Comparing Quantitative Balancing (QB) and Stephen Miran's Proposal: Two Different Visions to Reform the Global Financial System
Marco Saba's paper on Quantitative Balancing (QB) and the article describing the proposal by Stephen Miran , Donald Trump's advisor, represent two radically different approaches to reform the global financial system. Both aim to solve structural problems of the economy, but they do so with profoundly different objectives, tools and implications.
Below, a comparison between these two visions, highlighting strengths, weaknesses and potential impacts.
Objectives and Basic Philosophy
Quantitative Balance (QB)
- Main objective : Reduce public debt, increase transparency of the banking system and stabilize the global economy through an accounting reform that recognizes the role of banks in money creation.
- Philosophy : QB is based on the idea that the benefits of money creation (seigniorage) should be redistributed in favor of the States, reducing the power of private banks and ensuring greater economic equity.
- Approach : It is a structural reform that aims to change the way bank deposits are accounted for, transforming them into liabilities to the Treasury, and introducing a system of seigniorage payments as public revenue.
Stephen Miran's proposal
- Primary objective : Reduce the US trade deficit through a controlled devaluation of the dollar and the use of tariffs as negotiating leverage.
- Philosophy : Miran takes a protectionist and interventionist approach, based on the idea that the strong dollar is the main cause of US trade imbalances. His proposal aims to strengthen the US negotiating position vis-à-vis trading partners such as Europe and China.
- Approach : The strategy focuses on immediate measures, such as tariffs and currency agreements (the so-called "Mar-a-Lago Accord"), to gain short-term benefits.
Tools and Mechanisms
QB
- Accounting reform : Reclassification of bank deposits as liabilities to the Treasury.
- Seigniorage as public revenue : The proceeds of money creation are transferred to the States, reducing public debt or financing public spending.
- State Deposit Guarantee : Bank deposits are guaranteed by the state, reducing the risk of banking crises and bank runs.
- Transparency and stability : The QB aims to make the financial system more transparent and stable, reducing systemic risk.
Miran's Proposal
- Dollar Devaluation : Miran proposes an international agreement (similar to the 1985 Plaza Accord) to devalue the dollar in a controlled manner, making U.S. exports more competitive.
- Tariffs as Bargaining Leverage : The use of punitive tariffs to force trading partners to negotiate currency or trade agreements favorable to the United States.
- Debt restructuring : Proposals such as swapping short-term Treasury bonds for 100-year notes to reduce the burden of government debt.
- "User fee" on government bonds : Introduction of a fee for foreign holders of U.S. government bonds, to generate additional revenue.
Strengths and Weaknesses
QB
- Strengths :
- Long-term sustainability : QB addresses structural problems in the financial system, such as private money creation and accounting opacity.
- Economic equity : Redistributes the benefits of seigniorage in favor of the community.
- Financial stability : Reduces the risk of banking crises thanks to the state guarantee on deposits.
- Critical issues :
- Complex implementation : Requires global accounting reform and coordinated action between governments and central banks.
- Bank resistance : Private banks may resist a reduction in their seigniorage profits.
Miran's Proposal
- Strengths :
- Immediate Impact : Tariffs and dollar devaluation could have rapid effects on the U.S. trade deficit.
- Negotiating leverage : Tariffs can be used to obtain concessions from trading partners.
- Critical issues :
- Default risk : Debt restructuring and the introduction of government bond fees could be perceived as a partial default, undermining investor confidence.
- Financial Instability : A controlled devaluation of the dollar could cause turbulence in global markets.
- Adverse reactions : Trading partners could respond with protectionist measures, triggering a trade war.
Global Economic Impacts
QB
- Reduction of public debt : Seigniorage revenues could contribute significantly to the reduction of public debt, freeing up resources for productive investments.
- Financial stability : State guarantees on deposits would reduce the risk of banking crises, increasing citizens' confidence in the financial system.
- Economic Equity : The redistribution of seigniorage from private banks to governments would be a step toward greater economic equity.
Miran's Proposal
- Reducing the trade deficit : A devaluation of the dollar would make U.S. exports more competitive, reducing the trade deficit.
- Pressure on trading partners : Tariffs could force partners such as Europe and China to negotiate deals more favorable to the United States.
- Risk of instability : The proposed measures could cause turbulence in global financial markets and trigger trade retaliation.
Comparison with Other Monetary Reform Proposals
QB vs Other Proposals
- Modern Monetary Theory (MMT) : MMT proposes that states with monetary sovereignty can finance public expenditures through the creation of money, without the need for taxation or borrowing. However, MMT does not address the issue of private money creation by banks, while QB does so explicitly.
- Vollgeld (Full Money) : Vollgeld provides that only central banks can create money, eliminating money creation by commercial banks. Compared to QB, Vollgeld is more radical, as it requires a complete restructuring of the banking system.
- Taxation of Bank Seigniorage : Some economists propose to directly tax the profits of banks resulting from the creation of money. This solution is less structural than the QB, since it does not address the problem of accounting for deposits.
Miran's Proposal vs Other Proposals
- Protectionism vs. Free Trade : Miran's proposal aligns with protectionist approaches, while other monetary reforms (such as the QB or the Vollgeld) aim to restructure the global financial system without resorting to protectionist measures.
- Focus on Trade Deficit : Unlike other proposals, Miran focuses exclusively on the U.S. trade deficit, neglecting broader issues such as global financial stability or the equitable redistribution of monetary benefits.
Conclusion
Quantitative Balancing (QB) and Stephen Miran’s proposal represent two contrasting visions for reforming the global financial system. QB is based on structural and cooperative reform, aiming to reduce public debt, increase transparency and ensure long-term financial stability. Miran’s proposal, on the other hand, takes a protectionist and interventionist approach, focused on reducing the US trade deficit through tariffs and dollar devaluation.
While QB offers a sustainable and equitable solution to global economic challenges, Miran’s proposal risks generating instability and trade tensions. In a context of growing economic interconnectedness, QB appears as a more forward-looking and collaborative solution, capable of promoting a more just, stable and sustainable financial system.
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