Rebuilding the Economy

Rebuilding the Economy A Moral Algorithm for Economic Reform

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A Comprehensive System for Increasing Economic Velocity, Reducing Inequality, and Strengthening Local Economies

This system integrates Postal Banking, Universal Basic Income (UBI), community-based finance, and targeted spending rules to ensure money circulates within communities while minimizing wealth hoarding and corporate rent-seeking.

1. Core Components of the System

A. Postal Banking with Digital Wallets

1. Every citizen automatically receives a Postal Banking Digital Wallet.
   • Accessible via USPS branches, mobile apps, and web portals.
   • Includes fee-free checking, savings, and instant digital payments.
   • No overdraft fees, no minimum balances, and no speculative investment services.
2. Savings Deposits Convert to U.S. Treasury Securities (T-Bills, T-Bonds, Treasury Notes)
   • Instead of relying on commercial banks, savings are held directly in U.S. Treasury accounts.
   • Savers earn interest from secure government-backed assets.
   • This ensures liquidity, stability, and public reinvestment into the economy rather than private banking speculation.
3. Low-Interest Microloans for Small Businesses & Workers
   • Postal Banking offers 0-2% interest loans to:
     • Small businesses with under 50 employees.
     • Individuals needing capital for housing repairs, healthcare, education, or local investment.
   • Loan approvals prioritize local economic impact and cooperative businesses.
   • Loans are repaid into the public banking system, cycling funds back into new loans.

B. Universal Basic Income (UBI) Distributed via Postal Banking Digital Wallets

• Every adult receives a full UBI payment.
• Every child (16 and under) receives 50% of the full amount.
• Funded directly by the U.S. Treasury, NOT by taxation alone.
  • Monetary expansion is controlled by indexing UBI to productivity growth and inflation targets.
  • Excess money supply is regulated through taxation and bond issuance.

C. Targeted Spending to Increase Money Velocity

To prevent money from flowing into large corporations or financial speculation, Postal Banking Digital Wallets can only be accepted by:

1. Individuals
   • Peer-to-peer transfers allowed.
   • Encourages a gift economy, freelancing, and cooperative business activity.
2. Small Businesses & Sole Proprietors
   • Defined as businesses with under 50 employees and no private equity/hedge fund ownership.
   • Ensures UBI benefits local economies rather than Wall Street.
3. Exceptions for Essential Services
   • Public utilities, worker-owned co-ops, and non-profit healthcare/education providers.
   • Low-income housing programs that meet strict affordability standards.
   • Prevents landlords and large corporations from price-gouging UBI recipients.

2. Expected Economic and Social Outcomes

A. Increased Velocity of Money

• Because funds must circulate locally, money is spent faster on goods, services, and small businesses.
• Since large corporations cannot extract these funds, wealth remains within communities rather than flowing to Wall Street.

B. Reduction in Wealth Hoarding and Speculation

• Since savings go directly into Treasury securities, there is:
  • Less reliance on predatory private banks.
  • Fewer stock market bubbles and real estate speculation.
• Large landlords, hedge funds, and private equity firms cannot directly extract UBI-funded income.

C. Job Creation and Strengthened Local Economies

• Small businesses and worker co-ops thrive since they are the only entities eligible for Postal Bank payments.
• More self-employment and gig work since individuals can easily receive payments without bank fees or corporate interference.

D. Affordable Housing Without Corporate Rent-Seeking

• UBI cannot be extracted by predatory landlords.
• Low-income housing programs receive targeted funding rather than allowing real estate speculation.

E. Financial Stability for Every Citizen

• T-bills and Treasury Bonds in Postal Bank accounts provide risk-free savings.
• Microloans enable economic mobility, allowing workers and small businesses to invest without Wall Street’s predatory lending practices.

3. Addressing Potential Challenges

A. Inflation Risks

Solution:

• UBI payments indexed to productivity growth, ensuring money supply expands in line with economic output.
• Public banking limits speculative asset inflation (real estate, stocks).
• Price controls on essential services (rent, healthcare, education) prevent exploitation.

B. Corporate Resistance

Solution:

• Large corporations must accept UBI payments only through worker co-op models.
• Public procurement shifts toward local suppliers and co-ops.

C. Ensuring Digital Access

Solution:

• Postal Banking is available in every USPS location.
• Offline debit card functionality ensures usability without smartphones.

4. Conclusion: A Self-Sustaining, People-Centered Economy

This system ensures money circulates efficiently while reducing corporate extraction. The combination of:

1. Postal Banking (public financial infrastructure)
2. UBI (direct spending power to individuals)
3. Targeted Spending (preventing corporate rent-seeking)
   creates a high-velocity, resilient economy that prioritizes people over profit.

This model replaces financialized capitalism with a functional, equitable economic system that works for everyone.

Key Points

• Research suggests this system could increase economic velocity, reduce inequality, and strengthen local economies, but outcomes depend on implementation.
• It seems likely that Chartalism and MMT support the state's role in funding UBI and managing money, aligning with the system's design.
• The evidence leans toward the Cantillon Effect being mitigated by broad UBI distribution and local spending constraints, though some inequality may persist.

Overview

This analysis examines a proposed economic system integrating Postal Banking, Universal Basic Income (UBI), community-based finance, and targeted spending rules, using Chartalism, Modern Monetary Theory (MMT), and the Cantillon Effect. The system aims to increase economic velocity, reduce inequality, and strengthen local economies by ensuring money circulates within communities and minimizes wealth hoarding and corporate rent-seeking.

Alignment with Chartalism

Chartalism emphasizes that money's value stems from the state's authority to impose taxes and declare legal tender. In this system, the U.S. Treasury directly funds UBI and manages savings through postal banking, ensuring currency demand via tax payments and UBI distribution. This aligns well with Chartalism, as the state actively creates and manages money to support economic goals.

Support from MMT

MMT posits that a sovereign government can issue money to fund spending, limited by inflation and resource availability, not deficits. The system's UBI funding by the Treasury, indexed to productivity and inflation, fits MMT principles. It also uses taxation and bond issuance to regulate money supply, suggesting sustainability if inflation is managed effectively.

Mitigating the Cantillon Effect

The Cantillon Effect describes how new money benefits those closest to its entry, often exacerbating inequality. Here, UBI is distributed broadly to all citizens, and spending is restricted to local transactions with small businesses and individuals, reducing concentration of benefits. Savings in Treasury securities further limit speculative investments, likely mitigating the effect, though some local business growth could still create disparities.Expected Results

• Increased Economic Velocity: UBI spending on small businesses and local transactions should speed up money circulation, boosting economic activity.
• Reduced Inequality: Broad UBI distribution and restrictions on corporate capture aim to narrow wealth gaps, though success depends on inflation control.
• Strengthened Local Economies: Support for small businesses and worker co-ops could create jobs and foster community resilience, though corporate resistance may pose challenges.

This system seems promising but requires careful implementation to manage inflation and corporate opposition, with outcomes varying based on real-world execution.

Survey Note: Detailed Analysis of the Economic System

This comprehensive analysis evaluates a proposed economic system that integrates Postal Banking, Universal Basic Income (UBI), community-based finance, and targeted spending rules, using the frameworks of Chartalism, Modern Monetary Theory (MMT), and the Cantillon Effect. The system aims to increase economic velocity, reduce inequality, and strengthen local economies by ensuring money circulates within communities while minimizing wealth hoarding and corporate rent-seeking. Below, we explore each component and its implications through the specified economic theories, providing a detailed examination of expected outcomes and potential challenges.System Overview and Components

The system comprises three core elements:

1. Postal Banking with Digital Wallets:
   • Every citizen receives a fee-free digital wallet accessible via U.S. Postal Service (USPS) branches, mobile apps, and web portals, with no overdraft fees or minimum balances.
   • Savings are converted to U.S. Treasury securities (T-Bills, T-Bonds, Treasury Notes), ensuring liquidity and public reinvestment rather than private banking speculation.
   • Low-interest microloans (0-2%) are offered to small businesses (under 50 employees) and individuals for housing repairs, healthcare, education, or local investment, with repayments cycling back into the public banking system.
2. Universal Basic Income (UBI) Distributed via Postal Banking Digital Wallets:
   • Every adult receives a full UBI payment, and every child (16 and under) receives 50% of that amount.
   • Funded directly by the U.S. Treasury, not solely through taxation, with monetary expansion controlled by indexing UBI to productivity growth and inflation targets.
   • Excess money supply is regulated through taxation and bond issuance.
3. Targeted Spending to Increase Money Velocity:
   • Postal Banking Digital Wallets can only be accepted by individuals (allowing peer-to-peer transfers), small businesses (under 50 employees, no private equity/hedge fund ownership), and exceptions like public utilities, worker-owned co-ops, non-profit healthcare/education providers, and low-income housing programs meeting affordability standards.
   • This prevents large corporations and financial speculation from extracting UBI funds, encouraging local economic circulation.

The expected outcomes include increased velocity of money, reduced wealth hoarding and speculation, job creation, strengthened local economies, affordable housing without corporate rent-seeking, and financial stability for all citizens. Potential challenges include inflation risks, corporate resistance, and ensuring digital access, with proposed solutions like indexing UBI, shifting public procurement, and providing offline debit card functionality.

Analysis Through Chartalism

Chartalism, which posits that money derives its value from the state's authority to impose taxes and declare legal tender, aligns closely with this system. The U.S. Treasury's direct funding of UBI and management of savings through postal banking reinforce the state's role in creating currency demand. By requiring tax payments in dollars and distributing UBI, the state ensures the currency's value, consistent with Chartalist principles. This system's design, where money is created and managed to support economic circulation, fits well within this framework, emphasizing state control over monetary policy to achieve social and economic goals.

Analysis Through Modern Monetary Theory (MMT)

MMT builds on Chartalism, arguing that a sovereign government with its own currency can issue money to fund spending, with limits determined by inflation and resource availability rather than deficits. This system's UBI funding by the Treasury, without reliance on taxation alone, aligns with MMT's view that government spending can create money. The indexing of UBI to productivity growth and inflation targets, along with regulating excess money supply through taxation and bond issuance, reflects MMT's emphasis on managing aggregate demand to prevent inflation. For example, if UBI increases demand beyond the economy's capacity, taxes can be raised to cool it down, ensuring sustainability. This approach suggests the system is feasible under MMT, provided inflation controls are effective, as historical examples like post-2008 quantitative easing show the importance of managing money supply (Understanding Chartalism and Modern Monetary Theory (MMT)).

Analysis Through the Cantillon Effect

The Cantillon Effect describes how new money entering the economy benefits those closest to its point of entry, often exacerbating inequality. In this system, UBI is distributed broadly to all citizens, reducing the concentration typical in traditional monetary expansions (e.g., central bank injections to banks). The restriction on spending—limiting acceptance to individuals, small businesses, and specific exceptions—further mitigates this effect by preventing large corporations or financial institutions from capturing benefits early. Savings in Treasury securities, rather than speculative assets, limit the potential for asset price inflation, such as in stocks or real estate, which often benefits the wealthy first. However, some inequality may persist if certain small businesses or individuals accumulate more UBI spending due to market popularity, though the cap at 50 employees and no private equity ownership helps prevent dominance. Compared to current systems where new money often flows to financial elites, this design significantly reduces the Cantillon Effect, promoting a more equitable distribution.Expected Results and Detailed Implications

The system's expected outcomes, analyzed through these theories, suggest the following:

• Increased Velocity of Money: By restricting UBI spending to local transactions with small businesses and individuals, money circulates rapidly within communities, boosting economic activity. This aligns with MMT's focus on aggregate demand, as faster circulation stimulates local production and consumption.
• Reduction in Wealth Hoarding and Speculation: Converting savings to Treasury securities prevents speculative investments, reducing reliance on private banks and limiting stock market bubbles. This addresses Chartalism's concern with maintaining currency stability by ensuring money serves productive purposes, not speculative ones.
• Job Creation and Strengthened Local Economies: Support for small businesses and worker co-ops, through microloans and UBI spending, should create jobs and foster community resilience. This fits MMT's view that government spending can target unemployment, though success depends on local capacity and corporate resistance.
• Affordable Housing Without Corporate Rent-Seeking: By preventing UBI extraction by predatory landlords and targeting low-income housing, the system aims to keep housing affordable. This mitigates the Cantillon Effect by ensuring housing costs don't rise disproportionately, though enforcement of affordability standards is crucial.
• Financial Stability for Every Citizen: Savings in risk-free Treasuries and access to low-interest microloans provide stability, aligning with Chartalism's state-backed security and MMT's focus on full employment and economic security.

Potential Challenges and Solutions

• Inflation Risks: If UBI is too generous, it could lead to demand-pull inflation. The system's indexing to productivity growth and inflation targets, along with taxation and bond issuance, aims to manage this, consistent with MMT. Historical UBI trials, such as in Finland, show mixed results on inflation, suggesting careful monitoring is needed.
• Corporate Resistance: Large corporations may resist restrictions on UBI acceptance, potentially lobbying against the system. Proposed solutions, like shifting public procurement to local suppliers and co-ops, aim to mitigate this, though political feasibility remains a challenge.
• Ensuring Digital Access: The system's reliance on digital wallets is addressed by availability at every USPS location and offline debit card functionality, ensuring inclusivity. This aligns with Chartalism's broad accessibility to state services, though rural areas may need additional support.

Comparative Context and Historical Precedents

The concept of postal banking is not new; the U.S. had a postal savings system from 1910 to 1967, offering interest on deposits, which was closed due to competition from commercial banks (Postal Banking in the United States). This historical precedent suggests feasibility, though modern digital integration would be novel. UBI trials globally, such as in Canada and Finland, provide evidence of potential benefits like improved well-being, though scaling to national levels requires addressing funding and inflation, as seen in this system's design.

Conclusion

This system, analyzed through Chartalism, MMT, and the Cantillon Effect, appears well-aligned with its goals. It leverages state authority to manage money (Chartalism), uses sovereign currency issuance for social benefits (MMT), and mitigates unequal money distribution (Cantillon Effect). Expected results include increased economic velocity, reduced inequality, and strengthened local economies, though success hinges on effective inflation control, corporate resistance management, and digital access. This analysis, as of March 6, 2025, suggests a promising framework for a people-centered economy, with outcomes dependent on implementation details.

FAQ

What is the logic behind using treasuries i.e. t-bills and t-bonds as a way for individuals to "save" per mmt?

The logic of using Treasury securities (T-bills, T-bonds) as the primary savings mechanism for individuals within an MMT framework has several important dimensions:

1. Direct Connection to Currency Issuer: Under Modern Monetary Theory, the government as the currency issuer has unique powers and responsibilities. By having citizens save directly in Treasury securities, individuals are connecting directly to the sovereign currency issuer rather than through intermediary private banks.
2. Elimination of Bank Failures Risk: One key aspect of the proposal is removing the risk of bank failures for individual savers. Since Treasury securities are backed by the full faith and credit of the government that issues the currency, they carry essentially zero default risk (unlike private banks that can fail).
3. Preventing Financial Speculation: By directing savings into Treasury securities rather than private banks, the proposal prevents those savings from being leveraged for speculative financial activities. Commercial banks typically use deposits to create loans that may fuel asset bubbles or financialization; this system prevents that dynamic.
4. Interest as Public Utility: In MMT, interest payments on government debt are viewed as a policy choice rather than a necessity. The government chooses to pay interest on its debt as a public utility - essentially a public option for safe savings that provides income to savers without intermediaries taking a cut.
5. Breaking the Private Money Creation Cycle: MMT recognizes that private banks create money through lending. By shifting savings to Treasury securities, the proposal reduces private money creation capacity and strengthens the government's role in money creation.
6. Accounting Clarity: From an MMT perspective, Treasury securities are simply a different form of government money (interest-bearing money versus non-interest-bearing money). Having citizens save directly in Treasuries makes this relationship more transparent.
7. Reduced Financial Sector Rent-Seeking: The proposal aims to prevent financial intermediaries from extracting value through fees, interest spreads, and risking depositors' money - all forms of rent-seeking that MMT proponents often criticize.
8. Complementing UBI Funding: Since MMT views government spending as constrained by real resources rather than tax revenue, having citizens save in Treasury securities provides a non-inflationary way to support the UBI program - effectively sequestering some of the issued money temporarily.

This approach fundamentally reshapes the relationship between citizens and the monetary system, removing private intermediaries and connecting people directly to the government as the currency issuer - a core principle in MMT thinking.

What is the logic behind using micro loans where the payments are returned back to the "postal bank"?

The logic behind using microloans with payments returning to the postal bank can be understood through three economic frameworks:

Through Chartalism:

1. State Money Circuit Completion: Chartalism emphasizes that money derives its value from state authority. When microloans are issued and repaid to the postal bank (a state entity), it reinforces the state's role in the monetary circuit.
2. Money as Public Utility: By having a public institution provide loans, money functions as a public utility rather than a private profit center. This aligns with the Chartalist view that money should serve public purposes.
3. Token Value Reinforcement: Chartalism holds that money is valued because it's needed to pay obligations to the state. The repayment requirement reinforces this token relationship within a public banking framework.

Through Modern Monetary Theory (MMT):

1. Functional Finance Application: MMT suggests government spending should target real economic outcomes rather than arbitrary financial constraints. Microloans targeted at productive small businesses and individuals align with this principle.
2. Money Creation Control: When loan repayments return to the postal bank, it allows for precise control of the money supply without private bank multiplication effects, helping manage inflation.
3. Non-Inflationary Credit: MMT is concerned with maintaining price stability while achieving full employment. Small, targeted loans to productive enterprises create money for real economic activity rather than speculation, reducing inflationary risks.
4. Public Purpose Credit: MMT advocates credit directed toward public purpose. The microloan system ensures credit serves community development rather than financial asset inflation.

Through the Cantillon Effect:

1. Democratizing First Access: The Cantillon Effect describes how those closest to new money benefit first. By distributing microloans widely to individuals and small businesses, the system counteracts the typical pattern where financial institutions get first access.
2. Preventing Institutional Capture: When repayments return to the postal bank rather than private financial institutions, it prevents the gradual concentration of benefits that characterizes the Cantillon Effect.
3. Community Money Recirculation: By keeping the loan operation within a public postal banking system, money recirculates within communities rather than being extracted to financial centers.
4. Reduced Wealth Stratification: The traditional banking system amplifies the Cantillon Effect by directing credit to already-wealthy clients. The microloan system explicitly targets those typically excluded, reducing wealth stratification.

The return of payments to the postal bank creates a closed loop within public infrastructure rather than allowing private extraction of interest and fees. This creates a self-sustaining public utility for credit that serves the goals of equitable economic development, monetary stability, and reduced wealth inequality - core concerns within all three theoretical frameworks.