My Radical Stimulus Idea: Temporary Money

Now that Congress is looking to pass a second stimulus package, I would like to propose a simple yet quirky idea: instead of sending out checks that provide no incentive to spend, why don't we create a "temporary currency" with a definite expiration date?

This "temporary currency" would basically work as a gift card with a very close expiration date (December 31st of this year, for example).

How it might be implemented:

1. Some amount of temporary "Bush Bucks" is credited to each social security number
2. The Treasury department sets up accounts for each SSN with Visa. Visa manufactures and ships out debit cards linked to these accounts to all SSN holders with a valid address. (This method appears to require the least amount of additional infrastructure. Alternatively, this could be done electronically in some way, but I'm not clever enough to figure out how.)
3. The cards expire on a set date, after which the Treasury closes the accounts with Visa.

Potential problems:

1. Forgery. I would hope Visa could handle this.
2. There are alternative ways to get cash out of a debit card. Consumers could buy some bubble gum and then get the rest out through cash-back at the cash register. They could also buy coins, etc. However, these actions all require a conscious effort. The point of this program is to make it easier for consumers to spend their stimulus than stick it under their mattress. If some people really want to convert into cash then they will have to work at it.
3. My assumptions about the ready infrastructure to handle this sort of plan is woefully naive.

Benefits:

• We can be sure that virtually 100% of the stimulus going out will be spent THIS HOLIDAY SEASON instead of hoarded or saved. This would provide a boost to retail and prevent widespread shop closures -> layoffs -> and so on.
• This method would result in the "gift card effect". Consumers who go shopping with a gift card generally tend to spend money on top of that, because they know they have to spend the amount on the card. The close expiration date would only magnify this effect.
• The positive externality of getting the stores buzzing this holiday season would provide a major boost to consumer confidence. We need to create an atmosphere that makes people excited about spending again. The only way we can be 100% sure of packed stores is if consumers are heavily incentivized to spend.

I believe in this country's ability to find simple, creative solutions to complex problems. Since I have zero political influence, I cannot personally get this plan going. But I do hope that someone important will read this, find this idea interesting, and get it to the desk of someone who does have the power to shape policy.

Disclosure: none

Comments

[Balderdash:]

Your idea is creative. Unfortuntately it's really dumb and exactly where we're headed. More reckless consumption financed by foreigners or our grandchildren. This country is headed to financial ruin.

No offense.

2008 Oct 23 04:39 AM

[sieraromero:]

If the government gave each individual 1 million dollars instead of giving it to the financial institutions [which by the way only makes the rich--richer], think of the economic stimulas that this would provide. The dollar is going to be worthless anyway. What further harm could it do? And, talk about stimulating the economy and eliminating the bad debts. This would totally eliminate those problems!

2008 Oct 23 10:01 AM

[derryl:]

Jeff:
Your "temporary money" is very much like the idea of "national dividends" that is part of a theory of money called "social credit" that was thought up by an Englishman in the 1920s. Social credit was widely discussed by governments in the 1930s monetary depression, and it was widely condemned by the financial powers-that-be. A lot of people thought, and still think, that Douglas' idea threatened the banking system's "monopoly of credit" and that's why it was so vigorously resisted.

If you Google "money and the price system" you will find online the text of a presentation Douglas made to the King and government of Norway in 1935.

Douglas' insight was that any economy generates prices at a higher rate than it distributes incomes to pay those prices. New money creation by way of new loans generates new prices that have to be repais with interest, so you can't solve the arithmetic problem by expaning the money supply in the normal way of making new bank loans.

So the only way to clear all the prices (i.e. sell all the stuff that is produced) is for gov't to distribute free money to citizens. When the producers repay their bank loans the money all ceases to exist and you start financing a new round of production.

Of course in a real system there are new loans and new rounds of production occurring all the time so consumers can rob incomes paid out by Peter Inc. to buy the products sold by Paul Inc., but Douglas' arithmetic makes sense. There are more "prices" generated by an economy than there is "money" to pay those prices.

Check it out.

2008 Oct 23 11:38 AM

[alajac:]

I've been posting a somewhat similar plan (albeit on a permanent basis, as the scarcity of viable work is fast becoming a permanent problem).The people who think we have been "living beyond our means" are the same as the townspeople in the movie "Blazing Saddles" who let the black guy take himself hostage. The only reason that we have to pay somebody to create new currency for us is because we are dumb as mud. The dollar is a piece of the "pie" called the UNITED STATES. All that creating more dollars does is cut the pie into more pieces. Why do we need a central bank to do that? My plan calls for $1000 per month of new currency to be issued to every legal US resident. (I have a very interesting argument as to why that monthly payment is justified - compensation for "government privatization of all property" - but mainly it is justified because "that is the only way we can avoid a complete disaster".) The Fed Income Tax will be replaced by a 0.5% debit tax on all electronic transfers, avoidable by use of cash or barter (strictly to get rid of excess currency).


So, the plan: handles the problems with current mal-distribution of resources, gets rid of the IRS, ends tax avoidance, starts paying off the national debt, ends the 'poverty draft', ends illegal immigration (when other governments adopt the system), ends most poverty and crime, enables repopulation of rural areas, and ends the need for both parents to work to make ends meet. Voila.


We can bail out bankers but not ourselves? How stupid are we?


Look up Alan Jacquemotte on the classmates.com website for more info and WRITE-IN "ALAN JACQUEMOTTE" for EVERY office in EVERY election until we get this done.

2008 Oct 23 01:31 PM

[alajac:]

By the way,all of the bailout money should go out via equal dollar payments to every legal US resident. THE MONEY ALL ENDS UP IN THE BANKS ANYWAY, so what do we care whether people spend it or save it or send it to Guatamala? Micromanaging is the whole problem. The market is way smarter than any of us so lets get out of its way with the plans and the FDIC insurance and every other form of BS. If something costs too much (like heath care) then we NEED TO CREATE MORE SUPPLY, NOT RATION THE SCARCITY. Why is this so hard for you Earth people to get?

2008 Oct 23 01:40 PM

[alajac:]

ps. I realize that getting logged-in on the classmates.com website is a little bit of a hassle, but once you are on you will find it is a really cool, free networking place. I really like it and I get no compensation for saying so. It's all I use as a webpage especially since I can't figure out how the other sites work). I also have stuff on www,U4Prez.com (under"alajac"), but there are a bunch of neo-cons on that site that are truly obnoxious.

2008 Oct 23 01:46 PM

[Sonia:]

Good idea! Every penny of the $1000 stimulus check my husband and I received was spent as the government intended, and did indeed stimulate the economy. I paid cash to have living room chairs recovered, enabling the retired gentleman who did the work to put food on his table, and also paid cash to have trees hanging over our roof cut down . So yes, I think temporary money would be great, with the caveat that if it had to be expended by debit card fewer people would accept it and the money would buy less, circulating through the economy fewer times and providing less stimulus.

Jan 18 01:00 PM