Ron Paul says stop allowing them to "Monetize the debt"

What does it mean to "monetize the debt"? The Banking system is not merely paper money, it is much worse. It is debt money. To illustrate:

OK, here is the simple version of what our banking system does and why it is so crappy. The system we have is less viable now than it was during the Great Depression, but because of the added peace of mind that the FDIC (Federal Depositor Insurance Corporation) gives us we milk it along expecting it to last forever. It won’t, it can’t.

We Poe folk who actually work for a living have been continuously robbed since 1913, actually long before if you look into it. The ability for banks to manufacture money by merely loaning it out has been around for over 300 years. Governments in Europe looked to bankers for money when they went to war, and the bankers loaned out more money than they had. This has happened time and time again. It is how the rich stay rich, and the poor stay poor. As soon as a poor man gets rich, he either gets involved in the scheme, or his heirs go poor again. What I am saying is if your last name is Rothschild, Rockefeller, Schiff, Roosevelt, Morgan, Kennedy, or Bush, or you probably don’t have to work if you don’t want to, no matter how much money you spend. Just buy a Central Bank

The best way to illustrate the scheme is to simplify the operation. So let’s say there are only two banks and then the Federal Reserve above them. Picture a triangle. OK, I am Bank1, and in competition is Bank2. I have $100 and he has $100. I get a thousand people to deposit $1 in my bank to store it for them totaling $1000 plus the $100 of my own. I send out a monthly statement telling all my customers they have their full amount in my bank, but I can loan out all $1000, as long as I keep my $100 in reserve for those who spend their $1 out of my bank. This is the 10% required “reserve” in our fractional reserve system. This works great if not too many come in at the same time and take their money out. Cool for me and the FDIC for you.

But that’s nothing.

I loan out $1000 at interest by writing a check to my loan customer, he deposits the $1000 into Bank2. Now Bank2 has $1000 + $100 investment. He can loan out $1000 now too. His customer gets a check for $1000 and deposits it into my Bank1. Now I can lend out $900 of that. Bank2 gets that new deposit and can loan out $810, I can loan out $729, he can loan out $656.10 and on and on and on until all the money is loaned out, and all of it is tied up in the 10% reserve. It doesn’t matter if my customers spend their money, because whomever they give it to will usually just deposit it anyway! Cool eh?

Is everybody happy? So far the loans I am making interest money on total $2629, and my customer statements show a total of $3466.10, while I only spent $100. Cool. Interest money comes in, people take their money out, spend it, and others put it back in. All is well. Until, rats, the fool I loaned the $1000 to disappears with the loot. All heck breaks loose until, thank goodness, the Fed rescues me and loans me whatever I need into my reserves to keep the ship afloat.

Guess where the Fed gets the money it loans to me? Well, it used to be monetized gold, but now, it is 100% monetized debt. The Fed loans money to me that is backed by Government debt or my debt to them. They storing the debt paper makes the money they spent buying it have value. As a result, the total money supply grows by no other means than by loaning it.

The ability to manufacture money from loans has put lots of money in supply, and made it easy to get loans for houses and cars. But it requires more loans to sustain itself. Stop borrowing, and all the money disappears to the banks long before the loans are paid off; keep borrowing and the money becomes worthless, and most of it goes to the banks in interest.

This system is corrupt, and it is a house of cards waiting to be knocked over. There are toothpicks and band aids continuously stuck into it to keep it up. Bank owners are making a killing on interest, but all that interest money is created by debt, which creates a need for more inflation to cover the interest. There is no way this can sustain itself forever. The national debt is VITAL to keeping this joke afloat. Pay it off, and we get the great depression once again. Keep borrowing and we get runaway inflation and the great depression German style.

The solution is simple. Eliminate dishonest fractional reserve banking, and inflate the currency through government action, not bank action. BOTH must happen; neither will work independently. This is the only solution, there is no other way. Money must also have intrinsic value; not credit value, but tangible asset value. This would make our economy the wealthiest in the world again. And everyone would be wealthy, not just tax exempt bankers.