L i c e n s e d B y V i r t u a l m o n e y, I n c.
We make money the old-fashioned way - - - We print it !
Then we secure it with assets on a present value basis.
Patent(s) Pending
A Brief Description of the Private Currency
August 29, 2005
For additional information, please see: What is the MR$?
Introduction:
The introduction of the Millennium Dollar® (MR$), as a private currency in a printed format, represents the culmination of almost 17 years of research and development. This began, when we tried to resolve certain problems associated with the introduction of real (or inflation-indexed) mortgages into our nominal monetary marketplace. We were driven by the realization that offering real mortgages would reduce a homeowner’s mortgage payment by 25% to 30% in the first year, while protecting the lender from inflation and the borrower from deflation. This would allow homeowners to save, or spend, the difference; and since most would spend it, it would be a boon to the local economy.
Our research also indicated that nominal interest rates inherently ratchet upwards with inflation, while real interest rates ratchet downward over time. If the use of real financial instruments, such as the real mortgage, achieved this effect; then it would increase employment, corporate profits and government tax revenues. In our opinion, real mortgages, at a one percent real rate of interest, or less, appears to be inevitable; if only, we can resolve the problems associated with introducing such mortgages into our nominal monetary marketplace.
Unfortunately, while there are now 17 governments around the world that have offered inflation-indexed bonds; nonetheless, the offering of inflation-indexed instruments by the private sector is almost non-existent. There are many reasons for this, which we discuss in the patent filing with the U.S. Patent & Trademark Office. However, one fact arose time and again in our research. The way to resolve these problems is to create a private currency defined in a real (constant or whole) monetary unit; provided that, the private currency is secured by the proper inflation-adjusted assets. However, economic theory alone cannot open a can of beans; so, it is time for us to move beyond theory. If you want to grow real crops, you have to plant real seeds.
The Millennium Dollar® (MR$) is a private currency, which may be used as a medium of exchange, a unit of account or a store of value. The MR$ is indexed to the purchasing power of the United States dollar (USD), thereby representing a real (constant or whole) unit of purchasing power over time. The Millennium Dollars® issued and outstanding are then secured with assets on a present value basis, which will be verified annually by an audit. We call this the present value test.
While there is not a single government-issued currency in the world today that can pass such a present value test; nonetheless, the government-issued currency plays a critical role, since we can use it to measure inflation and deflation. In addition, fiat currencies are effectively real currencies, if they are spent before inflation or deflation can impact their purchasing power. (Assuming a three percent (3.0%) average rate of inflation, the inflation index will currently measure an uptick of inflation every 6.24 days.) The problem arises when we use the monetary unit on the government-issued currency to track the purchasing power of our capital over time. While we may be conscious in the present moment, we live in and through the space-time continuum. As such, we need a currency that can substantially hold its purchasing power over time. The present value test is a means of verifying the monetary unit’s ability to represent a real, constant or whole monetary unit over time.
Mission:
In science, the highest and best proof is a mathematical proof. The present value test of the Millennium Dollar® is a mathematical proof, which removes the perceived purchasing power of the Millennium Dollar® from the vagaries of nominal market forces. Only the currency exchange rate is allowed to float. However, if the same present value test was applied to the government-issued currency for any reasonable period of time, then the currency exchange rate would always favor the Millennium Dollar® during inflationary time periods. We can say this with mathematical certainty. The mission of the Millennium Dollar® is to restore a rational, mathematical approach to money; so that we may properly measure, and thereby control, our monetary affairs.
Theory:
While it is time to move beyond the theory; nonetheless, the theory will explain why we are offering a private currency. Fortunately, the theory is simple enough for any student of arithmetic to understand. In fact, the underlying theory is deceptively simple, yet very powerful.
Our theory in offering the private currency is based upon a simple observation, that provides us with an alternative definition of inflation and deflation; which is:
Inflation (or deflation) occurs when the monetary unit ($1.00) on our paper currency violates the concept of whole numbers by representing less (or more) purchasing power over time.
But, what is the concept of whole numbers? The concept of whole numbers simply states:
When using arithmetic, each successive integer (1, 2, 3 . . . etc.) must represent one additional whole unit without which we lose the ability to add, subtract, divide and multiply; which is to say, we lose the ability to count.
Collectively, it has been said by a number of prominent mathematicians and scientists, that:
1. the concept of whole numbers is the foundation of arithmetic,
2. arithmetic is the foundation of mathematics and
3. mathematics is the language of science.
The reason, mathematics is the language of science, is that it permits us to measure current phenomenon; so that we may predict the outcome of future events. This is the essence of science; which cannot not be achieved, if the concept of whole numbers is violated. For violating the concept of whole numbers would destroy the ability of science to measure current phenomenon for the prediction of future events by destroying our ability to count. Without honoring the concept of whole numbers, there would be no moon landings, no exploratory visits to Mars, no skyscrapers, no bridges, no mechanized transportation and agriculture, no miracle drugs and probably no modern civilization.
How does this concern economics? Economics has largely failed as a predictive science. To understand why, we must reduce the problem to its lowest common denominator, which is the money. Money is used as a medium of exchange, a unit of account and as a store of value; which is to say, that money is supposed to represent purchasing power. When our nominal monetary unit, offered by the local government, violates the concept of whole numbers by representing more or less purchasing power; then we lose the ability to account for the purchasing power of our money over time. We believe this explains why economics is not a predictive science, like the natural sciences.
When the study of economics involves measuring the activity of a nominal monetary system; then monetary activities become largely unpredictable, because we lose the ability to count. This forces participants in the marketplace to trade for current financial position; rather than, planning wisely for the future. There is a better way, but it is based upon using a real (constant or whole) monetary unit; such as the Millennium Dollar®.
Without any foreknowledge, or subsequent endorsement, of the Millennium Dollar®; Meg Whitman, CEO of e-Bay in an interview with Fortune magazine on September 1, 2003; aptly summed up our position by stating:
“If you can’t measure it, you can’t control it.”
How can we hope to measure, and thereby control, our monetary affairs; when our unit of measurement is the nominal dollar? Once again, we can say with mathematical certainty, that it cannot be done. Fortunately, the Millennium Dollar® now offers an alternative means to measure and control our monetary affairs by providing a monetary unit representing a whole unit of purchasing power over time.
Monetary Contract:
The Millennium Dollar® represents a promise-to-conserve the purchasing power of the holder’s capital, as measured by the inflation index. The sponsor is deemed to have performed on this promise; provided only, that it maintains sufficient present value assets to match the indexed value of the MR$ issued and outstanding on a 1:1 basis. This promise-to-conserve, as measured by the 1:1 ratio of present value assets to the indexed value of the MR$ outstanding; will be verified annually by an audit. To ensure that this promise is fulfilled, meeting the present value test is the sole obligation of the issuer and the sponsor in offering the Millennium Dollar®. We have taken this position in the belief, that the best way of supporting the value of the Millennium Dollar® in the marketplace is to ensure that the present value assets are properly maintained.
Millennium Dollar®:
The Millennium Dollar® is defined as equaling the purchasing power of the USD on the base-line-date (BLD) of January 1st, 2000, as measured by the inflation index. Thereafter, the value of the MR$ is assumed to be constant, while the purchasing power of the USD varies with inflation and deflation over time. This makes the Millennium Dollar® a real monetary unit; subject only, to the precision of the inflation index. Unfortunately, since we all purchase a slightly different basket of goods and services, there is no absolute rate of inflation; hence, our real monetary unit must be considered an approximation. What few people realize, beyond the scientific community, is that many scientific measurements are approximations. However, if your approximate measurement is reasonably accurate, then you may use it to predict future events; which is the essence of science. As participants in the marketplace, we must be able to measure the purchasing power of our capital over time; if we are to manage our financial and economic affairs. The Millennium Dollar® will allow us to do this more effectively than ever before.
Inflation Index:
The inflation index used by the Millennium Dollar® is the Consumer Price Index for All Urban Consumers (CPI-U), which is not seasonally adjusted. The U.S. Treasury also uses the CPI-U for indexing the Treasury Inflation Protection Securities (TIPS). See: Assets below.
The CPI-U is tabulated each month by the Bureau of Labor Statistics (BLS), which is an agency of the U.S. Department of Labor. The BLS has been tabulating inflation indexes since 1913. Recently, the BLS has been releasing the CPI-U index on the 22nd day of each month for the preceding month. It may be obtained at: http://data.bls.gov/cgi-bin/surveymost?cu. Simply check the box at the top of the list for: U.S. All items, 1982-84=100 - CUUR0000SA0; then click the Retrieve data button at the bottom of the page.
If you take the time to retrieve this data, then you can calculate the indexed value of the Millennium Dollar® for the coming month on your own. We will show you how, below.
Issuer:
The Millennium Dollars® are issued by Virtualmoney, Inc., a Minnesota corporation, in return for securities from the sponsor that are backed by inflation-adjusted assets. The inflationary adjustment is then stripped off monthly and sold. This changes the characteristics of the inflation-adjusted assets, thereby enhancing their value. The sales proceeds of the stripping process are paid to the issuer; which must then repurchase Millennium Dollars® from the marketplace, or purchase additional present value assets, to maintain the required 1:1 ratio. (The holder of the MR$ receives no payments, since this would alter the indexed value of the private currency; thereby destroying its intended use as a constant monetary unit.)
Sponsor:
The securities, backed by the inflation-adjusted assets, are issued by Real Monetary Reserve, Inc., a Minnesota corporation; which is doing business as Millennium Dollar® Store of Value. The sponsor then uses a patent-pending software process to strip off and sell the inflationary adjustment on these assets. In doing so, the sponsor creates a private liquid-payment market for this purpose. The Millennium Dollars® are then sold as a product by the sponsor; and, the private currency is thereby indirectly secured by the inflation-adjusted assets held by the sponsor. By mutual agreement between the parties, the present value assets may be hypothecated (or borrowed against) by the sponsor for the purpose of funding monetary conversions from MR$ to USD at the prevailing currency exchange rate. This overall process is then audited annually to verify the indexed value of the monetary unit. See: Verification below.
Analysis:
The indexed value of the MR$, as well as the present value of the assets, will rise in USD during inflationary periods and decline in USD during deflationary time periods. This activity is the result of the declining, or increasing, purchasing power of the USD; while the value of the Millennium Dollar® remains constant. How important is the Millennium Dollar®’s ability to perform this function? Please consider Alexander Hamilton’s observation to congress:
“There is scarcely any point in (economics) of greater moment than the
uniform preservation of the intrinsic value of the (monetary) unit. On
this, the security and steady value of property essentially depend.”
ALEXANDER HAMILTON, SECRETARY OF THE TREASURY
Report on the Mint, January 28, 1791
By indexing private currencies, such as the Millennium Dollar®, to the government-issued currency, and then backing them with present value assets; we can preserve the intrinsic value of the monetary unit, thereby securing the steady value of property. In doing so, we have reason to believe that many of the world’s social, financial and economic inequalities can be resolved peacefully. This belief has been our primary motivating force over the 17 years of research and development that were required to develop the technology for offering this private currency.
How it works:
In essence, the Millennium Dollar® is just another product to be dispersed to the final users. As such, the sponsor will offer to sell Millennium Dollars® wholesale (i.e. at less than the indexed value) through auctions and other distributors into the marketplace, which is how products are normally dispersed into the marketplace. In essence, the initial auction winners, and merchants purchasing MR$ from our distributors will be able to buy money wholesale, just as a car dealer buys automobiles wholesale.
Thereafter, merchants are asked to accept the Millennium Dollar® at the retail (or indexed value) for the sale of all goods and services. After accepting the private currency, the merchant has three options. The Millennium Dollars® may be:
1. converted into USD at the prevailing currency exchange rate;
2. used to pay creditors, thereby avoiding the currency conversion expense; or
3. held as a store of value, thereby accruing the inflationary adjustment over time.
Merchants will find these options preferable to accepting credit card payments, which are always subject to a merchant’s discount in order to receive a spendable currency; and, the private currency is preferable to the government-issued currency, since it is adjusted for inflation. By comparison, the Millennium Dollar® should be deemed the “good” currency. See: Gresham’s Law.
Anyone, accepting Millennium Dollar® payments, will have the same three options.
Indexed Value:
The Millennium Dollar® is indexed to the value of the USD, as measured by the inflation index. As such, the indexed value of the Millennium Dollar® is equal to one plus the percentage change in the CPI-U from the base-line-date. We refer to this conversion formula as InflatGlossary\IAF.htmlionary Adjustment Factor (IAF). As such, we can state the following:
Inflationary Adjustment Factor: IAF = 1 + ΔCPI-U
Hence, the Indexed Value: MR$ x IAF = USD
Or, conversely: USD = MR$
IAF
With these formulas, you will need to know the Reference CPI-U for the Millennium Dollar® on January 1, 2000, which is 168.2. You will find all of this information printed on the back side of the MR$ paper note. Finally, you will need to know the reference CPI-U for the day on which you wish to calculate the indexed value. An explanation of the reference CPI-U, and an example of these calculations, are shown below. Conversely, you can let us do the work for you, by downloading the Millennium Dollar®’s indexed value for each day of the coming month in a PDF file. See: MR$ Indexed Value.
Reference CPI-U:
The Millennium Dollar® uses a lagging inflation index, called the Reference CPI-U; which allows us to calculate the indexed value of the MR$ in advance. The Reference CPI-U for the Millennium Dollar® for January 1, 2000, is 168.2, which is actually the CPI-U index for October, 1999. As such, the inflationary adjustment for January, 2000 is the percentage change in the CPI-U from October, 1999, to November, 1999; and so on. This percentage change is then prorated over the days of the given month, so that we may know the indexed value of the MR$ on each day of that month. The assets, securing the issuance of the Millennium Dollars®, will use the same lagging inflation index; so the inflationary adjustment simply passes through the assets to the holder of the private currency. The MR$ note holder captures this value, when the merchant accepts the MR$ at the indexed value. The note holder does not have to liquidate an investment, or write a payment instrument against his, or her, credit card, bank, or money market, account; since the MR$ notes are money, representing full payment upon receipt.
Calculating the Indexed Value:
Using this approach, we can calculate the indexed value of the Millennium Dollar® for September 1st, 2000 as follows:
Whereas: CPI-UOct, 1999 = Ref. CPI-UBLD = 168.2
CPI-UJun, 2005 = Ref. CPI-USep., 2005 = 194.5
Therefore: IAF = 1 + (194.5 - 168.2) = 1.156
168.2
Indexed Value: 1.00 MR$ x 1.156 = $1.156
Or, conversely: $1.00 = .865 MR$
1.156
Dual Currency:
While the offering of the Millennium Dollar® creates a dual currency situation that is new to most Americans, it is commonplace in most countries around the world; where USD, euros or yen often circulate along with the local government-issued currency. Typically, it is the currency that holds its value the best, that is in the most demand in the marketplace. This means that the MR$ notes should be well-received in the marketplace. See: Gresham’s Law below.
Assets:
The Millennium Dollars® will be secured by the assets of the sponsor, including securitized U.S. Treasuries and cash investments. The Treasuries will be inflation-indexed government bonds, also called Treasury Inflation Protection Securities (TIPS). The TIPS will be securitized and stripped into their constituent cash payment streams, including the real-interest-only (RIO) strip, the nominal-principal-only (NPO) strip and the inflationary adjustment or accrued-interest-only (AIO) strip. The NPO and AIO strips will be used to secure the issuance of the Millennium Dollars®, while the RIO strip will be used to cover the expenses and provide the sponsor with a reasonable profit. In fact, it is the sale of the RIO strip that allows the sponsor to offer the MR$ notes on a wholesale basis.
Present Value Calculation:
The AIO payment stream will be stripped off and sold monthly, thereby providing the assets with a cash payment stream equal to the rate of inflation (or deflation). In addition, the Treasury will pay the NPO strip when the TIPS reach maturity. Together, when we do a present value calculation of these combined cash flows, using the rate of inflation (or deflation) as the capitalization rate; these assets will always have a present value equal to the indexed value of the Millennium Dollars®. This will occur, since the USD value of the NPO strip will equal the indexed value of the Millennium Dollar® on the day of issuance; after which, both instruments are adjusted for inflation with the same lagging inflation index. As such, meeting the requirement of maintaining the present value assets is a simple task; provided only, that we maintain a liquid-payment market for the stripping and sale of the AIO strips.
Monetary Conversions:
The sponsor will hypothecate (or borrow against) the present value assets for the purpose of funding monetary conversions. Once the Millennium Dollar® auctions are initiated at e-Bay, the company intends to use the weighted-average sale price of the MR$ at auction to determine the currency exchange rate that it will offer. However, as the Millennium Dollar® gains acceptance, we expect to see other parties offering to convert MR$ into USD. As such, the larger market will ultimately determine the currency exchange rate for the Millennium Dollar®. If you elect to convert your Millennium Dollars® with a third party, please be certain that they are a valid transaction partner. Neither the issuer, nor the sponsor, will be responsible for third-party transactions, which they have no control over.
Private Currencies:
Prior to the establishment of the Federal Reserve in 1913, an estimated 5,000 banks across the country offered their own private currencies in the form of bank notes. The passage of the legislation to establish the Federal Reserve effectively terminated the offering of bank notes by individual banks. At the time, and for many decades afterward, this period of “free banking” was criticized, but everything is relative. Friedrich von Hayek, the Nobel Prize-winning economist in the late 20th century, found that market economies experienced more recessions and depressions, since the establishment of central banks; than during the period leading up to their establishment. In recent years, this has been confirmed by other studies. As such, Hayek urged a return to the issuance of private currencies..
Hayek even proposed his own private currency, the Standard, which would be backed by commodities. The famous stock market analyst, Benjamin Graham, the co-author of Security Analysis, Principles & Technique; made a similar proposal to the United States government in the 1930s. Graham later said, “It was the best idea I ever had.” Bernard Lietaer (see below) has also proposed a private currency backed by commodities, yet the logistical problems of using commodities (i.e. the cost of storing and managing the commodities) to back a private currency have yet to be resolved.
Private currencies are not only legal in the United States, but in many countries around the world. An article by Barbara A. Good, entitled Private Money: Everything Old is New Again, published in the journal of the Federal Reserve Bank of Cleveland on April 1, 1998; stated that more than 30 communities in the United States have private currency systems. Bernard Lietaer, the author of The Future of Money, published in London by Century (Random House) in 2001; states that he found over 2,000 private currencies in 14 industrialized countries, including more than 400 in Great Britain alone. In a separate interview, Lietaer, who participated in the establishment of the euro, quoted Alan Greenspan, chairman of the Federal Reserve (until January, 2006); as saying that: “We will see a return of private currencies in the 21st century.”
Gresham’s Law:
So, what makes us think that people will accept the Millennium Dollar®? As it turns out, Gresham’s Law suggests that the private currency will not only be accepted, but that it may even be hoarded. Sir Thomas Gresham (1519? - 1579) was the master of the mint in England, when Queen Elizabeth I asked him about the advisability of a dual currency situation. Historically, a dual currency situation may involve the government issuing both gold coins and a paper currency. His advice to the Queen became Gresham’s Law, which states that:
“Bad money drives good money out of the marketplace.”
Ironically, Gresham’s Law is often misinterpreted. Gresham’s advice was based upon his experience as a merchant. During the course of the day, merchants might be paid in either gold coin or the paper currency. However, merchants understood that the gold coins would hold their value better than the paper currency; so the next day, the merchants would hoard the gold, or “good money,” while paying out the paper currency, or “bad money.” In this manner, the bad money drove the good money out of the marketplace.
Analysis:
It is reasonable to ask, Why does Gresham’s Law apply only to money? Each year at Christmas time, there is often a new toy, such as Cabbage Patch Dolls, that are in such great demand that they are swept off the shelves and hoarded; yet, by next Christmas season there are plenty of Cabbage Patch Dolls for everyone. The reason, that Gresham’s Law only applies to money, is that the government has a limited supply of gold, or the good money, which can be put into circulation; while the manufacturer of the Cabbage Patch Dolls can make plenty of new dolls to meet the demand.
While Gresham’s Law may initially affect the Millennium Dollars®, assuming the private currency is hoarded for its ability to store value; nonetheless, we should be able to meet any demand over time, since there should be a virtually inexhaustible supply of inflation-indexed assets (government bonds, municipal bonds, corporate bonds, mortgages, etc.) with which to back new MR$ issues. This supply will be created by the USD demand for MR$; which will give us the capital to purchase these inflation-adjusted assets, thereby making a market for them. As this process reaches a certain scale, we can begin to fund and securitize real mortgages.
Demurrage Charge:
While Gresham’s Law seems to predict substantial demand for the Millennium Dollar®, too much hoarding of the private currency is not good for the sponsor or the community. First, the sponsor must maintain a liquid-payment market to provide liquidity for the sale of the AIO strips, without which the assets would not meet the present value test. This involves certain ongoing expenditures, which the sponsor intends to pay out of its monetary conversion revenues. As such, a decline in the volume of monetary conversions could adversely affect the sponsor’s ability to maintain the liquid-payment market; which might then adversely affect the value of the private currency issued and outstanding. But even more important, the community depends upon the recycling of money, which thereby creates demand for goods and services. As such, the sponsor reserves the right to periodically make a demurrage charge on the Millennium Dollars® issued and outstanding, if a sufficient volume of MR$ are not being recycled each month.
The demurrage charge will be announced in advance, which thereby encourages people to spend their money before the charge comes due. If this effect is achieved, and a sufficient volume of the MR$ are spent; then the demurrage charge can be waived; until the next time the stimulus is required. If collected by the sponsor, then the demurrage charge will defray the costs of maintaining the liquid-payment market for the present value assets. Conversely, if the Millennium Dollars® are actively used in the marketplace, then the sponsor will cover the cost of the liquid-payment market from its monetary conversion revenues.
Currency Wholesaling:
Inasmuch as the NPO and AIO strips are sufficient to meet the sponsor’s promise-to-conserve the purchasing power of the holder’s capital; the sponsor will retain the RIO strip to cover its expenses and generate a reasonable profit. Inasmuch as this can be a profit-generating exercise for the sponsor, it is in the position to offer the Millennium Dollars® at a wholesale price; which it intends to do via distributors and auctions.
Currency Retailing:
Subsequently, as the sponsor repurchases the MR$ at the prevailing currency exchange rate, it will have to place the private currency at the indexed value; since recycling the MR$ will only produce a margin between the currency exchange rate and the indexed value. This margin is not sufficient to cover the compensation due to the auction venues or the distributors. Nonetheless, the sponsor may elect to deposit the Millennium Dollars® with financial institutions for lending to the general public, like any other currency. We are currently seeking financial institutions for this purpose.
e-Bay Store:
The sponsor intends to distribute the Millennium Dollars® via e-Bay auctions; provided that, e-Bay has no objection. (If e-Bay does object, then we will seek an alternative auction venue.) If the e-Bay auctions are successful, the sponsor will also open a store at e-Bay; where Millennium Dollars® may be purchased at the indexed value over time. This would eliminate the need to have the winning bid at the auction, but would result in a slightly higher cost.
Distributors:
The Company will also offer Millennium Dollar® for sale to merchants through distributors. If you wish to contact, or become, a distributor, then please e-mail us at USD@MillenniumDollar.com. If you should be contacted by a MR$ distributor; then, for your protection, please register with us before engaging in any financial transactions with the distributor. This will allow us to verify the authenticity of all parties concerned, including the distributor. There is no charge for registering, and any information you provide to us will be considered confidential. Please see: Privacy Policy.
Preferred Tender:
The Millennium Dollar® is not legal tender, which means that people do not have to accept Millennium Dollars® as payment. Nonetheless, the marketplace has accepted a wide variety of monetary equivalents, which are not legal tender; including credit cards, debit cards, smart cards, phone cards, personal checks, corporate checks, travelers checks, drafts, money orders, PayPal payments, wire transfers, coupons, tickets, frequent flyer miles, etc. Only the paper USD and coinage issued by the U.S. Treasury are legal tender. However, the legal tender laws do not prohibit the use of other forms of money; providing only, that the parties to a transaction are willing to accept payment in the given monetary format. Inasmuch as the Millennium Dollar® will be secured by the present value assets of the sponsor, Gresham’s Law suggests that it will become the preferred tender. If you wish to spend your Millennium Dollars®, then ask your merchant if he or she will accept them. This kind of query was a common practice, when credit cards first became available; and was repeated very successfully by PayPals only a few years ago. About four years later, PayPals was purchased by e-Bay for $1.5 billion.
Disclosure:
The Millennium Dollar® is not a payment instrument, such as credit cards, personal checks, travelers checks, money orders, etc.; which are issued as promises-to-pay the recipient in the government-issued currency. The Millennium Dollar® is a currency, which represents payment upon receipt. As such, neither the issuer, nor the sponsor, are required to convert the Millennium Dollar® into any government-issued currency.
Nonetheless, offering such monetary conversions represents a profit center for the sponsor, which is similar to Visa and MasterCard offering the conversion of credit card receivables into cash for merchants. As such, the sponsor will offer to convert the MR$ into USD at the prevailing currency exchange rate, which will float over time; but it is not required to do so, especially if it deems in its sole opinion that engaging in monetary conversions will adversely affect its ability to perform on its promise-to-conserve. We have taken this position in the belief; that the best way, to maintain the value of the Millennium Dollar® in the marketplace, is to maintain the assets on a present value basis. This act alone should generate sufficient confidence in the private currency, since the current money supply has no real assets securing its issuance.
Irreversible Process:
Finally, it should be understood that the creation of the private currency is not a reversible process, since the RIO strips are sold to fund the expenses incurred in creating the currency. If all the MR$ issued and outstanding were liquidated and the present value assets were sold, then a loss would occur equal to the value of the RIO strips plus the liquidation costs. However, this begs the question: Why would anyone want to convert all of the private currency, secured by the present value assets, into a currency secured by no assets? Gresham’s Law suggests that the trend should be in the opposite direction. While we have no rational answer for this question; nonetheless, it should be understood that the Millennium Dollars® issued and outstanding cannot be converted back into the inflation-adjusted assets without sustaining a loss. Of course, the same problem would occur, if you attempted to convert steel back into iron ore; but then, why would you want to?
Investment Status:
The Millennium Dollar® is not an investment, since it does not earn a return over-and-above the rate of inflation. (All the inflationary adjustment does is preserve the purchasing power of your money.) If the MR$ seems like an investment by comparison, then you may be losing money in real terms on your cash investments (i.e. investments of 12 months or less). If so, you should ask your investment advisor how you can earn a real rate of return on your cash investments. If your financial advisor is stumped, then please have him, or her, contact us at USD@MillenniumDollar.com. Our advice will be very simple: perhaps the financial advisor should sponsor the offering of investment alternatives denominated in Millennium Dollars®. Inasmuch as none currently exist, there may be a good upside for the investment advisor; which would also better serve the needs of his, or her, clients.
Taxable Impact:
In theory, the inflationary adjustment on the Millennium Dollars® should not be taxed, since it represents a return of the original purchasing power of your capital. However, the Internal Revenue Service (IRS) has ruled that the inflationary adjustment on the TIPS is taxable for tax paying entities. As such, the IRS may rule that the inflationary adjustment on the Millennium Dollars® is taxable. In such an event, you would have to report the inflationary adjustment on your Millennium Dollars® as income for tax purposes. In Great Britain, the inflationary adjustment on inflation-indexed government bonds is not taxed. Ultimately, we expect the U.S. government to take the same position, but this may require an act of congress. If this poses a problem for you, then we suggest you contact your congressional representative. Certainly, we will be available to answers any questions that he, or she, may have on this subject.
Monetary Transmissions:
At this time, neither the issuer, nor the sponsor, offer monetary transmission services. The Millennium Dollar® is offered and sold as a product for USD; after which, the buyer will own the Millennium Dollars® and the sponsor will own the USD, subject to our promise to secure the private currency with the present value assets. We are not currently in the business of transmitting either USD, or Millennium Dollars®, to third parties; although we may elect to offer such services in the future. If, and when, we intend to commence offering monetary transmission services, then we will apply for money transmitter license(s), as deemed appropriate.
It is reasonable to ask why we have differentiated ourselves in this manner. Quite simply, the offering of monetary transmission services currently means converting payment instruments into USD, or the local government-issued currency. This is required, since payment instruments are typically designed as a promise-to-pay USD to the recipient. However, the Millennium Dollar® is designed, not as a payment instrument, but as a currency; the receipt of which constitutes full monetary payment in itself. Finally, the offering of a promise-to-pay requires substantially different assets, and even different technology; then the offering of a promise-to-conserve. Hence, we cannot hope to offer a currency defined in a real (or constant) monetary unit, if we are also required to redeem the private currency in USD. Promises-to-pay are redeemed in a matter of days, while a promise-to-conserve is a permanent commitment spanning years. If the customer wishes to transmit USD, there are plenty of companies offering such services in the marketplace; but there is no one offering a real monetary product. Eventually, we hope to offer monetary transmission services in Millennium Dollars®, but everything in its own good time.
Questions:
If you have any questions, then please review the FAQs, as well as questions that may have been answered at the sponsor’s Forum. If these do not answer your question, then please post your question at the Forum or e-mail us at USD@MillenniumDollar.com. In either case, we will do our best to answer your questions promptly