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Toward an RF Monetary Theory and Discipline

Money in its banknote (paper) form has been one of the great and historic human innovations that facilitated commerce, industrial growth, and economic development. Our objection in RF monetary discipline is not the use of fiat (paper) money but rather the valuation of these banknotes. The book discussed earlier the two important RF banking and finance disciplines; the RF Commodity Indexation Discipline and the RF Marking-to-Market Discipline. In this section, an important aspect of RF discipline and lifestyle is the monetary aspect of fiat (paper) money and the RF monetary discipline. It is true that very little has been written on the subject and no formal in-depth research has been conducted. The following is a preliminary effort that will hopefully peak the interests of some readers to start a thoughtful research program to develop an RF monetary theory and discipline that will hopefully fix the shortcomings of the current system, which is believed to have been broken in 1971 by the Nixon doctrine and has not been fixed since.

Monetary theory develops the link between money supply and other macroeconomic variables, including the price level and output (GDP). In this chapter, we begin with competing theories of money demand and some empirical evidence about the behavior of money demand. In order to achieve an RF monetary theory and discipline in an introductory way, the following are in a preliminary way the aspects of what can be called the beginning of the RF monetary discipline:

1. The RF Commodity Indexation of products and services in order to disengage pricing in fiat money from its real nature of being a paper banknote used to transact business. This RF Commodity Indexation Discipline has been discussed earlier and the book and will be elaborated on later in this chapter.

2. The concept of the velocity of money, which measures how many times a dollar changes hands in an economy and was discussed earlier in Chapter 5. This concept is important because it gives an indication of two important policies; one is rate of economic growth in the economy and the impact of money supply on that economy and the tax rate applied by governments.

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