Heritage Check System - Discussion

[Guest]

Hi everyone,

 

My name is John. I'm 17 and interested in social sciences, and I'm currently writing an article about the Heritage Check System, created by Robert Heinlein in his book For Us The Living: A Comedy of Customs. You can read about it on Wikipedia. Quoting from that page, the system requires the following:

1. A required end to fractional reserve banking. Banks must always have a 100% reserve for any loan they give out.
2. New money is printed only by the government, and then, only enough to counteract the natural deflation that would occur in a system without fractional reserve banking.
3. The government uses this money (and only this money), divided among all of its necessary roles. Any extra is divided evenly among citizens and businesses that over-produce, to offset the loss of not selling their over-production (the government buying the over-production for its own use, which can be bought by citizens later if they so desire at the same price.)
4. Goods bought by the government are later sold by the government (or used by it), and normal governmental services (such as postage) are sold. These goods and services provide the standard backing for the currency, similar to how gold is used to back the gold standard.

So, the government basically has two economical powers: printing money and buying over-production. I'm trying to answer whether it would actually work, and I'd love some feedback on my reasoning so far:

 

During economic expansion, a government based on the Heritage Check System can counteract the wage-price spiral by selling previously bought goods. This prevents prices from rising, if the supply of goods can meet the demand. It does not bring deflation about, but the government could theoretically be funded from those sales. During recession, there is likely to be deflation, which, in the system, funds the government.

 

To summarize, it does seem as though a government based on the Heritage Check System theoretically could fund itself—but only theoretically. Since during recession, companies are eager to sell their over-production at a low price, and since the government is required to sell it back at the original price, it is possible the profit is small, in which case the government would not receive sufficient funding.

In addition, recession doesn’t always mean inflation, which also could make funding difficult.

 

What do you think? Is there something I've missed? Thank you!

 

John