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Monday, May 24, 2010
America Is Not The Wealthiest Nation, Americans Are Not The Wealthiest People - Response To A Preacher
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Nothing personal, I assure you, but parts of this are a Train Wreck.
ReplyDeleteWhen you got to the part about the "Printing Press" you ran off the rails, my friend.
1. The "government" does not have a monopoly on currency. It has abdicated their duty to a private banking cartel - The Federal Reserve Banking System. They are not part of the government. Check Article 1 Section 8 of the U.S. Constitution. It SHOULD have the monopoly that you refer to. It does not and has not since 1913 and the passing of the Federal Reserve Act.
2. Now, the United States cannot "print up" money to pay its debts. It may be able to "print up” government securities and place them for sale in the open market; but selling government bonds increases the government debt, it does not decrease government debt. Why? Because they have to pay them off at maturity. The government (Bureau of Printing and Engraving) does print money but sells a $100 bill to the Federal Reserve for about 4 cents (cost of printing). It does not pay off any debt by printing money. In fact, most of the "paper" printed money goes to replace worn bills in circulation - most of which are over-seas. The bulk of our money exists as electronic digits (bookkeeping entries) in bank computers.
3. Under the current system, aggregate debt can NOT be paid off (we only shift it around). All we have in circulation is debt money - borrowed money cannot be used to get out of debt. Also, since all money is a debt obligation to someone, we must borrow to pay interest, because interest is never created at the time of the loan - think about it. Therefore, interest payments come from someone else’s loan principal.
4. When a loan is made, it does NOT come from the account of a depositor - NEW money is created. So, it's not theft from "individuals". No one's account gets drawn down $20,000 when I get a loan for a car and 20,000 people don’t see $1 less in their accounts either – it’s new money. The bank "monetizes" my "promise to pay" and creates new money and deposits it into my account (or the account of the auto dealer, in this example). It is a myth (and a powerful one!) that banks loan out depositors’ money - they do not.
5. Whenever we see hyperinflation (decreasing the value of a currency by 95% in a matter of days or weeks) it is because the banks drive the interest rates up into triple digit, unpayable territory - just like they did in Germany (900%) and Zimbabwe (800%). Interest is a cost of doing business and is factored into the price of goods and services. If banks raise rates (arbitrary and manipulative) to those super-high levels, merchants must increase their prices daily, sometimes hourly! to keep up with their debt obligations. That is the true cause of hyperinflation. To believe otherwise is to believe that the less money we have, the more it's worth. With that logic, if I set fire to all of my money I'd be rich! It's another myth. It's not true. Banks control interest rates and interest rates determine whether or not we have hyperinflation.
6. Whether money is paper or tally sticks, or beads, or musket balls or sea shells, is insignificant. What matters is if it is loaned into circulation or spent into circulation. One way creates unpayable interest. The other does not. Loaned is bad. It leaves a debt vacuum that can never be paid because interest is never created in the process. Government spending is not necessarily bad – government borrowing is damaging in the extreme`! The bankers have you buffaloed into believing that government spending is bad – it’s not bad if it skips the borrowing part, coins/issues new money to pay for things we all need, like infrastructure! Better than begging the bankers for a loan that they don’t have and make up on a computer keyboard. If government monetized the production of infrastructure, new money would be backed by a tangible asset and solve nearly all of the challenges that you brought up.