Socialism/A Doylist Perspective on National Debt

An essay by AP295 (discuss • contribs)

The US government pays over a billion USD in interest on its debt per day. While I rarely watch TV, I did catch a brief few moments of CSPAN's coverage of a house debate on government funding. We need money for WIC, says a geriatric with neon hair color. We need money for defense, says a black republican. Another republican mentions debt, but then asserts that Democrats are responsible for this staggering and ever-increasing figure. My attention faded in and out. Was it suggested that monetary policy might be part of the problem? Was it observed that under the present system, each dollar is created with an equal amount of debt and therefore it is impossible to repay the debt with budgetary changes alone? Did anyone remark that the Department of the Treasury should be in charge of currency issuance, rather than delegate this task to a private bank calling itself The Federal Reserve, which is only nominally a "reserve" or "federal", and does not issue money but lends it out at interest? Was fractional reserve banking and its role in creating debt part of the conversation? Did anyone state that public affairs should not be hostage to lenders and other private interests rather than blaming the opposing party? Probably not. They were arguing over food stamps and other budgetary issues. Likewise, perennial 'debates' about the debt ceiling are typically framed as a Hobson's choice; borrow more money or shut down the government. The tacit (and seemingly reasonable) implication in so much televised media and internet media is that the US national debt results from budgetary policy. In fact, it results in large part from monetary policy. Overspending or undertaxing can cause a deficit and therefore result in debt, which is why these specious debates appear to make sense. However, a debt-based monetary policy will cause intractable debt.

Eliminating national debt requires a change in monetary policy. To understand why, one must understand how - and by whom - USD is presently created in the USA. In short, banks create money when they grant a loan and give that money to the borrower. The money supply effectively shrinks by that amount as the loan is paid off, and the bank keeps the extra interest. Commercial banks create the majority of money in exactly this manner, and central banks create a smaller fraction by creating money and using it to buy bonds, i.e. lending it. The common conception of fractional reserve banking, wherein banks lend out money deposited by customers but keep a fraction of it on hand, is essentially bogus. Even the Bank of England themselves corroborate this:

• "In the modern economy, most money takes the form of bank deposits. But how those bank deposits are created is often misunderstood: the principal way is through commercial banks making loans. Whenever a bank makes a loan, it simultaneously creates a matching deposit in the borrower’s bank account, thereby creating new money."

• "Just as taking out a new loan creates money, the repayment of bank loans destroys money."

• "In today’s modern economy, most money takes the form of deposits, but rather than being created by a group of savers entrusting the bank with holding their money, deposits are actually created when banks extend credit (i.e., create new loans). As Joseph Schumpeter once wrote, “It is much more realistic to say that the banks 'create credit,' that is, that they create deposits in their act of lending than to say that they lend the deposits that have been entrusted to them.” "

• "Banks lend by simultaneously creating a loan asset and a deposit liability on their balance sheet. That is why it is called credit "creation"--credit is created literally out of thin air (or with the stroke of a keyboard). The loan is not created out of reserves. And the loan is not created out of deposits: Loans create deposits, not the other way around. Then the deposits need a certain amount of reserves to be held against them, and the central bank supplies them."

Clearly these quotes are not stating that a loan is made whenever you make a deposit e.g. as in your paycheck. They are statements about how banks create and destroy money, slightly obfuscated by wording and jargon but still quite unambiguous. The US constitution states that currency issuance is the prerogative of congress, "[The Congress shall have power] to coin money, regulate the value thereof, and of foreign coin, and fix the standard of weights and measures." Despite its name, the Federal Reserve is a private organization, and commercial banks are plainly not government organizations either. This model of currency issuance is sometimes called "commercial money" or "debt-based currency". Alternatively, one could use the term "public currency" for currency issued and managed by a government agency like the Department of Treasury, and indeed that would solve the problem. Debt-based currency only benefits those who collect interest on the debt - usurers, in other words - and those who are venal enough to willingly oblige usurers in exchange for undeserved wealth or power. Other individuals, governments, businesses and organizations depend upon moneylenders to participate in the economy. If congress does not repeal the Federal Reserve Act and reassign this prerogative to the Department of Treasury, most people and most nations will be in debt to a small group of usurers in perpetuity. Debt-based currency doesn't allow humanity, in aggregate, to be debt-free or mostly so. A person or organization can sometimes repay all their debts and earn money, but someone is liable for the debt on the money earned. Loosely speaking, one cannot rid themselves of debt without indirectly putting others in debt, because most of the money itself is created along with an equal amount of debt and destroyed when that debt is repaid. This condition is morally and aesthetically grotesque. It is parasitic and sets people against one another.

Let's examine a practical, clear-cut and most importantly actionable solution. One of the few examples of honest journalism on the subject is Bill Still's documentary which proposes a very reasonable solution, described in more detail here . Some of these ideas were proposed earlier by Milton Friedman e.g. in . It makes two simple and important points, which are A) if congress repealed the federal reserve act and gave the Department of Treasury the authority to issue USD as treasury notes then the debt could be paid off instantly and directly by issuing that amount of currency and using it to pay the debts and B) if the reserve requirement is raised to 100% at the same time then banks would have to absorb much of the extra currency in order to meet the requirement and there would be much less inflation or no inflation (depending on how the numbers work out at present, see endnote three in , which was written in 2008) from repaying the debts with newly-issued money. The only thing that would change is that banks would then actually have a proper 'reserve', which they can't simply spend or lend out. All that being said, these banks and the people who run them have already taken the public for quite a ride and I'd just as soon see them thrown in jail rather than in possession of the vast majority of a newly issued supply of currency. Nationalizing banks that own the largest portions of the debt and paying the rest is a rather attractive option if there turns out to be leftover debt according to current figures. In any case, it is unacceptable to have unrepayable debt and interest payments in saecula saeculorum, which costs the public several trillion dollars per decade and ensures the financial exploitation of posterity as well. Why hasn't congress already done so? Bill Still attributes it to ignorance, and this is the only part of the documentary that strains credulity. While Chomsky originally made the following point, I rather like Hitchens' phrasing; "Noam Chomsky, a most distinguished intellectual and moral dissident, once wrote that the old motto about “speaking truth to power” is overrated. Power, as he points out, quite probably knows the truth already, and is mainly interested in suppressing or limiting or distorting it. We would therefore do better to try to instruct the powerless." The government is corrupt and collusive, not ignorant. Politicians and pundits write entire books on national debt, have debates on national debt, talk about national debt on television (typically in the farcical context of partisan budgetary arguments), etc. yet monetary reform is rarely if ever part of the discourse. Instead, as we have seen, the issue of national debt is dishonestly characterized as a budgetary problem rather than a monetary problem, with one party favoring higher taxes and the other less spending. The utter lack of interest in this reasonable solution to our monotonically increasing debt strongly suggests a conflict of interest within our government and collusion between both major political parties, who prioritize the interests of central banks over the public interest. It also indicates a strong contempt for our founding principles, various constitutional niceties, and the public they are sworn to serve.

Has it always been this way? Of course not, but care to guess who the last president to keep the US out of debt was? It was Andrew Jackson , because he fought the bank. "You are a den of vipers, I intend to rout you out and by eternal God I will rout you out. If the people only understood the rank injustice of our money and banking system, there would be a revolution before morning." And rout them he did. Yet how often does Jackson get credit for getting us out of debt? How often does his name come up in any of these congressional debates about funding, debt or the budget? His example is right there in the public record for all to see, and yet so many pundits and politicians seem bizarrely disinterested. Have they never heard of Andrew Jackson? Have they never heard of his war with the bank? Have they never looked at a chart of the national debt like the two I just cited? Those two charts come from and and amazingly, neither mention Jackson once. With pretentious titles "One chart that tells the story of US debt from 1790 to 2011" and "A Historical Perspective on U.S. Debt", you'd think they'd at least wonder why the debt shrunk to zero shortly after Jackson became president. The qz.com article tells us "Freedom isn’t free. The US was born in debt." Did the remarkable lack of debt around Jackson's presidency and shortly thereafter simply not stand out to them? It credits Hamilton with helping to manage the debt, about whom an interviewee (Charles Collins) said in Still's documentary, "Alexander Hamilton was a tool of the international bankers, and he wanted to create the U.S. bank, the Bank of the United States, and did so." Thankfully, we can credit Aaron Burr for putting Hamilton out of our misery. They dueled and Burr shot Hamilton in the gut. Incidentally, Jackson himself fought over one hundred duels in his lifetime and from what I've read, he had a cordial relationship with Burr. I did not cherry-pick these articles for their written content, they're just the first two I picked when I did an image search for a plot of the US national debt. Orwell, in his essay The Prevention of Literature, said the following: "The organized lying practiced by totalitarian states is not, as is sometimes claimed, a temporary expedient of the same nature as military deception. It is something integral to totalitarianism, something that would still continue even if concentration camps and secret police forces had ceased to be necessary. [...] Totalitarianism demands, in fact, the continuous alteration of the past, and in the long run probably demands a disbelief in the very existence of objective truth." In this case it's partisan framing and the omission or under-emphasis of salient information that misguides the public. While mass media shares the blame, it is chiefly a problem of education. Such things have faded from the public memory in large part because they either aren't taught in one's typical k-12 education or if they are, not nearly with adequate emphasis or context relative to their importance. Who's deciding what we're taught? Education standards are often prescribed, for example, by documents like this one Searching the document, I found not a single mention of Jackson's war with the bank. The only sentence in which Andrew Jackson is mentioned is the following: "Students will examine Jackson’s presidency, noting the ways it strengthened presidential power yet challenged constitutional principles in the case of Worcester v. Georgia (1832), including the controversy concerning the Indian Removal Act and its implementation." A rather incomplete view of Jackson's presidency, to say the least. It's true that he should have treated the Native Americans better, yet isn't it a disgrace that this is all we are intended to remember him for? Here's another article with a plot going far enough back to include Jackson, entitled "How worried should you be about the federal deficit and debt?", this time from David Wessel of the The Brookings Institution, an economics and policy think tank based in Washington DC with an endowment of roughly three hundred fifty million dollars, more than most colleges get. Surely they'd take note of this historical curiosity and connect the dots to Jackson, right? I'm afraid not, but we're told by the article that the debt is not currently a problem. How reassuring. Why are they telling the reader how worried they should be rather than what should be done about it? Of course most articles don't include a historical graph going back that far at all, let alone observe the important historical lesson Jackson gave us. Conversely, the idea that national debt is a problem caused by over spending or under taxing is impressed upon us by the media ad nauseam. At the time of writing, Wikipedia's articles Money Creation and Fractional Reserve Banking (permalinked shortly before writing) go well out of their way to obfuscate the basic idea using a profusion of jargon and generally poor summary style. Compare with the sentences I quoted earlier in the second paragraph of this essay, which themselves aren't even as direct as they could be. Jackson's Wikipedia biography mentions that he paid back the debt and was the only president to do, though without much interpretation and even less pomp. Compare with Still's segment on Jackson in the documentary. One could find any number of sources on the topic in which these salient, essential, and importantly, simple points are somehow obscured in one way or another, or distorted by partisanship, or omitted entirely despite their importance. Most often it's the latter. Any pundit who writes or speaks about inflation or national debt without speaking about reserve requirements, fractional reserve banking, or credit creation (i.e. how money is created by commercial banks and central banks) is committing a lie by omission. These salient points and the fact that money is always created with debt and destroyed when debt is repaid are not understood by most people because they are deliberately evaded by pundits and authorities.

Wikipedia's article on money creation is bad throughout, but it may suffice just to change a couple sentences. The lead is the most important and frequently-viewed part of an article, and when I permalinked it, the first paragraph was "Money creation, or money issuance, is the process by which the money supply of a country, or of an economic or monetary region, is increased. In most modern economies, money is created by both central banks and commercial banks. Money issued by central banks is termed base money. Central banks can increase the quantity of base money directly, by engaging in open market operations or quantitative easing. However, the majority of the money supply is created by the commercial banking system in the form of bank deposits. Bank loans issued by commercial banks that practice fractional reserve banking expands the quantity of broad money to more than the original amount of base money issued by the central bank." Bad, but not as bad as the current version, which is longer and does not even mention fractional reserve banking at all. The last two sentences are "However, the majority of the money supply used by the public for conducting transactions is created by the commercial banking system in the form of commercial bank deposits. Bank loans issued by commercial banks expand the quantity of bank deposits." Here's your homework assignment: try to replace that part with Commercial banks that practice fractional reserve banking create money when they grant a loan and give that money to the borrower. The money supply effectively shrinks by that amount as the loan is paid off, and the bank keeps the extra interest. Or replace it with any legible summary to that effect, preferably using the active voice and without jargon. I'm blocked on Wikipedia but nobody can reasonably argue that it's proxy editing as defined in w:WP:BE "unless they are able to show that the changes are productive and they have independent reasons for making such edits"; it obviously would improve the lead per w:MOS:INTRO, and every citizen benefits from a clear understanding of the money creation process. Consider it a public service or perhaps a social experiment. Observe w:WP:3RR. Good luck.

This is all to say nothing of the people and organizations besides the US government who are in debt (or in default) because of this monetary policy, stuck paying interest to these parasitic usurers. It's to say nothing of the fact that war is a strong generator of debt and therefore that usurers have strong incentive to encourage it. It's to say nothing of all the history in Still's documentary that suggests they do exactly that. Ultimately though, the object of these usurers is control and status, not money per se. Debt-based currency and private central banks like The Fed are the means and not the end. They want to exploit if not enslave humanity en masse, to give people a small fraction of what they should rightfully earn and own. And they want to be treated as honored citizens by the people they exploit in the nations they debase. The social acceptance of moneylending as a profession or common practice is a rather recent development. The definition of the word "usury" has become very narrow in recent times, supposedly referring to loans with 'high' interest instead of moneylending in general. We all know moneylending was generally against Christian morality. Conversely, one doesn't really hear much contemporary, secular discourse on the morality of moneylending and debt themselves. It would be absurd to simply write off the ethical and moral questions about debt as religious archaisms. There are or should be very serious ethical questions about it. There's nothing so much wrong with lending money or investment per se. Modern usury takes the form of debt-based, commercial money. Wages would be higher, taxes lower, and the economy altogether healthier without debt-based money. When currency is fundamentally created as debt, no person or organization can get out of debt without either suffering default and dispossession, or putting someone else into deeper debt. The government is in the hole for trillions and apparently can't afford healthcare for its people. Millions of middle-class Americans pay interest for the better part of their adult lives just to eventually own the house they live in. A majority of students graduate in debt from student loans . Why do we tolerate this? It is not a partisan issue, all the middle class suffers needlessly for it. Nobody benefits from it except these usurers and their crony politicians, figureheads, pundits and media personalities. They're two-faced liars who've debauched the entire nation and its culture. The vestige of the liberty that founders like Jackson ingrained for the sake of posterity is slowly but continually eroded by lesser people in similar positions of influence. They've got to go. They set people against one another with financial schemes such as this one and political schemes such as bipartisan fraud. They stultify the public by debasing education and by the garbage in mass media. Don't be like these nihilistic people.

What should one do? I suppose one could write their congressperson, but perhaps more importantly, one should inform their peers. Explain that the public is being defrauded. Do not pretend that this gross abuse of public policy is justified. Have the self-respect to demand decent government and decent behavior from leaders, and reject the big lie.

AP295 (discuss • contribs) 03:26, 30 September 2023 (UTC)