The following Four Points, if properly understood and acted upon, will save millions of Americans and hundreds of millions of people overseas from starving to death.
Fact One: The Only way out of a Depression is through Debt Cancellation.
How is such a dogmatic statement possible? Let’s begin with a useful definition of what a Depression is: A Depression is a period in time when Unpayable Debts are cancelled en masse. We associate Depressions with high unemployment, foreclosures and bankruptcies. But these are the Effects and not the Causes of Depressions. Understanding the Cause leads to a cure.
Historically, there are three ways to escape Depressions. One is a 1923 Weimar Republic style Hyperinflation. In 1923 German farmers could pay off a million marks in previously Unpayable Debts by selling two eggs.
In 1933 America Unpayable Debts were cancelled by foreclosures on farms and homes and through bankruptcy of individuals, businesses and companies. This cut the Money Supply by a third because under the Federal Reserve Act money can only be created when loans are made. And conversely, when a loan is either paid off or discharged in bankruptcy, money is destroyed. That loss of circulating money killed the economy and sentenced 3 million Americans to death by starvation.
The Third way to stop a Depression is through Debt Cancellation as the ancient Sumerians discovered 4,500 years ago.
The Bible writers copied this practice during the Babylonian captivity (586-539 BC). It was also copied by the Roman Republic which later chose Empire, slavery and Hyperinflation over periodic Debt Cancellation.
The Sumerians and later the Babylonian kings discovered that Debt Cancellation pulled small farmers and tradesmen out of indentured servitude so they could join the army and defend the kingdom against foreign enemies. Contrast that with the Romans. In the Republic they had Debt Cancellation and a military reserve of 700,000 men. In the Empire they had 125,000 soldiers with many of those being foreign mercenaries. The city of Rome was sacked in 410 AD by Alaric who previously had commanded 20,000 Visigoth mercenaries.
The point is that Debt Cancellation by government action is the least painful of the three methods to exit Depressions.
I have the least painful of the Debt Cancellation schemes. Arrest the Bankers and seize their assets even if we have to temporarily send our military into Lichtenstein, the Cayman Islands, the Bahamas and other such places. Use the money the Bankers stole from us to pay off our government debts and to fund our pensions. Let the Bankers rather than Hyperinflation pay for Debt Cancellation.
Occupying offshore Bank Havens for a week or so will be far more rewarding than invading Iraq a third time.
Fact Two: Modern monetary systems generate Unpayable Debts and create Depressions. Why? Because we are not allowed to have money unless we first go into debt.
Our paper money is created by our Central Banks. In the US it is the Federal Reserve which is privately owned. Our governments have given Bankers the right to charge us interest on the money they created out of nothing. This has led to mountains of Unpayable Debts.
Commercial banks create money whenever we take out a loan. Under the Federal Reserve Act, the United States Treasury’s Bureau of the Mint prints our paper money for the Federal Reserve but only after the federal government has gone into debt and agreed to pay interest to Bankers.
Checking account money is created mostly by the commercial banks.
Fact Three: You can choose to have a non-interest bearing currency. This would mean no state, local and national debt and no interest on those debts.
Examples of non-interest bearing currencies are Lincoln’s Greenbacks, the Bradbury pound which was issued in 1940 under wartime conditions in the UK and the Isle of Jersey pound. When Lincoln issued currency, he did so without interest and without entering a debt agreement with the banks. If we had Lincoln’s Greenbacks instead of Federal Reserve Notes, we would not have a national debt of $19 trillion and no state and local debts totaling more than $3 trillion. I used the figure of $19 trillion because the Treasury Department has refused to update debt figures for some time.
Fact Four: There is an alternative to fractional reserve banking. It has been called 100% money. It was recommended by the Chicago plan in 1933.
Two IMF economists said the Chicago plan would work. The nation of Iceland has studied it and has decided to convert to it. Under this plan both paper money and checking account money are created by the Treasury. The money can be spent into circulation to reduce taxation. It could finance both infrastructure repairs and new capital construction by the states which would eliminate state and local bond financing as well as the need for federal bonds. That means lower state and local taxes. My personal goal would be to eliminate property taxes on owner occupied homes.
Fractional reserve banking created most of our economic woes in the past. Some critics say we need to bring back the gold standard. But the Depression of 1348 happened on a gold standard. Their problem was fractional reserve banking. One gold coin on deposit could be multiplied into dozens of equivalent checking account deposits.
In 1929 you could go to a bank and exchange your Federal Reserve Notes for your choice of either gold or silver coins. Gold redemption was ended in 1933.
Bubbles are created because most of our investments come from newly created checking account money rather than savings. Loans issued under fractional reserve banking rules can create false impressions about the real need or demand for high priced homes or stocks.
In Britain and the UK Banks are allowed to loan out 30 pounds or euros for each one on deposit. The UK has far more Unpayable Debts to cancel than does the US. That means Britain will suffer more than America during the next Depression if we do not have Debt Cancellation and monetary reform.
We have governments run by Bankers. They have created more than a quadrillion dollars in liabilities which are supported by only $73 trillion in annual production. Of course that $73 trillion is inflated by trillions of dollars in war materiel that do not add to our individual wealth.
The economy has been contracting in real economic terms when you deflate for inflation. The bond and stock markets will collapse and very few will be able to sell and cut their losses.
My conclusion is that we ought to arrest the Bankers and to seize their assets to fund worldwide Debt Cancellation. To fund Debt Cancellation through inflation would shift all of the burden on to the middle and working classes while leaving our corrupt governments and the Bankers above them in control of our lives. Of course a billion people would die either from starvation or in Food Riots and Rebellions.
As I said, the only painless way out of this Depression is through Debt Cancellation paid for by asset seizure from the Bankers.
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The following is an article from Dr Michael Hudson which explores Sumerian and Babylonian bank reform in detail.
Below is the link to Iceland’s Monetary Reform proposal which has been endorsed by experts both as workable and needed.