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<p>[QUOTE=&quot;Numbers, post: 1209980, member: 11668&quot;]On (1), I completely agree with you.&nbsp; We&#039;d be better off if we weren&#039;t using billions of our tax dollars to pay interest to China et al., and we should work on getting out of that situation we&#039;re in.&nbsp; But doing away with the Fed/FRNs would not help us eliminate our foreign debts.</p><p><br /></p><p>On (2), you say that the excess of currency would only last a short time, but you don&#039;t seem to have given any mechanism by which the excess could be removed.</p><p><br /></p><p>Under our current system, if there are too many FRNs in circulation, then banks that end up with excess FRNs will ship them back to the Fed, and the Fed will credit their accounts with an equal dollar amount.&nbsp; The banks can then use those non-paper dollars to make loans, invest in other securities, or whatever.</p><p><br /></p><p>Under your proposed system, there&#039;s no Fed to perform that function, and the Treasury won&#039;t do it because your USNs aren&#039;t redeemable.&nbsp; So if there are too many USNs in circulation, then they&#039;ll stay in circulation, devaluing USNs.&nbsp; You say that USNs will be accepted for tax payments--and if USNs are somewhat devalued, then people will certainly prefer to pay their taxes that way than using other payment methods--so at first it looks like that process will remove the excess USNs from circulation.&nbsp; But there&#039;s a catch here: When the Treasury receives these USNs in tax payments, will the Treasury spend them again?&nbsp; If so, then they go right back into circulation, and the excess of USNs doesn&#039;t diminish.&nbsp; But if not, then the Treasury will be short of spendable money, and will have to either reduce spending or increase taxes to keep from going back into debt.</p><p><br /></p><p>In other words, reducing the debt using your USN system winds up looking just like reducing the debt under the FRN system: We&#039;ve got to either tax more or spend less if we want the debt to decrease.&nbsp; Issuing USNs doesn&#039;t make debt reduction any easier or more painless.</p><p><br /></p><p>Finally, on (3): the reason why FRNs are better than USNs is precisely that, when we&#039;re using FRNs, Congress can&#039;t attempt to do the exact thing you&#039;re proposing: Increase spending (or decrease the debt) by printing more money.&nbsp; History has repeatedly shown that doing this (to excess) causes the value of the currency to collapse.</p><p><br /></p><p>The supply of FRNs is elastic, is self-regulating: thousands of daily shipments of FRNs from the Fed to private banks, and vice versa, ensure that the overall supply of FRNs is always kept equal to the demand, so that the value of the notes remains constant.&nbsp; (Inflation can still happen, of course, but a $1 FRN is always worth one dollar, while a $1 USN has historically been worth less than a dollar at times.)</p><p><br /></p><p>The supply of USNs, on the other hand, is whatever Congress declares it to be, and it&#039;s dangerous to have our politicians playing with that kind of fire on a regular basis.&nbsp; As long as the Fed is running the paper-money show, there&#039;s one less way for Congress to get us all into trouble.&nbsp; (There are still plenty of other ways, though...see the debt to China again....)</p><p><br /></p><p>If you told people that &quot;by using [USNs], the nation gets out of debt dollar for dollar&quot;, then yes, I&#039;m sure people would be all for them.&nbsp; The trouble is that, as I&#039;ve been explaining for several posts now, <i>that statement is false</i>.[/QUOTE]</p><p><br /></p>

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