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Control the Money Supply

Going back to the gold standard will resolve our economic issues

13 December 2023
entral banks control inflation and the value of the currency by balancing the money supply and interest rates. These methods involve engaging in riba.

Reducing the money supply is better than raising interest rates, but it is not as easy. So increasing interest rate is what central banks prefer to do when they need to reduce inflation or raise the value of the currency. Even if they do reduce the money supply, they would only do so slightly.

Matching the Money Supply to Gold

To be free from riba and to eliminate inflation altogether, we need to establish the gold standard.

The Monetary Base (MB) is the total of a currency in circulation. It's the total amount "printed" by the central bank. What we want is MB to be either be higher equal to the value of the gold reserve of the central bank.

If the value of MB starts out to be lower than the value of the gold held, the central bank should reduce the MB until its value is equal or higher than to the value of the gold reserve of the central bank. This can be done several ways:

1. By selling off assets held by the central bank

2. By charging fees for services

3. By the government giving to the central bank the excess from tax income

In all of the above, the money received by the central bank is removed from existence.

Once the value of MB is matched or higher than the value of the gold held, it is the central bank's job to maintain the condition.

If, in the future, the price of the gold rises, the central bank has the option to print more money increase the MB value to match the gold value. If the price of gold falls, then it is an opportunity for the Central bank to buy more gold to add to the reserve.

The Interest Rate

Reducing the money supply must be done in conjunction with reducing the interest rate to zero.

Controlling the money supply is a step in stopping the deterioration of our country.



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