Fixing the Government’s Finances

I used to write a lot of letters-to-the-editor. It was mostly an exercise in futility – it’s been about 8 years since I sent the first one, and still nothing changes.

The constant talk from the mainstream media about the “debt ceiling” is rather irritating, and this letter sorta flowed out of my fingertips. The Arizona Republic saved it most of a week to put in their Sunday paper.

One of my signatures for message boards is “learn the rules so that you know how to break them properly”. This means that we must understand the systems that we interact with to maximize our personal freedom.

The present debt ceiling uproar is a completely contrived crisis. Most of the members of congress are completely clueless about what they’re arguing about.

This was my effort to help people “learn the rules” about finances:

GOP, Dems don’t understand banking

Can we please get past all the hot air about the government’s finances?

Everyone is talking as if the logic applied to household and corporate finances applies to the government.

The formula for household fiscal solvency is “spend less money than you make.”

The government gets different rules because it’s the one that’s supposed to make the money that households spend.

(continued inside)

Under the present monetary system, money is created only when someone borrows it.

Usually, the federal government borrows a little money from the Federal Reserve, and the banking system expands this “seed money” 10 times (or more) by making loans.

Due to the failure of the banks to lend, the government has had to step in as “the borrower of last resort.”

Just as fifth-graders are never put in charge of a school’s budget, neither should Republicans and Democrats who fail to understand banking get to play with matches.

Fire them all: Republicans for being stupid about meaningless lines in the sand, and Democrats for playing along. – James Knochel, Prescott

The first comment said, “I like this LTE! Good job, James. We could use people like YOU in Congress instead of the yahoos we’re saddled with.”

My Response:

Thanks, Boomer. The problems we face are rather simple, when distilled down to their essence.

Money is nothing more than a medium that allows humans to exchange their labors.

Gold used to be the western world’s standard form of money… People would dedicate their lives to extracting it from the earth.

Gold extracted with human labor was traded for mining supplies created by human labor… Gold spread from the mine into every corner of the economy.

Gold-as-money had it’s problems, of course. The gold rushes (California, Alaska, etc) flooded the economy with extra gold…

Then someone figured out how to extract gold from the earth with Caterpillars and chemistry instead of shovels and slush boxes. The process of disconnecting the government’s currency from gold started during the Civil War, with Lincoln’s Greenbacks… progressed with FDR’s gold freeze… and ended with the de-pegging of the dollar under Nixon.

The most important thing to realize about the present monetary system is that government only has a token degree of control over the Federal Reserve system.

Sure, the President appoints a president and five members to the Federal Reserve board in Washington, and the Government gets the Fed’s “profits after expenses.”

[The single largest expense is the Federal Reserve’s dividend to its shareholders. I wish I could buy a share of the Federal Reserve through E-trade, but that’s a different letter…. :]

Private Bankers decide who is an acceptable candidate for their bank, and after appointment they’re free to screw things up for the next 4 years (chairman) or 14 years (board members).

Look at all the damage Allan Greenspan did… Shouldn’t he be in prison by now? “Whoops, sorry ’bout that stock market bubble, and that housing bubble. Hope you guys can figure something out…”

There have been several court cases with rulings that the Federal Reserve is NOT a part of the government: “The [Federal Reserve] Banks are listed neither as “wholly owned” government corporations under 31 U.S.C. § 846 nor as “mixed ownership” corporations under 31 U.S.C. § 856.”

See “Is the Federal Reserve System a Governmental or a Privately controlled organization?”:

A few articles that are worth searching for:

Money and the Crisis of Civilization
I want the Earth plus 5%
A Bailout for the People

I’ve little interest in running for office: I am but a “fool” who points out that the emperor was swindled by his tailor.

Hopefully people will print my letter out and send a copy to their representative. 🙂

-James Knochel

Another response said that “democrats have their lines in the sand too.”

I said that they both sides need to realize that they’re arguing over sand, when they should be debating over how to build desalinization plants and aqueducts to green the desert.

Will sanity ever win out in politics? Probably some day. Maybe within the decade? Who knows.

It’s best to just enjoy the show.  🙂

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