Barack Obama actually did it. Despite enormous pressure from the government of Israel, President-elect Donald Trump and members of his own party in Congress, Barack Obama decided to stick a knife in Israel’s back at the United Nations. On Friday, the UN Security Council adopted a resolution that calls for a “two-State solution based on the 1967 lines” and that shockingly states that “the establishment by Israel of settlements in the Palestinian territory occupied since 1967, including East Jerusalem, has no legal validity”. This resolution was approved by a vote of 14 to 0, and the U.S. abstained from voting. But essentially the outcome of the vote was going to be determined by Barack Obama. For decades, the U.S. veto power on the UN Security Council has shielded Israel from these types of resolutions, but this time around Obama decided to betray Israel by allowing this vote to pass. Needless to say, this vote is going to have enormous implications for Israel, for the United States, and for the entire globe.
Just five days ago, I published one of the most important articles that I have ever written. It was entitled “The Real Reason Why America Has Been Given A Reprieve“, and in that article I explained why the U.S. has experienced a season of blessing since blocking a potential UN Security Council resolution that France wanted to introduce that would have formally divided the land of Israel in September 2015. If you have not read that article yet, please go back and read it, because it will be of great aid in understanding why this new UN Security Council resolution is so incredibly important.
As I stated in that previous article, it is my contention that the reason why things have gone so well for the United States over the past 16 months is because Barack Obama made the right decision in September 2015 and chose to protect the land of Israel from being divided.
But now that Barack Obama has reversed course and has greatly betrayed Israel, is America’s reprieve now over?
For months, I have been warning that Barack Obama may do something like this at the UN during the waning days of his presidency. You can see some examples of my previous warnings here, here and here. And I have also been warning about the severe consequences that the United States would face if our government did ultimately decide to betray Israel.
This UN Security Council resolution that was passed on Friday was originally going to be put up for a vote on Thursday. But after enormous pressure from the government of Israel and from President-elect Donald Trump, Egypt decided to withdraw the resolution that they had proposed at the last moment.
When that happened, it looked like everything was going to be okay.
However, temporary members of the UN Security Council New Zealand, Malaysia, Venezuela and Senegal immediately objected to Egypt’s move, and they indicated that they would submit the resolution for a vote if Egypt would not.
So on Friday a vote took place, and Obama did what many had been fearing. The following comes from the New York Times…
Defying extraordinary pressure from President-elect Donald J. Trump and furious lobbying by Israel, the Obama administration on Friday allowed the United Nations Security Council to adopt a contentious resolution that condemned Israeli settlement construction.
The administration’s decision not to veto the measure broke a longstanding American tradition of serving as Israel’s sturdiest diplomatic shield.
President-elect Trump publicly said that he would have vetoed this resolution, but now it will be virtually impossible for him to reverse it.
Another vote of the UN Security Council would be necessary to reverse it, and the votes simply would not be there. And even if they were, either Russia or China could use the veto power that they possess to block it.
So this resolution is going to be permanent, and it is considered to be legally binding on both Israel and the Palestinians.
It seems fitting that Barack Obama is vacationing in Hawaii while all of this drama is playing out. Perhaps while he is on the golf course he is enjoying a good laugh about how he really stuck it to his long-time nemesis Israeli Prime Minister Benjamin Netanyahu.
Needless to say, the Israeli government is absolutely furious that Obama has betrayed them. The following comes from U.S. News & World Report…
An Israeli official on Friday accused President Barack Obama of colluding with the Palestinians in a “shameful move against Israel at the U.N.” after learning the White House did not intend to veto a Security Council resolution condemning settlement construction in the West Bank and east Jerusalem the day before.
“President Obama and Secretary Kerry are behind this shameful move against Israel at the U.N.,” the official said. “The U.S administration secretly cooked up with the Palestinians an extreme anti-Israeli resolution behind Israel’s back which would be a tail wind for terror and boycotts and effectively make the Western Wall occupied Palestinian territory,” he said calling it “an abandonment of Israel which breaks decades of US policy of protecting Israel at the UN.”
You can read the full text of the UN Security Council resolution that was just adopted right here. These are some of the highlights that I pulled out of the document…
-It refers to Israel as “the occupying Power”
-It calls for a “two-State solution based on the 1967 lines”
-It speaks of a Middle East “where two democratic States, Israel and Palestine, live side by side in peace within secure and recognized borders”
-It demands “the dismantlement of all settlement outposts erected since March 2001”
-To me, the following is the key paragraph in the entire resolution…
Reaffirms that the establishment by Israel of settlements in the Palestinian territory occupied since 1967, including East Jerusalem, has no legal validity and constitutes a flagrant violation under international law and a major obstacle to the achievement of the two-State solution and a just, lasting and comprehensive peace
-It stipulates “that Israel immediately and completely cease all settlement activities in the occupied Palestinian territory, including East Jerusalem”
-It states that the UN Security Council “will not recognize any changes to the 4 June 1967 lines, including with regard to Jerusalem, other than those agreed by the parties through negotiations”
-It expresses a belief that “the cessation of all Israeli settlement activities is essential for salvaging the two-State solution, and calls for affirmative steps to be taken immediately to reverse the negative trends on the ground that are imperilling the two-State solution”
-It calls on all UN member states “to distinguish, in their relevant dealings, between the territory of the State of Israel and the territories occupied since 1967”
This is the most anti-Israel resolution that the UN Security Council has ever passed, and it never would have happened without Barack Obama’s approval.
The Israeli government and the Obama administration have had a very strained relationship for years, and this moment represents the culmination of tensions that have been building for a very long time.
But does this resolution actually represent the “division of the land of Israel” at the United Nations that so many have been waiting for?
I don’t know if I have a definitive answer to that question for you today. The language of this resolution does not directly give formal recognition to a Palestinian state, but it does speak of a “democratic state” of “Palestine”, and it does speak of “Palestinian territory”. It calls Israel “the occupying Power”, and it does say that all Israeli settlements in the West Bank and in East Jerusalem are illegal. And on top of everything else, the UN Security Council clearly stated that it “will not recognize any changes to the 4 June 1967 lines, including with regard to Jerusalem, other than those agreed by the parties through negotiations”.
So it seems clear that the UN Security Council has affirmed three major points that we have been watching for…
#1 A Palestinian state exists.
#2 The 1967 ceasefire lines represent the borders between the state of Israel and Palestine, but future negotiations between Israel and the Palestinians could alter these borders.
#3 East Jerusalem belongs to the Palestinians. This resolution does not refer to East Jerusalem as the future capital of Palestine, but that is obviously what is intended.
But perhaps another resolution will come later which will give official UN Security Council recognition to a Palestinian state.
At this point, we just don’t know.
However, what we do know is that for decades whenever the U.S. has taken steps toward dividing the land of Israel it has resulted in dramatic consequences for our nation.
It is my contention that this betrayal of Israel at the United Nations by Barack Obama represents a major turning point. I believe that America’s reprieve is now over, and that many of the things that people have been anticipating since September 2015 will start happening.
Barack Obama just made the worst decision of his entire presidency, and from this point forward nothing is ever going to be the same again.
This is one of the most important articles that I have written in a long time. The strange events of the past year and a half have befuddled and mystified many, and in this article I am going to explain why America has been given a temporary reprieve. If you go back to June 2015, I warned my readers that major financial problems were imminent, and sure enough in August 2015 we witnessed the greatest financial shaking that we had seen in seven years. I remember getting emails from my readers applauding me for absolutely nailing that prediction, but we were all concerned about what was coming next in September. If you will recall, there was more buzz about September 2015 than any other month that I can ever recall. That was the month of the last blood moon, the end of the Shemitah year and the Pope’s visit to the United States among other things. There was a tremendous amount of anticipation that the crisis that had begun in August 2015 would greatly accelerate in September and lead us into a period of cataclysmic global chaos. But that did not happen. Instead, U.S. financial markets calmed down and eventually recovered. There was a shift in the political realm as well, as the second half of 2015 marked the rise of Donald Trump. During those key months, Trump miraculously built a commanding lead in the race for the Republican nomination that none of his opponents were ever able to overcome. And now that Trump has won the election, an economic surge appears to be happening that is unlike anything that we have witnessed in many years.
Compared to much of the rest of the world, America appears to have been blessed over the past year and a half. Our financial markets have performed extremely well, the U.S. dollar is the strongest that is has been in over a decade, and jobs are coming back to the United States.
None of this was supposed to happen. In fact, our financial system was in such bad shape a year and a half ago that it was being projected that the U.S. would be on the bleeding edge of the next crisis. But instead here we stand safe, prosperous and seemingly secure.
How in the would can we explain this?
What I am about to share with you I have previously shared on national television down at Morningside, but it has been brought to my attention that I have never shared this with my readers on The Economic Collapse Blog. I apologize for this, because the past year and a half doesn’t make any sense until you understand these things.
When people look back at September 2015, they always forget the most critical event. In addition to everything else that was going on that month, France had a UN Security Council resolution all ready to go that would have permanently divided the land of Israel, that would have given formal UN Security Council recognition to a Palestinian state for the very first time, and that would have given East Jerusalem to the Palestinians as the capital of their new state.
The rest of the UN Security Council was ready to go along with the French resolution, but there was just one country standing in the way.
The United States has veto power on the UN Security Council, and so the Obama administration had the power to potentially block the resolution. After carefully considering the matter, the Obama administration decided that it was not the time for such a resolution, and so France never submitted it for a vote.
Just about everything else that Barack Obama did throughout his entire presidency was bad, but in this instance he got something completely right. The decision whether or not to divide the land of Israel was in his hands, and he made the right call.
Once this decision was made, it was almost as if someone hit a “pause button”. None of the bad things that people were forecasting ending up happening, and since that decision America has been blessed compared to the rest of the world.
And this is perfectly consistent with what God said that He would do. Starting in Genesis 12 and continuing all throughout the Scriptures, God promises to bless those that bless Israel and to curse those that curse Israel.
In this case, Barack Obama blessed Israel by preventing the UN Security Council from dividing the land, and so we were blessed as a result.
But of course there have been many other instances over the past several decades when we have been cursed as a nation for attempting to take steps toward the division of the land of Israel. One of the most notable instances took place in 1991 when George H. W. Bush got the Israelis and the Palestinians together for the very first time to discuss the dividing of the land of Israel into two states…
At that conference, the New York Times reported that Bush told Israel that “territorial compromise is essential for peace”. Needless to say, this upset a lot of people…
At the exact same time that conference was going on, the “Perfect Storm” was raging in the North Atlantic. Three major storms merged together, and instead of canceling one another out, they formed the kind of storm that is normally only seen once in a lifetime. If you will remember, Hollywood made a big blockbuster with George Clooney that was based on this storm. This gigantic storm went 1000 miles the wrong direction and slammed directly into the home of George H. W. Bush while he was at the Madrid conference talking about the need to divide the land of Israel…
Another very notable example of this phenomenon came in 2005. At that time, George W. Bush (the son of George H. W. Bush) had convinced Israel that it should pull all of the settlers out of Gaza and turn it entirely over to the Palestinians. According to the New York Times, the last of the settlers was evacuated on August 23, 2005…
On that exact same day, a little storm that came to be known as Hurricane Katrina formed over the Bahamas. It shocked forecasters by turning directly toward New Orleans, and it ultimately became the costliest natural disaster in all of U.S. history up until that time.
There are dozens more examples like this, and men like John McTernan, William Koenig and David Brennan have done a great job documenting them.
Today, 137 nations have already recognized a Palestinian state. The holdouts are mostly in North America and Europe…
France and most of the rest of Europe have been eager and ready to recognize a Palestinian state for quite a while now, but they don’t really want to move forward without the United States.
And of course they can’t officially do anything at the UN Security Council without U.S. approval.
Barack Obama had been hoping to achieve something through direct negotiations between the Israelis and the Palestinians, but those totally broke down and there is no hope that there will be any new negotiations any time soon.
So Barack Obama knows that his only shot at “leaving a legacy” in the Middle East is at the United Nations, and earlier this year he said that a UN Security Council resolution that would recognize a Palestinian state was “on the table” for the very first time…
At that time he did not indicate which way that he would go, and although there have been rumblings that something might happen, he has not taken any action yet.
But now time is running out for Obama, because his term is scheduled to end on January 20th. The advocates of a “two state solution” are becoming increasingly desperate, because they know that Donald Trump has already promised not to support a UN Security Council resolution that would divide the land of Israel. So they know that if something is going to be done, it has got to be done now.
A UN Security Council resolution would be legally binding on both the Israelis and the Palestinians, and it would be something that Donald Trump would not be able to undo. Another vote of the UN Security Council would be required to revoke a resolution once it has been passed, and the votes would not be there to do that.
So the next month is absolutely critical. The UN Security Council still has time to take action while Obama is still in office, and we know that such a move is actively being considered. For much, much more on this, please see the following articles that I have recently authored…
-“Jimmy Carter Urges Barack Obama To Divide The Land Of Israel At The United Nations Before January 20th”
-“John Bolton Warns That Obama May Divide The Land Of Israel At The UN Before The Inauguration”
-“The Danger Zone: Why Israel Greatly Fears Barack Obama’s Last Few Months In Office”
-“The New York Times Calls For Obama To Support A UN Resolution That Would Divide The Land Of Israel”
If we can get to January 20th and the land of Israel has not been divided by the UN Security Council and Donald Trump successfully takes office, perhaps our reprieve will be extended for a while.
But if Barack Obama very foolishly allows the land of Israel to be divided at the UN Security Council before January 20th, the “pause button” will be unpaused, our blessing will be turned into a curse, and all hell will break loose in America.
Large U.S. cities that the rest of the world used to look at in envy are now being transformed into gang-infested hellholes with skyrocketing crime rates. Cities such as Chicago, Detroit, Camden, East St. Louis, New Orleans and Oakland were once bustling with economic activity, but as industry has fled those communities poverty has exploded and so has criminal activity. Meanwhile, financial problems have caused all of those cities to significantly reduce their police forces. Sadly, this same pattern is being repeated in hundreds of communities all over the nation. The mainstream media loves to focus on mass shooters such as Adam Lanza, but the reality is that gang violence is a far greater problem in the United States than mass shooters ever will be. There are approximately 1.4 million gang members living in America today according to the FBI. That number has shot up by a whopping 40 percent just since 2009. There are several factors fueling this trend. Unemployment among our young people is at an epidemic level, about one out of every three U.S. children lives in a home without a father, and there are millions of young men who have come into this country illegally and have no way to legally support themselves once they arrive in our cities. Gangs provide a support system, a feeling of “community”, and a sense of purpose for many young people. Unfortunately, most of these gangs use violence and crime to achieve their goals, and they are taking over communities all over America. If your community is not a gang-infested war zone yet, you should consider yourself to be very fortunate. If nothing is done about this, the violence and the crime that is fueled by these gangs will continue to spread, and eventually nearly every single community in the United States will be affected by it.
Let’s take a closer look at some of the large cities all over America that are degenerating into gang-infested war zones…
East St. Louis
East St. Louis has a national reputation for being a city that you want to avoid. The following is from a recent Bloomberg article about the growing crime in that community…
Dodging open manholes where thieves had swiped cast-iron covers, Stephen Wigginton drives the crumbling streets of his hometown, East St. Louis, Illinois, pointing out new landmarks in America’s most violent city.
There’s the shopping mall where a police officer was shot in the face, a youth center that saw a triple homicide in September, and scattered about the city of 27,000 are brightly lit gas stations that serve as magnets for carjackers, hit-and-run robbers and killers.
“It’s the Wild West,” said Wigginton, the U.S. attorney for the Southern District of Illinois.
Today, the murder rate in East St. Louis is 17 times higher than the national average, but financial problems have forced huge cuts to the police budget. The number of police patrolling the streets of East St. Louis was reduced by 33 percent between 2008 and 2011. Police in the city admit that they are outgunned and outmanned, but there is not much that can be done about it.
Camden, New Jersey is another city that has experienced huge cuts to the police budget. Their police force shrank by about a third between 2008 and 2011. Today, Camden is considered to be one of the most dangerous cities in America and it has a murder rate that is about ten times higher than New York City.
The gangs have a very strong hold over Camden, and kids kill kids on a regular basis in the city. The following is a brief excerpt from a recent article about the horrible violence that is plaguing Camden…
At the vigil last week, residents prayed that Camden would simply find peace and that the masked gunman who killed Jewel Manire and Khalil Gibson would be caught.
As it grew darker, Michael Benjamin stood toward the back of the crowd, his son huddled even closer now, and shook his head.
“I’ve known at least 45 kids who’ve been killed in my lifetime,” he said, the boy holding his finger. “I stopped counting in 2004, though.”
In recent years there have been massive cuts to the police budget in Chicago due to financial difficulties. At the same time, gang activity has dramatically increased in the city.
As a result, Chicago has become known for murders and violence. The murder rate in Chicago was about 17 percent higher in 2012 than it was in 2011, and Chicago is now considered to be “the deadliest global city“.
If you can believe it, the number of murders in Chicago during 2012 was roughly equivalent to the number of murders in the entire country of Japan during 2012.
And the primary reason for all of this violence in Chicago is the gangs. As I have written about previously, there are only about 200 police officers assigned to Chicago’s Gang Enforcement Unit. It is their job to handle the estimated 100,000 gang members living in the city.
Approximately 80 percent of all murders and shootings in the city of Chicago are gang-related, and as the gangs continue to grow in size the violence in the city is going to get even worse. If Barack Obama wants to do something about violence in America, perhaps he should start with his home city.
I write a lot about Detroit, but that is because they are a perfect example of where the rest of America is headed if something dramatic is not done.
Detroit used to be one of the greatest manufacturing cities the world has ever seen, but over the past several decades the economic infrastructure of Detroit has been gutted and now there is very little industry left in the city.
Over half the children in the city live in poverty and a sense of hopelessness hangs in the air. At the same time, financial problems have forced the city to lay off huge numbers of cops. Back in 2005, there were about 4,000 police officers in Detroit. Today there are only about 2,500 and another 100 are scheduled to be eliminated from the force soon.
Meanwhile, crime in Detroit just continues to get even worse. There were 377 homicides in Detroit in 2011. In 2012, that number rose to 411.
Things have gotten so bad that even even the Detroit police are telling people to “enter Detroit at your own risk“.
New Orleans was a crime-infested city even before Hurricane Katrina hit it in 2005, but life has never quite been the same since that time.
The gangs have a very strong presence in the city, and there simply are not enough financial resources to keep crime in check.
If New Orleans was considered to be a separate nation, it would have the 2nd highest murder rate on the entire planet. There are some areas of New Orleans that you simply do not ever want to venture into at night.
Meanwhile, the police force has been such a mess in recent years that the federal government finally decided to step in. It is hoped that the “reforms” will mean less crime in New Orleans in future years, but I wouldn’t count on it.
Today, there are 626 police officers in Oakland, California. That is about a 25 percent decline from the 837 police officers that were patrolling the streets of Oakland back in December 2008.
Predictably, criminals have stepped in and have taken advantage of the situation. At one point in 2012, burglaries in the city of Oakland were up 43 percent over the previous year.
If you can believe it, more than 11,000 homes, cars and businesses were burglarized in Oakland during 2012. That breaks down to approximately 33 burglaries a day.
Police cuts in the city of Stockton, California have been so severe that the Stockton Police Officers’ Association ran a billboard advertisement with the following message at one point: “Welcome to the 2nd most dangerous city in California: Stop laying off cops!”
At the same time, crime in Stockton continues to get even worse. there have been more than 250 gold chain robberies in Stockton since the month of April, and there is no indication that crime in the city is going to slow down any time soon.
So what is the solution?
Should we have everyone turn in their guns?
No, that would just make the problem even worse. The gangs aren’t going to turn in their guns. The only people who would turn in their guns would be law-abiding citizens. That would just make them even more vulnerable to the violence and crime that are starting to spread like wildfire all over the nation.
We don’t have a gun problem in America. What we have is a gang problem.
In 2006, the Justice Department’s National Drug Intelligence Center reported that Mexican drug cartels were actively operating in 50 different U.S. cities. By 2010, that number had risen to 1,286.
Many of these gang members run up long criminal records, but our overcrowded prison systems just keep releasing them back into the streets. The results of this philosophy have been predictable. The following is from a recent article by Daniel Greenfield…
A breakdown of the Chicago killing fields shows that 83% of those murdered in Chicago last year had criminal records. In Philly, it’s 75%. In Milwaukee it’s 77% percent. In New Orleans, it’s 64%. In Baltimore, it’s 91%. Many were felons who had served time. And as many as 80% of the homicides were gang related.
Chicago’s problem isn’t guns; it’s gangs. Gun control efforts in Chicago or any other major city are doomed because gangs represent organized crime networks which stretch down to Mexico, and trying to cut off their gun supply will be as effective as trying to cut off their drug supply.
This is not a time to take away the ability of law-abiding American families to defend themselves. Instead, people need to put even more emphasis on self-defense as police forces all over the country are cut back.
Just recently, the city attorney of San Bernardino, California told citizens living there to “lock their doors and load their guns” because the police force in that city is being cut back again.
And that is good advice. As the economy continues to decline and as millions more Americans fall into poverty, the violence is going to get even worse.
What would you do if a desperate criminal broke into your house and started searching through your home room by room? That is the horrifying situation that one young mother down in Georgia was recently faced with…
She quickly retreated to an attic crawlspace with the children, but not before she also picked up her handgun.
The burglar, whom police identified as Paul Ali Slater, did a room-by-room search of the home, and when he reached the attic, she was ready.
Walton County Sheriff Joe Chapman told WSBTV: ‘The perpetrator opens that door. Of course, at that time he’s staring at her, her two children and a .38 revolver.’
She reportedly fired all six rounds, missing only once. The other shots hit Slater about the face and neck.
Sheriff Chapman told the Atlanta Journal-Constitution: ‘The guy’s face down, crying. The woman told him to stay down or she’d shoot again.’
What would have happened if she had not had any way to defend herself and her children?
That is something that we all need to think about.
For the last couple of decades, we have been fortunate to live in an era of falling crime rates. Unfortunately, that era is now over. Large cities all over the country are degenerating into gang-infested war zones, and what we are seeing right now is just the tip of the iceberg.
After the economy collapses, millions of people are going to become incredibly desperate and things are going to get much, much worse than this.
So what are you seeing in your area of the country? Please feel free to leave a comment with your thoughts 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.
In recent days, New York Times economist Paul Krugman has been doing a whole bunch of interviews in which he has declared that the solution to our economic problems is very easy. Krugman says that all we need to do to get the global economy going again is for the governments of the world to start spending a lot more money. Krugman believes that austerity is only going to cause the economies of the industrialized world to slow down even further and therefore he says that it is the wrong approach. And you know what? Krugman is partly right about all of this. The false prosperity that the United States and Europe have been enjoying has been fueled by unprecedented amounts of debt, and in order to maintain that level of false prosperity we are going to need even larger amounts of debt. But there are several reasons why Krugman is mostly wrong. First of all, we have not seen any real “austerity” yet. Even though there have been some significant spending cuts and tax increases over in Europe, the truth is that nearly every European government is still piling up more debt at a frightening pace. Here in the United States, the federal government continues to spend more than a trillion dollars a year more than it brings in. If the United States were to go to a balanced federal budget, that would be austerity. What we have now is wild spending by the federal government beyond anything that John Maynard Keynes ever dreamed of. Secondly, Krugman focuses all of his attention on making things more comfortable for all of us in the short-term without even mentioning what we might be doing to future generations. Yes, more government debt would give us a short-term economic boost, but it would also make the long-term financial problems that we are passing on to our children even worse.
It is important to understand that Paul Krugman is a hardcore Keynesian. He believes that national governments can solve most economic problems simply by spending more money. His prescription for the U.S. economy in 2012 was summarized in a recent Rolling Stone article….
The basic issue, says Krugman, is a lack of demand. American consumers and businesses, aren’t spending enough, and efforts to get them to open their wallets have gone nowhere. Krugman’s solution: The federal government needs to step in and spend. A lot. On debt relief for struggling homeowners; on infrastructure projects; on aid to states and localities; on safety-net programs. Call it “stimulus” if you like. Call it Keynesian economics, after the great economic thinker (and Krugman idol) John Maynard Keynes, who first championed the idea that government has an essential role in saving the free market from its own excesses.
So is Krugman right?
Would the U.S. economy improve if the federal government borrowed and spent an extra half a trillion dollars this year for example?
Yes, it would.
But it would also get us half a trillion dollars closer to bankruptcy as a nation.
Krugman claims that “austerity” has failed, but the truth is that we have not even seen any real “austerity” yet.
When a government spends more than it brings in, that is not real austerity.
People talk about the “austerity” that we have seen in places such as Greece and Spain, but the truth is that both nations are still piling up huge amounts of new debt.
So let’s not pretend that the western world is serious about austerity.
The goal for most European nations at this point is to get their debts down to “sustainable” levels.
But for economists such as Krugman, this is a very bad idea. Krugman insists that cutting government spending during a recession is a very stupid thing to do. The following is from one of his recent articles in the New York Times….
For the past two years most policy makers in Europe and many politicians and pundits in America have been in thrall to a destructive economic doctrine. According to this doctrine, governments should respond to a severely depressed economy not the way the textbooks say they should — by spending more to offset falling private demand — but with fiscal austerity, slashing spending in an effort to balance their budgets.
Critics warned from the beginning that austerity in the face of depression would only make that depression worse. But the “austerians” insisted that the reverse would happen. Why? Confidence! “Confidence-inspiring policies will foster and not hamper economic recovery,” declared Jean-Claude Trichet, the former president of the European Central Bank — a claim echoed by Republicans in Congress here. Or as I put it way back when, the idea was that the confidence fairy would come in and reward policy makers for their fiscal virtue.
Yes, Krugman is correct that government austerity measures will only make a recession worse.
Just look at what has happened in Greece. Wave after wave of austerity measures has pushed Greece into an economic depression. If you want to see what austerity has done to the unemployment rate in Greece, just check out this chart.
As other nations across Europe have taken measures to get debt under control, we have seen similar economic results all across the continent.
The overall unemployment rate in the eurozone has hit 10.9 percent which is a new all-time high, and youth unemployment rates throughout Europe are absolutely skyrocketing.
Right now there are already 12 countries in Europe that are officially in a recession, and in many European nations manufacturing activity is slowing down dramatically.
So, yes, austerity is not helping short-term economic conditions in Europe.
But what are the nations of the western world supposed to do?
According to Krugman, they are supposed to run up gigantic amounts of new debt indefinitely.
And that is what the United States is doing right now. But at some point the clock strikes midnight and all of a sudden you have become the “next Greece”.
U.S. government debt is already rising much, much faster than U.S. GDP is.
Between 2007 and 2010, U.S. GDP grew by only 4.26 percent, but the U.S. national debt soared by 61 percent during that same time period.
Today, the U.S. national debt is equivalent to 101.5 percent of U.S. GDP.
But Paul Krugman does not consider this to be a major problem.
The Obama administration is currently stealing approximately 150 million dollars from our children and our grandchildren every single hour to finance our reckless spending, but for Paul Krugman that is not nearly good enough.
To Krugman, the only thing that is important is what is happening right now. Apparently the future can be thrown into the toilet as far as he is concerned.
The founder of PIMCO, Bill Gross, told CNBC on Tuesday that the U.S. government is likely to be hit with another credit rating downgrade this year if something is not done about our exploding debt.
The United States already has more government debt per capita than Greece, Portugal, Italy, Ireland or Spain does.
But Krugman insists that the solution to our economic problems is even more debt and even more spending.
In a previous article, I detailed how we are doomed if the U.S. government keeps spending money wildly like this and we are doomed if the U.S. governments stops spending money wildly like this.
If we keep running trillion dollar deficits every year, at some point our financial system will collapse, the U.S. dollar will fail, and we will essentially be facing national bankruptcy.
But if the federal government stops borrowing and spending money like this, our debt-fueled prosperity will rapidly disappear, unemployment will shoot well up into double digits, and we will soon have mass rioting in major U.S. cities.
The truth is that we have already been following Paul Krugman’s economic prescription for the nation for decades. Our 15 trillion dollar party has funded a standard of living unlike anything the world has ever seen, but the party is coming to an end.
The Federal Reserve is trying to keep the party going by buying up huge amounts of government debt. The Fed actually purchased approximately 61 percent of all government debt issued by the U.S. Treasury Department in 2011.
It is a shell game that cannot go on for too much longer.
The national debt crisis can be delayed for a while, but at some point the house of cards is going to come crashing down on top of us all.
If Paul Krugman wanted to talk about real solutions he could talk about shutting down the Federal Reserve and he could talk about going to an entirely debt-free currency.
But we all know that is not going to happen, don’t we?
As I have written about before, the Federal Reserve was designed to be a perpetual government debt machine. The system was designed to have the amount of money and the amount of government debt constantly expand.
And it has been working quite well in that regard. At this point, the U.S. national debt is more than 5000 times larger than it was when the Federal Reserve was first created.
But Paul Krugman is not going to talk about the real issues. Instead, he is just going to keep running around declaring that more government spending and more government debt will solve all of our problems.
It is a very big lie, but millions of people are going to believe it.