If Donald Trump truly wants to fix the economy, he must shut down the Federal Reserve. If he just tries to patch up our current system, he will fail, because it has been fundamentally flawed from the very beginning. A little over a century ago, very powerful forces on Wall Street convinced Congress to completely restructure our financial system. An immensely powerful central bank known as the Federal Reserve was created, and the goal was to transform the U.S. dollar into a debt-based currency that would continuously be inflated and to create an endless debt spiral from which the federal government could never possibly escape. Sadly, they were successful on both counts. Since the creation of the Federal Reserve, the value of the U.S. dollar has declined by approximately 98 percent and our national debt has gotten more than 5000 times larger.
Americans tend to give most of the credit or most of the blame for the performance of the U.S. economy to our presidents, but the truth is that an unelected, unaccountable group of central bankers has far more power over our economy than anyone else does. The Federal Reserve has become known as “the fourth branch of government“, but unlike the other branches of government we are told that the Fed’s decisions are “above politics” because they are “too important”. Fed officials fiercely guard their “independence”, and they fiercely resist any “interference” from Congress, the President, or the American people.
Donald Trump can try to lower taxes and reduce regulations, but what he will be able to do to influence the economy pales in comparison to the immensely powerful tools that the Fed wields. The Fed controls interest rates, the Fed controls the money supply, and the Fed regulates the banks.
To give you an idea of how enormously powerful the Fed is, I want you to pull out a dollar bill.
As you look at that dollar bill, I want you to notice that it says “Federal Reserve Note” right at the top.
In the financial world, a “note” is an instrument of debt, and the truth is that our system was designed to create as much debt as possible.
So why are we using debt-based “Federal Reserve Notes” in the first place? Shouldn’t Congress have control over our currency?
According to Article I, Section 8 of the U.S. Constitution, it is Congress that has the authority to “coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures”.
So how did the Fed get involved?
Well, it is a very long and convoluted story, and if you are interested in the history behind it I would commend to you an excellent book by C. Edward Griffin entitled “The Creature from Jekyll Island: A Second Look at the Federal Reserve“. Basically, big money interests on Wall Street got their hooks into the White House and Congress, and they rushed through legislation right before Christmas in 1913 that created this insidious central banking system that was designed to slowly but surely take wealth from the American people and put it into their hands.
Sadly, most Americans don’t even realize that we have a debt-based currency, nor do they understand where our money comes from. In a previous article, I discussed how money is normally created by the Federal Reserve under our current system…
When the U.S. government decides that it wants to spend another billion dollars that it does not have, it does not print up a billion dollars.
Rather, the U.S. government creates a bunch of U.S. Treasury bonds (debt) and takes them over to the Federal Reserve.
The Federal Reserve creates a billion dollars out of thin air and exchanges them for the U.S. Treasury bonds.
The Federal Reserve takes the U.S. Treasury bonds that it receives in exchange for the “Federal Reserve Notes” that it gave to the government and it auctions off those bonds to the highest bidder. But of course this process always creates more debt than it does money…
The U.S. Treasury bonds that the Federal Reserve receives in exchange for the money it has created out of nothing are auctioned off through the Federal Reserve system.
There is a problem.
Because the U.S. government must pay interest on the Treasury bonds, the amount of debt that has been created by this transaction is greater than the amount of money that has been created.
So where will the U.S. government get the money to pay that debt?
Well, the theory is that we can get money to circulate through the economy really, really fast and tax it at a high enough rate that the government will be able to collect enough taxes to pay the debt.
But that never actually happens, does it?
And the creators of the Federal Reserve understood this as well. They understood that the U.S. government would not have enough money to both run the government and service the national debt. They knew that the U.S. government would have to keep borrowing even more money in an attempt to keep up with the game.
So our debt just keeps going up and up and up. While Barack Obama has been in the White House our national debt has risen by more than 9 trillion dollars, and at this moment it is sitting just under the 20 trillion dollar mark.
But we shouldn’t be surprised by this, because this is precisely what the Federal Reserve system was designed to do to us.
Many conservatives still hold to the mistaken illusion that we could somehow pay all of this debt back someday, but as I have shown in a previous article, this is mathematically impossible to do.
If the government went out today and grabbed every single dollar in existence we could not pay back the national debt, and of course we have trillions of dollars of household debt, trillions of dollars of corporate debt and trillions of dollars of state and local government debt that we need to pay back as well.
Under the current system our only hope is to keep the wheel spinning by continuing to devalue the dollar and by continuing to go into even greater amounts of debt.
And of course it isn’t just the United States that is in this predicament. At this point, almost every single nation on the entire planet has a central bank.
Even though there are extremely sharp disagreements among nations on virtually everything else, somehow central banking has achieved nearly universal adoption.
As you read this article, well over 99.9% of the population of the globe lives in a country that has a central bank.
Do you think that is just a coincidence?
Of course there are still a few very small countries such as the Federated States of Micronesia that do not have a central bank, but the only big nation not to have one is North Korea.
And you would literally have to be insane to want to live in North Korea.
But now we have an opportunity to get free from this insidious system. The truth is that we don’t have to have a central bank. In fact, the greatest period of economic growth in U.S. history was when there was no central bank.
We don’t need central planners to set our interest rates and to manipulate our money supply. They will never admit this, but the reality of the matter is that their interference in the economy often creates tremendous economic busts.
Since the Federal Reserve was created in 1913, there have been 18 distinct recessions or depressions: 1918, 1920, 1923, 1926, 1929, 1937, 1945, 1949, 1953, 1958, 1960, 1969, 1973, 1980, 1981, 1990, 2001, 2008.
Considering their track record, isn’t it time for a change?
And we don’t have to have a debt-based currency. In fact, not too long ago we had a president that decided to start issuing debt-free “United States Notes”.
Back in 1963, President John F. Kennedy issued Executive Order 11110 which authorized the U.S. Treasury to issue debt-free “United States Notes” which were directly created by the U.S. government.
He was assassinated shortly thereafter.
Most Americans don’t realize this, but many of the debt-free United States Notes that were issued under President Kennedy are still in circulation today, and President Trump could do something similar.
But will he?
It has been said that the borrower is the servant of the lender, and the Federal Reserve system has turned all of us into debt slaves.
Debt is a form of social control, and the global elite use all of this debt to dominate the planet. The total amount of debt in the world just hit a brand new record high of 152 trillion dollars, and the longer we allow the central banks to control the system the bigger this debt bubble will become.
There is a way out, and here in the United States that starts with shutting down the Federal Reserve and issuing debt-free currency. It would take someone very bold to make a move like this, and so let us hope that the man that we just elected is up to the task.
If Barack Obama can “solve” the debt ceiling crisis by printing up some trillion dollar coins, then why does the federal government need our money? As another debt ceiling showdown approaches, many in the liberal media are suggesting that if Congress does not raise the debt ceiling that Obama should just have the U.S. Treasury create a trillion dollar platinum coin and use it to pay our bills. It sounds crazy, but many notable voices (including Paul Krugman of the New York Times) are supporting this idea. But if the federal government has had the power to create trillion dollar coins out of thin air all this time, then why do we have to pay taxes? Not only that, why do we have a national debt? If the federal government can just create money whenever it wants, then why does the federal government ever have to borrow it from others? The U.S. Constitution actually grants Congress the power to “coin money”, so why is the Federal Reserve doing it? Those are some very important questions. Most Americans don’t even realize that the U.S. government never actually needed to borrow a single penny from anyone else. The U.S. Congress has the authority to create debt-free money whenever it wants to. Conceivably, the entire federal government could be funded without ever borrowing a single dollar and without ever receiving a single dollar from any of us in taxes. Just imagine that – a nation without a single penny of national debt, no income tax and no IRS. What a wonderful world that would be. Of course there would be other potential dangers under such a system (such as runaway inflation), and those dangers would have to be addressed. But the truth is that we don’t have to have an income tax or 16 trillion dollars of government debt. We only have those things because we have chosen to have those things.
Sometimes, a crisis can illuminate options that most people had not considered previously. As another debt ceiling crisis draws closer, many are looking for ways for the U.S. government to be able to continue to pay its bills if Congress does not authorize an increase in the debt ceiling.
If a debt ceiling agreement is not worked out, the U.S. government will soon only be able to pay about half the bills that are coming due after interest payments on the national debt (which will almost certainly be prioritized) are made.
That is why a lot of people on the left are pushing the “trillion dollar coin” alternative. So how would this work exactly? The mechanics were recently explained by Jim Pethokoukis on his American Enterprise Institute blog…
There are limits on how much paper money the U.S. can circulate and rules that govern coinage on gold, silver, and copper. BUT, the Treasury has broad discretion on coins made from platinum. The theory goes that the U.S. Mint would create a handful of trillion dollar (or more) platinum coins. The President would then order the coins deposited at the Fed, who would then put the coin(s) in the Treasury who now can pay all their bills and a default is removed from the equation. The effects on the currency market and inflation are unclear, to say the least.
In my opinion, if anyone in the federal government is going to be creating money out of thin air, it should be the U.S. Congress. After all, according to Article I, Section 8 of the U.S. Constitution, it is the U.S. Congress that has been granted the authority to “coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures”.
But those that are pushing Obama to create a “trillion dollar coin” point to a law that Congress passed that allows the U.S. Treasury to mint platinum coins. The following is from a recent CNN article…
Normally, the Federal Reserve is charged with issuing currency. But U.S. law, specifically 31 USC § 5112, also grants Treasury permission to “mint and issue platinum bullion coins and proof platinum coins.”
This section of law was meant to allow for the printing of commemorative coins and the like. But the Treasury Secretary has the authority to mint these coins in any denomination he or she sees fit.
But it wouldn’t quite be that easy. According to a recent ABC News article, some elements of the coin design would have to be determined by legislation…
The more difficult part comes sometime after the decision is made to coin the platinum and before the Mint gets to work in sculpting the pieces.
At that point, the American people must decide whose face will adorn the trillion dollar trinket. The process to determine the “specs” of the coin, U.S. Mint Public Affairs Specialist Genevieve Billia warns, must be “determined by legislation,” creating the potential for another congressional impasse.
So we would likely end up back at square one.
But if printing up a “trillion dollar coin” does not work out, Paul Krugman of the New York Times has come up with another option…
Don’t like the platinum coin option? Here’s a functionally equivalent alternative: have the Treasury sell pieces of paper labeled “moral obligation coupons”, which declare the intention of the government to redeem these coupons at face value in one year.
It should be clearly stated on the coupons that the government has no, repeat no, legal obligation to pay anything at all; you see, they’re not debt, and therefore don’t count against the debt limit. But that shouldn’t keep them from having substantial market value.
Of course there is a very, very low probability that any of these wild ideas will ever be tried, but this debate has raised some very interesting points.
The truth is that we do not have to have a system where more money is only created when more debt is created. We could have a system where the federal government directly creates debt-free money that is spent directly into circulation by the federal government.
In fact, this has happened before.
As I have written about previously, during the presidency of JFK a limited number of debt-free United States Notes were issued by the U.S. Treasury and spent by the U.S. government directly into circulation without any new debt being created. In fact, each bill said “United States Note” right at the top.
Unfortunately, after JFK’s presidency no more debt-free United States Notes were ever issued.
But even before JFK, there were times when debt-free United States Notes were being used. According to Wikipedia, United States Notes were first used during the Civil War….
They were originally issued directly into circulation by the U.S. Treasury to pay expenses incurred by the Union during the American Civil War. Over the next century, the legislation governing these notes was modified many times and numerous versions have been issued by the Treasury.
So why are we using debt-based Federal Reserve Notes today instead of debt-free United States Notes?
If the Federal Reserve did not exist and the U.S. government directly created money instead of borrowing it, it is conceivable that we could have a national debt of $0.00 today instead of $16,432,707,263,449.56.
Which option do you think our children and our grandchildren will wish that we had opted for?
In a system where the government directly created money, it is also conceivable that we could completely do away with the income tax and the IRS completely. The U.S. once prospered greatly without an income tax, and it could do so again.
And the truth is that our system of taxation is broken beyond repair. If you doubt this, just read this article.
So what would the downside be to such a system? Well, of course rampant inflation would be a huge danger. Allowing Congress to print up money whenever they wanted to would be playing with fire. That is why it would be imperative for there to be a hard cap on what the federal government could spend. For example, you could set the cap on spending by the federal government at 20 percent of GDP. That way we would hopefully never end up looking like the Weimar Republic.
And the current federal debt could be paid down a little at a time using newly created debt-free currency. This would have to be done slowly to keep inflation under control, but it could be done.
Of course if you wanted to continue to fund the federal government through taxation, there are other options that would still allow you to do away with the income tax. For example, one of the ways that our founders intended for the federal government to be funded was through tariffs, and we could definitely raise a lot of money that way. Plus, that would have the added benefit of making American companies much more competitive again and it would reduce the flow of American jobs out of the country.
So am I in favor of having Barack Obama create a trillion dollar coin to get around the debt ceiling crisis?
Most definitely not. If it does not violate the letter of the Constitution (which I believe it does), it sure does violate the spirit of it.
But if the U.S. Congress decided to shut down the Federal Reserve and the IRS and they decided to abolish the income tax, and instead they started directly issuing debt-free currency directly into circulation, that is something I would very much be in favor of.
Yes, that system would not be perfect either, but it would be far more preferable to what we have today.
So what do you think? Should we keep our current system of debt-based money, or would a system of debt-free money be better?
Please feel free to post a comment with your opinion below…
What if there was a financial system that would eliminate the need for the federal government to go into debt, that would eliminate the need for the Federal Reserve, that would end the practice of fractional reserve banking and that would dethrone the big banks? Would you be in favor of such a system? A surprising new IMF research paper entitled “The Chicago Plan Revisited” by Jaromir Benes and Michael Kumhof is making waves in economic circles all over the globe. The paper suggests that the world would be much better off if we adopted a system where the banks did not create our money. So instead of a system where more money is only created when more debt is created, we would have a system of debt-free money that is created directly by national governments. There have been others that have suggested such a system before, but to have an IMF research paper actually recommend that such a system be adopted is a very big deal. At the moment, the world is experiencing the biggest debt crisis in human history, and this proposal is being described as a “radical solution” that could potentially remedy some of our largest financial problems. Unfortunately, apologists for the current system are already viciously attacking this new IMF paper, and of course the big banks would throw a major fit if such a system was ever to be seriously contemplated. That is why it is imperative that we educate people about how money really works. Our current system is in the process of collapsing and we desperately need to transition to a new one.
One of the fundamental problems with our current financial system is that it is based on debt. Just take a look at the United States. The way our system works today, the vast majority of all money is “created” either when we borrow money or the government borrows money. Therefore, the creation of more money creates more debt. Under such a system, it should not be surprising that the total amount of debt in the United States is more than 30 times larger than it was just 40 years ago.
We don’t have to do things this way. There is a better alternative. National governments can directly issue debt-free currency into circulation. The following is a brief excerpt from the IMF report…
At the height of the Great Depression a number of leading U.S. economists advanced a proposal for monetary reform that became known as the Chicago Plan. It envisaged the separation of the monetary and credit functions of the banking system, by requiring 100% reserve backing for deposits. Irving Fisher (1936) claimed the following advantages for this plan: (1) Much better control of a major source of business cycle fluctuations, sudden increases and contractions of bank credit and of the supply of bank-created money. (2) Complete elimination of bank runs. (3) Dramatic reduction of the (net) public debt. (4) Dramatic reduction of private debt, as money creation no longer requires simultaneous debt creation. We study these claims by embedding a comprehensive and carefully calibrated model of the banking system in a DSGE model of the U.S. economy. We find support for all four of Fisher’s claims.
Why should banks be allowed to create money?
That is a very good question.
Why should sovereign governments ever have to borrow money from anyone?
That is another very good question.
Our current system is designed to enrich the bankers and get everyone else into debt.
And is that not exactly what has happened?
Taking the creation of money away from the bankers would have some tremendous advantages. A recent article by renowned financial journalist Ambrose Evans-Pritchard described some of these benefits…
One could slash private debt by 100pc of GDP, boost growth, stabilize prices, and dethrone bankers all at the same time. It could be done cleanly and painlessly, by legislative command, far more quickly than anybody imagined.
The conjuring trick is to replace our system of private bank-created money — roughly 97pc of the money supply — with state-created money. We return to the historical norm, before Charles II placed control of the money supply in private hands with the English Free Coinage Act of 1666.
Specifically, it means an assault on “fractional reserve banking”. If lenders are forced to put up 100pc reserve backing for deposits, they lose the exorbitant privilege of creating money out of thin air.
The nation regains sovereign control over the money supply. There are no more banks runs, and fewer boom-bust credit cycles.
So why don’t we go to such a system immediately?
Well, the transition to such a system would undoubtedly be a major shock to the global financial system, and most people try to avoid significant short-term pain even if there are tremendous long-term benefits.
More importantly, however, is that the bankers have a tremendous amount of power in our society today, and they would move heaven and earth to keep a debt-free monetary system from ever being implemented.
You see, the influence of the bankers is not just limited to the big banks. Our largest financial institutions (and the people who own them) also have large ownership stakes in the vast majority of the big Fortune 500 corporations. In essence, the big banks are at the very pinnacle of “the establishment” in the United States and in almost every other major country in the western world.
And the vast majority of all political campaigns are funded by “the establishment”. It takes an enormous amount of money to win campaigns these days, and most politicians are extremely hesitant to bite the hands of those that feed them.
So don’t expect any changes to happen overnight.
One proposal that has actually been put forward in Congress is to cancel all of the government debt that the Federal Reserve is currently holding. Right now, the Fed is holding more than 1.6 trillion dollars of U.S. government debt…
That would seem to make a lot of sense. That would immediately wipe more than 1.6 trillion dollars from the U.S. national debt without any real harm being done.
But “the establishment” would be horrified if such a thing happened, so I wouldn’t anticipate it happening any time soon.
Hopefully we can get the American people (along with people all over the globe) educated about these things so that we can start to get millions of people pushing for change.
A debt-free monetary system is superior to a debt-based monetary system in so many ways.
For example, if the U.S. government directly spent debt-free money into circulation, it could conceivably never need to borrow a single dollar ever again. If the government wanted to spend more money than it brought in, it would simply print it up and spend it.
Of course the big danger with that would be inflation. That is why it would be imperative for there to be a hard cap on what the government could spend. For example, you could set the cap on spending by the federal government at 20 percent of GDP. That way we would never end up looking like the Weimar Republic.
And the current federal debt could be paid down a little at a time using newly created debt-free dollars. This would have to be done slowly to keep inflation under control, but it could be done.
That way we would not hand a 16 trillion dollar debt to our children and our grandchildren. We created this mess so we should clean it up.
Theoretically you could also do away with the federal income tax if you wanted to. Personally, I would like to see the federal government be funded to a large degree by tariffs on foreign goods. That would also have the side benefit of bringing millions of jobs back into the United States.
Our system of income tax collection is just so incredibly inefficient. It costs us mind boggling amounts of time and money. Just consider the following stats from one of my previous articles…
1 – The U.S. tax code is now 3.8 million words long. If you took all of William Shakespeare’s works and collected them together, the entire collection would only be about 900,000 words long.
2 – According to the National Taxpayers Union, U.S. taxpayers spend more than 7.6 billion hours complying with federal tax requirements. Imagine what our society would look like if all that time was spent on more economically profitable activities.
3 – 75 years ago, the instructions for Form 1040 were two pages long. Today, they are 189 pages long.
4 – There have been 4,428 changes to the tax code over the last decade. It is incredibly costly to change tax software, tax manuals and tax instruction booklets for all of those changes.
5 – According to the National Taxpayers Union, the IRS currently has 1,999 different publications, forms, and instruction sheets that you can download from the IRS website.
6 – Our tax system has become so complicated that it is almost impossible to file your taxes correctly. For example, back in 1998 Money Magazine had 46 different tax professionals complete a tax return for a hypothetical household. All 46 of them came up with a different result.
7 – In 2009, PC World had five of the most popular tax preparation software websites prepare a tax return for a hypothetical household. All five of them came up with a different result.
8 – The IRS spends $2.45 for every $100 that it collects in taxes.
For long stretches of our history the United States did not have any income tax, and during those times we thrived. It is entirely conceivable that we could return to such a system.
At this point, the wealthy have become absolute masters at hiding their wealth from taxation. According to the IMF, a total of 18 trillion dollars is currently being hidden in offshore banks. What we are doing right now produces very inequitable results and it is not working.
In many ways, inflation would be a much fairer “tax” than the income tax because inflation taxes each dollar equally. Nobody would be able to cheat the system.
But if people really love the IRS and the federal income tax, we could keep them under a debt-free money system. I just happen to think that the IRS and the federal income tax are both really bad ideas that have never served the interests of the American people.
In any event, hopefully you can see that there is a much broader range of solutions to our problems than the two major political parties have been presenting to us.
We do not have to allow the banks to create our money.
The federal government does not have to go into more debt.
We don’t actually need the Federal Reserve.
There are alternatives to the federal income tax and the IRS.
Yes, it is very true that no system would be perfect. But clearly the path that we are on is only going to lead to disaster. U.S. government finances are a complete and total nightmare, and this mountain of debt that we have accumulated is going to absolutely destroy us if we allow it to.
So somebody out there should be proposing a fundamental change in direction for our financial system.
Unfortunately, our politicians are just proposing more of the same, and we all know where that is going to lead.
Most Americans have no idea that the U.S. government once issued debt-free money directly into circulation. America once thrived under a debt-free monetary system, and we can do it again. The truth is that the United States is a sovereign nation and it does not need to borrow money from anyone. Back in the days of JFK, Federal Reserve Notes were not the only currency in circulation. Under JFK (at at various other times), a limited number of debt-free United States Notes were issued by the U.S. Treasury and spent by the U.S. government without any new debt being created. In fact, each bill said “United States Note” right at the top. Unfortunately, United States Notes are not being issued today. If you stop right now and pull a dollar out of your wallet, what does it say right at the top? It says “Federal Reserve Note”. Normally, the way our current system works is that whenever more Federal Reserve Notes are created more debt is also created. This debt-based monetary system is systematically destroying the wealth of this nation. But it does not have to be this way. The truth is that the U.S. government still has the power under the U.S. Constitution to issue debt-free money, and we need to educate the American people about this.
Posted below are pictures of the front and the back of a United States Note printed in 1963 while JFK was president….
Notice that there is a red seal instead of a green seal on the front, and it says “United States Note” rather than “Federal Reserve Note”.
According to Wikipedia, United States Notes were issued directly into circulation by the U.S. Treasury and they were first used during the Civil War….
They were originally issued directly into circulation by the U.S. Treasury to pay expenses incurred by the Union during the American Civil War. Over the next century, the legislation governing these notes was modified many times and numerous versions have been issued by the Treasury.
So why are we using debt-based Federal Reserve Notes today instead of debt-free United States Notes?
It seems rather stupid, doesn’t it?
Well, that is what Thomas Edison thought too.
Thomas Edison was once quoted in the New York Times as saying the following….
That is to say, under the old way any time we wish to add to the national wealth we are compelled to add to the national debt.
Now, that is what Henry Ford wants to prevent. He thinks it is stupid, and so do I, that for the loan of $30,000,000 of their own money the people of the United States should be compelled to pay $66,000,000 — that is what it amounts to, with interest. People who will not turn a shovelful of dirt nor contribute a pound of material will collect more money from the United States than will the people who supply the material and do the work. That is the terrible thing about interest. In all our great bond issues the interest is always greater than the principal. All of the great public works cost more than twice the actual cost, on that account. Under the present system of doing business we simply add 120 to 150 per cent, to the stated cost.
But here is the point: If our nation can issue a dollar bond, it can issue a dollar bill. The element that makes the bond good makes the bill good.
Our current debt-based monetary system was devised by greedy bankers that wanted to make huge profits by creating money out of thin air and lending it to the U.S. government at interest.
Sadly, the vast majority of the American people have no idea how money is actually created in this nation.
In a previous article about money and debt, I explained how more government debt is created whenever the U.S. government puts more money into circulation….
When the government wants more money, the U.S. government swaps U.S. Treasury bonds for “Federal Reserve notes”, thus creating more government debt. Usually the money isn’t even printed up – most of the time it is just electronically credited to the government. The Federal Reserve creates these “Federal Reserve notes” out of thin air. These Federal Reserve notes are backed by nothing and have no intrinsic value of their own.
When each new Federal Reserve Note is created, the interest owed by the federal government on that new Federal Reserve Note is not also created at the same time.
So the amount of government debt that is created actually exceeds the amount of money that is created.
Isn’t that a stupid system?
The U.S. Constitution says that the federal government is the one that should actually be issuing our money.
In particular, according to Article I, Section 8 of the U.S. Constitution, it is the U.S. Congress that has been given the responsibility to “coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures”.
So why is a private central banking cartel issuing our money?
As is the case with so many other issues, we desperately need to get back to the way the U.S. Constitution says that we should be doing things.
The debt-based Federal Reserve system is literally stealing the future from our children and our grandchildren.
Back in 1910, a couple years prior to the passage of the Federal Reserve Act, the national debt was only about $2.6 billion.
A little over 100 years later, our national debt is now more than 5000 times larger.
So why don’t we just admit that this system simply does not work?
Our current debt-based monetary system also requires very high personal income taxes to pay for it.
In fact, it is no accident that the personal income tax was introduced at about the same time that the Federal Reserve system originally came into existence.
Our children, our grandchildren and many generations after that are facing a lifetime of debt slavery because of us.
As I have written about previously, if the federal government began right at this moment to repay the U.S. national debt at a rate of one dollar per second, it would take over 440,000 years to pay off the national debt.
Neither the Republicans or the Democrats are proposing any solutions to this problem. Rather, both parties are only trying to slow down the rate at which we are going into even more debt.
But the truth is that the federal government does not have to go into a single penny of additional debt.
How could this be?
It is not too complicated.
If Congress took back the power over our currency and started issuing debt-free money a lot of our problems could be fixed.
A basic plan would look something like this….
#1) The U.S. Congress votes to take back all of the functions that it has delegated to the Federal Reserve and begins to issue debt-free United States Notes. These United States Notes would have the exact same value as existing Federal Reserve Notes, and over time all existing Federal Reserve Notes would be taken out of circulation.
#2) The U.S. Congress nationalizes all debt held by the Federal Reserve. That would instantly reduce the national debt by 1.6 trillion dollars. In fact, there are a few members of Congress that have already proposed this.
#3) A Constitutional amendment is passed limiting future U.S. government deficits to a reasonable percentage of GDP. Any future deficits would not be funded by borrowing. Rather, future deficits would be funded by newly created United States Notes. Therefore, the federal government would never again accumulate another penny of debt.
And it would be important to inject new money into the economy from time to time. When existing money is destroyed or when the population grows it is important to inject a certain amount of new money into the system in order to avoid deflation.
#4) The existing national debt would be very slowly paid off with newly created United States Notes. The U.S. government spent over 454 billion dollars on interest on the national debt during fiscal year 2011, and over time this expense would go to zero.
If the national debt is paid off slowly enough, it would not create too much inflation. I believe that it could be paid off gradually over 50 years without shocking the economy too much.
There are some that would object to any measure that would ever cause a small amount of inflation, but my contention is that we have created a $15 trillion dollar debt mess for future generations, and it would be absolutely criminal to pass that legacy on to them.
We created this mess, and it is our responsibility to clean it up.
While there is certainly a danger that we would have a limited amount of inflation under a debt-free monetary system such as the one described above, the reality is that we are absolutely guaranteed inflation under the Federal Reserve system.
Most Americans believe that inflation is a fact of life, but the sad truth is that the United States has only had a major, ongoing problem with inflation since the Federal Reserve was created back in 1913.
If you do not believe this, just check out this chart.
Sadly, the U.S. dollar has lost well over 95 percent of its value since the Federal Reserve was created.
So, yes, there would be a need for strict monetary discipline under a debt-free monetary system, but it would be hard to do worse than the Federal Reserve has already been doing.
And Congress could always slow down inflation using other methods. For example, raising the reserve requirements for banks (which should be done anyway) would help keep inflation in check.
If the above proposals were adopted, the end result would be something that we could all live with. The Federal Reserve system would be abolished, the national debt burden on future generations would be wiped out, the economy would not have to go through a devastating economic collapse that could last a decade or longer, and we could eventually make a fairly smooth transition to “hard money” if we wanted to after the national debt is gone.
Is there any other proposal out there that does all of those things?
There are many out there that would dispute some of the points above, and debate is good. By engaging in debate, we can hopefully help educate the American people about the nature of money.
The key is to get rid of our current debt-based Federal Reserve Notes and replace them with debt-free United States Notes.
The American people need to understand that it is a lie that the U.S. government “must” borrow money from somebody else.
When the U.S. government borrows money, it slowly transfers wealth from the American people to those that lent it.
At this point, we have created a financial nightmare for future generations that is unlike anything the world has ever seen before. We owe it to future generations to eliminate the debt problem without destroying the United States economy. Adopting debt-free money would allow us to do that.
But sadly, neither political party is even talking about debt-free money. In fact, most of the politicians in both political parties probably do not even know what debt-free money is.
So we need to get the American people educated about these things. Because if we stay on the course that we are currently on, an economic collapse is inevitable.