by Rudy Avizius
Not long ago, an idea circulated in Washington that the government could issue a $1 Trillion coin and use that to fund its operations in the absence of an agreement on the raising of the debt ceiling. This idea certainly sounds like it came from fantasy land, but if one follows it carefully through to its logical conclusion, it will shine a light on our current monetary system and how it is fundamentally unsustainable. The floating of the $1 trillion coin has inadvertently opened up a window not just to reform, but to transform our monetary system.
The idea here is that the Treasury Department has the legal right to issue such a coin, deposit the coin in an account at the Federal Reserve, and then draw upon the account to fund projects approved by Congress. This idea hits at the heart of the power structure across the planet, which has at its core, [who ultimately holds the power] to create money out of thin air.
Currently nearly our entire money supply is created from nothing by private banks which in turn charge interest on that money. There are many people who, because of its official sounding name, think the Federal Reserve is a branch or part of the U.S. government. The Federal Reserve is no more federal than Federal Express. The Federal Reserve is simply a [powerful] cartel of private banks with an official sounding name that has usurped the right to print our money, a power bestowed upon Congress in the Constitution by the founding fathers.
Article I Section 8: The Congress shall have the power to coin money.
So what replaced the system that the founding fathers originally intended? In 1913, the passage of the Federal Reserve Act granting the Federal Reserve the legal authority to issue Federal Reserve Notes. When President Wilson signed the bill, he declared it the “first of a series of constructive acts to aid business”. In fact the only business it aided was that of the private banks. The system was designed from its inception to ensure that every dollar that came into existence had to be borrowed from this private cartel of banks called the Federal Reserve.
Every single dollar in circulation has to be borrowed by somebody. In other words, the entire money supply is debt based and someone is paying interest on that debt to the private bankers. In fact the total cost for 2012 for just servicing the interest on the U.S. government debt was an astounding $359 billion and $454 billion the year before. The interest on our debt for those two years exceeds the entire stimulus bill of 2009. Think of what we could do with that much money every year: transportation, healthcare, modernizing the electric grid, education, research, are just a few examples that quickly come to mind.
It becomes very easy to see that the ability to collect interest on the national debt involves huge sums of money being paid out to those with the power to create our money and that these people will do almost anything to make sure that things remain exactly as they are. That is why they encourage their corporate controlled media to ridicule the $1 trillion coin idea as something out of a fantasy tale, or having the talking heads echoing that investors will be spooked, and broadcasting that the world will think that the U.S. has totally lost its marbles.
So how exactly does this idea of printing a $1 trillion coin threaten their power? If the U.S. government does issue such a coin, it will simply be issuing its own currency as the founding fathers originally wrote into the Constitution, bypassing the need to borrow the money from the private bankers. This is what threatens their extremely privileged position. No interest will be paid to them on this money.
The question not being asked by the mainstream media is that if the U.S. government can issue its own interest free money in the form of a $1 trillion coin, then why is it borrowing the money at interest instead? Consider these questions: If you owned a printing press in your basement and could LEGALLY print your own money…
• would you choose to pay your bills by printing the money you needed?
• would you choose to pay your bills by going to the bankers for a loan?
Of course you would print your own money. Our government is in exactly this same position. It can legally print its own money as stipulated by the Constitution, and yet we have the spectacle of our government going to private bankers to borrow money to pay its bills, rather than printing its own debt free money. Most people are not aware of this fact, and that is by design.
Can you imagine yourself printing your money, then selling these same bills for the cost of printing to a private bank? Can you imagine yourself then going back to the bank and borrowing that same money at face value plus interest?
That is the unbelievable and absurd situation we currently have in place. The Treasury Department prints our paper dollars at a cost of approximately 4 cents per bill. The cost of printing each bill remains the same regardless of whether the denomination is $1, $10, or $100. These newly printed bills are then sold to a cartel of private bankers called the “Federal Reserve” for the cost of the printing. The government [taxpayers] then borrows this money back at face value plus interest.
The name “Federal Reserve” was deliberate in its attempt to deceive the people. It is a group of PRIVATE bankers, it has no reserves, and it is no more federal than Federal Express. In fact, the federal income tax was started in order to pay the interest on our “debt based” money supply.
Now there are 3 ways that money can be placed into circulation: it can be GIFTED, it can be SPENT, or it can be BORROWED.
If the government were to simply give people printed money, it would be GIFTED into circulation. Since this “free money” provides no incentive to produce anything, there is no increase in production. The money supply increases, but not the number of produced goods or services, which ultimately results in inflation.
If the money is SPENT into circulation, it is used to pay for goods or service that have been produced. The creation of these goods or services represents the creation of wealth. Therefore this created money is a payment for wealth that has been produced. This also increases the money supply, but since a matching amount of goods or services were also created, this does not result in inflation. This money is then “wealth based”, making it is a representation of wealth that has been created and therefore has no debt or interest burden associated with it.
If the money is BORROWED into existence as it is done in our current “debt based” monetary system, the money is created out of thin air by the banks using the fractional reserve lending system. This money is then a representation of debt and has a debt and interest burden associated with it.
The way money is brought into circulation is at the very heart of our problems. It turns out that in our “debt based” monetary system, our entire money supply (except for coins) is created when a loan is taken out. Once the loan is repaid, the money is removed from circulation. This system unfortunately has a fatal flaw that guarantees its ultimate collapse.
Let’s assume that we are on an island with a totally closed monetary system and you were to borrow $100 at 10% interest. You can pay back the $100 principle because $100 was put into circulation as a result of your loan. However, where will the $10 in interest payments come from if there is no other money in circulation? The fact of the matter is that the loan must default because there is not enough money in circulation to pay principal and interest. Since the $100 in circulation is the result of the loan being taken out, this $100 is placed as a liability on the bank’s books. Once you have paid off the loan, this liability is removed from the bank’s ledger. That is how the money is extinguished once you have repaid the principal on the loan.
The only way to pay back the interest on the loan is to borrow more money into circulation. Only the principle is extinguished, the interest is not extinguished because the interest was not a liability on the bank’s ledger. The interest amount ends up in the pockets of the bankers. If someone takes out additional loans to cover the interest charges, it will only delay the day of reckoning. Ultimately you will have an even higher interest burden that can never be repaid. Doesn’t this sound familiar to the economic situation we currently find ourselves in? [/column]
Of course our monetary system has millions of people, taking out loans, making payments and doing other transactions all of the time.
However, the fact remains that you can only repay a loan with interest if you or someone else takes out a loan to place additional money into circulation. The problem is that now someone else will have a loan to repay and will also need additional money in circulation to pay for their interest charges. So the debt burden for the money to pay the interest payment on your loan has been shifted to someone else, and over time the interest burden continues to grow.
It becomes quickly obvious that as a nation we must constantly be in debt in order to service the interest charges on our money supply. As time passes, this debt overhang with its associated compounding interest charges becomes a larger and larger burden on the society, eventually reaching a level that is no longer sustainable as it is becoming today. In a “wealth based” system, the government SPENDS money into existence, rather than BORROWS it into existence. The costs of all infrastructure projects could be cut by more than half. This fact should resonate to those of you with a home mortgage, once your mortgage is paid off, the interest charges have easily exceeded the original cost of your home. The same thing is happening to all of our infrastructure projects. The financial class is profiting immensely from our current “debt based” system.
So, is a “wealth based” monetary system some utopian vision of what has never been and can never be? The answer is no. In our colonial past we had colonial script where the government SPENT the money into existence. Our colonies were prospering at that time. David Hayes writes about Benjamin Franklin during a visit to England:
"The English officials asked how it was the Colonies managed to collect enough taxes to build poor houses, and how they were able to handle the great burden of caring for the poor. Franklin’s reply was most revealing: 'We have no poor houses in the Colonies, and if we had, we would have no one to put in them, as in the Colonies there is not a single unemployed man, no poor and no vagabonds'.”
Think long and hard about this. In the American colonies before the American Revolution, there was “not a single unemployed man, no poor and no vagabonds”: no one on Welfare, no one on Social Security, no homeless, no income tax, no alphabet agencies, no IRS, BATF, FBI, DEA, CIA, HEW, OSHA, SBA, and on and on and on to provide for the “general welfare” of our villages, towns, cities and states. How did Benjamin Franklin explain this to the British officials of his day? He said, “It is because, in the Colonies, we issue our own paper money. We call it Colonial Script, and we issue only enough to move all goods freely from the producers to the Consumers; and as we create our money, we control the purchasing power of money, and have no interest to pay.”
There was a reason the term Commonwealth was applied to Massachusetts, Pennsylvania, Virginia and Kentucky. The term was also used interchangeably with the term “state” by Vermont and Delaware in its 1776 constitution. When Benjamin Franklin was in England, he observed hunger, tramps, beggars, and poverty in the richest nation of its time. He asked how England with all its wealth had such grinding levels of poverty. The reply was that they had too many workers and that the rich were already overburdened with taxes. (Sound familiar?) However, they also had misdiagnosed their problem. It was not that they had too many workers, it was that they had too little money in circulation and it all carried the endless burden of unrepayable debt and interest.
The colonies did not have this problem because they used “wealth based” money that had need and they SPENT into circulation. This caught the attention of the English bankers. They had laws passed that prohibited the colonies from using their “wealth based” currency and mandated that “debt based” currency should be used. Within a year after passage of these laws, the colonies found themselves with mass unemployment and beggars as Franklin had found in England. This suffering brought on by a “debt based” currency was the trigger for the Revolutionary War. Unfortunately, even after the Revolutionary War, the monetary system remained “debt based” and except for brief periods of time we never returned to a “wealth based” currency.
Later in our history, Abraham Lincoln was faced with the financing costs of the Civil War. He went to the bankers and found to his dismay that they were going to charge him 24% to 36% interest which would have left the country hopelessly indebted to the bankers. Instead, he issued Treasury Notes that came to be known as Greenbacks because of their green colored ink on the back. This money was independent and debt free and was spent into circulation with no debt or interest burden. President Lincoln understood the power of the bankers which led him to write:
“The money powers prey upon the nation in times of peace and conspire against it in times of adversity. It is more despotic than a monarch, more insolent than autocracy, and more selfish than a bureaucracy. It denounces, as public enemies, all who question its methods or throw light upon its crimes. I have two great enemies, the Southern Army in front of me and the bankers in the rear. Of the two, the one at the rear is my greatest foe.”
In fact, Lincoln did exactly what the founding fathers had envisioned for the Republic when they specified that “only Congress shall have the right to coin money”.
President John F. Kennedy also understood the damage that the current “debt based” money system was having on the nation and he signed Executive Order 11110 which allowed the Treasury to issue “United States Notes” without having to go through the Federal Reserve system. Some of you may remember these.
The amounts of money that benefit the financial class by maintaining our current “debt based” money system is staggering. According to the U.S. Treasury, the amount of interest we have paid on the “Debt Outstanding” since 1988 is more than $8.2 trillion. To better understand the scope of that figure, that would be $8,200 billion! Our interest payments on the debt are projected to continue to grow if nothing is changed. Can you imagine what could be done for our nation with all that money? Education, healthcare, infrastructure, space exploration, alternative energy sources, research & development, lower tax rates, to name just a few. Add to that the fact that with huge debt overhang, we would not be at the mercy of the global bankers in this time of economic crisis. In fact if we eliminated fractional reserve lending, and had a “wealth based” money supply, there would be no crisis.
I see so many good people working so hard to address unemployment, lack of health insurance, budget deficits, foreclosures, endless wars, bank fraud, poverty, inflation, erosion of the middle class, and other SYMPTOMS of our current “debt based” money system that afflict our society and place huge burdens on the people. Yet until we eliminate the DISEASE, we will never be successful in eliminating the SYMPTOMS. This corrupt “debt based” system is at the very core of most of our social and economic problems. However, there are alternatives to our current system and many people and organizations are working towards changing our money system. The very powerful forces who wish to keep our current “debt based” system in place for their own self-serving individual benefit have the advantage of inertia, the support of the media controlled by them, and a general lack of knowledge about the subject. Most people are not even aware of the DISEASE, its nature, and that alternatives do exist.
We need to start laying down the foundations of a movement BEFORE the inevitable next economic crisis hits us. People need to become aware that in the past we had a better system. This can be accomplished through education, independent media, and word of mouth. It is time to end the illusion that our current “debt based” system works for the benefit of everyone.
About The Author
Rudy Avizius is a former educator and school administrator. Following the economic situation and the subsequent collapse for over a decade, he dedicates himself to educating the public that the current economic, social, and environmental course we are on is not sustainable, and the time for real change is now. Avizius is a featured author at www.OpEdNews.com