....... Ending the Financial Crisis For Good

National Debt

Ending the National Debt

"Dr. Strangemoney or How I Learned to Stop Worrying about the National Debt and Hate The FED".

There's a lot of talk going around about how the national debt is killing the economy and I want to tell you to stop worrying about it. So what is the national debt and how did we get here? Whenever the government needs money, it prints up some Treasury bonds and sells them to investors. Whatever it doesn't sell, the Federal Reserve (which is not federal and doesn't keep much in the way of reserves...more about that later) buys them. What most people fail to understand is that the FED doesn't use real money, as you know it, to buy them. It creates the money out of thin air with an accounting entry. If you or I did that, we would be in jail for counterfeiting. Let's suppose for a moment that the FED is actually a federal agency. The left hand needs some money so it asks the right hand to borrow some, which the right hand gladly does by printing up some cash and accepting an IOU in return. Is this really as absurd as it seems? The government is actually borrowing money from itself and paying itself interest on it?

The simple truth is that the Federal reserve is privately owned by its 12 member banks and by extension hundreds of other banks. You see, when your local bank gives you a loan, they don't use your deposits to create loans as you might think. In fact they create the loan by an accounting entry. In other words, out of thin air. If a bank has $1000 in deposits, it can loan $900, without ever touching your $1000 deposit. The extra $900 is created *in addition to* the $1000 in deposits. The bank now has $1900 in assets. When the money is paid back the $900 is destroyed. This is called fractional reserve lending. Many years ago, some unscrupulous goldsmiths figured out that they could create receipts for 10 times the amount of gold they had on hand because, at any one time, only 10% of the people who stored gold at their vaults would come to retrieve it. It is, at it's essence, a form of counterfeiting.

The problem comes with the interest you must pay the bank. It was never created! Every dollar in your wallet represents a debt someone else owes on a loan. Confused yet? It was designed to be confusing. The FED made it that way to hide the fact that they are slowly draining money away from the middle class straight into their pockets. It's a hidden tax. This expansion of the money supply is what we call inflation, meaning the cost of the products you buy must continue to go up over time and the government *must* increase the federal debt. If all the loans in America were paid off tomorrow, we would all be broke.

What about the money that was loaned to us by other countries? It too was created by their central bank out of thin air. It is also true that the FED returns 90% of the money it "earns" back to the government but you have to ask the question why is this any different than the mob skimming off the top from casinos. In 1913, a Congress very similar to what we have today- part ignorant, part stupid, part corrupt and way too few heroes, passed the 16th Amendment (the income tax) and the Federal Reserve Act. What the FED leaves out is that tiny fact that almost ALL of our money is not created by the FED but by the smaller regional banks. In other words, the same place you got your car loan from.

Many people confuse wealth with money. Money is a medium of exchange and a measure of value. Money could be made of red, white and blue poker chips. Dollar bills are merely paper. What gives them value is the government. Our forefathers had it right when they gave the power to create money to the government. It is absurd for the government to borrow it's own money. If the people demanded it, we could end the national debt with the click of a mouse. If the government printed up the money it needs to run the government and provide services, we could end the federal income tax tomorrow. This isn't some far-fetched idea. We've done it before. Our revolutionary war was funded by the Continental currency as was the Pennsylvania colonies. None other than Benjamin Franklin figured out how this would work.

The standard argument against this method is that it would create runaway inflation. A closer look at history proves all of these arguments wrong. The Continental currency was destroyed by the British army counterfeiting millions. Lincoln's greenbacks (this is where our current dollars get their color) worked well too until his death and the bankers seized control again. There has been a tug of war for centuries between the people and the bankers. Germany's Weimar Republic inflation was caused by currency speculation, not government spending. Inflation can be controlled by tying our currency to a wide ranging basket of commodities, like the Consumer Price Index so that a gallon of milk today costs the same as it would in 10 years.

What has happened to our economy is the result of the mathematical certainty of compound interest. There will always come a time when the interest due exceeds the ability to pay it. This is called the debt saturation point- where all your excess money goes to paying your bills. You can't dig your way out of a hole. Soon the government will not be able to pay the interest on the national debt. They will say we are broke and we need to raise taxes and cut services. To this I say, BULL! We can fix this problem with very little pain (that is unless you're one of those whose job depends on being a parasite on the backs of workers).

In summary, the national debt is not a problem at all. We need to demand our government return the money creation power back to the people as it is spelled out in the Constitution. The banks need to return to banking in the way most people think they already do, by taking in deposits and loaning out money given to them for investments.....not by creating an ever-increasing supply of money out of thin air. The government would create money and SPEND it into existence for infrastructure like bridges and roads and for services like Social Security, Medicare, etc.

Aristotle had it right centuries ago- "Money exists not by nature but by law". As it stands now, we-the-people have little to no control over the money supply and inflation. That is in the hands of a few too-big-to-fail banks. Government is the only control we-the-people have and the government is made up of the people we vote in. If they won't listen, vote them all out.

To paraphrase Bill Still- "A lot of people are complaining about the National Debt, about government spending too much money. The problem isn't that they're spending too much money, it's that they're BORROWING IT !"