Friday, July 13, 2012

ABOLISH THE NATIONAL DEBT

One hour and fifty-six minutes. That’s all it takes to understand what’s happening to our country and how to fix it.

You haven’t the time, you say? Too busy with tweets and twitters? Getting carpel tunnel syndrome just deleting all the news, views and boos that fill your email inbox every day?

So was I until this came along. It’s a documentary about money. Historical, factual, thoughtful and extremely rational.

http://www.youtube.com/watch?v=swkq2E8mswI&feature=youtube_gdata_player

I suppose one reason I was so impressed with Bill Still’s wonderful video is that he says some things I have believed in my gut for a long time.

Article 1, Section 8 of the U.S. Constitution gives the Congress the power to borrow money, to coin money and to regulate the value thereof.

I never could figure out why it would ever be necessary to borrow money if you have the power to coin money.

Thomas Jefferson said that if there was one amendment to the constitution that he could write it would be that the United States government is prohibited from borrowing money.

The national debt is now over 15 trillion dollars. We borrow more money to pay the interest on the national debt. Then, we borrow money to run the government.

Makes no sense.

We mint coins and we issue them. We pay no interest on the coins we issue. Why should we pay interest on paper money? We print the bills and sell them to the Fed for pennies on the dollar. Then we borrow it back, pay interest on the face value and give the money we borrowed away. Or spend it.

Makes no sense.

They tell us that the more we borrow, the more money there is in circulation. The ten dollar bill in your wallet says that it is a Federal Reserve note. A note is nothing but an I.O.U. And if you take your note to the Federal Reserve and tell them you have come to collect on the I.O.U., what will they give you? Two fives, ten ones, maybe. More notes. More I.O.U.s.

Makes no sense.

Ron Paul crusades against the Federal Reserve. He wants them audited. He wants them abolished. Like many conservatives, Paul favors returning to the gold standard. The Wizard of Oz video argues that the gold standard is an invitation to manipulation by those who accumulate gold.

In finance, the golden rule is: he who has the gold makes the rules. That’s what has happened in the past.

But the argument against fiat money is also supported by history. If there is no limit to the amount of money that can be printed except the will power of public officials, those officials will sooner or later give in to the temptation to turn the crank enthusiastically until the currency isn’t worth the paper it’s printed on.

There is a third way. The constitution which empowers our government to coin money should also empower it to issue certificates of legal tender – greenbacks, if you will – in an amount not to exceed a certain multiple of the population as determined by the most recent census.

Money is, after all, just a medium of exchange. The more people there are, the more money is needed. Increasing the money supply to serve a larger population is not inflationary.

The constitution should prohibit borrowing for any purpose, but when Congress declares war, it should be able to increase the greenback ceiling, temporarily.

I’m sure there is much more to be said about this by people more knowledgeable about finance than I, but I submit that the time has come for all concerned citizens to discuss, debate and decide what must be done before we experience the modern version of Greek tragedy.

6 comments:

  1. Judge,

    The Fed is audited and the Fed gives the profit it makes to the Treasury each year - Congress knows this as they pass a bill of instruction to the Fed to pay the specific amount to the Treasury. Jefferson and other Founders also said a little debt is a good thing.

    go here and there is a lot of info on the Fed and even some long debates you might find interesting.

    http://amendments-taxes-legal.blogspot.com/2011/09/toddy-littman-on-federal-reserve.html

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  2. Is my suggestion for a 28th Amendment starting to make sense yet? For instance, would the Fed be allowed to monopolize the money supply with this amendment in place:

    28th Amendment
    "Corporations are not persons in any sense of the word and shall be granted only those rights and privileges that Congress deems necessary for the well-being of the People. Congress shall provide legislation defining the terms and conditions of corporate charters according to their purpose; which shall include, but are not limited to; 1 prohibitions against any corporation becoming so large its failure would pose a threat to national security or harm the general economy, 2 prohibitions against any form of interference in the affairs of government, education, and news media, and 3 provisions for civil and criminal penalties to be paid by corporate executives for violation of the terms of a corporate charter."

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  3. I watched the first few minutes. There's too much telling me what to think instead of explanation of fundamentals. Therefore, I've concluded that the video is propaganda, not explanation. I don't have two hours to spend watching this for no good reason.

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  4. LockJ - yes the Fed 'pays' some of it's profit back to the Treasury - but it keeps hundreds of millions for operating expenses - and the real abuse is the FOMC operations - loaning billions of dollars under the table to Wall Street Banks and Foreign banks. 'High powered money' is what they call the transfers in the Primary dealer accounts once a Treasury is purchased - with a 10 to 1 fractional reserve banking system setup - it is apply named. The Federal Reserve and it's primary dealers (banks too big to fail) is a cobal of the worst kind.

    William - People don't fear corporations -- they fear the Government! (Sans the Primary Dealers -- which really aren't feared but are held in disgust).

    Al - A true American - too lazy to educate themselves.

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    1. People fear the government because they're too lazy to research who funds and controls the government. Too many politicians don't understand economics and too many economists don't understand politics. Too many journalists understand neither. Lawyers? Well, that, too, depends on their field of specialization. Businessmen, on the other hand, understand all of this; and financial sociopaths use that know-how to "game" the confusion and rob The People blind. Who's to blame? Me. You. Them. How do we fix it? By mastering the mechanics of incorporation and harnessing that power to better use. The constitution is the only legal "harness" we have; let's use it. You sound pretty smart. How would you write an amendment to restore the People's sovereignty?

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  5. The constitution gives the Federal Government a wide latitude in financial structure of our nation.

    Article 1, Section 8 of the U.S. Constitution gives the Congress the power to borrow money, to coin money and to regulate the value thereof.

    This allows everything from a central bank (1781-1836, 1863-1913) to independent bank notes (1837-1862) to the federal reserve system (1913-present).

    Congress should have the flexibility to adjust monetary policy, so long as the real impact on the economy is transparent to the electorate.

    It is uncertain that the founding fathers envisioned anything like the federal reserve system, which allows the federal government to borrow money from a quasi-government body, and make "payments" on these loans by authorizing the Federal Reserve to print more Reserve Notes.

    Any currency without a tangible backing will deteriorate in value. This is one of the principle causes of inflation. This is particularly insidious in the context of a capital gains tax.

    Suppose I bought a house at $100,000 in 1980. Today I sell the house at $200,000. I have to pay a capital gains tax on the $100,000 increase in value, despite the fact that this is almost entirely due to inflation, not an actual increase in value of the property.

    Thus the Federal Reserve System allows the federal government to hide the cost of its spending behind an inflationary tax on capital.

    Eventually, faith in the currency runs out and the currency implodes into hyper-inflation and a new monetary regime is instituted (see Weimar Republic Mark). Usually nations return to a monetary system tied to gold.

    Article 1, Section 10 of the constitution limits states from issuing any currency, other than gold or silver coins. Many feel this should be extended to the federal government.

    I agree that an amendment of the line:

    "To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures;"

    along the lines of:

    "To coin Money, and regulate its exchange value relative a tangible reserve commodity.

    To regulate the value of foreign Coin and fix the Standard of Weight and Measures"

    In particular, if the current federal reserve notes (M2~ $10 Trillion)are backed by our gold reserves alone(8134 tonnes), $38,200 of reserve notes would be required for 1 ounce of gold reserves, 20 times the value of said gold. This would create a shock to our economy, as the dollar falls to 5% of its value overnight. Our national oil reserves are negligible to this scale.

    If we reclaimed the copper from our phone lines as we replace them with fiber optics, our national copper reserve would be more than sufficient for any reasonable economic policy.

    Tying currency to fixed commodities would no longer allow our politicians to hide the true costs of programs behind a hidden inflationary tax on capital. Inflation would require the government to publicly lower the exchange value of the currency, leading to real accountability at the ballot for the real costs of our national debt.

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