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When the Federal Reserve Bank was created, in 1913, one of the purposes of the bank was to be a lender of last resort. The bank would finance government spending when no other person or country would. The concept of debt as money crept slowly into our system of money and is still not clearly understood by the man on the street.
DEBT: When you go to a bank to borrow money, the bank uses the deposits it has on hand (minus a fraction of that amount on hand that it cannot lend, called reserves) to loan you the money. The bank does not own the deposits (they belong to the bank’s customers who have money on deposit at the bank), but the bank, in making the loan to you, has ‘created money out of debt’. In other words you borrowing the money –taking on debt, creates money in the banking system. So, for every loan that is made, more money is created along with the debt. The more debt that is created, the bigger the money supply gets. This act of borrowing causes the money supply to get blown up, just like a balloon.
When you pay off the loan, the debt is gone and the money goes back to the bank; the money supply contracts... the air comes out of the balloon –the money supply (the balloon) gets smaller.
But, you must notice that the whole thing doesn’t get started until and unless someone FIRST borrows the money. If you do not go to the bank to borrow the money, then the debt is not created, and the money is not loaned out, and the money supply (the balloon) is not blown up.
WEALTH: Wealth is defined as an accumulation over time of assets that increase in value. Assets are assets because they are valuable.
Do you see now that wealth is not the same thing as debt. If you accumulate debt over time, unless someone is willing to buy the debt from you, your debt is what you owe to someone else.
Wealth and Debt are the opposite. Wealth is the accumulation of value for yourself, debt is the owing of value to someone else. Wealth ≠ Debt.
In our banking system, most of the money supply is due to people and the government borrowing and banks loaning money. Our money supply is a puffed up balloon of debt. The debt is not valuable unless someone is willing to pay us to buy it, and unless that payment is a gift, we’ll have to one day give them back their money OR we’ll have to give them something just as valuable as the debt.
For years I had been taught that the U.S. Government could print money with impunity, forever. The government, I was taught, would never have to face the fact that they money they were borrowing was not real, was not an asset, and would someday need to be paid back. But, I was taught, the government would never come to that day because, “We The People” would just be paying back our selves!! (How nifty…we only owe the money to US.)
Do you really think that whoever owns shares in the Federal Reserve Bank won’t want to be repaid? Or that at some point, the shareholders of the Federal Reserve Bank would perhaps want the dividends they earn to be paid in something of value (not U.S. Dollars, of course, because they’ve been devalued)? …like gold, perhaps? (Do we really know what's happening with the gold at Fort Knox?)
When “We The People” (otherwise known as “they”, or "us kids") wake up and realize that the money we think is valuable really is a debt to be paid, and the only thing that is of value is that person’s time, only then will they realize that they’ve woken up on a continent their father’s fought to wrest from another enslaver. (Who said that? Oh, yah, it was Thomas Jefferson!!)
Wealth is not Debt. And, luckily, only a few people actually realize that truth. Because if everybody knew it…why, who knows what would happen!!