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Tuesday, March 10, 2015

Debt-Free Money: NOT a Solution

……….Jeff Nielson for Sprott Money

Most Canadian readers (in particular) will be aware by now of an extremely important trial currently taking place, a lawsuit by a citizens’ action group against the Bank of Canada: COMER vs Bank of Canada. It is extremely important, both in specific and symbolic terms, which is precisely why the Corporate media has totally censored any/all coverage of this legal challenge, which goes to the very heart of the corruption of our current monetary system.

For those readers not aware of this current court challenge (because of the censorship by our “free press”), the gist of this trial can be summarized in easy terms. This organization (Committee On Monetary/Economic Reform) is demanding that our corrupt government and the nefarious central bank which rules above it return Canada’s monetary system to the issuance of debt-free money. In turn, the phrase “debt-free money” is relatively easy to define: issuing currency from our central bank, into the economy, without (literally) “borrowing it” into existence – i.e. attaching debt to every unit of currency.

Again, some readers not familiar with our current monetary system may require some additional clarification (as they discover the horror/insanity of our present system). Back when we had legitimate governments and legitimate economies, we also had (surprise! surprise!) a legitimate monetary system: a “gold standard” where every unit of currency was (at least partially) backed by gold, and was issued free of any debt.

However, at roughly the same time our (now) now corrupt governments began corrupting our economies, they also totally corrupted our monetary system. The gold standard was abolished (assassinated by Paul Volcker), and our governments began creating their so-called “money” from debt – i.e. our governments forced themselves to “borrow” our own currencies, from these corrupt central banks, as the mechanism for our money-printing.

The natural consequence of piling all of this additional debt upon regimes whose commitment to fiscal responsibility was dubious (at best) was that all Western regimes (and much of the Rest of the World) began to drown in oceans of debt produced from the creation of their (so-called) “money”. Having seen the consequence of money-from-debt, the demand (by COMER) for a return to “debt-free money” would seem to be unassailable, from any logical/legal/moral perspective.

Sadly, this “issue” (i.e. the complete corruption of our monetary system) is much too complex and much too endemic to be fixed with any quick-and-easy solution of this nature. Indeed, once readers understand the true dynamics at work here, they will understand that far from being a “fix”, (so-called) debt-free money can only accelerate the descent into the economic hell known as hyperinflation.

The reason why this is not obvious to other pundits (and COMER itself) is that they fail to make the extremely important connection between the two monetary events previously noted: the end of the gold standard, and the beginning of money-from-debt. It is only once one fully understands the former event that they will understand why it caused the latter.

What does it mean to have a “gold standard”, or to simply use real money itself (i.e. gold and silver currency)? It means that every currency unit is a “unit of value” (the definition of real “money”). It is backed by tangible wealth. When Paul Volcker assassinated the gold standard, suddenly each and every currency was transformed into a “unit of _____”(?)

As with all “fiat currencies”, there was no longer anything to give this so-called “money” any value. But while that is the most-obvious deficiency of all fiat currencies, it is arguably not the most-important deficiency. The other reason why (for a thousand years) every fiat currency ever created has been destroyed through hyperinflation (or removed before it could destroy itself) is there is no mechanism to limit supply.

To understand why these two factors together imply the quick death of any fiat currency can be illustrated through a simple example. Suppose tomorrow that the Harper government declared that Canada’s new “unit of currency” would be a grain of sand. It was the new “fiat currency” for Canada, and thus officially money.

Obviously, despite the fact that our government had bestowed its “fiat” on this so-called currency, it would quickly (instantly?) become worthless, because of the combination of the two factors previously mentioned. It could be produced virtually for free (since grains of sand, like scraps of paper, have no value), and there would be no mechanism to limit supply – since it is available in virtually infinite amounts.

This example brings us to a fundamental principle of economics (and thus any/all monetary systems): any “currency” produced for free, and in (near) infinite quantities must be worthless. It must be worthless for two practical reasons, which go entirely beyond the fact that the “fiat currency” has no inherent fundamental value.

As a practical matter, if one could produce currency (virtually) for free, and in (virtually) infinite amounts, one person/entity would create a near-infinite amount of this “funny money” – and buy every asset on the planet. It is because of this absurdity that we have the second practical reason which such a currency would be worthless: no one would respect such a currency. Thus they would not accept it as payment for goods/services.

In conceptual terms, a return to (so-called) “debt-free money” would be identical to making sand our official currency. It would guarantee near-term worthlessness of that currency, and thus hyperinflation. This brings us to the (corrupt) “reason” why regimes across the Western world began creating their currencies via borrowing them into existence, in the first place.

Returning to one of the original deficiencies of any fiat currency, it is nothing but a “unit of _____”, i.e. merely a “unit” with no actual or implied value of any kind. When our governments began to borrow these currencies into existence (after the assassination of the gold standard) they did so to fill in the blank.

Our fiat currencies (which were no longer units-of-value) became “units of obligation”. Every unit of currency was effectively a mini-IOU from our governments, and that is what has provided the support for our monetary systems over the past 40+ years – not some ridiculous “fiat”. A government “fiat” by itself is insufficient for any fiat currency to retain value as a medium of exchange, even over any medium-term period.

Note that borrowing our currencies into existence gave them quasi-value in two respects. In addition to becoming units-of-obligation, the mechanism of attaching debt to currency was an effective means of limiting supply. No government (or entity) could create near-infinite quantities of this fiat-paper – because they would have to pay interest on all that currency.

The return to supposed “debt-free money” would destroy those (only) two supports for our monetary system, and turn our currencies into (literally) something as worthless as sand because we would not have “debt-free money”. We would have debt-free currency.

“Debt-free money” (i.e. a gold standard) is legitimate, and practical, and sustainable. Debt-free currency is merely another form of paper, financial fraud. There is no rational, legitimate, economically sound manner in which any fiat-currency monetary system can ever be operated. By its very nature, every “fiat currency” must be grossly unsustainable and woefully fraudulent or fatally deficient in numerous, key respects. A thousand years of failed attempts at this ‘monetary alchemy’ attest to this elementary fact.

This brings us to the reason why this trial has terrified our governments, our central banks, and even the One Bank itself – to the point where they have been frightened into complete censorship of this ultra-important legal challenge. Here readers need to understand the normal manner in which the One Bank (and its Corporate media tentacle) reacts to what it perceives as a negative development. It uses its propaganda megaphone to “explain” the event to us – i.e. put its own “spin” on the event to attempt to influence our thinking.

Why have the central bankers, our governments, and their “pets” in the Corporate media simply been given a “gag order” by the One Bank on this one, particular subject? That question can ultimately be answered in two words “quantitative easing”.

By now, more enterprising readers would have already made a logical connection in their own minds. In previously defining a worthless currency, it was noted that any such currency would possess two properties: it could/would be “created for free” and in “near-infinite quantities”. This precisely defines the countless trillions of “QE currency” simply conjured into existence by these criminal central banks, and passively accepted by our puppet-governments.

There is simply no way for any banker, politician, or media drone to defend currency-from-debt without explaining the obvious, fatal deficiencies of “debt-free currency”. And the moment that any of these Liars began to “explain” this distinction, lots and lots of people would began to connect this to the fraud known as “quantitative easing”.

Every dollar/euro/pound/yen of “quantitative easing” is not merely worthless, but fraudulent – because our central banks have been cranking-out trillions upon trillions of this funny-money knowing that it was fundamentally worthless in every respect. In monetary terms, “QE” is literally identical to counterfeiting. Thus when our governments began their “QE” fraud, they made all of our currencies effectively worthless.

There is no way to distinguish a (totally worthless) “QE dollar” from the merely partially worthless “currency-from-debt” which these fraud factories have previously churned out. This is why our governments have always policed “counterfeiting” more seriously than virtually any other crime (except for their own counterfeiting).

The problem is that large quantities of counterfeit currency entering any monetary system do not simply “dilute” the value of that currency. They DESTROY the value of the currency being counterfeited, because the “integrity” of the monetary system is impugned, and thus the people lose confidence in that (corrupted) currency. One thousand years of history tells us that the moment any fiat currency loses the confidence of the people, it collapses to its true value: zero.

In many respects, the current legal challenge by COMER against the Bank of Canada can be likened to the quest of “Don Quixote”: while their motivations are sincere/honourable, they are fundamentally misguided. However, being sincere and honourable, any open, public debate about this incredibly important subject would inevitably expose the actual truth here.

This brings us to the symbolic reason for the absolute censorship of all coverage of this trial. This also represents an example of grassroots democracy: direct action at the level of the citizen. This also terrifies the Tyrants who rule over us.

As more and more citizens recognize the corruption and illegitimacy of our top-down pseudo-democracies, it is only natural that they begin to resort to more bottom-up activism. While ultimately COMER’s “cause” here is misguided, the activism demonstrated by this citizens’ group must be applauded – and needs to be emulated.

……….Jeff Nielson for Sprott Money

Read more about Debt-Free Money: NOT a Solution

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