Privatizing Money

The economy has a financial system that has convinced him that, that piece of paper has value. That financial system makes the transaction possible; without it the economy as we know it would not exist (Mc Graw-Hill, pg. 257).

So who is to say that the financial system could not put value on another person’s medium of exchange, unit of account or store of value. Giving let us just say my paper valve. With the right amount of medium of exchange, unit of account or store of value, anything is possible. So the question that arises “would I have to get into the banking system”? Would I have to have a bank for the notion to privatize money? I do believe so.

Banks are vitally important to macroeconomics because they “create” money. The key to understanding how banks create money is to remember the nature of financial assets. Financial assets can be created from nothing as long as an offsetting financial liability is simultaneously created. Because money is any financial asset that can be used as a medium of exchange, unit of account, and store of value, money can be created rather easily. The financial asset just needs to serve the functions of money (Argosy). And keep in mind expansionary monetary policy expanding credit in the economy. The Fed undertakes monetary policy by changing the supply of money (Mcgraw-Hill, pg. 292).

Now the Fed purchases Treasury bills and bonds. Now, what if a person had the value of wealth to do the same as the Fed. Could I create a bank of all banks? Ultimately, could this entity do the same as the Fed by operating with some of the same power? No, I would need to create a bank of all banks that would have enough customers that bring enough deposits that qualify for loans needed to be able to request an IOU from the Fed to initiate the money multitier effect. It states right on the bill that it is a Federal Reserve note, which means that it is an IOU (a liability) of the Federal Reserve Bank (the Fed) (Mcgraw-Hill). And what if the...