answering JAG’s question re: debt-free money

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  • Fri, Jul 30, 2010 - 09:59pm

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    strabes

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    answering JAG’s question re: debt-free money

I haven’t been on in a while, but somebody notified me that I might want to answer a question that was posted on a thread that has since had like 50 posts so I don’t want to post it there. JAG asked the following in that thread, and Farmer followed with “+zillions!!!!”….

[quote=JAG]OK, I’ve asked this question at least 20 times, and no one pushing the debt-free monetary system has replied to it. 

How does the physical printing of debt-free money (currency inflation) with no means to extinguish it not lead to hyperinflation down the road, especially if growth in the economy and growth in the money supply diverge for some unknown reason or circumstance?

At least with a credit-money system, the money supply is extinguished by repayment of the debt or by default. What piece of the puzzle am I missing here? And if you can’t explain it to me, then how are you going to explain it to the masses? And the fear of the masses is not something that should be marginalized with theoretical constructs, btw.

Strabes and/or Larry, please respond.[/quote]

I’ve answered this before, but I agree with JAG, I apparently haven’t done a good job because most people still cling to the model of being debt servants.  Here’s another try…

First, an acknowledgement of cycles:  yes, any and all money systems, ESPECIALLY the one we have today, are capable of cycles.  In a debt system we call those cycles inflation/deflation, and they are governed by a few Ivy Leaguers accountable to the most senior creditors of the world operating in a monopolistic cartel.  In a system with asset money I’d call them appreciation/depreciation, and they would be governed by a mechanism under Treasury accountable to the commonwealth, and then I would have state banks running smaller scale debt systems at their level which would generate inflation/deflation cycles based on more local conditions (though the publicly-owned ND bank that serves the commonwealth shows that it will avoid extreme cycles as opposed to privately-owned banks controlled by the global capital holders).  These cycles will need to be monitored regardless of which system, so would you rather have one where you and your commonwealth have assets (sovereignty), or would you rather have the one we have today which requires you and your governments to sign your assets over to the cartel as collateral and replace them with debt and mega taxation in order to have money (slavery)?  Either way, you’ll have cycles.

Second, to provide a precise answer, the question needs to be more precise.  Rather than using a term like hyperinflation as if it’s a defined, given condition of the world like gravity, the question might better be phrased “how does it not lead to attack by the people who control the most senior global capital pools and the primary banking institutions around the world?”  That’s what hyperinflation is.  If a country tries to serve the people with money that’s an asset to them, those who currently have a claim on all assets in the country will indeed transfer their capital elsewhere and crank up the banking vacuum machine by running interest rates to the triple digits to vacuum up purchasing power and try to keep the people from saving themselves from a servitude relationship where the only way for them to have money is to sign their hard assets as collateral over to the global capital holders.  (by the way this is precisely what the cartel has done to the US at this point…capital is ready to be transferred offshore in a moment’s notice and a crapload of people are under the threat of ARMs which gives the banks total vacuum power if the government tries to serve the people…we are certainly facing the threat of hyperinflation if my plan is enacted…but deadly deflation if it’s not).

So the key is to defend against that attack –> Usury laws and nationalization/breakup of the primary predators, esp. JPM Chase.  Will there still be pain?  Absolutely.  Either way the exponential engine is being shutdown…there will be pain regardless.  And if we enact my plan, we can’t stop global capital flight…but that’s a painful adjustment I want to go through because I don’t want to see so many millions living as slaves as the debt machine has run its course and brought us to the point where most people have absolutely NOTHING.

Why people continue to prefer slavery to sovereignty just because it keeps the global capital pools happy, i.e. the “markets,”  is beyond me.

Thomas Jefferson’s brilliance continues to amaze…

[quote=Jefferson]”Certainly no nation ever before abandoned to the avarice and jugglings of private individuals to regulate according to their own interests, the quantum of circulating medium for the nation — to inflate, by deluges of paper, the nominal prices of property, and then to buy up that property at 1s. in the pound, having first withdrawn the floating medium which might endanger a competition in purchase. Yet this is what has been done, and will be done, unless stayed by the protecting hand of the legislature. The evil has been produced by the error of their sanction of this ruinous machinery of banks; and justice, wisdom, duty, all require that they should interpose and arrest it before the schemes of plunder and spoliation desolate the country.” Letter to William C. Rives (1819)[/quote]

 

  • Fri, Jul 30, 2010 - 11:55pm

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    Peak Prosperity Admin

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    Re: answering JAG’s question re: debt-free money

Hey strabes,

Thanks for the personal response to my question.

Unfortunately, I have to say that your answer bewildered me a bit.

Let me back-up and ask a more basic question: Is there any means of removing debt-free money from the economy in such a system?

Also you might want to reference this related post in the original thread for context.

Thanks for your time…Jeff

 

  • Sat, Jul 31, 2010 - 12:50am

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    Re: answering JAG’s question re: debt-free money

[quote]Is there any means of removing debt-free money from the economy in such a system?[/quote]

Taxation.  But why would you want to? 

I’m just talking about M0, base currency, being debt-free.  Then the banking system primarily governed by state level public banks like ND would inflate/deflate on top of that base to serve most productive activity.  So most money in the system would still be debt-based.  But it wouldn’t be run by mega banks in the hands of private capital controllers who drive exponential growth and operate outside the country’s governance system. 

I don’t see any reason to ever remove base currency.  Bubbles may arise locally where private banks would still be able to operate, but that’s dramatically different from the Wall St cartel driving a macro bubble based on the debt-based currency. 

 

And thanks for pointing me to that followup post in that thread.  I don’t advocate 100% debt-free money funding all production…I think you’re correct that would indeed cause a problem, at least given the situation we’re in today.  If we could redesign everything from scratch, I think a system of 100% debt-free could be designed to work, but it can’t work right now.  I advocate debt-free, sovereign, base currency that would fund systemic, trans-state infrastructure, then production projects that happen within that infrastructure would be governed by the state banking systems.  For example, the feds right now could fund a mega solar/wind/thermo project designed to replace a portion of the oil/coal grid (it’s absurd that we as a community, a commonwealth, can’t do that…the reason we can’t is because the same interests that control oil/coal also control money and therefore the government).  That project would be funded by debt-free base currency of the sovereign United States.  Then all the multitude of businesses that would spring up as a result of that new infrastructure would be funded by the banks, i.e. self-extinguishing money, that themselves operate within the national infrastructure (has the added benefit of keeping financial institutions within the purview of the national government rather than allowing them to transcend it in terms of power as they have today).

Now, perhaps you might say I should be advocating a national bank similar to the state banks so that zero interest debt money would be used to fund infrastructure rather than debt-free money.  That would be better than what we have today. But I prefer some sovereign money being issued to the people (ala JFK) because that pushes power down…it’s like a monetary 2nd amendment…it’s money some people can have which cannot be vacuumed by the banking system. 

 

  • Sat, Jul 31, 2010 - 01:08am

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    Re: answering JAG’s question re: debt-free money

Damon,

Thanks for taking a stab at this tough question.  With that being said, I have to admit I am with Jeff on this one because I really don’t understand your answer.  I think the problem lies in this paragraph….

[quote=strabes]

Second, to provide a precise answer, the question needs to be more precise.  Rather than using a term like hyperinflation as if it’s a defined, given condition of the world like gravity, the question might better be phrased “how does it not lead to attack by the people who control the most senior global capital pools and the primary banking institutions around the world?”  That’s what hyperinflation is.  If a country tries to serve the people with money that’s an asset to them, those who currently have a claim on all assets in the country will indeed transfer their capital elsewhere and crank up the banking vacuum machine by running interest rates to the triple digits to vacuum up purchasing power and try to keep the people from saving themselves from a servitude relationship where the only way for them to have money is to sign their hard assets as collateral over to the global capital holders.  (by the way this is precisely what the cartel has done to the US at this point…capital is ready to be transferred offshore in a moment’s notice and a crapload of people are under the threat of ARMs which gives the banks total vacuum power if the government tries to serve the people…we are certainly facing the threat of hyperinflation if my plan is enacted…but deadly deflation if it’s not).

[/quote]

I think you are saying that high/hyper inflation is caused by capital flight and high interest rates, which are an intentional strategy by TPTB against what they perceive as a threat to their bread and butter by sovereign money.  I guess what I question is if this really has to be such a conspiracy? 

Imagine you own a home and you find out that they are going to be building a sewer treatment plant upwind of your neighborhood.  If you hear this first and can sell your home before everyone else tries to do the same, you will clearly do much better than if you wait.  Now maybe if you are close to all your neighbors and could come to some sort of agreement so that you all did not flood the market at the same time, you would all do better.  However it only takes a few that are out for themselves to cause a panic and when that happens, you don’t want to be the one left behind.  Same thing when a crowded theater catches fire.  If everyone remains calm, most likely far fewer people will get hurt.  However if a panic ensues, you really want to be out that door as quick as possible.  I guess what I am driving at is why frame it as a conspiracy, when it can be explained equally by psychology?

What do I like about your opinions of sovereign money is that they seem far more realistic than some others.  You admit that there will be pain and I completely agree.  At least to me, it seems that anyone that believes we can get out of the current situation without pain must clearly believe the current system has worked very well for everyone.  After all it allowed millions of people to live lifestyles far above where they had any right too, and now we can just painlessly move to another system.  What could have been better?  This seems silly to me because I have to believe that there must be a day of reckoning for our past follies.

Another thing I don’t understand is the faith in government.  To believe that some entities ( banks / financial firms / … ) have control over us because they have the power to create money, and think that the solution to this is to give that power to the one entity that already claims sovereign right to use FORCE against us seems like trouble to me.  We already have people that are in congress for 40+ years, handing out goodies like they are Santa Claus, getting reelected for bringing home the bacon.  What happens when they have complete control over the purse?  How many political fiefdom’s (public employee unions, defense contractors, …) will defend their benefactors in congress?  I shudder to think of the tyranny that would result.

Whatever the solution to our problems is, I don’t see how centralization is the answer.  Centralization of monetary powers is certainly convenient, but I think it is just to easy for corruption.  We will be better off with more local or competing solutions than a single monolithic solution.  I am not sure completely agree with it but I think something like the digital coin proposal is a far more innovative place to start thinking about solutions than belief in sovereign money.  At least that is my opinion.

Edit: I posted this before your reponse to Jeff.  I think I may disagree less with your new response.

  • Sat, Jul 31, 2010 - 01:33am

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    Re: answering JAG’s question re: debt-free money

Thanks for the clarification strabes, I understand your position much more clearly now and tend to agree with it. I have another question based on your response if you have the time. Would there be a floating exchange rate between FRNs and sovereign debt-free money in circulation? 

  • Sat, Jul 31, 2010 - 01:35am

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    Re: answering JAG’s question re: debt-free money

Hello strabes,

Enjoyed and as usual, learned from your post in response to JAG’s question.  Both JAG and goes211 posed a similar questions in another thread (Why the U.S. Need Not Fear a Sovereign Debt Crisis: Unlike Greece, It Is Actually Sovereign).

My attempted response may be found at the following link.

BTW, you probably missed it but you were quoted in the Ellen Brown article:

Damon Vrabel, of the Council on Renewal in Seattle, concludes:

“[T]he sovereign debt crisis . . . is a fabrication of the Ivy League, Wall Street, and erudite periodicals like the Financial Times of London. . . . It seems ridiculous to point this out, but sovereign debt implies sovereignty.  Right?  Well, if countries are sovereign, then how could they be required to be in debt to private banking institutions?  How could they be so easily attacked by the likes of George Soros, JP Morgan Chase, and Goldman Sachs? Why would they be subjugated to the whims of auctions and traders?  A true sovereign is in debt to nobody . . . .”

Fantastic stuff!

Larry

  • Sat, Jul 31, 2010 - 01:45am

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    Re: answering JAG’s question re: debt-free money

goes, I’m not framing it as conspiracy.  I’m describing how the banking system works…the plumbing of the banking system is what facilitates inflation, deflation, hyperinflation.  it’s a fact that our money system is based on signing over all property, assets, capital over to creditors.  and the senior creditors have the senior claim on all of it.  I know it’s hard to believe but those are actual people…that’s not conspiracy.  that IS our monetary system.  and if the government were to suddenly say “no more will we be hostage to that debt system which forces us into increasing indebtedness to you creditors for capital” then it’s an axiomatic reaction that the bond market breaks down, i.e. senior capital flees (or in non-conspiracy lingo, Treasuries skyrocket), and as the senior capital flees, just like when the music stops in musical chairs, lower level capital has to chase it up the pyramid, i.e. banks competitively race interest rates upward and the masses lose everything…exactly the psychology you’re talking about.  only it’s not the psychology of the masses that drives this…it’s the psychology of the senior creditors that control every other dollar via the hierarchical nature of the banking system.  the psychology of the masses at that point will simply be “uh, wtf just happened, why are my neighbors starving and shooting each other?”  then some historian will write a book about how mass psychology drove the end of the dollar because they don’t understand the facts of the banking system and its foundation, the bond market.

  • Sat, Jul 31, 2010 - 02:14am

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    Re: answering JAG’s question re: debt-free money

goes, I agree with your concerns about government at this point.  but I don’t see another solution besides taking the government back and making it serve the republic.  perhaps that would have to start at the state level first. 

JAG, FRNs would eventually disappear in my system.  so we would be left with the sovereign US money and then some form of US bank notes controlled/distributed by the state banks much like the regional Feds today.  I’ll have to think about the exchange mechanism.

thanks Larry, I didn’t see her article yet.

  • Sat, Jul 31, 2010 - 02:48am

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    Power corrupts and absolute power…?

Strabes,

I’m sorry, but I’m not buying any of this.  It’s not that I’m not buying the behavior you describe of our banking system – I agree it produces cycles, and I also agree the current system is set up to benefit those who control it.

What I do not buy is the notion of creating any kind of system, which, if controllable, won’t be abused by whoever holds the reigns.

The Roman Empire experienced the same kind of devaluation of currency we are.  Other systems have experienced hyperinflation, deflation, and counterfeiting-by-the-entrusted.  It does not seem to matter what kind of system is used.  What matters is whether it can be manipulated.  History seems to show that if it can be manipulated, it will be manipulated.

Your choice of whether one should prefer private bankers (or Ivy elites, if you prefer) controlling our money or “sovereigns”/”the commonwealth” does not resonate with me.

We have “the commonwealth” currently in charge of national legislation.  For decades, and especially in the past year, they have ignored the people and passed whatever laws are dictated to them by their handlers – special interests, lobbying groups, etc.  If we cannot even count on elected representatives passing laws people want (or refraining from passing laws people don’t want),  what hope is there of having them run something even more prone to corruption – our money itself?

All these reasons and more are why I continue to believe that the only money that could ever be trusted is private-issued, commodity-based coin.  Private issued currencies competing with one another, under the scrutiny of other private parties who would routinely assay coins for purity and audit bank reserves, is the only way to go in my book.  If someone cheats, the repercussions will be limited in scope to those who utilize the coin in question.  A monopolistic system, such as we have now and such as those proposed by you and many others, will only work completely until it doesn’t, and then everything breaks lose. 

For-profit, private systems work in every other facet of society, why not also allow for-profit monetary systems to exist? 

  • Sat, Jul 31, 2010 - 03:40am

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    Re: Power corrupts and absolute power…?

[quote=Farmer Brown]

All these reasons and more are why I continue to believe that the only money that could ever be trusted is private-issued, commodity-based coin.  Private issued currencies competing with one another, under the scrutiny of other private parties who would routinely assay coins for purity and audit bank reserves, is the only way to go in my book.  If someone cheats, the repercussions will be limited in scope to those who utilize the coin in question.  A monopolistic system, such as we have now and such as those proposed by you and many others, will only work completely until it doesn’t, and then everything breaks lose. 

For-profit, private systems work in every other facet of society, why not also allow for-profit monetary systems to exist? 

[/quote]

FB,

I totally agree with you about monolithic system’s only work until they don’t.  I used to also believe that money needed to be backed by a commodity but I no longer believe that MUST be the case.  I think commodity based systems seem to work best in times of uncertainty, because the underlying commodity acts like collateral.  The reciever of money has something tangible, for the good or service that was exchanged.  However I believe fiat systems can work but they either require FORCE ( which I find offensive ) or trust.  Force via legal tender laws, effectively legalizes government plunder.  Trust however must be earned and maintained.  I agree that the key is competition because as soon as only a few ( or one ) has the money power, corruption is only a matter of time.

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