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I propose a Sovereign Money System to Asgardia. Key advantages of a Sovereign Money System is as follows.
- No one has to take on more debt to create sovereign money.
- National Bank can directly manage money supply by prohibiting the creation of new money by commercial banks.
- The government can use all of the seigniorage as government revenues.
- Commercial banks are unable to deprive the the nation and the people of their wealth.
- Sovereign Money System reduces people's poverty compared to present central bank system.
Commercial banks have created excessive demand deposits by making loans. And, their new money creation resulted in depreciation of monetary value and people's poverty. Commercial banks, aiming to maximize their profit, expand the money supply faster than is compatible with economic growth, which causes inflation, hyperinflation and asset bubbles. So, our monetary system would prohibit their creation of new money and operation of funds in customer's demand deposit accounts. Therefore, demand deposits do not carry any interest. Customers who wish to invest their money would have to deposit their funds to the investment accounts. Then the commercial bank manage to these funds and also operate such as making loans. This is a system that does not permit the creation of new money by the commercial banks at all. In the Sovereign Money System, only the Asgardia National Bank would be responsible for creating and managing the money supply. Asgardia National Bank would create the digital legal tender SOLAR in exchange for the interest-free permanent bonds issued by the government. Its decisions on money creation would take into account parameters including economic growth rate, inflation goals and prices of financial assets. An independent Asdardia National Bank would have no motives to create an excess or shortage in money supply.
Money created by the Asgardia National bank would be kept in government account of the national bank and becomes government revenue. And the government would allocate the newly created money to education, insurance, public transportation services, citizen bonus, tax reduction, reduction of public bonds, infrastructure development, investment etc. If a organization monopolize the creation rights and the allocation rights of money, the organization would be motivated to supply excessive money. Therefore, issue rights and allocation rights must be strictly separated. First, the amount of newly created currency would be decided by the Currency Issuance Committee, then the Asgardia National Bank woudl create money by permission of the Currency Issuance Committee. Regarding the allocation of money, the government would prepare a budget proposal and the parliament would deliberate and approve it. In this way digital legal tender SORAL would be distributed to people and businesses as a government expenditure.
As above, i have proposed the outline of the money system which would be the basis of the Asgardea nation, but at the same time as the currency system will be established, we must promote and nurture the industry of Asgardia which would be attractive to ourselves.
