The better name is fraud

Artificial Booms and the Theory of "Forced Saving"

In the broad sense of the term, “forced saving” arises whenever there is an increase in the quantity of money in circulation or an expansion of bank credit (unbacked by voluntary saving) which is injected into the economic system at a specific point. If the money or credit were evenly distributed among all economic agents, no “expansionary” effect would appear, except the decrease in the purchasing power of the monetary unit in proportion to the rise in the quantity of money. However if the new money enters the market at certain specific points, as always occurs, then in reality a relatively small number of economic agents initially receive the new loans. Thus these economic agents temporarily enjoy greater purchasing power, given that they possess a larger number of monetary units with which to buy goods and services at market prices that still have not felt the full impact of the inflation and therefore have not yet risen. Hence the process gives rise to a redistribution of income in favor of those who first receive the new injections or doses of monetary units, to the detriment of the rest of society, who find that with the same monetary income, the prices of goods and services begin to go up. “Forced saving” affects this second group of economic agents (the majority), since their monetary income grows at a slower rate than prices, and they are therefore obliged to reduce their consumption, other things being equal.1

Problem? The currency issuer does not have free entry and exit for member banks.

The demand to be member banks and get the IOER rate would be higher, if allowed.  The honest method is that any person or group that meets the Fed reserve requirements can buy an account, and there is no penalty for early exit.  The Fed can price accounts to manage demand queue.This is a mathematical condition, needed to make the pricing algebra work.  Balanced queues or you cycle.

The solution, evidently, is to sue the Fed, which is like an audit.  Take them to court, have Selgin as a witness, the Fed imbalances cause cycles. Imbalanced because of its relationship with Treasury.  

This seems a bit  fundamental to me, the right to equal banking by voluntary action is part of free assembly folks.  Let us see what the federal court says.  Ther Fed will claim the right to mint and coin, and they have a point.  But we will still get a due process and malpractice.

The corollary here is the right to borrow in their account, they are after all, prequalled for cash in advance. As it is, Congress gets first right to borrow, any inflation measure will be long term not stationary.  Government pricing is extremely foul, as we all know. If they are you only borrower, you will cycle.

I should add, let loans and deposits split the pricing risk and currency risk.  Automate the interest charges, dump time use adjustable charges.   The Fed carries a bounded currency error.  Can't do better, sandbox.