A lot of people are very upset about the rapidly increasing U.S. national debt these days and they are demanding a solution. What they don't realize is that there simply is not a solution under the current U.S. financial system. It is now mathematically impossible for the U.S. government to pay off the U.S. national debt. You see, the truth is that the U.S. government now owes more dollars than actually exist. If the U.S. government went out today and took every single penny from every single American bank, business and taxpayer, they still would not be able to pay off the national debt. And if they did that, obviously American society would stop functioning because nobody would have any money to buy or sell anything.
And the U.S. government would still be massively in debt.
So why doesn't the U.S. government just fire up the printing presses and print a bunch of money to pay off the debt?
Well, for one very simple reason.
That is not the way our system works.
You see, for more dollars to enter the system, the U.S. government has to go into more debt.
The U.S. government does not issue U.S. currency - the Federal Reserve does.
The Federal Reserve is a private bank owned and operated for profit by a very powerful group of elite international bankers.
If you will pull a dollar bill out and take a look at it, you will notice that it says "Federal Reserve Note" at the top.
It belongs to the Federal Reserve.
The U.S. government cannot simply go out and create new money whenever it wants under our current system.
Instead, it must get it from the Federal Reserve.
So, when the U.S. government needs to borrow more money (which happens a lot these days) it goes over to the Federal Reserve and asks them for some more green pieces of paper called Federal Reserve Notes.
The Federal Reserve swaps these green pieces of paper for pink pieces of paper called U.S. Treasury bonds. The Federal Reserve either sells these U.S. Treasury bonds or they keep the bonds for themselves (which happens a lot these days).
So that is how the U.S. government gets more green pieces of paper called "U.S. dollars" to put into circulation. But by doing so, they get themselves into even more debt which they will owe even more interest on.
So every time the U.S. government does this, the national debt gets even bigger and the interest on that debt gets even bigger.
Are you starting to get the picture?
As you read this, the U.S. national debt is approximately 12 trillion dollars, although it is going up so rapidly that it is really hard to pin down an exact figure.
So how much money actually exists in the United States today?
Well, there are several ways to measure this.
The "M0" money supply is the total of all physical bills and currency, plus the money on hand in bank vaults and all of the deposits those banks have at reserve banks. As of mid-2009, the Federal Reserve said that this amount was about 908 billion dollars.
The "M1" money supply includes all of the currency in the "M0" money supply, along with all of the money held in checking accounts and other checkable accounts at banks, as well as all money contained in travelers' checks. According to the Federal Reserve, this totaled approximately 1.7 trillion dollars in December 2009, but not all of this money actually "exists" as we will see in a moment.
The "M2" money supply includes everything in the "M1" money supply plus most other savings accounts, money market accounts, retail money market mutual funds, and small denomination time deposits (certificates of deposit of under $100,000). According to the Federal Reserve, this totaled approximately 8.5 trillion dollars in December 2009, but once again, not all of this money actually "exists" as we will see in a moment.
The "M3" money supply includes everything in the "M2" money supply plus all other CDs (large time deposits and institutional money market mutual fund balances), deposits of eurodollars and repurchase agreements. The Federal Reserve does not keep track of M3 anymore, but according to ShadowStats.com it is currently somewhere in the neighborhood of 14 trillion dollars. But again, not all of this "money" actually "exists" either.
So why doesn't it exist?
It is because our financial system is based on something called fractional reserve banking.
When you go over to your local bank and deposit $100, they do not keep your $100 in the bank. Instead, they keep only a small fraction of your money there at the bank and they lend out the rest to someone else. Then, if that person deposits the money that was just borrowed at the same bank, that bank can loan out most of that money once again. In this way, the amount of "money" quickly gets multiplied. But in reality, only $100 actually exists. The system works because we do not all run down to the bank and demand all of our money at the same time.
According to the New York Federal Reserve Bank, fractional reserve banking can be explained this way....
"If the reserve requirement is 10%, for example, a bank that receives a $100 deposit may lend out $90 of that deposit. If the borrower then writes a check to someone who deposits the $90, the bank receiving that deposit can lend out $81. As the process continues, the banking system can expand the initial deposit of $100 into a maximum of $1,000 of money ($100+$90+81+$72.90+...=$1,000)."
So much of the "money" out there today is basically made up out of thin air.
In fact, most banks have no reserve requirements at all on savings deposits, CDs and certain kinds of money market accounts. Primarily, reserve requirements apply only to "transactions deposits" – essentially checking accounts.
The truth is that banks are freer today to dramatically "multiply" the amounts deposited with them than ever before. But all of this "multiplied" money is only on paper - it doesn't actually exist.
The point is that the broadest measures of the money supply (M2 and M3) vastly overstate how much "real money" actually exists in the system.
So if the U.S. government went out today and demanded every single dollar from all banks, businesses and individuals in the United States it would not be able to collect 14 trillion dollars (M3) or even 8.5 trillion dollars (M2) because those amounts are based on fractional reserve banking.
So the bottom line is this....
#1) If all money owned by all American banks, businesses and individuals was gathered up today and sent to the U.S. government, there would not be enough to pay off the U.S. national debt.
#2) The only way to create more money is to go into even more debt which makes the problem even worse.
You see, this is what the whole Federal Reserve System was designed to do. It was designed to slowly drain the massive wealth of the American people and transfer it to the elite international bankers.
It is a game that is designed so that the U.S. government cannot win. As soon as they create more money by borrowing it, the U.S. government owes more than what was created because of interest.
If you owe more money than ever was created you can never pay it back.
That means perpetual debt for as long as the system exists.
It is a system designed to force the U.S. government into ever-increasing amounts of debt because there is no escape.
We could solve this problem by shutting down the Federal Reserve and restoring the power to issue U.S. currency to the U.S. Congress (which is what the U.S. Constitution calls for). But the politicians in Washington D.C. are not about to do that.
So unless you are willing to fundamentally change the current system, you might as well quit complaining about the U.S. national debt because it is now mathematically impossible to pay it off.
***UPDATE***
It has been suggested that the same dollar can be used to pay off debt over and over - this is theoretically true as long as the dollar remains in the system.
For example, if the U.S. government gives China a dollar to pay off a debt, there is a good chance that the U.S. government will be able to acquire that dollar again and use it to pay off another debt.
However, this is not true when debt is retired with the Federal Reserve. In that case, money is actually removed from the system. In fact, because of the "money multiplier", when debt is retired with the Federal Reserve it can remove ten times that amount of money (and actually more, but let's not get too technical) from the system.
You see, fractional reserve banking works both ways. When $100 is introduced into the system, it can theoretically create $1000 as the example in the article above demonstrates. However, when that $100 is removed, it can have the opposite impact.
And considering the fact that the Federal Reserve "purchased" the vast majority of new U.S. government debt last year, we have got a real mess on our hands.
Even if a way could be figured out how to pay off all the debt we owe to foreign nations (such as China, Japan, etc.) it would still be mathematically impossible to pay off the debt that we owe to the Federal Reserve which is exploding so fast that it is hard to even keep track of.
Of course we could repudiate that debt and shut down the Federal Reserve, but very few in Washington D.C. have any interest in doing that.
It has also been suggested that instead of just using dollars to pay off the U.S. national debt, we could use the assets of the U.S. government to pay it off.
That is rather extreme, but let us consider that for a moment.
That total value of all physical assets in the United States, both publicly and privately owned, is somewhere in the neighborhood of 45 to 50 trillion dollars. Of course the idea of the U.S. government "owning" every single asset of the American people is repugnant to our entire way of life, but let's assume that for a moment.
According to the 2008 Financial Report of the United States Government, which is an official United States government report, the total liabilities of the United States government, including future social security and medicare payments that the U.S. government is already committed to pay out, now exceed 65 TRILLION dollars. This amount is more than the entire GDP of the whole world.
In fact, there are other authors who have written that the actual figure for the future liabilities of the U.S. government should be much higher, but let's be conservative and go with 65 trillion for now.
So, if the U.S. government took control of all physical assets in the United States and sold them off, it could not even make enough money to pay for everything that the U.S. government is already on the hook for.
Ouch.
If you have not read the 2008 Financial Report of the United States Government, you really should. Actually the 2009 report should be available very soon if it isn't already. If anyone knows if it is available, please let us know.
The truth is that the U.S. government is in much bigger financial trouble than we have been led to believe.
For example, according to the report (which remember is an official U.S. government report) the real U.S. budget deficit for 2008 was not 455 billion dollars. It was actually 5.1 trillion dollars.
So why the difference?
The CBO's 455 billion figure is based on cash accounting, while the 5.1 trillion figure in the 2008 Financial Report of the United States Government is based on GAAP accounting. GAAP accounting is what is used by all the major firms on Wall Street and it is regarded as a much more accurate reflection of financial reality.
So needless to say, the United States is in a financial mess of unprecedented magnitude.
So what should we do? Does anyone have any suggestions?
***UPDATE 2***
We have received a lot of great comments on this article. Trying to understand the U.S. financial system (even after studying it for years) can be very difficult at times. In fact, it can almost seem like playing 3 dimensional chess.
Several readers have correctly pointed out that when the U.S. money supply is expanded by the Federal Reserve, the interest that is to be paid on that new debt is not created.
So where does the money to pay that interest come from? Well, eventually the money supply has to be expanded some more. But that creates even more debt.
That brings us to the next point.
Several readers have insisted that the Federal Reserve is not privately owned and that since it returns "most" of the profits it makes to the U.S. government that we should not be concerned about the debt owed to it.
The truth is that what you have with the Federal Reserve is layers of ownership. The following was originally posted on the Federal Reserve's website....
"The twelve regional Federal Reserve Banks, which were established by Congress as the operating arms of the nation’s central banking system, are organized much like private corporations – possibly leading to some confusion about "ownership." For example, the Reserve Banks issue shares of stock to member banks. However, owning Reserve Bank stock is quite different from owning stock in a private company. The Reserve Banks are not operated for profit, and ownership of a certain amount of stock is, by law, a condition of membership in the System. The stock may not be sold, traded, or pledged as security for a loan; dividends are, by law, 6 percent per year."
So Federal Reserve "stock" is owned by member banks. So who owns the member banks? Well, when you sift through additional layers of ownership, you will ultimately find that people like the Rothschilds, the Rockefellers and the Queen of England have very large ownership interests in the big banks. But there are so many layers of ownership that they are able to disguise themselves well.
You see, these people are not stupid. They did not become the richest people in the world by being morons. It was the banking elite of the world who designed the Federal Reserve and it is the banking elite of the world who benefit the most from the Federal Reserve today. In the article above when we described the Federal Reserve as "a private bank owned and operated for profit by a very powerful group of elite international bankers" we may have been oversimplifying things a bit, but it is the essence of what is going on.
In an excellent article that she did on the Federal Reserve, Ellen Brown described a number of the ways that the Federal Reserve makes money for those who own it....
The interest on bonds acquired with its newly-issued Federal Reserve Notes pays the Fed’s operating expenses plus a guaranteed 6% return to its banker shareholders. A mere 6% a year may not be considered a profit in the world of Wall Street high finance, but most businesses that manage to cover all their expenses and give their shareholders a guaranteed 6% return are considered "for profit" corporations.
In addition to this guaranteed 6%, the banks will now be getting interest from the taxpayers on their "reserves." The basic reserve requirement set by the Federal Reserve is 10%. The website of the Federal Reserve Bank of New York explains that as money is redeposited and relent throughout the banking system, this 10% held in "reserve" can be fanned into ten times that sum in loans; that is, $10,000 in reserves becomes $100,000 in loans. Federal Reserve Statistical Release H.8 puts the total "loans and leases in bank credit" as of September 24, 2008 at $7,049 billion. Ten percent of that is $700 billion. That means we the taxpayers will be paying interest to the banks on at least $700 billion annually – this so that the banks can retain the reserves to accumulate interest on ten times that sum in loans.
The banks earn these returns from the taxpayers for the privilege of having the banks’ interests protected by an all-powerful independent private central bank, even when those interests may be opposed to the taxpayers’ -- for example, when the banks use their special status as private money creators to fund speculative derivative schemes that threaten to collapse the U.S. economy. Among other special benefits, banks and other financial institutions (but not other corporations) can borrow at the low Fed funds rate of about 2%. They can then turn around and put this money into 30-year Treasury bonds at 4.5%, earning an immediate 2.5% from the taxpayers, just by virtue of their position as favored banks. A long list of banks (but not other corporations) is also now protected from the short selling that can crash the price of other stocks.
The reality is that there are a lot of ways that the Federal Reserve is a money-making tool. Yes, they do return "some" of their profits to the U.S. government each year. But the Federal Reserve is NOT a government agency and it DOES make profits.
So just how much money is made over there? The truth is that we have to rely on what the Federal Reserve tells us, because they have never been subjected to a comprehensive audit by the U.S. government.
Ever.
Right now there is legislation going through Congress that would change that, and the Federal Reserve is fighting it tooth and nail. They are warning that such an audit could cause a financial disaster.
What are they so afraid of?
Are they afraid that we might get to peek inside and see what they have been up to all these years?
If you are a history buff, then you probably know that debates about a "central bank" go all the way back to the Founding Fathers.
The European banking elite have always been determined to control our currency, and that is exactly what is happening today.
Ever since the Federal Reserve was created, there have been members of the U.S. Congress that have been trying to warn the American people about the insidious nature of this institution.
Just check out what the Honorable Louis McFadden, Chairman of the House Banking and Currency Committee had to say all the way back in the 1930s....
"Some people think that the Federal Reserve Banks are United States Government institutions. They are private monopolies which prey upon the people of these United States for the benefit of themselves and their foreign customers; foreign and domestic speculators and swindlers; and rich and predatory money lenders."
The Federal Reserve is not the solution and it never has been.
The Federal Reserve is the problem.
Any thoughts?
Glenn Peters,
No-one has answered my question above. You seem very knowledgeable. Would you like to answer my question please?
The article says
“We could solve this problem by shutting down the Federal Reserve and restoring the power to issue U.S. currency to the U.S. Congress. But the politicians in Washington D.C. are not about to do that.”
My question is
If it does solve this problem, so why do we not do that? Is there any real practical problem with that, or is it just an ideological issue?
There is no way to fix it now and no way out. The best solution is to hunker down, let it all burn down around you as social disorder asserts itself, and try to come out alive. If you do, you’ll be a part of rebuilding the country, this time hopefully NOT under control of bankers with specific unchangeable parts of the Constitution that EXPLICITLY FORBID handing the money supply over to private banks of any kind.
JFK has already signed an Executive Order for the issue of debt free Treasury Notes and the Notes were printed and ready to go into circulation when he was killed. His Executive Order is still legally in effect but no one has had the courage since then to implement it. Immediately after they killed him, and he was not the 1st President to be killed for this reason, the newly printed Treasury Notes were destroyed. The President we now have like many before him are owned by the owners of the Federal Reserve (House of Rothschild) or their agents (George Soros etc.). If these people finally get kicked out of our country and the chance is slim because the American People will probably never understand or care about the financial system since these very same people control our minds using many methods but mainly through television, they will probably remotely militarily destroy what little remains of our economy, society, and country that they were not able to destroy while here. They will destroy it out of vengeance and desperation because it is their nature to destroy. The U.S.A. is not the only country they control against the will of the majority of it’s people. They hate the U.S. Constitution because it is based on God’s Laws and because we have been a Christian society. Still though, I believe that forgiving them for destroying us physically is the right thing to do. I’m not sure though if I will be able to follow through on my belief if some day I find my back up against a wall. It seems like that day is quickly approaching for most of us. Why do all of the JFK documentaries present every possibility of who did it to confuse but none ever mention this one fact?
@web ether-net ideas
your ideations of a barter system are ok, but it really doesnt make sense to “trade” anything. If you just gave people what they needed from what you were producing, and they just gave to you as needed from what they produced, things would be a lot easier. If you understand there is no real need for money, then it shouldnt be a big stretch to see that people would be happier if they only took what was necessary, and then only more than that as long as it didnt deprive others
PleaseExpalin asked:
Does shutting down down the Federal Reserve and restoring the power to issue U.S. currency to the U.S. Congress solve this problem, if so why do we not do that? Is there any real practical problem with that, or is it just an ideological issue?
============================================
There are several questions here and assumptions within them. In theory, central banks are independent bodies, such as in Norway, Australia etc. In practice in the USA, the power of the Federal Reserve to issue currency is already in the hands of Congress, via the majority of the incumbent party and therefore, the President.
Issuance of currency theoretically dilutes the value of extant currency, but as there are other world currencies traded and the US being the reserve currency, this distorts its value internationally. Domestically the picture is somewhat different. What we are seeing now in the domestic US economy is debt deflation. In the next few years, the US debt may likely be eroded due to increasing price inflation. In other words, inflation will reduce the debt over time, in the same way that fixed mortgage payments of 15 years ago are less a hit to your wallet today than they were in 1995. That’s good for the external debt to other countries, bad for your buying power domestically. If the USA can improve its international competitiveness by selling more to ther countries than it buys, it will have the income to reduce its debt over time. The big question is, can it do this? The emerging markets are there, in India and China. But costs of production, mostly labour costs are too high. The US will simply have to reduce its standard of living (paying its workers much less) to viably produce the goods that other countries want to buy. Printing more money and domestic consumption based upon credit isn’t the answer. If this fails, the USA’s currency value will plummet, and wars have been fought over less than that.
I hope this answer helps.
If you are serious about a solution, there is one from ancient times that did quite well.
Declare a year of jubilee every 50 or so years.
With fractional reserve banking, total debt will always exceed the money supply; there’s no need to plagiarize an economics textbook to explain this “feature” of the modern banking system.
It’s interesting to read about the fellow who was abused by his bank because he paid interest on his mortgage. I guess that his bank held a shotgun to his head and forced him to take the mortgage.
One can outlaw fractional reserve banking. It would be much harder to get a loan or a credit card and interest rates would be much higher. An there would be much higher fees for checking accounts.
The recent financial crisis would still have occurred even if fractional reserve banking were outlawed, since the main problem occurred in non-banking institutions such as AIG.
Here’s an idea–the government can cut spending (Medicare and Social Security, mostly) and raise taxes (say, to their levels in 2000) to balance the budget.
@Brophanity
That is the idea… i might have stretched the explanation too much, but that is exactly what i had i mind…. then again this would not work = read greed = people
@PleaseExpalin
David Smith just explained this to you, but there were few more posts about it before as well.
people that have tried it
Lincoln,JFK
and if i’m not wrong president Woodrow Wilson was on the right track but he chickened out=(lived) and created FED
@David Smith
I agree with the first part of your post, but I think the second part is not true. The US Constitution is not based on God’s laws. The USA have been founded as a nation which provides freedom of religion to all it’s inhabitants. The government itself was not intended to be religious itself.
The sooner the US Government defaults on its debt the sooner democracy can start recovering from being pimped out by left wing inclinations inherent in all people.
Running on your own money within budget is a personal and public virtue.
[...] Paying off the National Debt is now “mathematically impossible” – (Link to the source story) [...]
I hope the whole thing blows up, and the economy tanks. I am so tired of scrapping for every dollar I can earn, while people who cheat the system are rewarded.
California and the entire U.S. has become one big welfare state with entitlement programs designed to make people lazy, uneducated and dependent on the states and Fed. Gov. Not to mention they can’t think for themselves.
When people don’t utilize their right to vote, and the ones who do vote go with emotions instead of facts you end up with Obamma and an Opra Winfrey type of culture.
Maybe it would be more productive to hold a seance with a crystal ball and govern like that. At least that’s what Congress thinks.
We’ll just tax everybody and the problem will just vanish like a ghost. Only problem is that it’s going to get a lot worse in 3 years after half of the mortages held by Fannie go into default. Good luck NAR, hope you can convince people it’s a great time to buy in 2 years.
Very interesting article! I’d love to read more about it and everything you wrote is true.
Why would we need money on this planet anyway?
We all should work for the benefit of the whole planet!
I will never understand that someone born on a planet has to EARN & PAY money to live on it. “Idiocracy” if You ask me
It’s not like you have a choice to go somewhere where money does not exsist.
It’s sad people, we have to wake up and start living completley different.
All people have the right to be happy all of their lives!
@”Btophanity” – You said “…your ideations of a barter system are ok, but it really doesnt make sense to “trade” anything. If you just gave people what they needed from what you were producing, and they just gave to you as needed from what they produced, things would be a lot easier. If you understand there is no real need for money, then it shouldnt be a big stretch to see that people would be happier if they only took what was necessary, and then only more than that as long as it didnt deprive others
Right.
You know, I was thinking – we could really shorten this great idea of yours into something simple and catchy!!
What about…
OH! I got it!!
“From each according to his ability. TO each according to his need.”
Is that about it?
Listen: I’m not sure if you’re just an idealistic moron or a true commie (not that there’s any substantive difference).
Let me make myself perfectly clear. Like my namesake, I have one basic catch-all creed: Give me LIBERTY, or give me DEATH! Millions of my ancestors died to pass on a legacy of Liberty to me, my children, their children and so on.
Given the slightest opportunity, If forced, I’ll see the “death” passed on to those who would deprive me and mine of our G*d given rights to Liberty. I see no difference between slavery to a communist system, slavery to an out-of-control government or slavery in fact to some “owner” — I’ll die on my feet before I live on my knees, and I’ll count it a blessing to have been able to do so – so long as I can take at least one would-be tyrant with me.
These are strong words, but you’d be amazed at the amount of restraint I’ve shown in using them – you really don’t want me to get explicit about how I REALLY feel.
Sure – you’ll write me off as some un-enlightened neanderthal, and you’ll be as wrong as you are about everything else.
For the first time in the history of our race on our planet, a Government was instituted which gave the people power over their Government. We’ve trusted too much for too long, and it’s been nearly dismantled under our very noses, but it’s not done yet.
There are literally millions of Citizens (not “subjects”) like me. We surround you – and you’re not smart enough to see it.
In 1941 Admiral Yamamoto sagely opined that he feared he’d awakened a sleeping dragon.
We too are awakening – and we’ll not go quietly.
We are your neighbors, your police, your soldiers, sailors and airmen. WE are the ones who provide you the freedom to undermine our Republic from the inside – but we’ve had about enough.
You really need to learn what we’ve learned: To shut our mouths and get busy preparing for what may (likely MUST) come.
Keep pushing.
If you think our reaction to the Japanese was something, just wait until you finally force us to take back our Republic.
God help us – and God Save Our Republic!
Patrick Henry
Am I wrong, but since the Fed can ‘loan money’ and collect 6%… and since they can ‘create money out of thin air’ – this is more than just a decent return…
They are getting paid interest on thin air…
well, maybe it costs a bit to actually print money… but they can also create ‘digital’ money out of thin air with a bookkeeping entry and voila, they are making 6% on NOTHING…
Thieves
Edward Flaherty has already addressed the idea that any monetary system subject to interest ultimately terminates itself under insoluble debt in his rebuttal of Jaikaran’s book, The Debt Virus:
Remarkably, the Austrians conceded to Montagne his third premise. He quotes a Ron Paul supporter: “While an interest based monetary system eventually breaks down because of greed, corruption and the intractable problem of insoluble debt, there is no reasonable alternative.”
Leaderless youth! Paul has given these kids no guidance, only bumper sticker slogans. They let Montagne’s labor theory of value go unchallenged, conceded to him the kernel of his theory, the “intractable problem of insoluble debt,” and then beat on him with a sponge. “Math cannot predict human action!!!”
With mathematically impossible to pay off the debt, you’re missing an all-important tiny little word ‘currently’. It’s mathematically impossible for me to pay off my mortgage now. That’s no problem, and neither is that fact in and of itself for the US government. I’m not saying they’re not in really nasty trouble though.
And let’s see… Let me find a couple of examples of exactly *why* a central banking system is “independent” of it’s government, and why you shouldn’t start printing 12 trillion dollars to lose the debt
Weimarer Republik, ca 1925
Starts printing huge amounts of notes to do just what you propose.
Result: Hyperinflation, destabilising government and a complete collapse of the economy. This all stopped only when they released a completely new currency, hard-backed and stable enough to earn trust.
CCCP / Russia, circa 1985-2000
Remember that? The Soviet Union? That centralist communist state with no independent central bank? Those guys who printed money when they needed it? Fat lot of good it did them. It didn’t resolve anything, it made inflation much worse, it crippled their capability to effectively govern the financial markets and it completely wasted their economy. This was only stopped when Jeltsin did a shock-introduction of a completely new currency.
Zimbabwe, circa last year
after an inflation of 231.000.000% (although economists admitted this figure was by then purely academic) and printing presses being unable to keep up, everybody in Zimbabwe now trades in… well, not Zimbabwean dollars, that’s for sure. By the time you get on your bike to the grocery store your suitcase of money is worth less than the rags you’re wearing. But hey, by that time 25kg’s of more money are waiting for you next day! All freshly printed.
Of course in all these cases the money printing was far from the only cause. But in all cases it ended really really disastrously. Two government collapses and a world war disastrously.
Exactly!
“….
well, maybe it costs a bit to actually print money… but they can also create ‘digital’ money out of thin air with a bookkeeping entry and voila, they are making 6% on NOTHING…
Thieves“
I’ve written about this on my blog. I call it the Compound Interest Paradox. I’ve also heard it referred to as the debt virus.
This is a very confusing subject. The details of the monetary system were made complicated on purpose, by the banksters, to cover up their crimes.
Summarizing, new money is only created when someone borrows. However, only the principal is created and not the interest payments. The result is that society as a whole is in a deeper and deeper debt hole. In order to prevent the scam from collapsing, you need every-increasing inflation.
During a recession/depression, you need cheap interest rates and deficit spending by the Federal government to keep up inflation. That’s why the Fed Funds Rate is 0.25% while real inflation is 20%-30% or more.
The banksters profit by printing and spending new money. That’s why Wall Street is making record profits while the rest of the economy is in a severe recession/depression.
All taxation is theft. The inflation tax is an evil tax, because it steals your savings and accumulated labor. Economic power is concentrated in the hands of the banksters, who print and spend new money.
It’s a tough mental shift. Taxation is theft. Government is one big extortion racket. The USA has an unfair monetary system.
People who have received brainwashing as an economist are hostile to this idea, because they can’t realize they’ve been conned.
@Niels
Most aspects of the U.S. Constitution are based on principles that are found in the Bible like righteousness and justice. It sure changes things when what I meant is said in a better way doesn’t it? I did not say that the Constitution endorses or mandates any religion, and thank God it doesn’t because I wouldn’t want to do all that jail time. Also who would qualify to be the Judge and Jury and how come they’re not doing time also? I incorrectly wrote: They hate the U.S. Constitution because it is based on God’s Laws and because we have been a Christian society. What I meant to write is completely different: They hate the U.S. Constitution because it is based on God’s Laws, and they hate the U.S because we have been a Christian Society. Maybe inadvertently I was correct….would they have hated the Constitution if we had not been a Christian Society?
A well regulated Militia, being necessary to the security of a free State, the right of the people to keep and bear Arms, shall not be infringed.
When we reach the breaking point…we just don’t pay. Why? Because we can’t.
The Federal Reserve has to take a pay cut and lessen their tight grip on the reigns. They take a loss that they won’t feel anyway because it’s only cyber money at this point.
They have a vested interest in keeping everybody but themselves working and don’t want a new system. Unfortunately, the slavery continues. Until they can tighten the reigns again. Then it’s just more of the same.
The solution is always education. If the majority of us remain ignorant and can’t imagine a better monetary system then we are forever stuck in this mire.
How do we get the majority of “us” to clue in? That’s a tough one.
The basis for this article is propaganda and ignorance.
The most obvious solution was not even mentioned:
Sell Alaska to China (and make sure Palin is there while it happens). That’s what smart people call solving two problems with one stone.
we dispute different points of view here, but only one thing is true… we are all only pawns in the great scheme of things where only few play the real game of chess…. and no matter how hard we protest, no matter how mad we get, no matter how many great ideas we all come up with, NOTHING is going to change … because in all actuality until society is greedy, envious and ignorant we will never have peace… Today over 50% of world population lives on less than $3/day, 80% of that fraction on less than $2/day and about 1.3 billion $1/day… CAN ANYONE HERE EXPLAIN TO ME if 50% of world population lives in poverty and only 1% of world population has 95% of worlds wealth, how come we even bother discussing this little predicament of economy we are currently in, which by the way is part of the economic cycle, and do not discuss how to change the former??? <rhetorical…… just think about it
I see. Thanks Glenn Peters
you guys do realize that the reason Federal Reserve still exist today does not mean the government don’t want to shut it down.
It is only because the president was elected by the money from these bankers.
and if the president wants mess around with the system (eg. shut it down), then they could well be the next JF Kennedy…and all the murdered presidents before him…
i heard the 2nd amndmnt was actually a reference to state militias, and not to individuals…
…also, didn’t the US dollar use to say something to the effect of “redeemable for its value in gold”, or something, and then they took that off, something to do with a bank scandal in the 30’s or 40’s. You could go to the bank and trade your notes in for the gold, but then that got squandered away, so after some shifty legislation and then a makeover on the dollar bill, no one ever speaks of it anymore….
What happens if the debt keeps increasing and eventually just goes so far out that whatever is done, it just cannot be repayed? So what happens to the US, the US government and the American folks?
Makes you really hate Mr. Regan doesn’t it.
http://zfacts.com/p/318.html
@Patrick Henry, what are you on about? “God Save Our Republic”??? It was this stupid republic and your ilk who borrowed up to your friggin ears that’s landed it in this sh*t. When it comes time to payback you wanna talk tough? I presume you thought all the money you got was free money, right? Get an education, pal!
The Fed was the brainchild of Paul M. Warburg, brother of Max Warburg of the German & Belgium banking dynasties, and representative of the Rothschild banking cartel. He wrote a book in the 30’s about the origin of the Fed. It turns out that one of the primary purposes of the Fed was ‘TO TRANSFER ANY LOSSES THAT THE BANKS INCURRED TO THE AMERICAN TAXPAYER”. Sound familiar?
You say The truth is that we have to rely on what the Federal Reserve tells us, because they have never been subjected to a comprehensive audit by the U.S. government.
Ever. But isn’t it regularly audited by the GAO, part of the US Government?
As it stands right now, there are “blanket restrictions” on GAO audits of the Fed. That is one reason why it is so important for Ron Paul’s bill to audit the Fed to get through Congress. For more, check this out….
http://www.ronpaul.com/on-the-issues/audit-the-federal-reserve-hr-1207/
The reason they don’t actually do that is because it would be a complete disaster! Don’t believe everything that you’re reading in this article without doing further research. So they can’t pay it back right now? Well that was NEVER the plan. Businesses along with governments take on debt and expect to keep it and it’s NOT always a bad thing.
The reason you don’t want to give the power to create money to congress is because you are then allowing politions and not economists to affect the economy. You want the money supply to be in the hands of people who’s job is not affected by people’s votes and can make decisions based on acedemic research rather than public opinion. Just reading these comments shows me how bad of an idea it would be to allow the public to have any say in the control of money.
Fun fact (not):
One trillion (just ONE) is $1 per SECOND for 32,000 YEARS!
Tragically, we are just now worrying about our housing burning down, but only AFTER we have thoroughly doused it with gasoline and tossed a torch on it.
Too late, game over.
Whatever the High and Noble intents of the US Government to get into debt, everything must have limits, as the debt was reasonably under control until 1990. However, when there is a 20 year record of exponential borrowing – culminating in a Crisis and after that still NO REGULATION, we can postulate that US is struggling to reign in a runaway horse just as the British Empire in 1945, and the Russian Empire in 1990. US has over stretched its capability. Like a elastic band, the economy can be stretched, but even that has a limit and that limit has been reached. http://www.buyerbeaware.blogspot.com
@web ether-net ideas
You have to attack on all fronts, not just one. People aren’t poor and hungry because they “don’t have enough food”, it’s because their governments are corrupt. Get to the root, otherwise its a perpetual waste of time.
Also, great article btw.
For those who want to know more about how the Federal Reserve has been created and why we need to get rid of it:
Read the Creature from Jekyll Island
Or, listen to this 1 hour audio lecture by the author.
http://video.google.com/videoplay?docid=-8484911570371055528#
Also, congress is controlled by the Fed since they give them plenty of money for the election.
Ah, the nice work done by the evil lobbyists.
The past is the past, so the international bankers have bankrupted america. Well we know it’s happened before and will happen again.
Do you think the solution will be a new currency?
thus devalueing the old dollar?
No dollar… no dollar debt problem… TA DAAA !
That seems like the logical solution to me. therefore I urge people to purchase gold and silver with those federal resertve notes they all love so much and worship.
I think we are missing a fundamental monetary concept here.
This might be a silly question, but if the economy of a country collapes, doesn’t its money become worthless?
And if the money becomes worthless (i.e. nobody wants it or trusts it), who cares who has it?
In otherwords, what good would it do the Federal Reserve (system, subsidiaries, etc.) to own all the papar money in the world, if nobody wants it or will use it?
All money, even gold, has to have value to the recipient, or it is a worthless medium of exchange.
All the ‘rich elite bankers’ (or whatever or whomever) would be impoverished overnight if their money became worthless because nobody wanted it, trusted it or used it.
This is a two-edged sword.
First of all, they have a vested interest in not letting the system collapse or their paper wealth will dissappear also.
On the other hand…
If they manage to use the money to get control of substantial tangible assets and power before the money collapses, they won’t need the paper money anymore anyway.
@DAN
whoever has the wealth at this point, it doesn’t matter what currency they hold, its the power that counts that comes with it… so yeah all the dollars you hold would make you a penniless but for those “elites as you describe” it would like misplacing $100, ….
Being pretty good with mathematics, I can see that ultimately the Fed system the US is presently using cannot be sustained, especially if the investment bankers are greedy and our politicians are corrupt (that simply accelerates our demise). The question is, “How do we make a viable currency system?” The problem as I see it is that we (the US and the world) requires a currency system that has to represent the world’s wealth in some way, have high intrinsic value, and is relatively easy to transport and store. Gold has represnted such a commodity for many years because it was pretty, scarce and would not corrode. Silver has become a competitor to gold because it is also pretty, somewhat scarce, but has a lot of practical industrial uses (e.g., great conductor of electricity, etc). But there is simply not enough of it or gold to cover all the world’s currencies. What I propose is not a new concept. Some guy came up with it way back in the 1960’s. Mine lots of uranium ore and make it into metal coins (they have very low radio activity which can be shielded by a thin coating of a coating of metal or even plastic or ceramics. The uranium would have the intrinsic value of the energy it could potentially produce in a nuclear reactor (after some additional refining and centrifuge work to concentrate the reactive uranium isotope to ~3% or so). People would not necessarily hold the coins (probably would not want or need to), but nations could put out an appropriate amount of paper money with these coins as backing (and coins could be redeemable if necessary). Such an inventory of potential energy is now, and especially in a thousand years or so, will be very important when humanity has to go underground with its inventory of nuclear reactors to survive the next ICE AGE (you bloody global warming nuts). Such a coinage backed currency system is what I call real long term intrinsic value (i.e., it will save humanity!!).
This is just not true. Imagine the government getting money through taxes, paying a little debt off and using the rest for projects etc…
Where does the money go? Back to the people, who will spend again which results in more taxes for the government.
Like that you can pay debts off theoretically every year with money cycling back to you.
It is a simple concept to understand and it’s interesting noone has pointed that out yet…
Julius:
That is true for some of the debt, but when the U.S. government retires debt with the Federal Reserve (which owns about half the debt) the only way that money gets back into the system is if the U.S. government borrows it from the Federal Reserve again.
I have 2 quick questions:
1] What if you dont pay them back, every country is in debt , so in reality if every country starts paying their debt .. they borrow from some1 else and cycle continues. What happens if you dont pay , debt is after all a number ?
2] Why not work hard, start manufacutring and create value, if sugar cane becomes sugar , doesnt it add more value to economy .. this one takes time but once millions start doing it together the results can be significant .. thats how an individual pays his debt .. by doing more work .. shldnt a country do that by creating value rather than borrowing money from anywhere ?
The truth is that if all money was paid back, if all debts were paid back that is, then there would not be enough money to actually do so. No one ever creates the interest. The interest is tacked onto the money in circulation. All money is created through debt, that is how we create capitalist money. We will need to find another way of creating money if we don’t want to be caught in this conundrum.
Fear not my fellow Americans, we soon will be rid of the real problem (the current administration and congress) and be steered toward the conservative ways and away from the existing greedy morons. Bless God and America.
Might as well keep going with it; seeing as it has not changed thus far.
Although these articles are informative they’re always going to be uselss because as people we’re too ignorant and stupid. How sad is that?