I cannot place my finger on it precisely, but this seems too easy. If you make that much debt disappear, SOMEBODY should be taking a financial haircut of extraordinary magnitude. Who?
On the other hand, maybe the government has already done most of the Chicago Plan, albeit in an obfuscated manner. According to the official inflation rate of 2.9%, Treasury Bills (rate 4.3%) have a real rate of return of 1.4%. Throw in the income tax on that nominal rate and the real ROI drops further. Alas, the Shadow Stats site does not show up to date inflation numbers, but looking at the history, it is possible that the real inflation rate is just as high as the treasury bond rate.
Real interest rates for demand accounts are negative.
Do commercial banks finance mortgages any more? Or are they just retailers with mortgages financed with equity money via FANNIE MAE and FREDDIE MAC?
The Federal Reserve has gotten mighty creative in the last decade. Too creative.
But what they have been doing has been sort of working.
Explicitly doing the Chicago Plan might be [mostly] formalizing what is already going on. (Another study of the Federal Reserve's balance sheet is in order, but I lack the time.)
This analysis -- noble effort that it is -- complete misses an important factor in how to resolve the situation. That factor is the missing Economic Growth!
Money is well & good, and fascinating to many people. But the Real Economy consists of human being producing goods & services to trade with other people. Production Precedes Consumption.
The current analysis misses the critical factor, which was the creation of the Environmental Protection Agency in the early 1970s and the subsequent explosion in counter-productive regulation and lawyer-enriching lawsuits. Consequently, the US lost most of its steel industry, almost all of its consumer foods industries, essentially all of its shipbuilding industry, most of its computer chip industries, a large part of its pharmaceutical industry, and much of its automobile industry. All gone! -- along with all those high-paying jobs and the tax revenue they used to contribute to the government's coffers. And then we wonder why we have lawyers out the gazoo, budget deficits, and an unsustainable Trade Deficit.
FedGov expenditures definitely need to go down. But an important part of the solution lies in cutting regulations and simplifying taxation to make the US the prime place in the world to build factories and develop new industries. Let's give China a run for their money!
I am happy to believe in economic growth and happy to support regulatory reform, but as I mentioned in the footnote, this article *specifically* focused on just one aspect of reform. Please go read the footnote and you will see that unfortunately I now have to have you taken out and shot. :(
But as you know, when analyzing a complex system and breaking it down into major subcomponents, ideally those subcomponents are relatively independent of each other and have little if any cross over impact [handled via well controlled interfaces].
We definitely need to be patient and let you fold your various thought streams together, but they do have quite a bit of interaction and cross impact.
So impatience aside, there is merit in recognizing some of those issues or problems, as there is a small chance you will not have already observed all of those issues yourself. :-)
In today's economy it's not possible to grow your way out of debt. Economic growth is no longer financed by savings but by debt. If you grow using debt, the growth rate of your debt will be at least as large as the growth rate of your economy. What's worse is that each new dollar of output requires more than a dollar of new debt. Right now, it's multiples of a dollar (somewhere between 4.5 and 5.5).
This may be a good place to add the thought I forgot to add in my other replies.
Essentially, wheras many people think money is the source of demand for economic activity, or the "fuel" driving the economy, I believe it is only the lubrication. The real fuel is the innovation and entrepreneurship of selected folks coming up with new ideas or recognizing new opportunities. If those ideas are attractive enough, someone will provide the capital to help make it happen (for a cut, of course). So only at the macrolevel is there a possible disconnect between the availability of the "promise money" needed to allow the economy to expand; and its absence can assist in creating conditions leading to recessions.
I gather you are saying people are so greedy that they no longer wait until they, or their capital provider, has saved enough to support new economic activity, they just go borrow it. That of course adds to risk, and possibly funding of less well thought out ideas.
I believe it's time preference. As long as borrowing costs are low, why wait for savings to be accumulated? Today, financing growth with debt is almost universally used. It's also cheaper. If you knew how much of a cut venture capitalists and angel investors take, you'd want to borrow money as well. I also agree that money is a lubricant. My definition is: Money is a tool that facilitates commerce. "Commerce" being all value transactions. Economics is about Production and Productivity; how much we produce and how efficiently we produce it. Money is the measurement tool for societal value.
Yes, good points about growth and Say's Law on production.
I had not recogized the core role of the EPA as over regulatory monster, essentially starting with "Earth Day".
Some would argue the same for the NRC vs. nuclear power. Mr. Woe identifies the welfare state as another factor. And there is a "WTF" substack or website out there providing many examples of the impact from 1970/71 when Nixon took the US off of the gold standard.
In his 1967 book The Magic of Money, Hitler’s Reichsbank President, Dr. Hjalmar Horace
Greeley Schacht, let out the big secret:
“The mark’s dramatic devaluation began soon after the Reichsbank was “privatized,” or delivered to private investors.”
In other words, responsible for the post-war hyperinflation was not the German government, but rather the privately owned central bank in Germany, and its monopoly it had over the creation of money. Germany’s economy was crashed and devastated by bankers… that is, until Hitler arrived.
After Hitler was elected, refusing to play ball with the Rockefeller-Rothschild rules, one of the first things he did was fix the corrupt, debt-based financial system. By completely thwarting the international banking cartels, the Nazi government issued its own currency known as Reich Marchs, which were debt free and uncontrollable by international financial interests.
Debt Free Finance = Freedom
If America nationalized their currency as Hitler did for Germany, they would effectively sever all ties with international bankers, the manipulation of their government and economy would cease, and they would live debt-free. Just as Hitler issued debt-free currency for Germany, Abraham Lincoln setup an interest free banking system in the United States when he was President, and he was murdered for it. Former US president Andrew Jackson issued interest-free currency, and two shots were fired at his head in an assassination attempt, but the shots misfired and he survived. John F. Kennedy issued interest-free currency during his presidency and we all know how he met his untimely demise.
After Germany’s public banking system was installed, world Jewry responded by declaring war on Germany, including a global boycott of German goods. Within two years, the German economy was flourishing with its new-found stable, and inflation-free currency.
You're 100% correct, but I have found that when I promote a policy to my audience, I usually don't get the best result by focusing on "Hitler did it, and it worked!" For some reason it just never goes over well. :-D
Yes it is strange., the greatest economic and industrial revival in history, and no one knows anything about it.
-
"Indeed, during most of the 1930s Hitler received widespread international praise for the great success of his domestic economic and social achievements, making the cover of Time Magazine on numerous occasions and even being named its Man of the Year for 1938. "
"We made a monster, a devil out of Hitler. Therefore we couldn’t disavow it after the war. After all, we mobilized the masses against the devil himself. So we were forced to play our part in this diabolic scenario after the war. In no way we could have pointed out to our people that the war only was an economic preventive measure."
- US foreign minister James Baker (1992)
“THERE WILL COME A DAY WHEN ALL THE LIES WILL COLLAPSE UNDER THEIR OWN WEIGHT, AND THE TRUTH WILL TRIUMPH AGAIN”
JOSEPH GOEBBELS
-
“Atrocity propaganda is how we won the war. And we’re only really beginning with it now! We will continue this atrocity propaganda, we will escalate it until nobody will accept even a good word from the Germans, until all the sympathy they may still have abroad will have been destroyed and they themselves will be so confused that they will no longer know what they are doing. Once that has been achieved, once they begin to run down their own country and their own people, not reluctantly but with eagerness to please the victors, only then will our victory be complete. It will never be final. Re-education needs careful tending, like an English lawn. Even one moment of negligence, and the weeds crop up again – those indestructible weeds of historical truth.” - Sefton Delmer, 1904-1979, former British Chief of Black propaganda, said after the German surrender, in 1945, in a conversation with the German professor of international law, Dr. Friedrich Grimm
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You once wrote : “One of the humbling aspects of writing about philosophical issues is that, no matter how much you believe you’ve stumbled upon a fresh insight, it is virtually certain that someone who died 2000 years ago has already thought of your idea.”
I find that to be true of almost everything, economics, science, politics et al.
So I treat it all as 'theatre', it is much less wearing (wearying?) to be amused than to be enraged.
"Damascus has fallen" and there will be a lot of dead bodies spread around. not just from bombs but from starvation and disease, but I believe we are entering the "confucian" age.
Unfortunately I do not expect to be around to see it.
What I meant is that it has been tried before with huge success, however in each case, the Jewish fraternity declared war on the proposal and killed the originator.
Solving the 'debt' crisis or the usury based finance system is a death warrant.
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"Germany's unforgivable crime before WW2 was its attempt to loosen its economy out of the world trade system and to build up an independent exchange system from which the world-finance couldn't profit anymore. ...We butchered the wrong pig." --
Winston Churchill (The Second World War - Bern, 1960)
"Germany must be handed over to Jewry and the Germans shall be scattered amongst the peoples of the world."
Lionel de Rothschild, scion of the Rothschild clan, demand on October 22, 1939 to John Colville, Winson Churchill's secretary.
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"Henceforth no Jew, no matter under what name, will be allowed to remain here without my written permission. I know of no other troublesome plague within the state than this race, which impoverished the people by their fraud, usury and money-lending and commits all deeds which an honourable man despises. Subsequently they have to be removed and excluded from here as much as possible."
Queen Maria Theresa
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“You see, a legitimate government can both spend and lend money into circulation, while banks can only lend significant amounts of their promissory bank notes, for they can neither give away nor spend but a tiny fraction of the money the people need. Thus, when your bankers here in England place money in circulation, there is always a debt principal to be returned and usury to be paid. The result is that you have always too little credit in circulation to give the workers full employment. You do not have too many workers, you have too little money in circulation, and that [money] which circulates all bears the endless burden of unpayable debt and usury…..In the Colonies, we issue our own money. It is called Colonial Scrip [interest-free, wealth-based money issued by The Colonies 1750-1764 before Bank of England crooks made it illegal]. We issue it in proper proportion to make the products pass easily from the producers to the consumers. In this manner, creating ourselves our own paper money, we control its purchasing power, and we have no interest to pay to no one….” –
Benjamin Franklin (US statesman, political theorist, genius inventor), speaking at the London Parliament, 1763.
You may be right, but what effectively happened is that the "privatised" bank instituted Quantitive Easing to increase credit and stimulate growth.
The crippling WW1 debts and reparations were designed to ensure that Germany would never recover and remain an agricultural country and not an industrial power.
Hitler's greatest step to economic recovery was repudiation of those payments paying only interest on bonds raised earlier by Weimar.
> The crippling WW1 debts and reparations were designed to ensure that Germany would never recover and remain an agricultural country and not an industrial power.
Like you said, those reparations were never actually paid.
Actually Hitler repudiated the debts in 1939 but at the imposition on Germany after the surrender 1945, the WW1 debts were listed as part of the terms and WW2 reparations were added. The WW1 debts were finally paid off 90+ years after the end of WW1.
At the end of the war, USA, France and Britain took ALL industrial capacity from Germany and Japan.
Machines and forges, everything was stripped and sent to the victors. Both Japan and Germany were reduced to using old tin cans to make trinkets and toys, for export.
There was nothing left behind.
Then in the mid-fifties both countries started to re-industrialise. They had to start from scratch and make the new machines to create an industry, just as private vehicles were really taking off in Europe and Asia.
The machines in Britain and America were from the 30s and doors fitted with 1/4-1/2 inch clearance were the norm. Engines had 5-8/1,000th clearances and were therefore very unreliable and basically crap.
Germany and Japan had brand new much improved machines and presses and thus the VW, Mercedes, Toyota, Honda, et al. cars and bikes and engines were far, far superior in the 60s -70s and still are today.
The 'Allies' should have dumped their old industrial capacity into Japan and Germany and rebuilt USA/UK with 50s technology but it is what it is.
China did the same in the 90s and 00s.
The fact that the Germans, Japanese and Chinese had a far more difficult life from 1945 to 1990 also made them much harder working and more committed than the fat and lazy Americans, Brits and French.
"No problem can be solved from the same level of consciousness that created it."
Albert Einstein .
Trump sees everything in terms of "money deals", he is incapable of seeing anything but capital and debt. He is Heinlein's "Nehemiah Scudder" sent to be the saviour of the US (and then the world), The Orange Orator is the Meda-MAGA-moron, leading the mini-MAGA-morons to oblivion.
To solve a problem you first have to understand (and define) what the problem is., and that is the problem, no-one has defined it yet.
In the end there will be massive debt repudiation of the western economy and hopefully the east and south will be sufficiently independent not to suffer too much.
There was no reprieve under Clinton. That was a lie the MSM pushed during the 90s and people still believe it. Your own chart shows the debt continued to climb throughout the 90s. Reduction in the deficit is what they were referring to but we were still spending way more than we took in.
It's one big grift and they've been doing it for a long time no matter who was in office.
I do believe that history shows that when sovereigns are indebted, the bondholders eventually take a haircut. Bayonets are stronger than gold. But, yes of course, trade tokens should be issued by the -crown-, er congress, not created as debt by banks.
"Bayonets are stronger than gold." Undoubtedly true for a time, but eventually social or popular assessment of the government's declining legitimacy can also override bayonents. Soldiers do not like being paid in garbage money and there is usually an officer or sargent somewhere you can rally enough troops to rectify that lapse.
Perhaps then the recycle repeats, or a new regime style/ type is implemented instead [1776 to 1791?] .
The criminals in congress keep voting for their criminal enterprise to be funded.
Tree of Woe is correct. What’s never mentioned is all of the money that’s pre-appropriated as a matter of law (unfunded liabilities). Things like Social Security, and Medicare, they have to be funded as a matter of law, and are on autopilot, so to speak.
It’s like your power bill. If you have a poorly insulated house, and a 20 year-old AC unit, while living in south Florida — changing your lights from incandescent to LED isn’t going to dent your power bill -- because the majority of it is going to the AC.
Government spending is the same way. They are “fighting” over amounts of money that are insignificant when compared to the debt that’s racking up because of unfunded liabilities.
Our government is run by shit actors at this point. Because everyone is arguing over nonsense. Nobody is looking to actually "fix" anything. And the looming economic collapse just keeps marching on.
3. Structural repudiation - replace Federal Reserve Note - a note is proof of indebtedness -with US Dollars, like Lincoln did. And it worked, by the way.
Remember, the people we owe the national debt will be repaid in full as to principal - but not interest.
They will use economic warfare against us, yes, but with what? It's long past time we became an autarchic state. I think that is where the God Emperor is leading us, by the way.
If they have a problem with this, charge them massive tariffs.
One nit I found confusing: you cite $36T of national debt at the top of your essay, but later you only identify (16+6+7.5=) $29.5T. A $6.5T difference??
When it comes to this conversion from debt money to equity money, a few commenters have felt not at ease about it either, sensing something is off. I believe they are sensing a "something for nothing" action happening here, which is never good for "someone". One aspect is that this quantity of national debt money is a mix of "real" and "promise" money, so only a portion of it really contains the "value" we presume to be stored in money, the remaining being "promised value" yet to be available to return to the lenders. If I understand correctly, then the equity money replacing this mixed value old money starts off with full value being stored in it, regardless of whether any wealth creating activity/ transactions were involved up to this point. Thus it basically wipes out the expected value to be returned to the lender, and giving the borrower a windfall that did not involve creating any corresponding wealth (an "unfair" situation on both sides.)
So, first to clarify: I think it is better to say the US is bankrupt, since we can never see our way clear to repaying the full indebtedness we owe ($36T plus up to $200T over 75 years if you believe other sources). We are not "broke" since we can still generate revenue, just not enough to meet our obligations. Thus we need to go through a bankrupcy procedure. I would prefer that it be an open and honest one, where everyone receiving a haircut recognizes it is happening and necessary to preserve our US liberty, eventually return us to real prosperity, and as fairly distrubed as can reasonably be expected by human agency.
I gather your procedure is basically saying via a "bankrupcy court" we are changing the agreement about the kind of money we will be using, from a debt created version to an equity created ASSERTION. The rules will be changed "just like that". In that sense, might makes right, and in any case the government is always going to be soverign over the money supply, rather than remain only one actor among many in a market place of other private sector actors. [This is also why cryptocurrency will not be money until the government accepts it and can control it. But maybe I am wrong on that?]
But when we receive or provide debt, this presents us with two types of "submoney". I call money that has been used to pay for real goods and services "real money". The value being stored in that money has been created where it did not exist before (or was created via some earlier transactions). In contrast, money created via debt/loans is (at least temporarily) "promise money" because it has not yet been used to pay for some wealth in some form -- so it does not yet really contain any "value" to store. It is "promised" by the borrower that this will occur, and accepted by the lender as a suitably low risk potentiality. And if the borrower has a means of converting promise money to real money, or use other sources of real money, he can pay off the debt and extinguish the "promise" nature of the money created [that money goes back into the "thin air" from which it was created, but accompanied by real money interest payments to the lender. The disappearance of that money still leaves some wealth that it created. [There is probably a double entry bookkeeping action here somewhere that I am not qualified to describe.]
Another aspect of value accounting is what I call "persistence of value." Some transactions involve creating value that exists for only a short time, such as the services provided by a waiter in the restaurant or physical objects that get consumed quickly. Other physical objects have a long time value usage until they become obsolescent or fall apart. But so do some services, such as legal services for estate planning or keeping you out of jail, providing a historical record, providing insurance, etc. This is all a fancy way of saying that the normal prices for these transactions can vary so keeping your value in goods and past services may be very useful, or have limitations vs. keeping your surrogate value in financial instruments, which have their own market forcing functions.
FWIW there are also rumours in the crypto world of Ripple (XRP) being a possible vehicle for dispensing with the US's national debt (eg: https://www.youtube.com/watch?v=4XVvXeJOo24). Whether it can actually work... I mean with God-Emperor Trump who knows, but I suspect even that will only work as a stop-gap. Give me the gold standard or give me death!
But restricting the money supply to what the commodity gold standard can support economically might still end up with you (and me) being hungry, if not dead. Plus gold is still subject to fraud and mismanagement via altered alloying, coin shaving, etc. I just saw something the other day suggesting the gold supply being mined was not enough to support economic growth of 2+%.
Until the government decides to accept tax payments in cyrptocurrency, crytocurrency will not be real money, although it is a dynamic and risky speculative investment for many people (many of whom cannot really afford to be so strung out).
"But restricting the money supply to what the commodity gold standard can support economically might still end up with you (and me) being hungry, if not dead."
Not sure why that would be the case.
"Plus gold is still subject to fraud and mismanagement via altered alloying, coin shaving, etc."
Sure, nothing's perfect, but those problems pale in comparison to the ones we have with either fiat or debt-based money.
"I just saw something the other day suggesting the gold supply being mined was not enough to support economic growth of 2+%."
Perhaps. On the other hand, how is that economic growth being measured? And would not a transition back to the gold standard result in more interest in gold?
First time I hear about Chicago plan however you already know a feasible solution when you wrote about Douglas Social Credit. Indeed debt free money can be used to clear debt using the same patterns of the economic cycle. But you need to do continuous calculations on how much money supply you need to keep a functional economy, one element to make Social Credit work is a national set of books. Then you need a credit authority with the task of supplying debt free money to catalyse production, the dividend and the price rebate, however money ought to be cancelled when used to pay for consumer goods.
Then you need the private banks to become a full reserve.
This is in very few words what could be done however many people need to know how debt money works and how it could work.
Great that you are attempting to address THE major issue of our governance and economy today.
I believe I found out about the Capital Plan and equity money via one of your posts a year or so ago, and I now have 4 specific files in a folder labeled: Equity Money & Chicago Plan 2008ff, including the IMF analysis and the one with a two or three chart set of boxes explaining graphically what you describe via text for the transformation from our current to your proposed condition.
Please take my comments as much as questions to clarify and learn more as assertions of possibly contrary "knowledge".
So, to start: what is money? I have come to learn that money is nothing more or less than an "agreement" to use some neutral digital or physical commodity to provide the functions of:
1) medium of account (in our case $'s). 2) medium of exchange 3) surrogate for or store of value for what the money was exchanged during a transaction for goods and services (aka, real "wealth".) These functions are so valuable that we will live with distortions of the core "stable" value of the money until we just can no longer afford to keep up the pretense, so changing a money system is a really big deal. Sometimes the transactions are really just converting the money from one form to another and obtaining or providing real wealth is yet to occur.
It does not matter what the medium of account is, as long as we continue to agree to using it. I surmise that is what is at the core of your proposal: a change in the agreement from using fiat money to "equity" money.
The core element that I believe is missing from this analysis is what I call "value accounting". Now, value is subjective and thus subject to all of the variations of human mind assessments as to what they "value". Fortunately for most of us most of the time, we can get by with holding pretty close to the same value for certain transactions for food, shelter, and other forms of wealth, in contrast to say our changing tastes in cars, clothing, entertainment, and a few other situations.
Give a man a gun, and he can rob a bank. Give a man a bank, and he can rob the world.
I cannot place my finger on it precisely, but this seems too easy. If you make that much debt disappear, SOMEBODY should be taking a financial haircut of extraordinary magnitude. Who?
On the other hand, maybe the government has already done most of the Chicago Plan, albeit in an obfuscated manner. According to the official inflation rate of 2.9%, Treasury Bills (rate 4.3%) have a real rate of return of 1.4%. Throw in the income tax on that nominal rate and the real ROI drops further. Alas, the Shadow Stats site does not show up to date inflation numbers, but looking at the history, it is possible that the real inflation rate is just as high as the treasury bond rate.
Real interest rates for demand accounts are negative.
Do commercial banks finance mortgages any more? Or are they just retailers with mortgages financed with equity money via FANNIE MAE and FREDDIE MAC?
The Federal Reserve has gotten mighty creative in the last decade. Too creative.
But what they have been doing has been sort of working.
Explicitly doing the Chicago Plan might be [mostly] formalizing what is already going on. (Another study of the Federal Reserve's balance sheet is in order, but I lack the time.)
The nine ruling familys of jekyll island
This analysis -- noble effort that it is -- complete misses an important factor in how to resolve the situation. That factor is the missing Economic Growth!
Money is well & good, and fascinating to many people. But the Real Economy consists of human being producing goods & services to trade with other people. Production Precedes Consumption.
The current analysis misses the critical factor, which was the creation of the Environmental Protection Agency in the early 1970s and the subsequent explosion in counter-productive regulation and lawyer-enriching lawsuits. Consequently, the US lost most of its steel industry, almost all of its consumer foods industries, essentially all of its shipbuilding industry, most of its computer chip industries, a large part of its pharmaceutical industry, and much of its automobile industry. All gone! -- along with all those high-paying jobs and the tax revenue they used to contribute to the government's coffers. And then we wonder why we have lawyers out the gazoo, budget deficits, and an unsustainable Trade Deficit.
FedGov expenditures definitely need to go down. But an important part of the solution lies in cutting regulations and simplifying taxation to make the US the prime place in the world to build factories and develop new industries. Let's give China a run for their money!
I am happy to believe in economic growth and happy to support regulatory reform, but as I mentioned in the footnote, this article *specifically* focused on just one aspect of reform. Please go read the footnote and you will see that unfortunately I now have to have you taken out and shot. :(
Pater yay! 🥳
Hobbles away, bleeding profusely. Thank goodness he aimed for my head and not anything important. :)
No, no, just sell him some rope and he will do the job for you.
But as you know, when analyzing a complex system and breaking it down into major subcomponents, ideally those subcomponents are relatively independent of each other and have little if any cross over impact [handled via well controlled interfaces].
We definitely need to be patient and let you fold your various thought streams together, but they do have quite a bit of interaction and cross impact.
So impatience aside, there is merit in recognizing some of those issues or problems, as there is a small chance you will not have already observed all of those issues yourself. :-)
OK, OK, I will not have anyone taken out and shot. I stand corrected!
In today's economy it's not possible to grow your way out of debt. Economic growth is no longer financed by savings but by debt. If you grow using debt, the growth rate of your debt will be at least as large as the growth rate of your economy. What's worse is that each new dollar of output requires more than a dollar of new debt. Right now, it's multiples of a dollar (somewhere between 4.5 and 5.5).
This may be a good place to add the thought I forgot to add in my other replies.
Essentially, wheras many people think money is the source of demand for economic activity, or the "fuel" driving the economy, I believe it is only the lubrication. The real fuel is the innovation and entrepreneurship of selected folks coming up with new ideas or recognizing new opportunities. If those ideas are attractive enough, someone will provide the capital to help make it happen (for a cut, of course). So only at the macrolevel is there a possible disconnect between the availability of the "promise money" needed to allow the economy to expand; and its absence can assist in creating conditions leading to recessions.
I gather you are saying people are so greedy that they no longer wait until they, or their capital provider, has saved enough to support new economic activity, they just go borrow it. That of course adds to risk, and possibly funding of less well thought out ideas.
I believe it's time preference. As long as borrowing costs are low, why wait for savings to be accumulated? Today, financing growth with debt is almost universally used. It's also cheaper. If you knew how much of a cut venture capitalists and angel investors take, you'd want to borrow money as well. I also agree that money is a lubricant. My definition is: Money is a tool that facilitates commerce. "Commerce" being all value transactions. Economics is about Production and Productivity; how much we produce and how efficiently we produce it. Money is the measurement tool for societal value.
Yes, good points about growth and Say's Law on production.
I had not recogized the core role of the EPA as over regulatory monster, essentially starting with "Earth Day".
Some would argue the same for the NRC vs. nuclear power. Mr. Woe identifies the welfare state as another factor. And there is a "WTF" substack or website out there providing many examples of the impact from 1970/71 when Nixon took the US off of the gold standard.
You mean just like Hitler.
-
In his 1967 book The Magic of Money, Hitler’s Reichsbank President, Dr. Hjalmar Horace
Greeley Schacht, let out the big secret:
“The mark’s dramatic devaluation began soon after the Reichsbank was “privatized,” or delivered to private investors.”
In other words, responsible for the post-war hyperinflation was not the German government, but rather the privately owned central bank in Germany, and its monopoly it had over the creation of money. Germany’s economy was crashed and devastated by bankers… that is, until Hitler arrived.
After Hitler was elected, refusing to play ball with the Rockefeller-Rothschild rules, one of the first things he did was fix the corrupt, debt-based financial system. By completely thwarting the international banking cartels, the Nazi government issued its own currency known as Reich Marchs, which were debt free and uncontrollable by international financial interests.
Debt Free Finance = Freedom
If America nationalized their currency as Hitler did for Germany, they would effectively sever all ties with international bankers, the manipulation of their government and economy would cease, and they would live debt-free. Just as Hitler issued debt-free currency for Germany, Abraham Lincoln setup an interest free banking system in the United States when he was President, and he was murdered for it. Former US president Andrew Jackson issued interest-free currency, and two shots were fired at his head in an assassination attempt, but the shots misfired and he survived. John F. Kennedy issued interest-free currency during his presidency and we all know how he met his untimely demise.
After Germany’s public banking system was installed, world Jewry responded by declaring war on Germany, including a global boycott of German goods. Within two years, the German economy was flourishing with its new-found stable, and inflation-free currency.
You're 100% correct, but I have found that when I promote a policy to my audience, I usually don't get the best result by focusing on "Hitler did it, and it worked!" For some reason it just never goes over well. :-D
Yes it is strange., the greatest economic and industrial revival in history, and no one knows anything about it.
-
"Indeed, during most of the 1930s Hitler received widespread international praise for the great success of his domestic economic and social achievements, making the cover of Time Magazine on numerous occasions and even being named its Man of the Year for 1938. "
"We made a monster, a devil out of Hitler. Therefore we couldn’t disavow it after the war. After all, we mobilized the masses against the devil himself. So we were forced to play our part in this diabolic scenario after the war. In no way we could have pointed out to our people that the war only was an economic preventive measure."
- US foreign minister James Baker (1992)
“THERE WILL COME A DAY WHEN ALL THE LIES WILL COLLAPSE UNDER THEIR OWN WEIGHT, AND THE TRUTH WILL TRIUMPH AGAIN”
JOSEPH GOEBBELS
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“Atrocity propaganda is how we won the war. And we’re only really beginning with it now! We will continue this atrocity propaganda, we will escalate it until nobody will accept even a good word from the Germans, until all the sympathy they may still have abroad will have been destroyed and they themselves will be so confused that they will no longer know what they are doing. Once that has been achieved, once they begin to run down their own country and their own people, not reluctantly but with eagerness to please the victors, only then will our victory be complete. It will never be final. Re-education needs careful tending, like an English lawn. Even one moment of negligence, and the weeds crop up again – those indestructible weeds of historical truth.” - Sefton Delmer, 1904-1979, former British Chief of Black propaganda, said after the German surrender, in 1945, in a conversation with the German professor of international law, Dr. Friedrich Grimm
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You once wrote : “One of the humbling aspects of writing about philosophical issues is that, no matter how much you believe you’ve stumbled upon a fresh insight, it is virtually certain that someone who died 2000 years ago has already thought of your idea.”
I find that to be true of almost everything, economics, science, politics et al.
So I treat it all as 'theatre', it is much less wearing (wearying?) to be amused than to be enraged.
"Damascus has fallen" and there will be a lot of dead bodies spread around. not just from bombs but from starvation and disease, but I believe we are entering the "confucian" age.
Unfortunately I do not expect to be around to see it.
Not sure what you mean here, but just because the Austrian painter liked an idea… doesn’t mean that it is without merit 😉
What I meant is that it has been tried before with huge success, however in each case, the Jewish fraternity declared war on the proposal and killed the originator.
Solving the 'debt' crisis or the usury based finance system is a death warrant.
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"Germany's unforgivable crime before WW2 was its attempt to loosen its economy out of the world trade system and to build up an independent exchange system from which the world-finance couldn't profit anymore. ...We butchered the wrong pig." --
Winston Churchill (The Second World War - Bern, 1960)
"Germany must be handed over to Jewry and the Germans shall be scattered amongst the peoples of the world."
Lionel de Rothschild, scion of the Rothschild clan, demand on October 22, 1939 to John Colville, Winson Churchill's secretary.
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"Henceforth no Jew, no matter under what name, will be allowed to remain here without my written permission. I know of no other troublesome plague within the state than this race, which impoverished the people by their fraud, usury and money-lending and commits all deeds which an honourable man despises. Subsequently they have to be removed and excluded from here as much as possible."
Queen Maria Theresa
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“You see, a legitimate government can both spend and lend money into circulation, while banks can only lend significant amounts of their promissory bank notes, for they can neither give away nor spend but a tiny fraction of the money the people need. Thus, when your bankers here in England place money in circulation, there is always a debt principal to be returned and usury to be paid. The result is that you have always too little credit in circulation to give the workers full employment. You do not have too many workers, you have too little money in circulation, and that [money] which circulates all bears the endless burden of unpayable debt and usury…..In the Colonies, we issue our own money. It is called Colonial Scrip [interest-free, wealth-based money issued by The Colonies 1750-1764 before Bank of England crooks made it illegal]. We issue it in proper proportion to make the products pass easily from the producers to the consumers. In this manner, creating ourselves our own paper money, we control its purchasing power, and we have no interest to pay to no one….” –
Benjamin Franklin (US statesman, political theorist, genius inventor), speaking at the London Parliament, 1763.
The germans also did international barter trade, thereby avoiding using pounds or dollars entirely, and the banks in england especially hated this
> “The mark’s dramatic devaluation began soon after the Reichsbank was “privatized,” or delivered to private investors.”
I believe it had more to do with trying to start a welfare state despite being bankrupt.
You may be right, but what effectively happened is that the "privatised" bank instituted Quantitive Easing to increase credit and stimulate growth.
The crippling WW1 debts and reparations were designed to ensure that Germany would never recover and remain an agricultural country and not an industrial power.
Hitler's greatest step to economic recovery was repudiation of those payments paying only interest on bonds raised earlier by Weimar.
> The crippling WW1 debts and reparations were designed to ensure that Germany would never recover and remain an agricultural country and not an industrial power.
Like you said, those reparations were never actually paid.
Actually Hitler repudiated the debts in 1939 but at the imposition on Germany after the surrender 1945, the WW1 debts were listed as part of the terms and WW2 reparations were added. The WW1 debts were finally paid off 90+ years after the end of WW1.
And we still got the post-WWII German miracle.
I have my theory about that.
At the end of the war, USA, France and Britain took ALL industrial capacity from Germany and Japan.
Machines and forges, everything was stripped and sent to the victors. Both Japan and Germany were reduced to using old tin cans to make trinkets and toys, for export.
There was nothing left behind.
Then in the mid-fifties both countries started to re-industrialise. They had to start from scratch and make the new machines to create an industry, just as private vehicles were really taking off in Europe and Asia.
The machines in Britain and America were from the 30s and doors fitted with 1/4-1/2 inch clearance were the norm. Engines had 5-8/1,000th clearances and were therefore very unreliable and basically crap.
Germany and Japan had brand new much improved machines and presses and thus the VW, Mercedes, Toyota, Honda, et al. cars and bikes and engines were far, far superior in the 60s -70s and still are today.
The 'Allies' should have dumped their old industrial capacity into Japan and Germany and rebuilt USA/UK with 50s technology but it is what it is.
China did the same in the 90s and 00s.
The fact that the Germans, Japanese and Chinese had a far more difficult life from 1945 to 1990 also made them much harder working and more committed than the fat and lazy Americans, Brits and French.
Trump needs to create the Depart of Woe. Use the DOW to fix the Dow and debt.
"No problem can be solved from the same level of consciousness that created it."
Albert Einstein .
Trump sees everything in terms of "money deals", he is incapable of seeing anything but capital and debt. He is Heinlein's "Nehemiah Scudder" sent to be the saviour of the US (and then the world), The Orange Orator is the Meda-MAGA-moron, leading the mini-MAGA-morons to oblivion.
To solve a problem you first have to understand (and define) what the problem is., and that is the problem, no-one has defined it yet.
In the end there will be massive debt repudiation of the western economy and hopefully the east and south will be sufficiently independent not to suffer too much.
There was no reprieve under Clinton. That was a lie the MSM pushed during the 90s and people still believe it. Your own chart shows the debt continued to climb throughout the 90s. Reduction in the deficit is what they were referring to but we were still spending way more than we took in.
It's one big grift and they've been doing it for a long time no matter who was in office.
Fair enough. Sometimes as skeptical as I am, I still get fooled by the sham!
I do believe that history shows that when sovereigns are indebted, the bondholders eventually take a haircut. Bayonets are stronger than gold. But, yes of course, trade tokens should be issued by the -crown-, er congress, not created as debt by banks.
"Bayonets are stronger than gold." Undoubtedly true for a time, but eventually social or popular assessment of the government's declining legitimacy can also override bayonents. Soldiers do not like being paid in garbage money and there is usually an officer or sargent somewhere you can rally enough troops to rectify that lapse.
Perhaps then the recycle repeats, or a new regime style/ type is implemented instead [1776 to 1791?] .
Surprise, surprise.
The criminals in congress keep voting for their criminal enterprise to be funded.
Tree of Woe is correct. What’s never mentioned is all of the money that’s pre-appropriated as a matter of law (unfunded liabilities). Things like Social Security, and Medicare, they have to be funded as a matter of law, and are on autopilot, so to speak.
It’s like your power bill. If you have a poorly insulated house, and a 20 year-old AC unit, while living in south Florida — changing your lights from incandescent to LED isn’t going to dent your power bill -- because the majority of it is going to the AC.
Government spending is the same way. They are “fighting” over amounts of money that are insignificant when compared to the debt that’s racking up because of unfunded liabilities.
Our government is run by shit actors at this point. Because everyone is arguing over nonsense. Nobody is looking to actually "fix" anything. And the looming economic collapse just keeps marching on.
1. https://cowboystatedaily.com/2023/08/14/still-fighting-federal-reserve-in-court-wyomings-custodia-bank-opens-2-services/
2. https://www.unz.com/article/beating-wall-street-at-its-own-game-the-bank-of-north-dakota-model/
I love Ellen Brown.
3. Structural repudiation - replace Federal Reserve Note - a note is proof of indebtedness -with US Dollars, like Lincoln did. And it worked, by the way.
Remember, the people we owe the national debt will be repaid in full as to principal - but not interest.
They will use economic warfare against us, yes, but with what? It's long past time we became an autarchic state. I think that is where the God Emperor is leading us, by the way.
If they have a problem with this, charge them massive tariffs.
After that, have them call 1-800-MARINES.
Yes, people forget that Lincoln did exactly this.
Have you read A History of Central Banking and the Enslavement of Mankind?
(continued 2)
One nit I found confusing: you cite $36T of national debt at the top of your essay, but later you only identify (16+6+7.5=) $29.5T. A $6.5T difference??
When it comes to this conversion from debt money to equity money, a few commenters have felt not at ease about it either, sensing something is off. I believe they are sensing a "something for nothing" action happening here, which is never good for "someone". One aspect is that this quantity of national debt money is a mix of "real" and "promise" money, so only a portion of it really contains the "value" we presume to be stored in money, the remaining being "promised value" yet to be available to return to the lenders. If I understand correctly, then the equity money replacing this mixed value old money starts off with full value being stored in it, regardless of whether any wealth creating activity/ transactions were involved up to this point. Thus it basically wipes out the expected value to be returned to the lender, and giving the borrower a windfall that did not involve creating any corresponding wealth (an "unfair" situation on both sides.)
So, first to clarify: I think it is better to say the US is bankrupt, since we can never see our way clear to repaying the full indebtedness we owe ($36T plus up to $200T over 75 years if you believe other sources). We are not "broke" since we can still generate revenue, just not enough to meet our obligations. Thus we need to go through a bankrupcy procedure. I would prefer that it be an open and honest one, where everyone receiving a haircut recognizes it is happening and necessary to preserve our US liberty, eventually return us to real prosperity, and as fairly distrubed as can reasonably be expected by human agency.
I gather your procedure is basically saying via a "bankrupcy court" we are changing the agreement about the kind of money we will be using, from a debt created version to an equity created ASSERTION. The rules will be changed "just like that". In that sense, might makes right, and in any case the government is always going to be soverign over the money supply, rather than remain only one actor among many in a market place of other private sector actors. [This is also why cryptocurrency will not be money until the government accepts it and can control it. But maybe I am wrong on that?]
(continuing)
But when we receive or provide debt, this presents us with two types of "submoney". I call money that has been used to pay for real goods and services "real money". The value being stored in that money has been created where it did not exist before (or was created via some earlier transactions). In contrast, money created via debt/loans is (at least temporarily) "promise money" because it has not yet been used to pay for some wealth in some form -- so it does not yet really contain any "value" to store. It is "promised" by the borrower that this will occur, and accepted by the lender as a suitably low risk potentiality. And if the borrower has a means of converting promise money to real money, or use other sources of real money, he can pay off the debt and extinguish the "promise" nature of the money created [that money goes back into the "thin air" from which it was created, but accompanied by real money interest payments to the lender. The disappearance of that money still leaves some wealth that it created. [There is probably a double entry bookkeeping action here somewhere that I am not qualified to describe.]
Another aspect of value accounting is what I call "persistence of value." Some transactions involve creating value that exists for only a short time, such as the services provided by a waiter in the restaurant or physical objects that get consumed quickly. Other physical objects have a long time value usage until they become obsolescent or fall apart. But so do some services, such as legal services for estate planning or keeping you out of jail, providing a historical record, providing insurance, etc. This is all a fancy way of saying that the normal prices for these transactions can vary so keeping your value in goods and past services may be very useful, or have limitations vs. keeping your surrogate value in financial instruments, which have their own market forcing functions.
FWIW there are also rumours in the crypto world of Ripple (XRP) being a possible vehicle for dispensing with the US's national debt (eg: https://www.youtube.com/watch?v=4XVvXeJOo24). Whether it can actually work... I mean with God-Emperor Trump who knows, but I suspect even that will only work as a stop-gap. Give me the gold standard or give me death!
But restricting the money supply to what the commodity gold standard can support economically might still end up with you (and me) being hungry, if not dead. Plus gold is still subject to fraud and mismanagement via altered alloying, coin shaving, etc. I just saw something the other day suggesting the gold supply being mined was not enough to support economic growth of 2+%.
Until the government decides to accept tax payments in cyrptocurrency, crytocurrency will not be real money, although it is a dynamic and risky speculative investment for many people (many of whom cannot really afford to be so strung out).
"But restricting the money supply to what the commodity gold standard can support economically might still end up with you (and me) being hungry, if not dead."
Not sure why that would be the case.
"Plus gold is still subject to fraud and mismanagement via altered alloying, coin shaving, etc."
Sure, nothing's perfect, but those problems pale in comparison to the ones we have with either fiat or debt-based money.
"I just saw something the other day suggesting the gold supply being mined was not enough to support economic growth of 2+%."
Perhaps. On the other hand, how is that economic growth being measured? And would not a transition back to the gold standard result in more interest in gold?
First time I hear about Chicago plan however you already know a feasible solution when you wrote about Douglas Social Credit. Indeed debt free money can be used to clear debt using the same patterns of the economic cycle. But you need to do continuous calculations on how much money supply you need to keep a functional economy, one element to make Social Credit work is a national set of books. Then you need a credit authority with the task of supplying debt free money to catalyse production, the dividend and the price rebate, however money ought to be cancelled when used to pay for consumer goods.
Then you need the private banks to become a full reserve.
This is in very few words what could be done however many people need to know how debt money works and how it could work.
Yep the Chicago plan.
Milton Friedman liked it in the '30s and still liked it in the '70s. If he were still around I'm sure he'd love it today.
Not just backed be the government's good word, In God we trust, not in whatever the government chooses to call cash.
So I'd want something solid behind it, like exchangeable for gold or silver & yes, I'm old enough to well remember silver certificates..
In summary:
A great post exploring a very difficult and challenging topic, with commenters adding value as well.
Thank you.
I don't claim perfect knowledge about most of this, so I welcome any countervailing ideas that might improve my understanding.
Describing it as a "bankruptcy court order" is a good way of thinking about the situation, yes. Thanks for your detailed thoughts!
Great that you are attempting to address THE major issue of our governance and economy today.
I believe I found out about the Capital Plan and equity money via one of your posts a year or so ago, and I now have 4 specific files in a folder labeled: Equity Money & Chicago Plan 2008ff, including the IMF analysis and the one with a two or three chart set of boxes explaining graphically what you describe via text for the transformation from our current to your proposed condition.
Please take my comments as much as questions to clarify and learn more as assertions of possibly contrary "knowledge".
So, to start: what is money? I have come to learn that money is nothing more or less than an "agreement" to use some neutral digital or physical commodity to provide the functions of:
1) medium of account (in our case $'s). 2) medium of exchange 3) surrogate for or store of value for what the money was exchanged during a transaction for goods and services (aka, real "wealth".) These functions are so valuable that we will live with distortions of the core "stable" value of the money until we just can no longer afford to keep up the pretense, so changing a money system is a really big deal. Sometimes the transactions are really just converting the money from one form to another and obtaining or providing real wealth is yet to occur.
It does not matter what the medium of account is, as long as we continue to agree to using it. I surmise that is what is at the core of your proposal: a change in the agreement from using fiat money to "equity" money.
The core element that I believe is missing from this analysis is what I call "value accounting". Now, value is subjective and thus subject to all of the variations of human mind assessments as to what they "value". Fortunately for most of us most of the time, we can get by with holding pretty close to the same value for certain transactions for food, shelter, and other forms of wealth, in contrast to say our changing tastes in cars, clothing, entertainment, and a few other situations.