Imagine Legislation That
Eliminates Inflation
 

Under NESARA, inflation is controlled through four (4) regulation tools, one of them existing but modified by NESARA, and another being an entirely new mechanism.

NESARA creates a Treasury Reserve Account, a new mechanism to control the quantity of national currency in circulation.

This Treasury Reserve Account acts like a shock absorber, much like the coolant overflow tank works in your car. When cooling pressure builds in your car’s cooling system, the coolant expands and flows into the overflow tank. Similarly, when pressure decreases, coolant contracts and flows back into the cooling system. The design of the system operates using the laws of physics and thermodynamics. Through such a mechanism, pressure and temperature of the system remains stable within operating design.

Controlling the amount of currency in circulation is not easily performed using those same natural laws, but the same design principles can be used. Therefore, NESARA uses an external indicator, the United States Treasury Credit-Note Exchange-Value Index, to monitor the exchange value of the currency in circulation. This Exchange-Value Index is established by law to be maintained within a range of 97 percent to 103 percent.

When the Treasury Reserve Board observes the Exchange-Value Index rising above 100 percent, indicating inflation, that is, too much currency in circulation, the Board can impound revenues in the Treasury Reserve Account, removing that currency from circulation.

Conversely, when the Exchange-Value Index drops below 100 percent, indicating deflation, that is, not enough currency in circulation, the Board can do one of several things with Treasury Reserve Account funds: 1) transfer funds to the U.S. Treasury, which Congress can spend, or 2) buy public debt, or 3) deposit funds at commercial banks, thereby increasing reserves and introducing currency into circulation through encouraging new loans (monetization of debt). All of these actions effectively put additional currency into circulation though they work in different time frames.

The new Treasury Reserve Board has exclusive control of this new Treasury Reserve Account which exists solely for the purpose of regulation of the exchange value of the currency. Congress is not allowed to spend any of the funds unless the Board transfers them to the U.S. Treasury.

As mentioned, funds in the Treasury Reserve Account may be used to buy U.S. public debt. Under NESARA such debt is held only by private investors and foreign governments. Purchasing U.S. debt would introduce currency into circulation and would be done only when the Exchange-Value Index goes below 100 percent. But, because of NESARA’s modifications to this regulation tool, any U.S. debt purchased by the Treasury Reserve Board must be turned over to the U.S. Treasury for immediate cancellation. Thus the Treasury Reserve Board loses the option the Fed once had of selling U.S. debt. Obviously it can’t sell what it doesn’t have.

The two traditional regulation tools used by the Fed, 1) setting the percentage of reserves required of commercial banks, and 2) setting the national discount rate at which commercial banks may borrow funds from their district Treasury Reserve Banks remain in effect. The new Treasury Reserve Board may make use of these tools but will probably find the newer tools better for fine tuning the exchange value of the currency.

More information about, and a copy of the bill, are located on this web site.