a service, I am going to still charge the same amount, because that is what my knowledge, skill and abilities are worth. Irrelevant to me if you have to give me 50 of your 10 cent bills to pay. Do you think corporations and banks have not war gamed this issue? You want our pensioners to suddenly go from $3,000 a month to $300 to live on? Might work in a perfect world, but not the world I live in. Make laws to force everyone to play nice? Thank you Mr. Social Justice Warrior, for criminalizing human nature again. I will take this opportunity to apologize to everyone I have offended. Rant over.
And what would this proposed law or ruling or Executive Order do to the stack of 1 oz silver rounds I currently hold?
But never mind that.
For a person that wants gubberment out of their life, you sure do pick the oddest means and requests to want MORE gubberment in everyone’s life.
Nope, I’m with Seymour L, Tim B, and Buck…….not a good idea.
I like Tim B’s idea, get gubberment out of our lives, gradually, allow time for the capitalism free market to adjust, lather, rinse, repeat.
You still have ounces. This is the HUGE advantage of holding metals.
And the point would be? Any idea how the world see countrys that do this?
I have lived long enough to know that the average person will not benefit from this type of manipulation, no matter how good it seems on paper. The greedy and evil people/banks/ corporations/governments of the world will turn it to their advantage and the rest of us will be the bulls-eye on their targets. The rich will win, the middle-class would lose most everything we have worked for all our lives. The lower economic classes would probably do better because they don’t have as much to lose and many of them are given taxpayer money to live on. I think a dollar currency reset would cause panic and violence around the world.
How about just eliminating the penny and the nickel? Round off prices to the $.1.
You would still need the penny and nickel except as 11 and 15 cents. Unless I got to keep all the rounding errors.
I have a complimentary idea. At the same time and without advance notice pay off the entire national debt. Print the money (it’s wouldn’t really be printed just signed into existence) and pay it off overnight on a weekend. This would eliminate the debt payments from the budget allowing a tax cut and/or increased spending on national defense.
“It will wrest considerable power from the Federal Reserve banking cartel”
what, you think they’ll permit that? get back to work, plowhorse.
knocking a 0 off the dollar means nothing. the entire dollar system must be abandoned entirely. this will entail much suffering, but keeping the dollar in any form will end in more suffering.
Keep the Dollar just get rid of FRNs. Kennedy tried it,how did you like the outcome? Plus we wouldn’t of gotten led into 2 World Wars to guarantee the Bank of Englands debts.
Ah, yes, the price of a Forever stamp. It can be confusing to quickly find out – as Google often has it wrong. Last year it was $0.49, but it is currently $0.50.
Courtesy of the little web site: https://foreverstampvalue.com/
Certainly an interesting concept. I had two initial thoughts, and I’m sure more will come with time. #1 – “Banana Republic,” was the first thing that entered my mind. Lived in San Diego when Mexico did the same thing years ago. While it was buying bonanza for “el touristas,” it was a disaster for the natives. They had huge inventories of raw/final products that took a severe financial hit. #2 – The first word in your blog is “Survival” and with no disrespect intended, there’s a lot to be said on the extreme value of your accounts of your households weekly preparations versus an article fictionalizing a massive change to the American financial structure that would demoralize the nation and change the face of the world forever. America is truly great and with the Trump administrations small, yes at times slow, but steady progress, America will remain the shining Republic on the hill the world has always looked up to.
Just imagine, if you will, what China would do if we decided to just knock a zero off the dollar. Let’s just see. With China sitting on hundreds of billions of The bills. I think they’d invade.
“I propose we start by taking yours.”
you’re not grasping the concept. it’s not mine vs yours. it’s the entire system.
While China may be far more populous then Japan, they had best remember what Yamato said about a ‘gun behind every blade of grass’
The TRUE BEAUTY of this idea is this: Income Tax Bracket Creep will be (for a time) Revoked!
reb Ianos
JWR in the past has advocated stockpiling nickels in huge quantites. These are the only people that would benefit from this plan, those with thousands of dollars in change. If you have $100,000 in the bank, you would now have $10,000 over night. Your wages would drop as well, but as some people have noted, the government can not force contract renegotiations
Yes they can and have been doing for years,remember PATCO,veterans who were guaranteed lifelong healthcare for 20+ years service,pensioners turned over to PBGC at $.40/dollar when the pensions were stolen,by judges that refuse to force contracts to be honored,by bureaucrats that don’t like them and sue to break them etc.
Neat, but no chance it could be implemented by 1/1/19. Maybe not even 1/1/20.
I am in a highly regulated financial industry that depends on TONS of valuations, algorithms, rates, etc. that would ALL have to be re-done, custom.
Imagine getting a big fine that automatically garnished your account, but hadn’t been re-valued? That $1,200 fine from the IRS or FINRA is now equivalent to $12k. Ouch. And they aren’t going to fix it anytime soon, because why be in a hurry when you’re benefiting from the problem?
JWR, I love your work and ideas but this is an ENORMOUS change, with infrastructure issues much bigger than Y2K or anything else that’s ever been attempted.
Folks are making this sound more difficult than this would be. For a recent precedent, see the history of the New Israeli Shekel. (See: https://en.wikipedia.org/wiki/Israeli_new_shekel). In 1985 they lopped three zeros off a badly inflated currency. (See: http://www.mfa.gov.il/mfa/aboutisrael/economy/pages/economy-%20major%20reforms.aspx) All debts, all stocks, all bonds, and all accounts (public and private) were redenominated 1000-for-1, virtually overnight. Yes, it will have some challenges, but the rewards definitely outweigh the headaches!
We’d love to hear about the rewards.
“we’d love to hear about the rewards”
well for one thing, as rawles has pointed out previously, coinage typically is not replaced but continues as-is – meaning a quarter becomes worth $2.50 in present terms.
Here is the problem, the U.S. Dollar was and is the reserve currency for those central banks you cited. You have tried to over-simplify the devaluation of the U.S. Dollar. If we did what you’re recommending it would affect every currency in the world that uses the U.S. Dollar as a reserve to establish their own currencies’ value. This would only work if the U.S. Dollar was dependent on another currency such as the Yuan or Euro as it’s reserve, which it’s not! Mass Chaos would result in this move. We want less government control not more and your proposal would require more.
After reading the two links you listed above to the New Israel Shekel, I didn’t see any reference to the devaluation of the currency including a change to “All debts, all stocks, all bonds, and all accounts (public and private)…”, just the currency. The reference to debts, stocks, bonds, etc wasn’t spelled out in your article above and wasn’t included in your linked references. Can you clarify how debts (which are loan contracts), stocks, bonds, etc were done, and where you can cite this information.
I’m a peon compared to the great minds here, like Mr. Rawles…. And i cant grasp how there would be any change by this? You say people would spend more because things are cheaper but their income will also have a zero lopped off so it equals itself out.. a gallon of milk only cost 30 cents but your only making 2 dollars per hour…. Wouldnt this have the same outcome of a 15 dollar minimum wage? The wage hike would raise the cost of goods which would basically wipe out the increase in your income. Someone smarter than me please school me on this.
-PINEY
How exactly would this work and what would be the point? Other than spending a lot of tax payer money to reprint new bills. If my savings drops 10 times but China, Europe, Mexico or whomever still charges their current rates on goods they manufacture how am I supposed to buy anything? Are they just suddenly going to accept 10x less money without adjusting everything in their own economy? I’m don’t claim to be an economist but I believe it would destabilize and probably collapse the world economy. I for one, wouldn’t spend a dime for quite a while.
Adding this article to the recent list of proposed pardons and I’m thinking Mr. Rawles has drifted into some extreme thought processes.
Here is one of the benefits. Imagine you are a Mexican cartel boss with a couple billion in $100’s, $50’s and $20’s sitting in one of the bedrooms of your hacienda. Just the fact that in a year or two those bills would become unusable would cause you a huge loss. You would need to convert it all to the new currency and somehow do it without anyone noticing. It would cause serious harm to the cartel and make them more vulnerable to being found out.
It’s called money laundering and the big banks do it every day. The only ones who had bales of paper were the ones too stupid go buy a laundrymat. Ever see a business that never seems to be open but never goes out of business,businesses that never turn a profit but keep getting funded?
Has JWR’s account been hacked? He twice mentions the only real benefit, a psychological effect where things appear to be cheaper. But wages will also be lower. Nothing has really changed. The starting line and the finish line have both been moved, only the same distance. The overall distance of the race hasn’t changed. As others have mentioned, a better move would be to return to the gold standard. Now you’re talking!
All that looks nice on paper. Then there is reality. As pointed out, the individuals purchasing power wouldn’t increase. In THEORY it wouldn’t decrease either, and there might be a psychological benefit. Yet a tremendous amount of other issues abound too where debt, mortgages, national debts, etc. are concerned.
A bigger concern that I don’t see mentioned, is what a Romanian friend told me happened in his country in the 50’s when they revalued the leu: while wages were revalued, prices of goods were NOT consistently cut, which resulted in greatly inflated prices and in actuality, decreased purchasing power, even though the government tried to keep that from happening. How would that be handled, because you know people would take advantage of it. Say that $ 3.00 gallon of milk ended up costing you 40 cents instead of the promised 30 cents… you lose ground not gain it. And that was exactly the sort of thing my Romanian friend experienced ACROS THE BOARD with his daily needs- while on paper everything was just ‘wonderful’. How do you stop that? Government price controls? Black market? Where does it go?
I don’t know what the real answer is, other than it will probably involve a lot of pain for a lot of people. Call me skeptical…
So, you “knock a zero” off the dollar. One dollar is now worth ten of the old dollars. What good does that do? Something costing $10.00 now would cost $1.00, but someone making $15.00/hour now would be making $1.50/hour. Where is the benefit? It’s the same as all of the people screaming “FIGHT FOR 15!!!” Yeah, your wage goes to $15.00/hour from, say, $10.00/hour. The cost of living goes up proportionally. Everything ends up costing more, and you’re STILL making minimum wage!
A few years ago I would not have been able to understand the benefit of doing this. Today I do. JWR is right. The benefits to doing this are huge, even if just psychological.
Since mortages and wages are currently negotiated in FRNs, future payments would be in “New Dollars” (ND) your $100k mortgage would now have the ND value of $10k. Any mortgage holder who tried to cheat it’s customers would be automatically guilty of banking fraud and likely put out of business or at least hit with huge fines if not a lot of jail time. The same would go for any FRN denominated contracts. Any contract negotiate prior to date of implementation would immediately redenominated into NDs. That is not hard to do or to understand and any supposed banking firm or monetary industry that doesn’t get it is already being run by incompetents and already needs to be put out of business.
Your $80k a year salary would immediately become $8k a year. Your purchasing power would not change. That $200 grocery shopping trip would now be $20 for the same exact purchase. That $45k Ford Explorer would be revalued at $4500. No change and no damage to your purchasing power. That $100k FRN you have in the bank would be revalued to $10k ND but still have the same purchasing power. We would not be devaluing the dollar, we would be revaluing the dollar. No net lose to you.
For a year there would be dual currencies. They wouldn’t look alike so confusion should be minimal. Oh, and while you are at it, think of any foreign trip you make, think of all you could buy with your NDs since Mexico, Canada, Europe and the rest of the world has currency based on the defunct FRN.
Finally think of putting the Federal Reserve in it’s place and minimizing it into non existence. Remember you now have US Treasury notes possibly eventually backed by a basket of precious metals, instead of worthless pieces of paper, the FRN, backed by an illusion.
I’m guessing then that all goods & services will also have a zero lopped off so a $300,000 piece of Real Estate is now $30,000? So how would that change anything? I agree with the others on this. Without deficit/spending cuts, and policy reforms, as in the example of Israel’s devaluation, nothing would change except the way people felt about the changes.
We all know the Federal Reserve will not go quietly into the night and lose trillions.
The next phase of monetary policy will be “cashless” society.
That holds the same benefits of cracking the drug cartel since every dime can be tracked. It will work with foreign money since it will be tracked too.
The millennials do not use cash anyway.
How hard will it be for that to happen?
Oh, I agee with other opinions, a drop of a zero would cause more damage than the present system. I mean who is ever going to accept the new system if the elite in DC can change the rules with a stroke of a pen?
And what happens to the poor 80 year old grandma that gets her shoe box out of the closet? The shoe box that has her life savings in it , all $17,327.00 and goes to her local bank to trade it in??? You think that wont set off alarms? Heck the old granny MUST be a drug dealer, bring the IRS and FBI and DEA in, this old lady has too much money, it can’t really all be her’s.
What happens to small businesses and the value of their inventories. How do they get revaluated, or is it a loss? My gut does not see value to this. Gold standard, yes. But even that in this day and age is questionable. Electronic money is a joke if hackers are taken into consideration….yet it’s pushed the hardest. It’s all about control, for sure. Barter will rule the day.
What happens to small businesses and the value of their inventories. How do they get revaluated, or is it a loss? My gut does not see value to this. Gold standard, yes. But even that in this day and age is questionable. Electronic money is a joke if hackers are taken into consideration….yet it’s pushed the hardest. It’s all about control, for sure. Barter will rule the day.
Like the idea. It reduces my wage but also reduces my debt. And the importance of reducing the taxes taken out of me for government is fantastic. Why do they want a higher minimum wage? They dont care a wit about the worker THEY WANT THE TAX!
DD,
Your wage to debit ratio would remain the same!! Sorry!!!!!
Still controls inflation. Whats the tax on a 90 cent hamburger?
DD: And what would motivate the IRS to put anyone in a lower tax bracket? You wouldn’t be in a lower tax bracket…same ol’ 30% or wherever you might be at the time.
Thats the bonus most of the middle class are all in the lowest tax bracket. The way we are going who benefits from a $90 hamburger? The government! When you pay a $10 tax! Just look at what the $15 minimum wage has done to the price of restraunt food.
With all due respect, a ridiculous idea. Most retailers would take advantage of apparently lower prices and round up.Global confidence (if any) in our currency would drop. Loads of sound and fury, signifying nothing. Let Congress, rather, remember its Constitutional responsibility and issue silver-backed currency, and we could put the bloodsucking Federal Reserve out of business, and have truly the world’s reserve currency, as well as protecting all lawfully earned wealth from theft by inflation. Call it, The Silver Dollar.
This block of comments goes to show why it won’t work. Not a lot of serious thought from way to many of you. Your granny with $17k under the bed will just have to change her cash a little at a time, or maybe you could do it for her. The inventory issue is meaningless. Your small business inventory goes from $300k to $30k in value. This stuff isn’t really that hard to understand. No one actually loses anything, it’s a wash.
The real loser is the Federal Reserve. They deserve to lose. The Fed is unconstitutional, period. The FRN is an unconstitutional currency. Constitutionally only gold and silver or a reasonable facsimile there of, is money. So at the time we had silver certificates and gold certificates (paper) directly convertible to silver or gold. The FRN is backed by nothing, it’s just paper. I find no authorization, no amendment in our constitution that authorizes anything but gold and silver as money. Nor do I find any authority for the FED, only the US Treasury or the State Treasuries have the authority to issue money, and we have definitions of what that money is supposed to weigh, after all, a dollar is not a value, it’s a weight, defined in both gold and silver.
This proposed new currency would take the power away from the Fed and return it to the US Treasury where it rightfully belongs. Then it would be time to establish a basket of precious metals to base this new currency on. This isn’t hard, don’t overthink it.
JWR must like running these thought experiments, just to see how his readers think and react. Interesting, yet, based on the comments, disturbing.
You could Show me the article who authorizes only Gold and silver as Money?
People freaking out about their home mortgages and car loans: You would be paying the bank with dollars worth 10x what you owe. You have a balance of $100,000 and your monthly payment is $800 right now?
The government could simply legislate that for the life of any existing contract the exchange from new (2.0$ to old (1.0$) would be conducted prior to each payment transaction being completed. Or they could require the continued existence of electronic (1.0$) for the payment of all old debts.
Jan 1, 2019 you pay them the new (2.0$) at the instituted exchange to the old (1.0$) they’re owed or do an exchange. This wouldn’t be very difficult.
My mortgage is (1.0$)800? Here’s (2.0$)80. Whether I electronically exchange it prior to payment, or whatever its not very complicated.
You make (1.0$)25/hr? Now it’s (2.0$)2.5/hr. You make (2.0$)200 biweekly before taxes.
Whether you make (2.0$)200 or (1.0$)2000 you still work 32 hours a month to pay your mortgage because the banks have to accept (2.0$) at a rate of 10x against existing (1.0$) debts.
The only benefit I could see to a revaluation is an increased usage of coinage. Think about it, a burger costs $6.50 and then costs $0.65. That could possibly be paid in coinage because paying for a $6.50 burger with change, you will have a heavy bulging pocket. Other than that I do not see any benefit to knocking off a zero.
as a dairy farmer , that hasn’t benifited from inflation. i am paid less than my grand father was in the 60’s. the debts i have currently would foreever be there. our doing nothing more than kicking the legs out off a 1 legged chair.
those guys that had a 300,000 combine debt, just go bankrupt and walk away from everything.
Why try to save a system intent on destroying us? Washington must go.
History has again recorded a long train of abuses and usurpations, pursuing invariably the same Object clearly evincing a design to reduce Americans under absolute Despotism.
Our Founders’ Republic is long gone and not coming back. We are now in a near free-fall toward the inevitable breakup of Lincoln’s Northern model of a highly centralized, supreme and tyrannical federal government. Prepare accordingly. Where do you want your loved ones to be when the breakup happens, an ‘Estonia’ or a ‘Tajikistan’?
“Every kingdom divided against itself is brought to desolation.” Matthew 12:25 (KJV).
A gallon of gas would not go from $2.90 to 29 cents. It would go for what people would pay/sell it for (99 cents still ‘looks’ cheap). This reminds me of the idea of giving everyone a million dollars where prices would go up and in a few years there would still be richer and poorer people.
Most everyday items people use are produced outside the USA. Who is going to make Canada, Mexico and China revalue their currencies to match us? I see our money devalued, but everything we have to buy staying the same. This idea would kill most Americans.
I think you misunderstand my intent: The value of the US Dollar on the Forex would also be revalued, overnight. It would be a Zero Sum Game, with NO appreciable impact in international trade, except that the perceived value/buying power of the Dollar would increase.
I am curious about what the effect would be in this scenario when coins disappear from the economy from now until the end of the year? There would be a run and hoarding of coins like water before a hurricane.
When a lot of European countries went to the Euro we were faced by this problem. To be honest I did not notice much change. It was just different numbers. Pay slips and bank statements were printed in both currencies for (I think) 2 years prior to the change. There are still exactly the same number of people who never have small change, so businesses will have to supply more coins as change. This is especially true in summer where people stuff a crumpled, sweaty, smelly 20 Euro note into their pocket and you are permanently handing out large amounts of change.