What does it mean to "monetize the debt"? The Federal Reserve Banking System is not mere paper money as Ron Paul has pointed out. It is debt money.
The system we have is the same as it was during the Great Depression, but because of the added peace of mind that the FDIC (Federal Depositor Insurance Corporation) gives us and the National Debt becoming high enough to make it stable, we milk it along expecting it to last forever. It won’t, it can’, it shouldn't.
We poor folk who actually work for a living have been continuously robbed of the value of our money since 1913. And long before that in other countries if you look into it. The ability for banks to manufacture money by merely loaning it out has been around for over 300 years. Governments in Europe looked to bankers for money when they went to war, and the bankers loaned out more money than they had. This has happened time and time again. It is how the rich stay rich, and the poor stay poor. As soon as a poor man gets rich, he either gets involved in the money "making" scheme, or his heirs go poor again. What I am saying is if your last name is Rothschild, Morgan, Rockefeller, Schiff, Roosevelt, Kennedy, or Bush, you probably don’t have to work if you don’t want to, no matter how much money you spend. Just buy a Central Bank.
“Let me issue and control a nations money, and I care not who rights the laws”
-Amschel Rothschild 1790
The best way to illustrate the scheme is to simplify the operation. So let’s say there are only two banks and then the Federal Reserve above them. OK, I am Bank1, and in 'competition' is Bank2. I have $100 and he has $100 in Federal Reserve money. I get a thousand people to deposit $1 in my bank to store it for them; totaling $1000 plus the $100 of my own. I send out a monthly statement telling all my customers they have their full amount in my bank, but I then loan out all $1000, as long as I keep my $100 in reserve for those who spend their $1 out of my bank. This is the 10% required “reserve” in our current fractional reserve system. This works great if not too many come in at the same time and take their money out. Cool for me and the FDIC for you.
But that’s nothing.
Because the money is in two places at once; that is, it is in my depositors accounts and 90% of it also loaned out too, it actually becomes the basis of more fractional reserve deposits. It can in effect be in thousands of places at once, one right after another.
So I loan out $1000 at interest by writing a check to my loan customer, he deposits the $1000 check into Bank2. Now Bank2 has $1000 + $100 investment. He can loan out $1000 now too. His loan customer gets a check for $1000 and deposits it into my Bank1. Now I can lend out $900 of that. Bank2 gets that new deposit and can loan out $810, I get that and loan out $729, he gets it and loans out $656.10 and on and on and on until all the money is loaned out, and all of it is tied up in the 10% reserve. It doesn’t matter if my customers spend their money, because whomever they give it to will usually just deposit it in one of the banks anyway. Cool eh?
Is everybody happy? So far the loans I am making interest money on total $2629, and my customer statements show a total of $3466.10, and I only spent $100. Cool. Interest money comes in, people take their money out of the banks, spend it, and others put it back in. All is well. Until, rats, the fool I loaned the $1000 to disappears with the loot. All heck breaks loose until, thank goodness, the Fed rescues me and loans me whatever I need into my reserves to keep the ship afloat. Sure appreciate that lender of last resort!
Guess where the Fed gets the money it loans to me? Well, it used to be monetized gold, but now due to the continuous inflation this system requires, it is 100% monetized debt. The Fed loans money to me that is backed by Government debt to them or my debt to them. Holding the debt paper bond[age] makes the money they spent buying it have value, just as the loans I made create the value behind them. As a result, the total money supply grows by no other means than by loaning it out, at interest.
The ability to manufacture money from loans has put lots of money in supply, and made it easy to get loans for houses and cars. But it requires more loans to sustain itself. Stop borrowing, and all the money disappears to the banks long before the loans are paid off; keep borrowing to sustain it and the money becomes more and more worthless, and most of it goes to the banks in interest.
This system is corrupt, and it is a house of cards waiting to be knocked over. There are toothpicks and band aids continuously stuck into it to keep it up. Bank owners are making a killing on interest, but all that interest money they get is created by debt, which creates a need for more inflation to cover the interest. There is no way this can sustain itself forever. The national debt is VITAL to keeping this joke afloat. Pay it off, and we get the great depression once again. Keep borrowing and we get runaway inflation and the great depression German style. The dollar is actually the reserve currency of the world, and all currencies pyramid off of the Federal Reserve just as the banks here do.
The solution is simple, but revolutionary, as revolutionary as the Constitution of the United States. Eliminate the dishonesty in fractional reserve banking, and inflate the currency through government action, not bank action. BOTH must happen; neither will work independently. This is the only solution, there is no other way. Money must also have real value; not credit value, but tangible asset value. This would make our economy the wealthiest in the world again. And everyone would be wealthy, not just tax exempt bankers.
My blog can be found at http://thetruckintruth.blogspot.com/