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Proposed administrative procedure - CURR.02
Legal   Tender   Law

Purpose : To reduce nexusproness in Reserve Bank of India

Pre-requisite reading :
  • RLPP
  • Expulsion By Jury

    1. Problems with banks
    2. CURR.02 : Citizens' Legal Tender Law
    3. Citizens' Legal Tender Law’s summary
    4. Transfer from existing system to new system
    5. Citizens' Legal Tender and Deficit Financing
    6. Main differences between existing system and CLT system
    7. Gold vs Citizens' Legal Tender
    8. Issuing Loans in New System
    9. Conclusion
    10. Advantages of CURR.02
    11. Draft to create procedure CURR.02

    The problems RBI/banks have created

    The worst problem is that the banks create money from thin air, and charge interest on it. Say banks create Rs 100 cr out of thin air. Then banks will loan this 100cr to Government or public, but only on the condition that borrowers repay Rs 100 cr plus interest. Say interest rate is 8%/pa. Then borrowers will have to repay Rs 108 cr at the end of the year. Pray, how can borrowers repay Rs 108 cr if ONLY Rs 100 cr worth cash was created to begin with? IOW, the borrowers' debt will keep increases. And if and when they go bankrupt, the bankers will grab away their wealth.

    This phenonmenon benefits those who own banks, or those who are senior executives in banks, or thoese who have nexuses/friendship with the bank-owners/executives. And this is burden on everyone else.

    Another problem is that as of today, the banking oligarchy, which consists of Finance Ministers and RBI Governor/Directors, and the wealthy individuals with whom they have nexuses, has hijacked the power inflate the money supply at their will/whim. No consent is taken from citizenry. Nor does citizenry has any procedure to cancel the decision to increase money supply. CURR.02 is the administrative procedure that I propose to reduce this problem.

    Solution? CURR.02 : The Legal Tender Law

        He who solves the money question will do more for the world than all professional soldiers of the history ---- Sri Henrybhai Ford    

    What is Legal Tender? The Legal Tender is something that citizenry has agreed to be unit/means for exchange between Government bodies and private parties, amongst Government bodies, and between Government bodies and its employees, so that Government can mobilize employees and resources. While "money" is what economists may define as they wish, and what free market may agree upon. Money supply is NOT a political/administrative issue, it is economic issue and should best left to market forces and NOT govt bodies. While legal tender is very much a legal/administrative issue, and should be under firm control of citizenry, and NOT private bodies.

    CURR.02 i.e. "Legal Tender Law" is to ensure that citizenry has fast procedure to reject RBI Governor's/Directors' decision to raise legal tender supply. At the same time, CURR.02 also ensure that the free market will have complete control over money supply. This procedure will seperate money and legal tender from each other.

    The procedures are as follow :
    1. The PM will appoint the Finance Minister (as today).

    2. [CURR.01] The Finance Minister will appoint RBI-Governor, 5 RBI-Directors, SBI-Chariman and 5 SBI-Directors (as today), which citizens may replace using RLPP. (please see CURR.01 for details.)

    3. The currency of India shall be named as "Citizens’ Legal Tender of India" or "Citizens' Rupee" or just "Rupee". ALL RBI documents MUST refer Legal it as "Citizens' Rupee".

    4. RBI will confine itself to only three functions ----
      1. Issuing legal tender
      2. Fund Transfer between legal tender accounts
      3. Insurance of legal tender accounts against theft and robberies

    5. The RBI-note will have signatures of the five of eldest Grand Jurors on the day the note was sent for printing. It would also have the issuing date, names of the Grand Jurors and their Juror numbers. The note will NOT have signatures of the Governor or any of the Director.

    6. There will be only 2 forms of Citizens' Legal Tenders in the country
      1. RBI-notes and coins (= LT1)
      2. the balance in an account at an RBI Branch (= LT2, book form of LT1)

    7. [IMPORTANT]There will be only ONE way by which RBI-Governor woild the volume (= LT1 + LT2) of legal tender --- by LM.03 in which at least 25% of ALL citizens vote YES.

    8. If the Parliament has already declared an Emergency due to War, the FM can issue new legal tender without the consent of citizens.

    9. RBI-Governor will be allowed to convert RBI-notes into RBI-balance and vice versa, after all 5 Director’s permission.

    10. Depositing legal tender in a bank
      1. The scheduled banks can continue all accounts such as current, savings, fixed etc. In addition, all the nationalized banks would be required carry a new type of account called "Citizens’ legal tender Account" or or CLT-account for short. The private banks may or may not carry CLT-account as they wish. RBI/SBI will maintain ONLY CLT accounts.
      2. In an CLT-account of this type, 100% of deposits will remain in form of Citizens' Legal Tender (RBI notes or RBI balance). In other words CRR for deposits in CLT-accounts is 100%.

    11. If any bank officer tries to loan money in an CLT-account, it will be considered as theft and the Jurors may imprison him for 5 years. The Jurors may also confiscate his property.

    12. The Finance Ministry will pay interest on CLT-accounts of senior citizens (please see a later chapter for details).

    13. Officers of government bodies will accept a check ONLY if the account is an CLT-account. If any person passes a non-CLTA check as an CLTA-check will be considered a crime equivalent to forgery of RBI notes.

    14. All govt. agencies and govt. owned corporations or any corporation even partly owned by govt. will keep all their deposits in CLT-accounts only

    15. No govt. agency, including RBI and FM, will give any form of insurance to any account which not a legal tender Account. Thus money in other accounts will no longer be insured, even for nationalized banks.

    16. RBI will not issue any loans to any nationalized bank or private bank or GOI or any private company.

    17. No Government body can create a debt on to itself.

    18. The entire administration of bank with CLT-account will be at branch level, and NOT at bank level. In other words, each branch is a separate entity and every branch with CLT-account must treat every other branch of same or different bank in the same way.

    19. Insurance on Deposits
      1. RBI will insure at-most Rs 500,000 in an CLT-account against robbery, theft, fraud etc. The fee will be 0.001% per month of the highest balance in the account in that month, or as decided by RBI-Directors.
      2. If an account belongs to an entity other than citizen, such as company or association etc. the charge can be upto 10 times higher.
      3. If a citizen has more than 5 accounts in the country, his other accounts (except first two) will be charged 10 times higher.

    20. The account holder can write a paper check against his deposits in an CLT-account. The check transfer will be as today, except that credit can be given ONLY after check is realized.

    21. The bank can charge a fee for clearing a check. The RBI can also charge a fee for clearing the checks via itself.

    22. SBI will be required to open a branch in ALL towns with population above 5000, and it must have one branch in every Tahsil. SBI will also allow EVERY citizen of India to have a bank account, with no balance requirement, with his PAN-ID, or national ID, as account number.

    23. Reducing the use of cash and increasing use of card/check : The RBI Governor/Directors can impose a cash-processing fee of upto 1% above yearly cash withdrawals/deposits exceeding Rs 100000 from an account. This is to reduce cash transactions and also pay the salaries of staff to count the notes. In the same way, RBI may impose a surcharge of upto 1% on bills of phones, electricity, rents, cable and other items if paid in cash, and amount over a certain limit.

    Legal Tender Law’s summary

    1. RBI/SBI is run by personnel who can be expelled by citizens using RLPP or Jurors

    2. Only RBI can issue legal tender, and ONLY after LM.03 i.e. Approval of citizens

    3. CRR for Legal Tender Accounts will be 100% i.e. bank managers CANNOT give out any loans from legal tender in CLT-accounts.

    4. The Government bodies can deal ONLY with legal tender and legal tender accounts.

    Transfer from existing system to new system

    Please see CURR.03.

    Citizens’ Legal Tender Law and Deficit Financing

    The above CLT-Law does not prohibit govt. from deficit financing. It only insists that such an action would need issuing new legal tender, and would LM.03 with approval of over 25% of citizens.

    Main differences between existing system and CLT System

    I described the Citizens’ Legal Tender System in the previous sections. The nickname of this system is "citizens create money from thin air". I will compare the system with existing "illusionary legal tender system", whose nickname is "bankers create money from thin air". Main differences between

    Existing "bankers create money from thin air" system
    Proposed "citizens create money from thin air" system
    The PM appoints RBI Governor and Directors. Since the PM and super-rich have nexuses, the super rich also decide who will get these jobs. The citizens have no control over RBI officers. The PM appoints RBI Governor and Directors. But citizens, using RLPP can expel/replace them. So citizens have direct control over them.
    The RBI-Governor consults the PM/FM and super-rich and issues RBI-notes. The private bankers also create money from thin air. RBI-Governors can issue notes ONLY after majority of citizens have Approved. The bankers cannot issue money. So only citizens can create money from thin air, not the rich.
    The disputes are resolved by judges. Due to continuous proximity with same layers, over time the many judges develop nexus with lawyers and so dispute-resolution favors becomes biased in favor of those who can pay. Also Indian judges are too busy and can seldom resolve a case in time. The disputes are resolved by 12 Jurors (randomly chosen common citizens) who have no nexuses with anyone. So trials will be fairer. Further, Juries can give continuos un-interrupted hearings for days and thus resolve the cases faster.
    When a bank make profits, the bankers keep it and when the bank makes huge losses, the citizens have to bear the burden. Non-issue as Legal Tender System ONLY deals with deposits and transfer. There are no losses or profits as CLT-agency cannot issue loan.
    The bankruptcies are built in The bankruptcies are NOT built-in
    Today, RBI issues notes ONLY after govt gives interest bearing bonds. The interest creates a burden on the citizens. The RBI issues notes upon citizens’ Approval without any interest. So RBI-notes in CALT-System create zero burden on citizens.

    Gold vs Citizens' Legal Tender

    Many folks believe that existing fiat money should be replaced by gold. It will be a good move, but I would like to show that Citizen's Legal Tender is better than gold.

    First of all, politically speaking, gold is as costly as Citizens' Legal Tender. When can gold become Legal Tender? When citizens approve it as Legal Tender. Thus political reality is that ONLY citizens have power to make gold a Legal Tender. The Gold does not have power to become Legal Tender on its own. Gold, without the approval of citizens, has limited value. Also, just as citizens can recognize gold as Legal Tender, they can also de-recognize it as Legal Tender. Thus by all means, it is citizens recognition which is the real Legal Tender. It is unfortunate that the bankers have bribed/blackmailed politicians etc to rig the system and make their approval as Legal Tender.

    Now if bankers declare gold as Legal Tender, and citizens are manipulated/forced to accept it, and then after 10 years the bankers de-recognize gold as Legal Tender, and the citizens are manipulated/forced to accept that too, it will be victory of bankers and mockery of all three ---- gold, Legal Tender and citizens. So before gold can become good Legal Tender, it is necessary that citizens have the power to create Legal Tender, NOT bankers or elite-members. Thus gold is politically as expensive as Actual Legal Tender.

    Now the disadvantage of gold is that if a foreign country discovers a gold mine, it got a de-facto right to produce a country’s Legal Tender. This can only cause disadvantage to citizens. Also, gold can stolen and needs to be guarded. The Citizens' Legal Tender can exist in book form and only a small form needs to exist in the form of notes. Only the notes need to guarded, guarding book-form is easy. Thus Citizens' Legal Tender is simpler to administer.

    Also what about checking system? For gold to become easy legal tender, it will become necessary to have accounts which store gold and allow writing checks. This will again create a fiat money system unless reserves are 100%.

    The worst disadvantage of gold is that supply is fixed. Many (including myself) believe that fixed supply of currency is sufficient for economy of any size, except in very extreme cases. Thus many (including myself) believe that fixed amount of currency is sufficient. But many feel that fixing the supply of currency for eternity can restrict economic growth. Neither side has objective proofs. But if it turns out that fixing supply for ever is a bad idea, the gold as Legal Tender may actually restrict economic growth.

    Besides, prime purpose of Legal Tender is to create a token by which officers can be supported to run the administration. The citizens own the State and administration, and so citizens do have moral right to decide the Legal Tender. Thus Actual Legal Tender is morally valid.

    And as a last reason, the gold cannot be created from thin air, but the decision to make gold as currency does come from thin air. Gold is NOT a natural currency, as there is nothing natural about currency ; the currency itself is an artificial concept. Suppose gold is accepted as Legal Tender and then the citizenry decides to pay a government officer, say for example, 10 grams of gold a month a salary. This decision does come from thin air ; it is political not based on market. In short, even of gold cannot come from thin air, many decisions which relates government are political and no based on any "natural" fact or market.

    1. I find gold MUCH better Legal Tender than banker’s Illusionary Legal Tender.

    2. And the Citizens’ Legal Tender is better than gold.

    Issuing Loans in New System

    The Actual Legal Tender Law DOES NOT prohibit private banking and issuance of loans. CLT-Law ONLY prohibits loans from deposits in the ATL-accounts.

    If a person deposits money in a private bank in a non CLT-account, the bank managers can issue loan from deposits in his account. But such company cannot have fixed deposits which can be withdrawn pre-maturely. In other words, the company can accept deposits only by issuing bonds. Restrictions on giving loans

    If a citizen (not a company, association) etc. has Rs 100,000 he can ONLY loan at most 50%. There should be checks to ensure that he does not over-invest in loans. For amount between Rs 100,000 and Rs 500,000, he can loan out at most 75%. And for amounts above Rs 500,000 he can invest upto 90% in loans.

    One can view it as individualized reserve system. Or a system which stops a person from risking his financial health or from taking risks that may be suicidal.

    How can this be checked? If two persons have dealt privately, it is difficult to check. But if a person has deposited money in a registered bank for the purpose of issuing loans and obtaining interest, this limit can be enforced.


    Whatever may the word "money" mean, the "Citizens' Legal Tender" Law is does NOT deal with money CTL-Law ONLY deals with Legal Tender. The Legal Tender is what the Citizens have agreed to recognize, and this it is very much a political issue. An economist, with some democratic values, will agree that every citizen must have rights of Government affairs and since issuing Tender that Government officers MUST deal with is a very much a Government issue, the citizens should have rights and powers over it.

    And so RBI-Governors MUST NOT have powers to issue Legal Tender without citizens’ Approval. Just as a manager in company in not allowed to issue new shares without shareowners’ approvals. CURR.02 implements this basic moirality and does nothing more.

    Advantage of CUUR.02 It ensures that supply of Legal Tender will change ONLY after citizenry's consent, and it hence it provides a nexusless procedure to decide if legal tender supply should change, and by how much.

    Draft of the act to create procedure CURR.02

    Two laws needed to be passed for to enact CURR.02, one in Parliament and another at State level. I have drafted the texts for both. To see the drafts, please click here.

         Now citizens can ask MPs to pass this act. But IMO, it will be wiser for citizens to first enact procedure LM.03, and then use LM.03 to pass this CURR.02 draft WITHOUT any help from MPs. To know about procedure LM.03, please click here.

    If you have any other question, please mail it to Thousand thanks in advance.

    Next - CURR.03 : Converting existing legal tender into Citizens' Legal Tender