(Week 5 – Friday, Aug. 29)
In yesterday's column we walked through the private-bank-loan transaction by which our money is created, issued and controlled to show that the "national debt" does not refer to money that actually exists, is loaned out for a time, and is then paid back. It is not "real," therefore, in the dictionary or common-sense meaning of the word "debt." The question naturally arises, "How then can this "national debt" be "repaid" (whatever "repaid" might mean in this case)?"
The quick answer is, it cannot be "repaid." It can, however, be eliminated in a systematic manner by changing the basis on which the monetary system operates. Thomas Jefferson said, "But follow the principle, and the knot unties itself." If the operation of the monetary system were returned to sound principle, the so-called "national debt" would disappear in an orderly way over time, virtually of its own accord.
The present Federal Reserve System operates according to what might be called the "private-debt-money" principle. Our money is created by a private banking system, and "loaned" out at "interest," thus creating a supposed "debt" of society to that system. The money required to pay back such "loans" is available because it circulates in the money supply, but the money needed to make the "interest" payments is not because it was never issued. This means that participants in the economy must, in the aggregate, "borrow" increasingly more money into circulation in order to keep making the principal and "interest" payments on old bank loans, while maintaining a money supply. This is another way of saying that the "debt" associated with older money must be redeemed (rolled over) with "debt" attached to new money, with the result being that the total "debt" the nation "owes" to the banks builds up continuously in a snowballing manner.
If the present system issued money directly out of the U.S. Treasury, it would be operating according to what might be called the "public-debt-free-money" principle. Our money would be created by our own government, and then spent or loaned interest-free into circulation. This public money would for a time be used to make the principal and "interest" payments on old bank loans, and maintain a circulating money supply. The crucial difference is that in the new system, more money would not have to be "borrowed" into circulation from a private banking system to accomplish that. Old "debt money" would be redeemed with new "debt-free money," resulting in an ongoing reduction of the total amount of money in circulation for which the people "owe a debt" to the banks.
With the "private-debt-money" principle, the life of the nation serves money. With the "public-debt-free-money" principle, money serves the life of the nation. The contrast is that stark.
As bank loans were paid off with public money, the bubble of "national debt" that is attached to the nation's money supply would be deflated without default or economic disruption. By this process the "national debt" would be retired over time in an orderly way, and fade naturally out of existence.
This states the matter in principle, but the next step is to describe how, specifically, this would work out with respect to what I described in Col. #25 as the four forms of the "national debt"; i.e. the "Federal deficit," "Federal debt," "balance of payments deficit" and "money supply." I will pick up on that task in the next installment.
Richard Kotlarz
richkotlarz@gmail.com
The complete set of columns from this series is posted at the following websites.
http://economictree.blogspot.com/
http://www.concordresolution.org/column.htm
Friday, August 29, 2008
Thursday, August 28, 2008
Column #28 IS THE “NATIONAL DEBT” A REAL DEBT?
(Week 5 - Thursday, Aug. 28)
When we talk about a “national debt,” does this expression refer to money that actually exists, is loaned out for a time, and is then paid back? Is it “real” in the dictionary or common-sense use of the term “debt”? I would offer a description of two outwardly similar loan transactions, and perhaps through them we can discern the answer to the question.
(1) – A Loan from a Friend:
Suppose I needed to borrow some money, say $1,000. I might approach a personal friend and ask for a loan. He checks his bank account to see if he has the money to lend, and makes an assessment of whether I am likely to pay him back. Let us suppose that he has the money and is willing to lend it, but on one condition; that I agree to pay him more than I borrow (i.e. interest on the loan). After all, is he not foregoing the use of that money for a year, and is there not a risk that I might not pay it back?
We agree that he will lend me $1,000, and I will pay him back the $1,000 principal of the loan, plus a $200 interest charge (for a total of $1,200) at the end of a year. He writes up an I.O.U. on a slip of paper, and I sign it. He then writes a check for $1,000 out of his account, and hands it to me.
At the end of the year when I give him the $1,200, he marks the I.O.U. “paid,” and the loan is deemed by both of us to be satisfied.
(2) – A Loan from a Bank:
Now suppose that instead of borrowing the $1,000 from my friend, I decide to go to a bank. After all, is that not what banks are for? I approach the banker and ask for a loan. Like my friend, he checks what he has in his accounts, but not because he is planning to loan me any of that money. Instead, his intention is to create the money he will “loan” to me out of “thin air” by virtue of his authority as a banker. The reason he checks his accounts is to make sure that he has enough money “on reserve” to create the new money according to the “fractional reserve formula” by which he is governed.
He makes an assessment of my “creditworthiness,” and the loan is “approved.” We agree that he will lend me $1,000, and after a year I will pay back the $1,000 principal amount of the loan, plus a 20% interest charge ($200). He writes up a contract which states that I promise to pay back the loan, and I sign it. He then writes a check for $1,000 out of his authority to create money, and hands it to me.
At the end of the year when I pay him the $1,200, he marks the loan contract “paid,” and the loan is assumed by us, and deemed by the legal authorities, to be “satisfied.”
On the surface there are many similarities between these two transactions. In fact, the operative words of the discussion (“loan,” “interest,” “debt,” “payback” and “satisfaction”) are used in what appears to be identical ways. If one filmed each session, except for the incidental settings (one across a kitchen table and the other a banker’s desk), one would be hard pressed to detect any substantive difference between the transactions.
My experience has shown that when people go into a bank and borrow money, they generally assume that they are involved in an upfront common-sense transaction (like with their friend), whereby the banker is loaning them some money that he will no longer have on deposit in his bank for a time, and that he therefore needs the interest charge to compensate for the risk that he will not be paid back, and further, that when he is paid back all the conditions of the loan will have been satisfied without any residual debt to the borrower, banker or society as a whole. This is mistaken all counts.
If we carefully track the steps of the bank loan transaction we can see that:
● It was not essentially a process to “loan” money, but to create it.
● The banker did not charge “interest” on the “loan” because he was “at risk” of losing something substantial that he had entrusted to the “borrower.” Rather, the compounding “interest” charge was a fee that he was privileged to attach to the principal of the “loan” as the agent of a private banking system that had acquired the power to control the terms by which society would gain the use of its own money.
● This “loan” at “interest” is not a “debt” in any true meaning of the word. The money created and issued was done so out of a prerogative of sovereignty that was unlawfully (in my view) appropriated from the social order of which the borrower is a part. How can we the people be “in debt” for borrowing something that rightfully belongs to us, with an attached compounding “interest” charge to boot?
By logical extension then, the “national debt” is not a real debt.
I would hasten to stipulate that I am not in any way advocating the tearing down of the banking system, or even defaulting on the “national debt.” Rather, I would redeem it, the banks, and the nation’s financial life, by returning the way this country creates, issues and regulates money to sound principle. This, I can imagine, may sound strange now, but the idea will be fleshed out as we go.
Richard Kotlarz
richkotlarz@gmail.com
The complete set of columns from this series is posted at the following websites.
http://economictree.blogspot.com/
http://www.concordresolution.org/column.htm
When we talk about a “national debt,” does this expression refer to money that actually exists, is loaned out for a time, and is then paid back? Is it “real” in the dictionary or common-sense use of the term “debt”? I would offer a description of two outwardly similar loan transactions, and perhaps through them we can discern the answer to the question.
(1) – A Loan from a Friend:
Suppose I needed to borrow some money, say $1,000. I might approach a personal friend and ask for a loan. He checks his bank account to see if he has the money to lend, and makes an assessment of whether I am likely to pay him back. Let us suppose that he has the money and is willing to lend it, but on one condition; that I agree to pay him more than I borrow (i.e. interest on the loan). After all, is he not foregoing the use of that money for a year, and is there not a risk that I might not pay it back?
We agree that he will lend me $1,000, and I will pay him back the $1,000 principal of the loan, plus a $200 interest charge (for a total of $1,200) at the end of a year. He writes up an I.O.U. on a slip of paper, and I sign it. He then writes a check for $1,000 out of his account, and hands it to me.
At the end of the year when I give him the $1,200, he marks the I.O.U. “paid,” and the loan is deemed by both of us to be satisfied.
(2) – A Loan from a Bank:
Now suppose that instead of borrowing the $1,000 from my friend, I decide to go to a bank. After all, is that not what banks are for? I approach the banker and ask for a loan. Like my friend, he checks what he has in his accounts, but not because he is planning to loan me any of that money. Instead, his intention is to create the money he will “loan” to me out of “thin air” by virtue of his authority as a banker. The reason he checks his accounts is to make sure that he has enough money “on reserve” to create the new money according to the “fractional reserve formula” by which he is governed.
He makes an assessment of my “creditworthiness,” and the loan is “approved.” We agree that he will lend me $1,000, and after a year I will pay back the $1,000 principal amount of the loan, plus a 20% interest charge ($200). He writes up a contract which states that I promise to pay back the loan, and I sign it. He then writes a check for $1,000 out of his authority to create money, and hands it to me.
At the end of the year when I pay him the $1,200, he marks the loan contract “paid,” and the loan is assumed by us, and deemed by the legal authorities, to be “satisfied.”
On the surface there are many similarities between these two transactions. In fact, the operative words of the discussion (“loan,” “interest,” “debt,” “payback” and “satisfaction”) are used in what appears to be identical ways. If one filmed each session, except for the incidental settings (one across a kitchen table and the other a banker’s desk), one would be hard pressed to detect any substantive difference between the transactions.
My experience has shown that when people go into a bank and borrow money, they generally assume that they are involved in an upfront common-sense transaction (like with their friend), whereby the banker is loaning them some money that he will no longer have on deposit in his bank for a time, and that he therefore needs the interest charge to compensate for the risk that he will not be paid back, and further, that when he is paid back all the conditions of the loan will have been satisfied without any residual debt to the borrower, banker or society as a whole. This is mistaken all counts.
If we carefully track the steps of the bank loan transaction we can see that:
● It was not essentially a process to “loan” money, but to create it.
● The banker did not charge “interest” on the “loan” because he was “at risk” of losing something substantial that he had entrusted to the “borrower.” Rather, the compounding “interest” charge was a fee that he was privileged to attach to the principal of the “loan” as the agent of a private banking system that had acquired the power to control the terms by which society would gain the use of its own money.
● This “loan” at “interest” is not a “debt” in any true meaning of the word. The money created and issued was done so out of a prerogative of sovereignty that was unlawfully (in my view) appropriated from the social order of which the borrower is a part. How can we the people be “in debt” for borrowing something that rightfully belongs to us, with an attached compounding “interest” charge to boot?
By logical extension then, the “national debt” is not a real debt.
I would hasten to stipulate that I am not in any way advocating the tearing down of the banking system, or even defaulting on the “national debt.” Rather, I would redeem it, the banks, and the nation’s financial life, by returning the way this country creates, issues and regulates money to sound principle. This, I can imagine, may sound strange now, but the idea will be fleshed out as we go.
Richard Kotlarz
richkotlarz@gmail.com
The complete set of columns from this series is posted at the following websites.
http://economictree.blogspot.com/
http://www.concordresolution.org/column.htm
Wednesday, August 27, 2008
Column #27 TO WHOM IS THIS "NATIONAL DEBT" OWED?
(Week 5 - Wednesday Aug.27)
Yesterday I offered the view that the reason we have a "national debt" is that we as a people and a nation have allowed our sovereign prerogative to create our own money supply to be usurped by a private banking establishment. This raises the question, "To whom is this 'national debt' owed."
It would be easy to assume that because the "national debt" arises from transactions in which money is "borrowed" from banks, it must be to these banks that this "debt" is owed. If we trace carefully the course of the bank-loan-and-payback cycle we will discover that this is not the case.
I have described in previous columns how the banker is not really "loaning" money in the common sense use of the term. He is, rather, creating it out of his authority to do so as an agent of the banking system.
I have also described how, when a "borrower" makes a payment on a bank "loan," the payment is divided into two parts, with one portion being used to the pay down the amount of the "loan," and the other applied to "interest." The money credited towards the pay-down of the "loan" is extinguished back to "thin air" in a process that mirrors its creation out of "thin air."
The part that is credited towards the "interest" payment goes instead (after the bank subtracts its operating expenses, that is) into the account of a speculator in "financial-debt" contracts, usually described as an "investor," whose interest typically in the transaction is not to be a financial partner to a productive enterprise, but to be the recipient of the "interest" payments.
It is these "investors" to whom the "national debt" is owed. So who are these "investors?"
This is a big question that can be answered on many levels. At the highest level of finance, they are the persons who have both the means and the privilege of being in a position to act as the first link in the buying and selling of "debt."
For example, the quantity of money borrowed by the Federal government that is allowed to circulate in the economy (the so-called "high-powered money" that serves as the basis for how much money banks can create according to the "fractional reserve formula") is regulated by the buying and selling of U.S. government bonds through the "Open Market Desk" of the Federal Reserve Bank of New York. This "open market" is in reality a strictly limited market, in that the privilege of buying and selling these bonds is restricted to certain few dealers.
After the bonds are bought by these dealers, they are generally sold to "investors," by whom they may or may not be resold. Theoretically, they can wind up in the financial portfolio of anyone in society, even the world, and in fact they do get widely dispersed.
It is not, however, an equitable distribution. The system is set up in such a way that those who are privileged to be the primary bond dealers and their customers (or are otherwise strategically positioned in the system), as well as others who already possess an excess of funds to "invest," have a distinct and often insurmountable advantage in the game.
To illustrate, if one person manages to move into the financial position of being the receiver of "interest" payments (e.g. by buying mortgage contracts), and another finds himself obliged to be a regular payer (e.g. by making payments on a mortgage), then generally, while the latter works to be a producer of wealth (i.e. earns a paycheck), the first will become wealthy without further expenditure of effort. I would caution the reader that this illustration can be simplistic if one tries to apply it dogmatically to real human situations, but it remains a reality in the overall picture that the private-bank-loan transaction by which our money is created is the great engine of inequitable wealth redistribution.
While much has been said in the public discourse about the inherent greed of "the bankers" because they are supposedly getting the benefit of all this money that they "create out of nothing," it is evident from the financial section of the newspaper that the banks too are experiencing difficulties. In fact, many are on the brink of bankruptcy. That is because they are not sovereign entities, but instead have been co-opted themselves as the agents of a perverse principle at the heart of the monetary system which would tempt persons to use the control over money to satisfy their desire for undue private gain, and to exercise control over humanity itself.
To be sure, there are to all outward appearances people who act as this principle's particular promoters, facilitators and even conspirators, but I think a suspension of judgment is necessary if we hope to divine all the way to the core of the "national debt" matter. In truth, the acquiescence to this obverse monetary principle has become culture-wide. Directly or indirectly, in big ways or small, virtually all of us are at least partly responsible for the "national debt." Would it be too much to say that we are all part of the problem, and, potentially, the cure?
While we need not and should not ignore the gross injustices of the monetary system that do arise, it behooves us also to be aware that none of us is wholly blameless. This is a topic that will be explored in an incisive, but dispassionate manner as these columns unfold.
Richard Kotlarz
richkotlarz@gmail.com
The complete set of columns from this series is posted at the following websites.
http://economictree.blogspot.com/
http://www.concordresolution.org/column.htm
Yesterday I offered the view that the reason we have a "national debt" is that we as a people and a nation have allowed our sovereign prerogative to create our own money supply to be usurped by a private banking establishment. This raises the question, "To whom is this 'national debt' owed."
It would be easy to assume that because the "national debt" arises from transactions in which money is "borrowed" from banks, it must be to these banks that this "debt" is owed. If we trace carefully the course of the bank-loan-and-payback cycle we will discover that this is not the case.
I have described in previous columns how the banker is not really "loaning" money in the common sense use of the term. He is, rather, creating it out of his authority to do so as an agent of the banking system.
I have also described how, when a "borrower" makes a payment on a bank "loan," the payment is divided into two parts, with one portion being used to the pay down the amount of the "loan," and the other applied to "interest." The money credited towards the pay-down of the "loan" is extinguished back to "thin air" in a process that mirrors its creation out of "thin air."
The part that is credited towards the "interest" payment goes instead (after the bank subtracts its operating expenses, that is) into the account of a speculator in "financial-debt" contracts, usually described as an "investor," whose interest typically in the transaction is not to be a financial partner to a productive enterprise, but to be the recipient of the "interest" payments.
It is these "investors" to whom the "national debt" is owed. So who are these "investors?"
This is a big question that can be answered on many levels. At the highest level of finance, they are the persons who have both the means and the privilege of being in a position to act as the first link in the buying and selling of "debt."
For example, the quantity of money borrowed by the Federal government that is allowed to circulate in the economy (the so-called "high-powered money" that serves as the basis for how much money banks can create according to the "fractional reserve formula") is regulated by the buying and selling of U.S. government bonds through the "Open Market Desk" of the Federal Reserve Bank of New York. This "open market" is in reality a strictly limited market, in that the privilege of buying and selling these bonds is restricted to certain few dealers.
After the bonds are bought by these dealers, they are generally sold to "investors," by whom they may or may not be resold. Theoretically, they can wind up in the financial portfolio of anyone in society, even the world, and in fact they do get widely dispersed.
It is not, however, an equitable distribution. The system is set up in such a way that those who are privileged to be the primary bond dealers and their customers (or are otherwise strategically positioned in the system), as well as others who already possess an excess of funds to "invest," have a distinct and often insurmountable advantage in the game.
To illustrate, if one person manages to move into the financial position of being the receiver of "interest" payments (e.g. by buying mortgage contracts), and another finds himself obliged to be a regular payer (e.g. by making payments on a mortgage), then generally, while the latter works to be a producer of wealth (i.e. earns a paycheck), the first will become wealthy without further expenditure of effort. I would caution the reader that this illustration can be simplistic if one tries to apply it dogmatically to real human situations, but it remains a reality in the overall picture that the private-bank-loan transaction by which our money is created is the great engine of inequitable wealth redistribution.
While much has been said in the public discourse about the inherent greed of "the bankers" because they are supposedly getting the benefit of all this money that they "create out of nothing," it is evident from the financial section of the newspaper that the banks too are experiencing difficulties. In fact, many are on the brink of bankruptcy. That is because they are not sovereign entities, but instead have been co-opted themselves as the agents of a perverse principle at the heart of the monetary system which would tempt persons to use the control over money to satisfy their desire for undue private gain, and to exercise control over humanity itself.
To be sure, there are to all outward appearances people who act as this principle's particular promoters, facilitators and even conspirators, but I think a suspension of judgment is necessary if we hope to divine all the way to the core of the "national debt" matter. In truth, the acquiescence to this obverse monetary principle has become culture-wide. Directly or indirectly, in big ways or small, virtually all of us are at least partly responsible for the "national debt." Would it be too much to say that we are all part of the problem, and, potentially, the cure?
While we need not and should not ignore the gross injustices of the monetary system that do arise, it behooves us also to be aware that none of us is wholly blameless. This is a topic that will be explored in an incisive, but dispassionate manner as these columns unfold.
Richard Kotlarz
richkotlarz@gmail.com
The complete set of columns from this series is posted at the following websites.
http://economictree.blogspot.com/
http://www.concordresolution.org/column.htm
Tuesday, August 26, 2008
Column #26 WHAT CAUSES A "NATIONAL DEBT" TO ARISE?
(Week 5 - Tuesday Aug. 26)
In yesterday's column I defined "national debt" as any monetary "indebtedness" that is taken on by the society or nation as a whole, and I then listed four ways in which this "debt" manifests. The issue of "national debt" suggests a series of questions, which can be stated in a fivefold manner:
(1) – What causes a "national debt" to arise?
(2) – To whom is this "national debt" owed?
(3) – Is the "national debt" a real debt?
(4) – Can the "national debt" ever be "repaid?"
(5) – What is the solution to the "national debt?"
For this column let us focus on point #1 - What causes a "national debt" to arise? (1) – A "national debt" arises when an elite private group (or person) manages to usurp the power of the sovereign to create, issue and control a nation's money. In earlier periods of history this power was usually vested in a monarch, czar, emperor, dictator, or other authoritarian ruler. The American experiment represented something new in that sovereignty was deemed to reside in the people themselves, and exercised through their elected representatives within the rule of democratically determined law.
Since the beginning of civilization there have always been private parties (as opposed to rulers or executors of the political life) who have sought to co-opt society's money power, because in doing so they could effectively gain control over the whole nation. Indeed, in important ways it was better than ruling a nation in an overt political sense. The "money-lenders" got to skim-off the cream of the wealth of the country, while pulling the strings of power and staying safely in the shadows. The monarchs and politicians, on the other hand, were obliged to endure all the exposure, risk and abuse of being in public office.
Much could be said about the human motivations that cause people to seek such an extremely advantaged position in society (some would say, a stranglehold over it), but whatever the case, it is sufficient for now to state that whenever a person or group is successful in capturing the power over a country's money, it has gained effective control over the nation itself. That is what Mayer Amschel Rothschild (founder of the Rothschild banking dynasty) meant when he said, "Give me control of a nation's money and I care not who makes the laws."
Once the control over a nation's money has been handed to private persons, a "national debt" will arise, virtually as night follows day. This is because they will invariably use their power to supply the nation they purport to serve with money on such terms that, not only individuals, but the society as a whole will become, and remain, perpetually in their "debt."
This is not necessarily a simple case of avarice. Those with control over money may believe that they have been handed this privilege for good reason, or even as a sacred trust (and many have articulated a case for their view). The way this has unfolded in human history is extremely complex, and we should not be too quick to judge issues of motivation. Nonetheless as a practical matter, private money goes hand-in-hand with "public debt."
In the American experience, the crucial power of sovereignty (the power to create, issue and regulate money), has been abdicated by the elected representatives of the people in favor of a private banking cartel that issues the nation's money supply through a form of "private-bank-loan" (actually private-money-creation) transaction, by which a compounding "interest" fee that realistically cannot be paid is attached.
Therefore, this nation has a "national debt." It is a straightforward matter of cause and effect.
Richard Kotlarz
richkotlarz@gmail.com
The complete set of columns from this series is posted at the following websites:
http://economictree.blogspot.com/
http://www.concordresolution.org/column.htm
In yesterday's column I defined "national debt" as any monetary "indebtedness" that is taken on by the society or nation as a whole, and I then listed four ways in which this "debt" manifests. The issue of "national debt" suggests a series of questions, which can be stated in a fivefold manner:
(1) – What causes a "national debt" to arise?
(2) – To whom is this "national debt" owed?
(3) – Is the "national debt" a real debt?
(4) – Can the "national debt" ever be "repaid?"
(5) – What is the solution to the "national debt?"
For this column let us focus on point #1 - What causes a "national debt" to arise? (1) – A "national debt" arises when an elite private group (or person) manages to usurp the power of the sovereign to create, issue and control a nation's money. In earlier periods of history this power was usually vested in a monarch, czar, emperor, dictator, or other authoritarian ruler. The American experiment represented something new in that sovereignty was deemed to reside in the people themselves, and exercised through their elected representatives within the rule of democratically determined law.
Since the beginning of civilization there have always been private parties (as opposed to rulers or executors of the political life) who have sought to co-opt society's money power, because in doing so they could effectively gain control over the whole nation. Indeed, in important ways it was better than ruling a nation in an overt political sense. The "money-lenders" got to skim-off the cream of the wealth of the country, while pulling the strings of power and staying safely in the shadows. The monarchs and politicians, on the other hand, were obliged to endure all the exposure, risk and abuse of being in public office.
Much could be said about the human motivations that cause people to seek such an extremely advantaged position in society (some would say, a stranglehold over it), but whatever the case, it is sufficient for now to state that whenever a person or group is successful in capturing the power over a country's money, it has gained effective control over the nation itself. That is what Mayer Amschel Rothschild (founder of the Rothschild banking dynasty) meant when he said, "Give me control of a nation's money and I care not who makes the laws."
Once the control over a nation's money has been handed to private persons, a "national debt" will arise, virtually as night follows day. This is because they will invariably use their power to supply the nation they purport to serve with money on such terms that, not only individuals, but the society as a whole will become, and remain, perpetually in their "debt."
This is not necessarily a simple case of avarice. Those with control over money may believe that they have been handed this privilege for good reason, or even as a sacred trust (and many have articulated a case for their view). The way this has unfolded in human history is extremely complex, and we should not be too quick to judge issues of motivation. Nonetheless as a practical matter, private money goes hand-in-hand with "public debt."
In the American experience, the crucial power of sovereignty (the power to create, issue and regulate money), has been abdicated by the elected representatives of the people in favor of a private banking cartel that issues the nation's money supply through a form of "private-bank-loan" (actually private-money-creation) transaction, by which a compounding "interest" fee that realistically cannot be paid is attached.
Therefore, this nation has a "national debt." It is a straightforward matter of cause and effect.
Richard Kotlarz
richkotlarz@gmail.com
The complete set of columns from this series is posted at the following websites:
http://economictree.blogspot.com/
http://www.concordresolution.org/column.htm
Monday, August 25, 2008
Column #25 THE FORMS OF "NATIONAL DEBT"
(Week 5 - Monday Aug. 25)
There is, in my view, a very direct and completely effective way to address the problem of the "national debt," which is, by my definition, any monetary "indebtedness" that is taken on by the society or nation as a whole, and not in particular by any of its members or sectors. We can list four forms by which the "national debt" manifests at present. These are:
(1) – The "Federal deficit" – This is the amount of money borrowed by the Federal government in a given year from the nation's semi-private (some say quasi-public) central bank (Federal Reserve) to make up for the deficiency in tax revenues collected, which causes it to come up short in meeting its budgetary obligations.
(2) - The "Federal debt" - This is the ongoing sum of yearly "Federal deficits," which constitutes the total amount of money borrowed by the Federal government from the Federal Reserve.
(3) – The "balance of payments deficit" - This is a net monetary imbalance caused by this country buying more goods from foreign nations than we sell. When we sell goods to foreign countries we receive a net inflow of money, or stream of "national income." When we buy goods from foreign countries we spend part of that income. If we buy more than we sell, then there is a net outflow of money from the U.S. to foreign lands, which is referred to in the current economic discourse as a "balance of payments deficit."
(4) – The "money supply" - This is the amount of money that the participants in the social order or nation as a whole, including both public and private sectors, "owe" to the private banking system for the system's having made available the supply or pool of money which society requires to conduct its commerce.
The first three of these forms of the "national debt," and the arguments about them, no doubt look like familiar features of the national debate over money, and the descriptions that I have provided above are essentially the conventional ones. I would assert, however, that they are not what they commonly appear to be. In my experience, the terms "Federal deficit," "Federal debt" and "balance of payments deficit" are misnomers. That is, the phenomenon that each ostensibly refers to is not what the words themselves would seem to indicate. They are all abstract figures of speech that effectively serve to cover up the real nature of what is happening in the financial affairs of the nation, though, I dare say, very few people realize it. Typically, these expressions pass for what a literal interpretation of their words would tend to indicate, and that, in turn, is the cause of untold dysfunction and misery in the economic life.
Item #4, the "money supply," is one I have never heard identified as being an aspect of the "national debt," but previous columns in this series may give the reader some basis for understanding what I mean by identifying it as such.
In the next few installments I will offer very specific thoughts about how, in principle and practice, these aspects of the "national debt" were formed, and how they can be eliminated (to be clear, I am not proposing eliminating the money supply, but rather eliminating it as "debt"). In the end, we will discover that the very expression "national debt," when used in a monetary sense, is a contradiction in terms.
Richard Kotlarzmailto:Kotlarzrichkotlarz@gmail.com
The complete set of columns from this series is posted at the following websites.
http://economictree.blogspot.com/
http://www.concordresolution.org/column.htm
There is, in my view, a very direct and completely effective way to address the problem of the "national debt," which is, by my definition, any monetary "indebtedness" that is taken on by the society or nation as a whole, and not in particular by any of its members or sectors. We can list four forms by which the "national debt" manifests at present. These are:
(1) – The "Federal deficit" – This is the amount of money borrowed by the Federal government in a given year from the nation's semi-private (some say quasi-public) central bank (Federal Reserve) to make up for the deficiency in tax revenues collected, which causes it to come up short in meeting its budgetary obligations.
(2) - The "Federal debt" - This is the ongoing sum of yearly "Federal deficits," which constitutes the total amount of money borrowed by the Federal government from the Federal Reserve.
(3) – The "balance of payments deficit" - This is a net monetary imbalance caused by this country buying more goods from foreign nations than we sell. When we sell goods to foreign countries we receive a net inflow of money, or stream of "national income." When we buy goods from foreign countries we spend part of that income. If we buy more than we sell, then there is a net outflow of money from the U.S. to foreign lands, which is referred to in the current economic discourse as a "balance of payments deficit."
(4) – The "money supply" - This is the amount of money that the participants in the social order or nation as a whole, including both public and private sectors, "owe" to the private banking system for the system's having made available the supply or pool of money which society requires to conduct its commerce.
The first three of these forms of the "national debt," and the arguments about them, no doubt look like familiar features of the national debate over money, and the descriptions that I have provided above are essentially the conventional ones. I would assert, however, that they are not what they commonly appear to be. In my experience, the terms "Federal deficit," "Federal debt" and "balance of payments deficit" are misnomers. That is, the phenomenon that each ostensibly refers to is not what the words themselves would seem to indicate. They are all abstract figures of speech that effectively serve to cover up the real nature of what is happening in the financial affairs of the nation, though, I dare say, very few people realize it. Typically, these expressions pass for what a literal interpretation of their words would tend to indicate, and that, in turn, is the cause of untold dysfunction and misery in the economic life.
Item #4, the "money supply," is one I have never heard identified as being an aspect of the "national debt," but previous columns in this series may give the reader some basis for understanding what I mean by identifying it as such.
In the next few installments I will offer very specific thoughts about how, in principle and practice, these aspects of the "national debt" were formed, and how they can be eliminated (to be clear, I am not proposing eliminating the money supply, but rather eliminating it as "debt"). In the end, we will discover that the very expression "national debt," when used in a monetary sense, is a contradiction in terms.
Richard Kotlarzmailto:Kotlarzrichkotlarz@gmail.com
The complete set of columns from this series is posted at the following websites.
http://economictree.blogspot.com/
http://www.concordresolution.org/column.htm
Saturday, August 23, 2008
Column #24 WHAT ABOUT THE GREENS & RALPH NADER?
(Week 4 - Saturday Aug. 23)
Some people have asked me, "What about the Greens and Ralph Nader?" As America's "third-party" alternative, many have looked to the Greens as a pivotal movement around which a force for fundamental change could possibly gather. In my view, there has been some basis for this hope.
The Greens have for the most part not been involved in the movement for monetary transformation on the Federal level. They have attracted a fair number of activists for local currencies, barter networks, land trusts, and the like, but they have largely stayed clear of taking on the issue of national currency reform.
I was for a time a member of the Green Party, and found the people there to be a fine and dedicated group of souls who talked a great deal about economic issues, but the conversation rarely extended to the nature of money. My Green friends would tell me that this obscure "banking issue" I seemed to be so obsessed with was all very interesting, but right now we have starving people to feed, wars to stop, and a planet to save, so it would just have to wait. I was never able to get them as a group to consider that perhaps this "banking issue" was in fact the very engine that was driving all those problems, and to leave it unaddressed would only insure our ultimate inability to effect transformative change.
The Greens would do well to reclaim the historical roots of their own party. They have an antecedent namesake in the Greenback Party, which was, in fact, a key player in the anti-bank-money populist movement of the late 19th and early 20th centuries. There is an evolution that has proceeded from the populist parties, through the farmer/labor movements, to the progressive/liberal/grassroots politics of more recent times, of which the Green Party is a prime beneficiary. They have a genuine heritage on the monetary issue, if they will awaken to and embrace it. It represents their authentic vehicle to break out of the perceived disgruntled-left-wing-of-the-Democratic-Party ghetto.
The Greens at this point are sometimes deemed to be a radical left-wing import, and not fully American. By re-invoking the true issues of the American Revolution, as opposed to the conventional jingoistic mythology, it could move to the very highest and most patriotic ground. From that pinnacle there is no major constituency it could not speak to. There is no argument from the "major parties" it could not trump. This is a historic opportunity.
The groundwork that has already been laid down by Ralph Nader should be taken a critical step further. He is in the eyes of many the most famous, expert and eloquent (though sometimes a bit demagogic) spokesman on the predations of corporate practice, yet I have never heard him say a word about the ruler of them all, the corporation (Federal Reserve) which has been unconstitutionally granted the charter for money creation. I can't be sure he has never done so, but clearly it has not been the centerpiece of his efforts. Without making it so, the rest of his heroic labors may find limited success on particular issues, but are doomed to overall futility, as it will leave corporate money power still "enthroned" (as Lincoln had warned about).
If Nader and the Green Party had truly picked up on the monetary issue, they would have had the formula for a truly revolutionary program that could transcend all regions of the political and ideological spectrum. The money-creation franchise is the linchpin of the entire globalist corporate order, and it would all come undone if it were removed.
With Ralph Nader as its presidential candidate, the Greens emerged briefly as a force to be reckoned with in American politics in the late '90s. Since then the party has declined, and Nader has moved on to independent runs for the presidency in 2004 and 2008. It would appear that whatever opportunity the Greens and Nader had to be that political force for monetary redemption in America has been largely dissipated. Still, for the sake of the country, one can only hope that it could return?
Richard Kotlarz
richkotlarz@gmail.com
The complete set of columns from this series is posted at the following websites.
http://economictree.blogspot.com/
http://www.concordresolution.org/column.htm
Some people have asked me, "What about the Greens and Ralph Nader?" As America's "third-party" alternative, many have looked to the Greens as a pivotal movement around which a force for fundamental change could possibly gather. In my view, there has been some basis for this hope.
The Greens have for the most part not been involved in the movement for monetary transformation on the Federal level. They have attracted a fair number of activists for local currencies, barter networks, land trusts, and the like, but they have largely stayed clear of taking on the issue of national currency reform.
I was for a time a member of the Green Party, and found the people there to be a fine and dedicated group of souls who talked a great deal about economic issues, but the conversation rarely extended to the nature of money. My Green friends would tell me that this obscure "banking issue" I seemed to be so obsessed with was all very interesting, but right now we have starving people to feed, wars to stop, and a planet to save, so it would just have to wait. I was never able to get them as a group to consider that perhaps this "banking issue" was in fact the very engine that was driving all those problems, and to leave it unaddressed would only insure our ultimate inability to effect transformative change.
The Greens would do well to reclaim the historical roots of their own party. They have an antecedent namesake in the Greenback Party, which was, in fact, a key player in the anti-bank-money populist movement of the late 19th and early 20th centuries. There is an evolution that has proceeded from the populist parties, through the farmer/labor movements, to the progressive/liberal/grassroots politics of more recent times, of which the Green Party is a prime beneficiary. They have a genuine heritage on the monetary issue, if they will awaken to and embrace it. It represents their authentic vehicle to break out of the perceived disgruntled-left-wing-of-the-Democratic-Party ghetto.
The Greens at this point are sometimes deemed to be a radical left-wing import, and not fully American. By re-invoking the true issues of the American Revolution, as opposed to the conventional jingoistic mythology, it could move to the very highest and most patriotic ground. From that pinnacle there is no major constituency it could not speak to. There is no argument from the "major parties" it could not trump. This is a historic opportunity.
The groundwork that has already been laid down by Ralph Nader should be taken a critical step further. He is in the eyes of many the most famous, expert and eloquent (though sometimes a bit demagogic) spokesman on the predations of corporate practice, yet I have never heard him say a word about the ruler of them all, the corporation (Federal Reserve) which has been unconstitutionally granted the charter for money creation. I can't be sure he has never done so, but clearly it has not been the centerpiece of his efforts. Without making it so, the rest of his heroic labors may find limited success on particular issues, but are doomed to overall futility, as it will leave corporate money power still "enthroned" (as Lincoln had warned about).
If Nader and the Green Party had truly picked up on the monetary issue, they would have had the formula for a truly revolutionary program that could transcend all regions of the political and ideological spectrum. The money-creation franchise is the linchpin of the entire globalist corporate order, and it would all come undone if it were removed.
With Ralph Nader as its presidential candidate, the Greens emerged briefly as a force to be reckoned with in American politics in the late '90s. Since then the party has declined, and Nader has moved on to independent runs for the presidency in 2004 and 2008. It would appear that whatever opportunity the Greens and Nader had to be that political force for monetary redemption in America has been largely dissipated. Still, for the sake of the country, one can only hope that it could return?
Richard Kotlarz
richkotlarz@gmail.com
The complete set of columns from this series is posted at the following websites.
http://economictree.blogspot.com/
http://www.concordresolution.org/column.htm
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