Thank you for your comment and questions.

With regard to your first question, interest is allowed to be charged on loaned money, but no interest is paid on deposits held in transaction accounts. Banks will thus obtain income on the interest charged on loans, and since no interest is paid on deposits, the interest charged on loans can come down and the banks can still obtain the same net income. Note also that the maximum interest rate that can be charged is 8%, including all fees, and the interest charged may not exceed the principal amount of the loan, except on mortgages (which tend to be long term). This has the effect of doing away with (unlimited) compounding interest.

With regard to your second question, the effect is likely to move towards more balanced trade with countries exporting to the USA, e.g. China, since when they earn dollars, instead of investing them in US Treasury securities, they can buy things from the USA in exchange. Since the primary objective of monetary policy in the bill is to assure that it is neither inflationary nor deflationary, i.e., to maintain a stable purchasing power for the US dollar, this will generally be beneficial to all holders of US dollars and US dollar-denominated assets. Also, since banks will no longer be able to create what we use for money to fuel speculation, that component of the price for oil should go away.

Kind regards,

Jamie Walton

I have two questions about it:

* From my reading of the bill, there is interest on money loaned. That seems reasonable since there needs to be some money made for the holding and loaning of money (otherwise the bankers are working for free, an unlikely event for any of us when we have full-time jobs). Also, if there isn’t some sort of interest, how will we ensure accountability from the person taking out the loan?

* What is the likely effect on international trade with the US? How is it likely to effect trade with the Chinese? Will we simply pay them for their Treasury bond purchases? How will it affect dollar-denominated oil, both for the US and for foreign countries? I’m guessing it might be a benefit to oil exporters since it would stabilize the dollar.

Any thoughts would be appreciated.

David Ward

Peace
Susmita Barua