With the world in a new once in a century economic dire new solutions need to be forged to put the world back onto a path of growth and prosperity. When I was a young teenager knowing zero about economics, not even knowing that central banks existed and printed money. I recall saying to an old friend, why don't banks just print money and give everyone free money. Well fast forward to today and with the knowledge I now have of finance and economics, which is only a little bit more than then but I still can think outside the box. So this is my new idea / solution to the crises:
New Solution to Global Debt Crisis
The simple solution would be Private Peer to Peer Central Banking. So how would this solution to the global debt crisis work.
- National Central Banks still retain money creation control.
- Private individuals must have a minimum of £100k cash to start a Private Central Bank.
- Private individuals allowed to leverage their own cash capital 100:1 with lowest cost funding provided from the Central Bank.
- Central Banks fully back the >£100k collateral from loss to individuals Private Central Banks, Central Banks effectively replace losses with new printed money.
- Small loans of >£2.5k <£5k from the multiple Private Central Banks to individuals, small businesses and banks.
- IT system for operation provided and run by the National Central Bank which maybe delegated to a next level down strong traditional bank, say HSBC or similar, run at small overall cost say 0.1% per loan.
What would be the further economic benefits of this?
New Private Central Banks would deliver job growth on 3 fronts.
1. The individual running the new Private Central Bank would give up the day job, effectively creating a new job.
2. The new much needed loan growth would stimulate jobs and inflation in turn reducing the deficits quicker which would in turn create a cycle of growth.
3. The individual running the new Private Central Bank would have a new found wealth and thus start stimulating the economy from spending more money than normal from profits, or further investing which also increases GDP / stimulation.
In addition to this:
- Traditional banks get a new source of funding which is leveraged existing cash M(1-6)-whatever, 100 fold increase, which can compound up as stable growth in the economy filters through.
- Governments and central banks MUST control the rate of growth at <4%.
- Loans given by Private Central Banks must be secured against assets.
A significant amount of Private Central Banks can co-exist globally and potentially allow money creation of any currency linked to whichever Central Banks join this new innovative solution. Will Mervin and Tim go for this?
UPDATE: After my comments the BOE & Conservative government are to provide £100bln in loans via banks starting Q3 2012. This has parallels to my calls for stimulation and has impressed the USA FED who may implement a similar scheme. They should pay me a consultancy fee, circa £1 million would do, cheaper than Goldman Sachs advice.
