Tuesday, October 30, 2007

Money, Money, Money, Money

People really don't understand anything about how money is created, yet it is so very simple. I was amazed at the magic myself until I finally understood it. Fully one half of every transaction in almost everything we do involves money, and yet I had no idea where money originated or how it is worth anything. The most amazing thing is, we don't even care. Millions of people make their living dealing with money every day and most of them don't even know why money is money. It is truly amazing. Sigmund Freud suggested that there is a psychological connection between money and feces; he said we grew up thinking shit was valuable. (In fact they used to call outhouses "vaults") Maybe that is why we guard such smelly truth, and don't even want to discuss it.

Right now our money system is so benignly fraudulent that we call anyone who criticizes it a "conspiracy theorist". Amazing, for Ron Paul is right on, and he is considered crazy. If he could have his way, everyone would be better off. Even those who think he is “insane”, even the bankers. The only place that money gets into society is through a bank, and every time a bank issues money, they demand it back with interest. Why is it strange to think that it cannot work forever? Maybe it is because it has worked for so long, even though it really hasn’t. Why is it strange to think that whoever controls the bank, eventually owns whatever, and controls whatever else they want? Including bribery, donating to campaigns, buying off news editors, running the education system, and intimidating or even killing someone who threatens them? What a cash cow. What would you do if you had this power, would you rather be president of the United States?

There are two fundamental problems with our money system, and both have been around much longer than the Federal Reserve. But the Federal Reserve monopolized and multiplied it instead of fixing it. The fundamental problems are:

1- Fractional Reserve banking,
This allows a bank to loan out much more money than it has, and that money is backed mostly by the IOU documents written up at the time the loan is made. Only a small percentage of their own money is used to "back" the loan. Right now reserve requirements are between 8 and 16 percent. This, in any other business, is fraud; but in banking it is merely a regulated rule. The problem is when a loan defaults, it deletes the IOU but not the money, and as a result all money becomes worth less. This has been a practice of bankers for hundreds of years, but it is not common knowledge even today. Every single bank failure in history would not have happened if this practice was illegal.

2- Treasury Securities
This is the national debt chopped into little pieces and sold. There are different types of securities and they are a great investment to buy because they are guaranteed by the government to earn interest. The problem is, they are a burden to all taxpayers and give the rich a desire for the nation to stay in debt. Individuals are limited in how much they can buy, but banks are not. The Chinese central bank buys approximately $2 billion of these every day. This market, called the bond market, has caused (along with fractional reserve banking) all money in circulation to lose gold backing completely. Today all money is backed only by these government IOU's. The Federal Reserve has the very most "debt paper" as its assets. These "assets" are the backing to our Federal Reserve notes. (Yes, it is magic) When Alexander Hamilton first instituted this scheme within the first year of the constitution, Thomas Jefferson said:

“America is being transformed into a gaming table…Already the new national government is imperiled by the financial mania. Furthermore their gamester ethic will corrode the traditional frugality and industry that defines the American character”

The real problem with this type of government debt is the immorality of it. Those who are in government are less likely to curb government spending when they know that they can profit personally from the debt. As Hamilton said to the First National Bank president Robert Morris “A national debt, if not excessive, to us is a national blessing” For some reason, I am glad that Aaron Burr won that duel. I only wish it would have happened twelve years sooner. This system was eliminated by Andrew Jackson, but then restored during the Civil War, and has been with us ever since.

Wouldn’t it bee cool to see debtless money enter the economy through farming, manufacturing, and natural resources? Will it ever happen? I doubt it.


Anonymous said...

Ron Paul will not receive more than 4% of the vote in the primary or the election. Want to bet? And even if by some miracle Ron Paul is elected...he couldn't keep even one of his promises. Why? Because they are too extreme.
Cool blog though.
Peace Through Victory,
p.s. I sent your latest blog to the whitehouse...lol

al the trucker said...

How much?

Oh, Oh, to the white house? "They're coming to take me away ha ha.."

Victory through Peace,