Understanding "National Debt" As A Function Of Fiat Money
DriftingByTheStorm
Posts: 8,684
I think its time for a discussion of sorts on this topic.
I will start this short.
After much more reading, i have come to the crux of the "Paying off the National Debt" debate.
Here it is in a nutshell.
ALL "money" created by the federal reserve is DEBT based.
Every dollar that is printed by the Fed is LITERALY lent to the government at interest. [yes it gets really complicated with who earns what, because the Fed actualy has to return a lot of their profit back to the treasury as part of their charter]
But fundamentaly, the Fed prints dollars (or issues bank account digits) and gives it to the government.
The government in turn gives the Fed TREASURY BILLS (BONDS, DEBT, NOT MONEY!) as payment.
"here, give me some money, and i will give you an IOU that earns interest" ...
Now.
Answer this question,
If i give you 10 blue widgets, the ONLY blue widgets in the world, and you give me a note that promises me TEN PLUS ONE blue widgets in return,
HOW ARE YOU GOING TO MAKE GOOD ON THAT PROMISE?
The Fed prints up money for the government,
and the government hands it promises to pay back the Fed that money PLUS MORE MONEY !??!
THIS IS REALLY HOW IT WORKS!
You can say it isn't that simple,
but it is.
Someone show me where this is fundamentaly flawed?
The below is illustrative, and may or may not be theoreticaly correct, but here goes:
1. Government literature puts the total number of paper dollars in circulation at 1 TRILLION ($400 billion in the US and $600 billion internationaly)
2. Banks can lend out digital cash at 9 to 1. Every dollar you give them, they lend out 9ish (but almost always as digits in a bank account).
3. 1 Trillion dolars X 9 = NINE TRILLION DOLLARS (paper and digital "money)
remember ALL money originates from the Fed, even if it is the bank that is lending it out 9 to 1. Also remember the 4 or 5 major banks in America are actualy HUGE investor\owners of the regional Fed Banks. So in a very real sense, they are lending their own money. Because they own the Fed which prints and "lends" it to them.
4. The National Debt is 9 TRILLION DOLLARS.
5. 9 TRILLION IN DEBT. 9 TRILLION IN "MONEY" OUTSTANDING.
COINCIDENCE?
So if we just give ALL THE MONEY IN THE WORLD back to the government, they can pay off the debt, minus that small fraction of interst, that is probably like 100billion or something -- which can NEVER be repaid! LOL.
SO HOW ARE WE GOING TO PAY OFF THE NATIONAL DEBT IF ALL MONEY ACTUALY IS NOT MONEY, BUT SIMPLY DEBT?
:(
I will start this short.
After much more reading, i have come to the crux of the "Paying off the National Debt" debate.
Here it is in a nutshell.
ALL "money" created by the federal reserve is DEBT based.
Every dollar that is printed by the Fed is LITERALY lent to the government at interest. [yes it gets really complicated with who earns what, because the Fed actualy has to return a lot of their profit back to the treasury as part of their charter]
But fundamentaly, the Fed prints dollars (or issues bank account digits) and gives it to the government.
The government in turn gives the Fed TREASURY BILLS (BONDS, DEBT, NOT MONEY!) as payment.
"here, give me some money, and i will give you an IOU that earns interest" ...
Now.
Answer this question,
If i give you 10 blue widgets, the ONLY blue widgets in the world, and you give me a note that promises me TEN PLUS ONE blue widgets in return,
HOW ARE YOU GOING TO MAKE GOOD ON THAT PROMISE?
The Fed prints up money for the government,
and the government hands it promises to pay back the Fed that money PLUS MORE MONEY !??!
THIS IS REALLY HOW IT WORKS!
You can say it isn't that simple,
but it is.
Someone show me where this is fundamentaly flawed?
The below is illustrative, and may or may not be theoreticaly correct, but here goes:
1. Government literature puts the total number of paper dollars in circulation at 1 TRILLION ($400 billion in the US and $600 billion internationaly)
2. Banks can lend out digital cash at 9 to 1. Every dollar you give them, they lend out 9ish (but almost always as digits in a bank account).
3. 1 Trillion dolars X 9 = NINE TRILLION DOLLARS (paper and digital "money)
remember ALL money originates from the Fed, even if it is the bank that is lending it out 9 to 1. Also remember the 4 or 5 major banks in America are actualy HUGE investor\owners of the regional Fed Banks. So in a very real sense, they are lending their own money. Because they own the Fed which prints and "lends" it to them.
4. The National Debt is 9 TRILLION DOLLARS.
5. 9 TRILLION IN DEBT. 9 TRILLION IN "MONEY" OUTSTANDING.
COINCIDENCE?
So if we just give ALL THE MONEY IN THE WORLD back to the government, they can pay off the debt, minus that small fraction of interst, that is probably like 100billion or something -- which can NEVER be repaid! LOL.
SO HOW ARE WE GOING TO PAY OFF THE NATIONAL DEBT IF ALL MONEY ACTUALY IS NOT MONEY, BUT SIMPLY DEBT?
:(
If I was to smile and I held out my hand
If I opened it now would you not understand?
If I opened it now would you not understand?
Post edited by Unknown User on
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Comments
There are better write-ups I read a few years ago... I'll look for them when I can. Lost my bookmarks awhile back during a re-format.
http://en.wikipedia.org/wiki/Fiat_currency
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