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... ... a USD already is an IOU. USD’s are borrowed into existence. That’s why they’re federal reserve NOTES.
....
OP: The wheel has already been invented.... it's called the Federal Reserve!
And 'legal tender' is primarily to establish the demand for dollars at minimum to pay taxes due.
But when no one wants $USD except the US government we'll have gone way past the road to hell. We'll be quite firmly IN IT.
P.S. ALL currencies in the world today are such 'fiat' currencies. They are 'backed' by nothing but faith.
Last edited by PamelaIamela; 10-12-2020 at 02:20 PM..
Government bonds are written and given to people who put money into the country's economy. You cannot buy anything with Government bonds but it has monetary value. In fact those who put money into the economy, obtaining Government bonds, are promised interest (added to how much was originally given to the country) after a period of time.
In other words, Bonds are paper that is written on it (1) the person (or institution) who you should get your money from, (2) the amount originally put in, (3) the maturity date & the interest.
Debt on the other hand is paper that is written on it (1) the person who holds your money, (2) the original amount loaned, (3) the interest that was previously agreed upon.
A monetary aid package is needed to help countries currently suffering from the economy lockdowns. What the people need is money to live in their countries (not necessarily to do trade amongst countries but to do trade amongst themselves - to buy food, to pay rent, etc).
Many of the aid package currently done by leaders all over the world are being done by borrowing money from institutions or through finding investors to invest in their country. And then use that money to give to their citizens without asking them for any work done.
Not all governments are willing to allow their countries to go into debt. In the end, the governments end up making up new rules for their citizens (that causes demonstrations to happen) so that investors are willing to invest in the country.
My proposed plan is to have an aid package where the government prints a currency similar to the workings of an IOU. In this case the country writes an IOU to their citizens in their respective currency bills (e.g for US/SG/AU/HK $1, $2, $5, $10, $20, $50, $100 bills respectively). The country then tells its citizens that it gives its citizens money that it currently does not have but later after 2 years or so or when the COVID crisis has calmed down, the citizens will be able to trade their IOUs with real money (plus maybe a small percentage interest added) from their government, one at a time.
The use of this IOU aid package (to be given from governments to citizens) is so that the people may have money to pay their rent or food, in IOUs, whilst stores & businesses are made to receive these IOUs as payment. This hopefully revives the local economy which currently is low on supply and demand. By printing IOUs, the government can somehow put into circulation new money without the inflation of prices. By injecting money through this method, companies and factories may hire back the employees that they have laid off because there is now a growing demand of food, products and services (of course companies will still have to ensure the procedures to prevent COVID-19 spread is still being obeyed).
A fair aid package is a fair distribution of that money to all citizens rich or poor. The final decision should be decided by the wise leaders of respective countries, what is fair according to their countries' needs.
Coming back to the question of this Thread, "Can IOUs, in this manner, be printed by the governments to be used by their citizens/residents for trade amongst themselves - to revive local economies throughout the globe?"
OP: The wheel has already been invented.... it's called the Federal Reserve!
And 'legal tender' is primarily to establish the demand for dollars at minimum to pay taxes due.
But when no one wants $USD except the US government we'll have gone way past the road to hell. We'll be quite firmly IN IT.
P.S. ALL currencies in the world today are such 'fiat' currencies. They are 'backed' by nothing but faith.
Agreed.
The Key is the Fed if one is talking of creating and handing out temporary USD's. (just like some new Covid 19 moneys)
Bonds themselves are not useful enough as currency. Their denominations are typically too large. And in the US case they would first have to be redeemed for USD's, and then those handed out or spent. The value of bonds fluctuates, so this process would have some up or down risk. And as noted above only USD's can be used to pay Federal taxes.
But the key being the Fed. If the Fed buys US Treasuries and hands out USD's to whomever and for whatever reason, those USD's could be temporary like an IOU. As long as the Fed keeps the Treasury on its balance sheet, the money stays out there. As long as the Treasury stays on its balance sheet, the interest it receives is swept back to the Treasury, so our taxpayers are not on the hook.
If and when the Fed decides to sell the Treasury or the bond matures without a rollover, then the money has to be repaid. In the very end the Fed then extinguishes that original amount of money, no longer money. Poof!
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