Over the last two years, the US money supply has increased by more than two Trillion dollars. Because most of this money has been created by Fed action, and because almost all of it has been put into the financial system as loans or bond purchases, the effect of this policy has been to increase the national debt/equity ratio considerably. Such a policy weakens the US economy, by degrading the banking system's capital structure, by increasing the number of bankruptcies, and by increasing the number of unemployed Americans.
While we need to expand the money supply in order to accommodate economic growth, the present policy of increasing only the debt side of the financial system is a failure.
The solution is very simple: We need a predictable, easy-to-understand tax on the money supply, which is to say, a tax on the Federal Reserve. Specifically:
1. The Fed shall be required to pay 4% of US GDP each year. That would currently amount to $520 Billion per year.
2. The Fed shall also be required to pay 4% of the foreign-held cash and debt instruments. At last report, this amounted to $3 Trillion, so the tax would be $120 Billion per year.
The narrow economic benefits of this would be to reduce the systematic debt, while increasing the aggregate equity. The political benefits would be to place taxation onto the financial system itself, which would greatly increase the public perception of fairness.