When ever I tell someone that I can fix the US debt problem in two years, they are obviously very skeptical. I don't blame them. The most brilliant minds on Wall St. and Capitol Hill have been working around the clock to try and solve the debt problem, and if they haven't figured it out, then a senior political science major probably doesn't know how to solve the problem either. However, one thing that must be taken into consideration is that the flaws in the current monetary system benefit those who hold the power to fix it. Politicians and Bankers gain wealth and power because of the Federal Reserve System, which is also the reason why we have a debt crises and economic collapse on our hands.
What is the one thing that every politician hates to do? Raise taxes. What is the one thing that most citizens want? Government Programs. What is the one thing every politician wants? To be reelected. But how can a politician spend more money without raising taxes? With a central bank such as the Federal Reserve.
Imagine a politician named John Jackson. He would like to spend more money on federal road upkeep, but the Department of Transportation does not have any extra money to spend on new projects. Traditionally one would think that John Jackson would try and get the people of the US to pay slightly higher taxes so that the Department of Transportation would have the extra money to support such a project. However this is not the way government spending works, because of the Federal Reserve Act of 1913. Since it is after 1913 John Jackson has a new way to spend more money on infrastructure. All he has to do is have his committee vote to appropriate more money to the Department of Transportation, and the US Treasury department will get the money. However, the Treasury will not get the money by raising taxes, in fact there is no where near enough tax revenue to pay for what the US government needs. So where does the Treasury get the money? It sells bonds to anyone who will buy them, the only problem is that the Treasury needs to sell a lot of bonds. The US public, and even Chinese public do not buy the majority of the bonds that the Treasury sells, instead the Federal Reserve Bank buys these bonds. That's why they are called the lenders of last resort, because they lend money to the Treasury when nobody else will. So the Treasury gets the money from the Federal Reserve Bank, but where does the Federal Reserve Bank get its money? They create it out of nothing.
Remember that all modern currency is just paper, or electronic bits on a computer. How can this bank create money out of nothing and lend it to the treasury? Because that is the law.
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| Federal Reserve Note |
The Federal Reserve Act gave the banks of this country a monopoly over currency production. If you notice on any paper money it will say 'Federal Reserve Note.' This means that it is currency created by the Federal Reserve. Before 1963 there used to be some paper bills produced by the Treasury that said 'United States Note' instead of 'Federal Reserve Note.' These United States Notes were currency created by the Treasury under Lincoln's orders during the Civil War, and they were called Greenbacks. He had them created to fund the war because the banks, the ones which created banknotes, were going to charge the US government 36% interest on any money borrowed. Interest on government debt? This sounds very familiar, and in fact it is the same interest on the same kind of debt to banks, and the Greenback solved both the debt and interest problems because it was created by the US Government and did not need to be borrowed from anyone by selling bonds.
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| United States Note |
A complete plan for monetary reform can be found
here.
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