This book presents nonpartisan solutions to many of our nation’s most vexing economic problems—our chronic deficit and spiraling debt, an eroding middle class, and the feeling most citizens report today: that it is increasingly difficult to get ahead. The solutions are proposed as a congressional bill—the Financial Freedom Act, or FFA—which if passed would free us from many of the unnecessary shackles holding us back today.

 

The solutions in the FFA are derived from the observation that our overall economy is comprised of two very different economies, a material economy and a monetary economy. Our material economy is the production and consumption of goods and services, which forms the basis of our standard of living. The monetary economy is the creation and trade of financial assets, which one might assume reflects the material economy. Today, however, there is a disconnect between the two economies that gives rise to our economic problems.

 

The magnitude of this disconnect is evident when we compare the size of the two economies. The material economy is sized by our GDP—about $25 trillion per year. The monetary economy is sized by the annual flow of money from the creation and trade of financial assets, which was over $9,000 trillion in 2022.

 

Nine quadrillion dollars is an astounding amount of money to change hands each year. It is not a figure normally used in economics.  Our monetary economy is thus 350-times bigger than our material economy, which is something that has never happened before. Indeed, the monetary economy has a life of its own and is not a mere reflection of the material economy. In fact, the monetary economy has tremendous influence over the material economy, so it is important that understand the interrelationship between this abstract we call money, and the material economy we live in.

 

We saw evidence of the disjunct between the two economies during the two years of the pandemic. While millions were out of work in the material economy, the supply chain was disrupted, and countless small businesses closed their doors, the ten wealthiest men in the world somehow doubled their net worth. It had taken them a lifetime to build their fortunes, but somehow the monetary economy doubled those fortunes in just two years. Likewise, a brand-new billionaire was minted every 26 hours in those same two years. How this was possible is key to understanding our economic problems and what we need to do to correct them.

 

In this book, we will discover how the monetary economy is holding back our material economy today and eroding our standard of living. This is happening when technology is rapidly advancing our ability to produce goods and services in the material economy. If we can correct this problem, we would enter a new era of prosperity.

 

Think of our monetary economy as a financial operating system that needs upgrading as our technology improves, just as a computer’s operating system needs upgrading as its hardware improves.

 

Did you know that most of the cost of everything you buy today is due to our financial operating system? That is why we need an upgrade. We want our financial operating system to create as little drag as possible on our material economy, not to make it more expensive. In fact, it would be ideal if our financial operating system stoked the material economy, driving it forward and catalyzing progress that improved our standard of living. That is what the FFA would do.

 

Was this not the vision of Joseph Smith and Milton Friedman? Was this not what we were taught is the purpose of capitalism?

 

It probably will not surprise you to learn that taxes are high among the upgrades that are needed in our financial operating system. After all, income taxes were implemented in 1903, more than a hundred years ago. Our economy has changed a lot since then.

 

Under the FFA we would stop taxing income. We would switch our tax base from the $23 trillion we collectively earn to the flow of money. Since over 99% of payments are in the monetary economy, a fee on payments would shift the burden of taxes from the production of goods and services, where it hurts the most, to the creation and trade of financial assets, where it hurts the least.

 

Instead of the high taxes you suffer from today, the FFA would levy a minuscule 0.25% fee on the movement of money. That would be the only tax you would need to pay! We can eliminate all our federal and state income taxes, sales taxes, property taxes, capital gains taxes, inheritance taxes, excise taxes, and tariffs, simply by charging a tiny fee on payments.

 

Today, you pay $40,000 or more in taxes for every $100,000 you earn. Under the FFA, you would only pay $250 for every $100,000 you earn. You can imagine how that would supercharge the material economy. It is easy to see how that would improve your standard of living.

 

Simply by charging a quarter point fee on payments, our nation would go from a chronic deficit to an enormous surplus. In fact, we would collect enough revenue to fully pay off the national debt and give every adult citizen a basic income of $24,000 per year. We could even afford to provide free healthcare and college for everyone and still have a multi-trillion-dollar surplus.

 

We have been needlessly handicapping ourselves by taxing income—the lifeblood of our standard of living. There is an ocean of untapped payments in the monetary economy that has been growing without the constraints that our material economy labors under. We have always had to navigate the harsh realities of the physical world in our material economy. Technology has done wonders to loosen those constraints. The irony regarding our economic woes today is that now it is our man-made rules that are creating the problems we are suffering from and not the laws of nature. We can change those man-made rules.

 

The second aspect of our financial operating system that is in dire need of an upgrade is banking, which was also implemented in 1903, the same year as income taxes. The FFA would convert the Federal Reserve into a true central bank, owned by the people and for the people. It would eliminate fractional reserve lending, which artificially inflates the money supply and causes inflation.

 

The fact that banks lend out their customers’ money, the basis for fractional reserve lending, is the main source of risk in banking today and the reason for our heavy-handed banking regulations. It is also why we have a cost-of-funds. Under the FFA, the Fed would be the source of capital that its member banks lend out. Thus, there would no longer be any cost of funds, as the Fed can generate reserves without cost.

 

Think about it. You end up paying the bank more for your home than you pay the seller by the time your mortgage is paid off. It is the same for all the infrastructure in the supply chain. When a mine or factory is financed, or the vehicles delivering goods are financed, or a mall or shopping center is financed, the interest builds up over time and is reflected in the price you pay for every product on the shelf.

 

When you add the cost of interest throughout the supply chain to the cost of taxes, you can see how most of the cost of everything you buy today is due to our financial operating system. We are paying more for our financial OS than we realize.

 

The upgrades to our financial operating system detailed herein in the Financial Freedom Act would enable all of us to enjoy a much more prosperous life. The FFA would lead to a more robust middle class and make our nation stronger for many years to come. The technology for the material economy to provide a higher standard of living is already here. We just need to upgrade our financial operating system to enjoy greater prosperity for all.