Making “Capital as Money” Easy

By Colin McGrath (with comments from Brian McGrath)


Imagine the next time you buy something, pulling out a piece of plastic and purchasing your item in the exactly the same way you would now use a credit or debit card.  But in this case, there is an important difference. Now you are purchasing with a transfer of shares of a broad capital index fund instead of traditional dollars.  For simplicity, suppose you and the seller are using the most familiar and widely held stock market capital index fund—SPYDRS (based upon the value of the 500 largest publicly held U.S. companies).  Hence, you would be trading a small piece of these companies to the seller in order to accomplish your purchase instead of using dollars.  There would be a small, agreed upon transfer out of your SPYDR account into the SPYDR account of the seller for whatever good or service you bought.  If this kind of transaction became widespread it would redefine what we think of as “money” and would change the nature of trading, prices, and wealth holding.  It would be simple but it would be revolutionary.  It would result in a privatized, non-bank transparent monetary and exchange system free of government manipulation, control and exploitation and free of the intrinsic instabilities of a currently broken fractional-reserve banking system.  How could it happen?













Imagine further a forward-looking discount brokerage firm that allows you to open a SPYDR equity account with trading privileges and then gives a trading SPYDR debit card to facilitate transactions.  Obviously, your purchases could not exceed the balance of your SPYDR account, unless the brokerage firm was willing to extend a short-term SPYDR loan to you.  Why would a brokerage firm be willing to facilitate such purchase transactions with essentially a SPYDR debit card?  Simply because it could get a small fee from every such transaction.  Moreover, if the practice grows, who knows where it might end.  Hopefully, SPYDRs could grow to become the effective money supply of the whole U.S. economy and why not?  Instead of using fictitious value of a government fiat money, or a speculative commodity money of little actual value in production, or an artificially scarce but intrinsically worthless cyber-money such as bitcoins, we would be using the most fundamental and valuable good of a market economy—ownership of a portion of the economy’s capital stock, the means of producing all goods and services.  The business opportunity for any brokerage firm accommodating changes in ownership and custody of even a small fraction of such exchanges could be staggering.

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