In the spirit of Thomas Jefferson
In our current debt-based monetary system, we're never going to pay off the national debt.
This article will explain what the debt is, why we can never pay it, and the elegant and obvious solution proposed by Nobel Prize winning economist, Milton Friedman. Please read and understand this crucial information for your responsible citizenry. You literally have nothing more valuable to do.
The US national debt is approaching $12 TRILLION dollars. Of that amount, about 2/3 is owed to whomever among the public purchased US government debt securities (bills up to one year, notes from two to ten years, and bonds of 20 and 30 years) and 1/3 is intragovernmental transfers (US government agency purchases like Social Security surplus and other retirement funds). China and Japan hold about $750 and $650 billion, respectfully.
The reason we have a national debt is because our government "leadership" surrendered to the banking system its power to create money directly for the payment of public goods and services through the Federal Reserve Act and fractional reserve banking. The cost of this transfer is ~$1 trillion every year to the American public. But don't worry. The banks are doing a great job with the responsibility; that's why we collectively bailed them out with up to $12 trillion of our collective money from addictive gambling losses with no change in regulation. But back to our story of national debt.
We won't and can't pay $12 trillion because it's too much money. The population of the US is ~300 million, dispersed among ~100 million households. That means the average household would have to pay $120,000 each. Given the average annual household income is $50,000, your share would vary proportionally. The national debt doesn't include TOTAL US debt, which is ~$70 trillion. These numbers explain why our monetary system is called "debt-based."
The interest payment on this debt last year was $450 billion. That's ~$4,500 for the average household with $50,000 income, with your share varying. If your household earns $133,000, you're paying $1,000 every month on interest to the national debt. This is similar to the US choosing to pay only the interest on a credit card, then borrowing even more money to make the minimum payment on the principal while ever-increasing the total debt.
This debt-based monetary system is a Robber Baron-era structure created by banking oligarchs for their own benefit, not for the American public. The insanity of perpetuating such a system was well-expressed by Wright Patman, Representative in the U.S. Congress from 1929 to his death on March 7, 1976, and Chair of the House Committee on Banking and Currency for 40 years. For 20 of those years, he introduced legislation to repeal the Federal Reserve Banking Act of 1913. This quote is from excerpts of September 29, 1941, as reported in the Congressional Record of the House of Representatives (pages 7582-7583):
“When our Federal Government, that has the exclusive power to create money, creates that money and then goes into the open market and borrows it and pays interest for the use of its own money, it occurs to me that that is going too far. I have never yet had anyone who could, through the use of logic and reason, justify the Federal Government borrowing the use of its own money... The Constitution of the United States does not give the banks the power to create money. The Constitution says that Congress shall have the power to create money, but now, under our system, we will sell bonds to commercial banks and obtain credit from those banks. I believe the time will come when people will demand that this be changed. I believe the time will come in this country when they will actually blame you and me and everyone else connected with this Congress for sitting idly by and permitting such an idiotic system to continue. I make that statement after years of study.”
Here is the elegantly simple and obvious solution: because a nation's government has the power to create money, do so. Instead of rolling-over the national debt as its individual securities come due and are redeemed (paying them by additional borrowing), just pay them with government created money. To avoid inflation, concurrently restrict the banking industry's fractional reserve power to inflate this money through lending by increasing their reserve requirement proportionally. The reserve requirement is the percentage of deposits they cannot create credit from when someone asks for a loan. This ends the debt while maintaining the money supply. The 8-minute video below will explain.
To maintain American's access to credit, we have three basic choices. One is privately-owned banks that lend long-term deposits directly and make fractional reserve banking and its multiplier effect illegal (see my brief for full explanation). The investors who purchased government securities will invest to meet lending demand because its a similar investment to government securities. Two: have a government-owned banking system, like how we manage fire departments on geographic need. The argument for this system is American's minimal borrowing costs and that the creation of credit is relatively simple. The advantage of non-profit lending rates would be mortgages of less than 1% interest. Three: a hybrid of private lending with perhaps government-sponsored 1% mortgages. BTW, current mortgages usually double the cost of buying a home, as you probably know. Given a choice, the public would prefer non-profit lending.
Many of our brightest historical minds have understood the insanity of a national debt and the obvious answer of government-created money rather than bank-created credit, from the writings of Benjamin Franklin and our Founding Fathers to Thomas Edison and today's members of Congress, notably Dennis Kucinich and Ron Paul.
The following 8-minute video from The Money Masters gets to the heart of this solution; I recommend the entire 3.5 hours of viewing and the video at the end of my brief, Money as Debt II: Promises unleashed.
As always, please share this article with all who say they want to be competent citizens. If you appreciate my work, please subscribe by clicking under the article title (it's free).
Comments
Carl, These money reform articles you've been doing here are superb, and of critical importance to the very survival of our civilization. As much as I enjoyed your article on bringing our troops home, serial wars are not going to be ended, or even abated, until the private bankers' monopoly on money creation is broken, and that power is returned to the people, where it belongs. You are an exceptional educator with a rare talent for explaining complex issues in simple, easily understood terms. Keep up the great work.
We can't pay the debt back because every "dollar" (Federal Reserve Note) has been "borrowed into existence." And, based on the rules of our current "debt-money" system, the money is "erased" when debts are repaid. (In short, if we ever wanted to be completely "debt free," we would have to return every dollar (physical or digital) to the bankers who created them. There wouldn't be a single "dollar" (Federal Reserve Note) to share among us.
There is a short, free, and easy book about our so-called "Federal Reserve System" available online. (Google "Meet The System"
Joe: actually the destruction of loans is from bank-issued credit. And yes, for that debt we would destroy our money supply by paying it off because it was all created out of debt!
The national debt is different. The privately-owned debt would be paid by new government-created money to the people who transferred their money to the government. What gets destroyed here is the security. For the publicy-owned debt, we just erase it off the books and pay for social security and government retirement programs with new money. We avoid inflation by taking away the power of banks to create money and manage the money supply with population and economic growth. Of course, this all must be done transparently.
It is indeed an elegant solution, however it was proposed by Dr.Jacques S Jaikaran in his book "Debt Virus" in 1992.
the federal reserve board members are a criminal conspiracy, a crime syndicate and rico laws should be imposed on them. solves all the problems right there , because immediately all their assets could be seized, then charge congress for treason for allowing them to print the money. the constitution is very specific in that only congress can mint the money.
there are numerous ways our woes can be fixed , unfortunately retaing the status quo isnt one of them
Why do all that hard work you describe when we can sit back and allow ourselves to remain serfs?! You people are loonies, what sane person really wants all that wealth creation happening for the 'other' 99% of the world anyway. People would be so happy things might change fundamentally and that is just plain scary to think about. Where's my prozac and donuts Jen...oh hmmm now I feel safe again. Time to get drunk while wallowing in my poverty depression watching sitcoms hmmm goooodd...
We can't pay the debt back because every "dollar" (Federal Reserve Note) has been "borrowed into existence." And, based on the rules of our current "debt-money" system, the money is "erased" when debts are repaid. (In short, if we ever wanted to be completely "debt free," we would have to return every dollar (physical or digital) to the bankers who created them. There wouldn't be a single "dollar" (Federal Reserve Note) to share among us.
There is a short, free, and easy book about our so-called "Federal Reserve System" available online. (Google "Meet The System"
For a continually updated debt clock on our true national debt of $71 trillion, check out www.truthin2010.org. This site has a spinning debt clock with both the official debt and the true debt, which includes promises to Social Security and Medicare beneficiaries. The spinning debt clock is a widget, so you can easily put it on your website.
Terminate the following imediately: Federal Reserve, IRS, Dept. of Education, Dept. of Energy,Dept of Home Land Security, Dept. of Agriculture, All Intellegence Agencies except the CIA,Department of Commerce.
Term limites on all Congressmen and Senitors of no more than 2 four year terms.
All these suggestions would be carried out right now to be followed by many more the next year. Any future change in the size or reach of the Government would be to less and smaller.
Why the exception for the CIA? The CIA have been our nation's drug lords since Vietnam. Let's shut them down and open up all their records. I think we'll be stunned.
"This debt-based monetary system is a Robber Baron-era structure created by banking oligarchs for their own benefit, not for the American public."
Jct: Of course, I agree money should be a public utility. But LETS is a stable interest-free debt-based currency system so the problem isn't that money is debt-based, it's that there is interest increasing the debt beyond the amount of money borrowed into existence available to repay.
Yes we can pay off the debt with interest-free US notes which can be taxed out as the collateral depreciates or as services are delivered yearly to recuperate the notes we're indebted for. But no more. See my youtube video Debt Money Good
Finally, he worries about the FED doubling our money supply without realizing is that the problem is the debt for that money
supply that grew with interest. Doubling the money supply doesn't
cause inflation, doubling the debt plus more does.
Should we all be getting reverse mortgages if we are going into a severe depression?
I just LOVE that quote from Wright Patman. He is spot on. I’ve written a fair amount on this topic. For an article I wrote claiming the national debt is pointless, Google “Government borrowing is near pointless” and my name, Ralph Musgrave.
Re how to pay off the national debt in a short space of time, my ideas are similar to the above article. Google “Musgrave’s law”.
There is no real money anymore. Currency although printed on paper and stamped on coins is merely worthless in reality. Money is nothing more than a series of checks and balances in some international accountants electronic balance sheet. It's called fiat money and is nothing more than smoke and mirrors. When the Fed needs more money it merely prints it. The IRS is its' collection agency and a good portion of the fees and taxes raised go overseas to pay off the international debt. Remeber that every dollar says property of the Federal Reserve, not the US Treasury.
It would therefore make sense to go to a cashless society of which we are in the process of doing. I do all my banking except for paying my rent, on line electronically, which is also cheaper fee wise than withdrawing money. Of course that could lead to some serious curtailment of our individual rights and freedoms. If you don't have the smart chip cards or clearances you could find yourself locked out of the systems and access to your resources. With nano technology how long before we are requested to have it implanted in each of us?I don't mean to raise the conspiratorial red bull here but you have to admit it is a possibility sometime in the future. Electronic banking does have one unexpected feature; I get to say to the homeless guy, sorry I don't carry cash. Of course most of them look better fed than I do and that's because most of them are scam artists. Then again, that's another topic for another time. Thanks for a good article Carl.
Michael Kirkby
Great article. By the way F.R.A.U.D stands for Federal Reserve Accounting Unit Dollar
A see one major flaw in the video, and that is that US banks will return to 100% reserve. This doesn't work in an open economy world, where other banks still have their fractional reserve lending system. The only way to end this burden is imo to devaluate the dollar in a global controled and agreed upon (China / Japan ?) plan.
Anon: You're welcome to argue for devaluation and surrender of US sovereign right to issue our own currency. You're also welcome to ignore and distract from paying our national debt and issue a "money supply" rather than a "debt supply." You're welcome to argue for ideas that continue to cost Americans trillions every year.
You're a propagandist who does not, and cannot discuss the facts in this article of the benefits of the US creating "money" rather than "debt."
Good luck with your future arguing for the destruction of the US economy.
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