It's not impossible. You're on the right track though.

It's impossible to do with the current monetary and financial system. If we reform the system, then we could pay off the national debt within a few years.

The problem now is that the dollar (as well as every other major world currency) is debt based. Every dollar created, is created out of debt. What do I mean by this?

Dollars are created in two ways. The first way is by government bonds being purchased by the Federal Reserve Bank. A trillion dollars worth of bonds can be bought at once, in one fell swoop, and POOF, our money supply is increased in size by a trillion dollars -- as well as our national debt. Congress will approve this when it needs money.

The second, and much larger, way is through fractional reserve banking. Fractional reserve banking (as opposed to full reserve) is the practice of maintaining small reserves in a bank while loaning out much more than exists. Every time money is lent out by a bank, that money has been created out of nothing.

For example, Person (A) deposits $100 into Bank XYZ. Bank XYZ loans out $90 to Person (B). Person (A) still has $100 in their checking account but now Person (B) has $90 in their checking account. Bank XYZ has $10 in reserves. Ninety percent of our inflation comes from fractional reserve banking.

It has its roots in the days when gold was traded for goods. People would deposit their gold in a goldsmith's vault for safe keeping. The goldsmith would give out a receipt for the gold deposited. People began using these receipts to trade for goods, since it was easier than retrieving their actual gold, so these receipts were used like paper money. Well, the goldsmiths soon realized that only a fraction of people ever retrieved their gold at any one time. They only needed to maintain enough gold reserves to cover the small fraction of people who wanted to retrieve their actual gold. So they began to print out more gold receipts than there was actual gold, and lent these receipts out at interest, thus increasing the size of the money supply and inflating everyone else's gold receipts. It's an ancient fraud that is still perpetuated today.

As you can see, every single dollar created in our fiat (ie., non-gold backed) dollar is created out of debt. Whether it be debt owed to the Federal Reserve Bank, or debt owed to a deposit bank, every dollar represents a loan that must be paid back -- plus interest. Unfortunately since every dollar must be paid back, there are no dollars left to pay the interest! Foreclosures and defaults are an inherent part of the system. We're running on a system of credit. When the credit lines stop, dollars begin to disappear and the dollar deflates, and people default on their loans.

So, to review, the dollar inflates when credit is easy and the dollar deflates when credit is hard to obtain. This is our boom and bust "business cycle". In actuality it is a calculatingly caused cycle, not a "natural" cycle of business.

"I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around [the banks] will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs."

-Thomas Jefferson


Banks are in the business of dealing dollars. They want a deflated dollar because that means what they have the power to create is worth more. Unfortunately for them, every time they loan out new dollars, the money supply becomes more inflated. Thus it become necessary to conduct business for some period of time, all the while inflating the money supply. Then it becomes necessary to suddenly deflate the money supply to add value to the currency once again, while taking possession of actual wealth (eg., repossessions, foreclosures).

As you can see, the problem with inflation is not that "we're printing too much money." (Only about 5% of our money supply is printed on paper anyway) The problem is with the system. And not just the system, but those who control it. The wealth of our nation (and the world) does not simply vanish over night. (One must distinguish between wealth and money, which are direct opposites.) Wealth is transferred in such cases; not destroyed. Through a massive deflationary action (not a stock market crash), the Great Depression came about and the financial elite of western civilization gained possession of property and businesses for pennies on the dollar.

Who controls the value of money? The monetary authority -- in our case, the Federal Reserve Bank. (In the UK, the Bank of England. For the euro, the European Central Bank.) These are all privately owned banks. They all provide for an illusion of government control.

What is the solution?

a) Repeal the Federal Reserve Act.

b) Abolish fractional reserve banking.

As Thomas Jefferson (and many others) said, Congress should be in control of the money supply (and the people should be in control of Congress).

It's no coincidence that the Federal Reserve and the Income Tax were created in the same year (1913). The debt service on the national debt is the third largest budget item, after social security and defense.

The national debt can be paid off with debt-free dollars. (eg., newly created debt-free dollars, instead of Federal Reserve Notes. The operative word there is "notes", as in promissory notes.)

Congress will no longer need to borrow money from the privately-owned Fed, nor will they need to tax us nearly as much. Congress, being the monetary authority, can simply create new dollars to spend into the economy. This will serve to abolish (or significantly decrease) income taxes as well as increase the money supply at a healthy rate, such as 3% per year.

Commercial/deposit banks will no longer add to the money supply through fractional reserve banking. When Person (A) deposits $100 in Bank XYZ, then Person (B) borrows $90 from Person (A) then Person (A) will have $10 and will be owed $90.

We will no longer have outrageous inflation and taxes, and Congress will slowly inflate the money supply at a healthy rate by spending into the economy.

I was going to write a bit more, but I lost my train of thought because I helped the girlfriend with groceries and she dropped a jar of grape jelly.

For those of you who doubt the contents of this post, try reading (an easy read) Modern Money Mechanics, a document once circulated by the Federal Reserve Bank of Chicago.
http://landru.i-link-2.net/monques/mmm2.html

For a more in depth history, try Tragedy and Hope: A History of the World in Our Time, which is a 1350 page book published in 1966 and written by Carrol Quigley, a history professor at Princeton, Harvard, and Georgetown for over 30 years.

For a good online documentary video, try The Money Masters, produced by Bill Still circa 1995.

-Mojo