The national debt problem could potentially cripple the entire country, sending it into a modern day dark age. Nobody in Congress is coming up with good ways to fix the debt problem, instead they are coming up with ways to lessen the future debt problem at the expense of the economy. The debt problem we face today can be fixed by if less is spent and more revenue is generated, but the end result would be a very bad depression. The country's monetary system itself must be changed if the debt is to be paid off and everyone wants to eat. Although this plan may sound outlandish because it is not widely discussed in the media, common sense should be enough to make this idea more than convincing.
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Jefferson Would Be Proud Of This |
Monetary Sovereignty
The first step that needs to be taken to solve the debt problem is to explain to every member of Congress what Monetary Sovereignty is. If this term is broken down into the two separate words the meaning can be gleaned. Remember that sovereignty means "To answer to no higher authority." A nation which is sovereign makes it own rules, and follows them because it is accountable to no other power. The word monetary means pertaining to money. So the term Monetary Sovereignty means, "Answering to no higher authority pertaining to money." If the United States is monetarily sovereign it should be in complete control of its currency, meaning that it should create, loan, deposit, destroy and spend its own currency.
The Federal Reserve Bank
A lot of people get lost on the fact that the United States does not create its own money. This means that our government is not monetarily sovereign, and is the reason why our government is in debt. When the treasury needs money to pay for things, it does not create the money, it creates bonds to sell for the money. If treasury does not create the national currency, then what does? The Federal Reserve Bank. It is essential to realize that the Federal Reserve is not part of the United States government, and that it creates money and lends it to the United States treasury.
A Union Of Banks
Senator Louis T McFadden, Chairman of the House Banking and Currency Committee in the 1930s, said, "Some people think that the Federal Reserve Banks are United States Government institutions. They are private monopolies which prey upon the people of these United States for the benefit of themselves and their foreign customers; foreign and domestic speculators and swindlers; and rich and predatory money lenders."
The Ninth District court even concluded that the Federal Reserve was not a federal agency in Lewis v. United States, 1982. This can be seen when the court writes, "The Court of Appeals, Poole, Circuit Judge, held that federal reserve banks are not federal instrumentalities for purposes of the Act, but are independent, privately owned and locally controlled corporations."
Monopoly On Money Creation
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| The Federal Reserve |
Federal reserve notes, to be issued at the discretion of the Board of Governors of the Federal Reserve System for the purpose of making advances to Federal reserve banks through the Federal reserve agents as hereinafter set forth and for no other purpose, are hereby authorized.
This means that the Federal Reserve Note, and its unnamed computerized counterpart, the Electronic Reserve Note, are the currencies which the monetary system currently uses to represent a dollar. These currencies are issued at the discretion of the Board of Governors, and are the legal tender of the country. Once created, they are deposited into member banks. Member banks can only use Federal Reserve Notes and Electronic Reserve Notes. Because all national banks are currently members of the Federal Reserve System, the Board of Governors has control over the creation of the entire money supply in this country.
The Creation Of Money Through Debt
I.
It is not the United States which creates its own currency. It is a privately owned and locally controlled group of financial corporations. Because these banks control the money supply, the United States must borrow the money it needs from them if the Treasury wants to have funds available to spend. The United States borrows money by selling bonds. These bonds are government promises to pay back the amount of money which is borrowed, plus interest. They are for sale to the general public, but the general public cannot buy enough of them to fund the entire country. The bonds which are not purchased are then put up for sale by the Treasury to the Federal Reserve banks. The Federal Reserve banks buy these bonds with money created by the Board of Governors and deposited into Treasury accounts held by banks in the Federal Reserve System. If the Federal Reserve tells a member bank to increase the amount of money in a Treasury department account, that is exactly what happens.
II.
The other way which money is created is through fractional reserve banking. Imagine that the United States sells a $1 million bond to the Federal Reserve. The Federal Reserve tells a member bank to increase the balance of a Treasury account by $1 million. The member bank is then allowed to loan out 90% of the $1 million deposit. The reason why money is created this way is because both the deposit and the outstanding loan are able to be claimed as assets to the bank. The bank has the original $1 million, and it has $900,000 in the form of debt. For this reason the same $1 million can be loaned and deposited multiple times until about $10 million is created. This scheme of valuing a loan like a deposit means that when the Treasury borrows $100 billion, it creates and injects $1 trillion into the economy.
Decreased Spending Means Economic Disaster
When a political science advisor at Coastal Carolina University was asked, "What needs to happen to solve the debt problem?" he quickly replied, "Create government surpluses until the debt is payed off, then balance the budget." This does need to happen, but not under the current monetary system. Any government surplus right now would be severely detrimental to the US economy. If a law was passed to pay off the debt taxes would increase and spending would decrease. There is no way to create a budget surplus without doing both. In 2010 the Treasury spent $3.5 trillion, yet only took in $2.2 trillion in taxes, which meant a $1.3 trillion deficit. Taxes would have to increase close to 60%, or spending would have to decrease about 60% in order to decrease a budget deficit that size. These two actions, or a combination of the two, would have horrific effects on our economy. Decreased governmental spending would significantly constrict the money supply. A government bond sale to the Federal Reserve results in an injection of about ten times the amount the original bond was sold for. If the budget deficit was reduced by $1.3 trillion, $13 trillion would be taken out of the money supply. The economy would shrink, unemployment would rise, and private debt would soar.
Increased Taxes Mean Economic Disaster
Tax increases would have the same effect as decreased spending. There would be a reduction in the money supply. Interest rates would increase. Personal debt would increase. A large portion of consumers would have no means to buy anything but food, if that. This would result in lower profits for companies. These companies would not want to borrow the money to pay their employees because of higher interest rates, and as a result they would lay people off. These laid off people would seek government help, however, there would not be any available because the government had to decrease spending. A balanced budget will result in a nightmare for this country.
Debt Free Is The Way To Be
The only way that the budget can be balanced is by issuing a new debt-free currency. The Treasury already prints the currency for the Federal Reserve. It also creates the bonds which are now sold to create our currency. The Federal Reserve Act can be amended to allow the Treasury to skip the bond selling step, and simply create currency without the Federal Reserve. The United States could pay off its debts without creating new ones. However, these printed United States Notes could not simply be released into the economy to pay off the country's outstanding debts. Increasing the money supply so drastically would decrease the value of the dollar. Federal Reserve Notes would have to be simultaneously removed from the economy. The Fed could increase interest rates and create its own bonds. These bonds could be sold to the public in exchange for Federal Reserve Notes or Electronic Reserve Notes. Once these bonds were in the market, the Treasury could buy them with United States Notes. This would slowly remove the currencies created out of debt from the economy, while introducing the same amount of the debt-free United States Notes into the economy.
Federal Bank Creation
If this system were to be put in place there would also need to be some changes in banking practices. Fractional reserve banking, remember, creates about ten time more money than is introduced with the ability to create money through loans. This practice would have to stop. Federal banks must be created to simply store money. No interest would be paid to depositors, and the very very few loans given out would have flat fees instead of interest rates. As the number of United States Notes increases, the number of Federal Banks must increase while the number of Federal Reserve System banks simultaneously decreased until no fractional reserve banks exist. This is the most important part of fixing the economy because it would return the purchasing power of the dollar to every class by giving the treasury complete control of the money supply so that it does not grow, except in times of economic expansion.
Another Aristocracy
Interest should be destroyed for sake of the economy, and also for the sake of society. Interest inherently creates a class system and rips democracy apart one piece at a time. To see this imagine two people, one in the top 1% of wealth in the nation, and the other below the poverty line. The wealthy man deposits all of his money in the same bank as the poor man. The poor man lives paycheck to paycheck, and one day needs a new tire. If he has no cash on hand to pay for the tire, he must borrow the money to pay for the tire. If he borrows money from his bank, he will owe the principle plus the interest to the bank. In contrast, the wealthy man who has his money in a high interest savings account makes money simply for having money. The poor man pays more money because he has less money, and the rich man gets his money just for being rich.
A Different Future
Our country would have many things change if this plan was put into place. The first thing is that there would be no debt. The United States would be printing its own money, and it would be in complete control of the money supply. It could slowly pay off the debt with United States Notes while simultaneously removing Federal Reserve Notes and Electronic Reserve Notes from the moneytary supply.
The best part about this monetary plan is that the buying power of the dollar would be constant. There would be no inflation if this was done correctly, because the rate at which money was created by the Treasury would be the rate at which the economy expanded, not at the rate that people needed to borrow money.
The third benefit of this system is that the federal government would be forced to do only the things which it was originally created to do. If a constitutional amendment was put into place limiting the amount of money that could be created depending on economic factors, then the power of the federal government would be much more limitted than it is now. It would not have the money to have military bases in every region of the world. It would not have the money to support welfare states (even though there would be no need since the buying power of the dollar were restored). The government would have to pick the best ways to introduce money into the economy by paying for education, infrastructure, scientific research and so on. War would not be as profittable because the government would need to pay cash for any military conflict which it was involved in There would be no more bonds to sell to raise funds and no more profit made by banks in a country at war.
Before The Change
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| Howard Beale |
I want you to get mad! I don't want you to protest. I don't want you to riot - I don't want you to write to your congressman because I wouldn't know what to tell you to write. I don't know what to do about the depression and the inflation and the Russians and the crime in the street. All I know is that first you've got to get mad. You've got to say, 'I'm a HUMAN BEING, God damn it! My life has VALUE!' So I want you to get up now. I want all of you to get up out of your chairs. I want you to get up right now and go to the window. Open it, and stick your head out, and yell, I'M AS MAD AS HELL, AND I'M NOT GOING TO TAKE THIS ANYMORE!
