"I know no safe depository of the ultimate powers of the society but the people themselves; and if we think them not enlightened enough to exercise their control with a wholesome discretion, the remedy is not to take it from them, but to inform their discretion." ~ Thomas Jefferson
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The TV anchor--anchorette?--was interviewing her financial guru, who had just pointed out that the rapid growth of debt, if graphed, would be a virtually vertical line. Nothing like it had ever happened before in American history--at least not in living memory.
“How did we get in this mess?” anchorette asked. “How are we ever going to pay this debt?”
A good--if naïve--question. But before we look at the subject of payment, let’s ask just who “we” is. Are you responsible for the debt? Am I? The debt was run up by a bunch of strangers, without our knowledge or permission. The assumption that “we” are responsible for it is ludicrous, or would be, if the people who marvel at it were ever to actually think about it.
Suppose I owe you a dollar. Would you accept a modern dollar coin (token, actually) for payment? I’m sure you would. There is almost a nickel’s worth of metal in the dollar coin, so you’d be discounting your debt by 95%. Why in the world would you do that? The first, and commonest reason, is that you’ve never given the matter any thought. But even if you know the truth about the coin, you’d accept it anyway, because you knew you could pass it, and thus obtain the same 95% discount from whomever you owed a dollar. This remarkable phenomenon--accepting debt in lieu of payment--has a name. It’s called the “monetization of debt.” It’s the basis of our “monetary” system.
Admittedly, coins are only rarely used to settle debts. But I used the example of coins because they offer the most bang for the buck, so to speak. The debt monetization is even worse with other forms of money.
It costs about four cents, for example, to print a dollar bill. The paper and ink may have some value, but surely an insignificant one. Obviously, it would also cost four cents to print a 100-dollar bill. So if I owe you 100 dollars, and offer a 100-dollar bill, and you accept it, you are accepting about 4 cents worth of material for ten thousand cents! That’s a 99.96% discount! Again, your reason for agreeing to such “payment” is one of the two mentioned above.
Most debts, however, are settled with checks. Increasingly, electronic banking is making even checks obsolete, so that a person banking online could pay what he owed you with nothing at all that was tangible. Monetization of debt reaches perfection in such a case, when 100% of the “amount” owed can be settled with nothing.
So, how can the alarming national debt be paid? Obviously, it cannot. We are using it, in a very true sense, for our money. Put another way, you cannot pay a debt with a debt, even if it is “monetized.” You can settle, as opposed to pay, a debt, but exchanging debt certificates, monetized or not, for real goods or services, is possible only when, somewhere in the dark recesses of the public mind (or what passes for a mind) there is a dim recollection of notes being paid, or bills being honored. But payment of the public debt, even were it possible, is the last thing the beneficiaries of the system desire.
If you were a banker, and could create “money,” (actually, credit is the proper term, meaning “he believes it”) as loans, would you want the U.S., which owed you trillions, to repay? Credit creation is a bookkeeping operation; it costs nothing. And the result is the collection of millions in interest every day. You can use those millions to buy desirable things. Were the debt to be paid (how?), the interest payments would dry up. A catastrophe! The goal of modern banking, in my opinion, is the creation of debt that cannot, by its very nature, be paid, so that profits--interest--are virtually perpetual.
Besides, if the debt--which, monetized, is our “money”--were to be paid, what would we use for money? There has been no money in our “monetary” system for decades.
No, the system will continue until the burden of debt extinguishes the economy entirely, or until the worthlessness of the money becomes apparent to even the most obtuse. At that point the jig is up, and social chaos results, but never worry: the beneficiaries of the system will emerge virtually unscathed, having acquired your goods and services with their fictional debt!