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Objective: Reintroduce and gradually raise reserve requirements (currently 0% since March 2020) on net transaction accounts and other reservable liabilities. This directly reduces the money multiplier, limits banks’ ability to create new deposits/loans from existing reserves, slows M2 expansion, and supports lower long-term inflation—strengthening the dollar by making it scarcer relative to goods/services and potentially allowing higher real interest rates. Rationale:

• Higher requirements force banks to hold more reserves idle (or borrow them at a higher cost), reducing lending leverage.
• This acts as a tightening tool complementary to interest rate policy, without relying solely on the fed funds rate or balance sheet tools.
• Historical precedent: Pre-2020, requirements were up to 10% on larger transaction accounts; reinstating and exceeding that level would have a meaningful impact.
• Expected effects: Slower M2 growth (targeting 2–3% annual vs. recent 4%+), reduced inflation risk, stronger dollar via lower inflation expectations and higher yields.

Phased Implementation (5-Year Horizon, Starting 2027):

• Phase 1 (Year 1, e.g., 2027): Reintroduce requirements at 2% on net transaction accounts above the exemption amount (currently ~$39 million indexed). This is a modest restart to test systems and allow banks to adjust liquidity.
• Phase 2 (Year 2, 2028): Increase to 4% across the board for transaction accounts. Add 1% on certain non-transaction liabilities (e.g., large time deposits) if needed for broader coverage.
• Phase 3 (Year 3, 2029): Raise to 6% on transaction accounts; extend to 2–3% on savings and other deposits to capture more of the money creation process.
• Phase 4 (Year 4, 2030): Increase to 8% on transaction accounts (approaching pre-2020 norms but higher for tightening).
• Phase 5 (Year 5, 2031 onward): Final step to 10% on transaction accounts and 4–5% on broader liabilities, with flexibility to pause or reverse if credit contraction risks emerge (e.g., recession signals).

Additional Safeguards:

• Exempt small banks (<$10–20 billion assets) or phase them in more slowly to protect community lending.
• Pair with Fed tools: Adjust Interest on Reserve Balances (IORB) upward to encourage holding excess reserves without forcing fire sales.
• Monitor: If M2 growth falls below 2% or lending contracts sharply, cap or delay increases.

This proposal alone could meaningfully strengthen the dollar by enforcing monetary discipline through the banking system.

• Bitcoin’s issuance is algorithmically fixed and transparent (halvings every ~4 years; current block reward 3.125 BTC, next halving ~2028).
• Tethering dollar supply growth to ~Bitcoin’s annual new coins (e.g., limit M2 or base money growth to match Bitcoin’s ~1–2% issuance rate) creates “hard money” discipline, reducing arbitrary Fed expansion.
• Layering reserve increases amplifies the effect by curbing fractional creation on top of the base.
• Secondary benefits: Boosts dollar credibility (linked to a deflationary asset), attracts crypto-savvy capital, and counters inflation long-term.

• Phase 1 (Years 1–2, 2027–2028):
  • Reintroduce reserve requirements at 2–4% (as in Proposal 1, Phase 1–2).
  • Introduce “Bitcoin-tether rule”: Cap annual base money (reserves + currency) growth at Bitcoin’s projected issuance rate (~1.6% in this period). Fed adjusts open market operations/quantitative tools to enforce.
• Phase 2 (Years 3–4, 2029–2030):
  • Raise reserve requirements to 6–8% on transaction accounts (Proposal 1, Phase 3–4).
  • Tighten tether: Limit broad M2 growth to Bitcoin issuance rate + adjustment factor (e.g., +0.5–1% buffer for economic needs, declining over time). Use reserve hikes to help meet the cap if lending pressures emerge.
• Phase 3 (Years 5–6, 2031–2032):
  • Final reserve increase to 10% on transaction accounts + 4–5% on others.
  • Full tether: Align M2 growth target to Bitcoin’s post-2028 halving rate (~0.8–1%). If Bitcoin issuance drops further (e.g., 2032 halving), dollar growth floors at 1% minimum to avoid deflation risk.
• Phase 4 (Year 7+, 2033 onward):
  • Lock in 10%+ requirements as baseline.
  • Permanent tether rule: Dollar supply growth cannot exceed Bitcoin’s annual rate without supermajority Congressional approval (e.g., emergency override clause).

• Start with a pilot: Apply tether to a portion of base money initially.
• Flexibility: Include escape clauses for wars, pandemics, or severe recessions (e.g., temporary suspension).
• Transparency: Public dashboard tracking dollar growth vs. Bitcoin issuance.
• Complement: Encourage voluntary dollar-Bitcoin reserves or tokenized assets to build hybrid credibility.