The
eternal curse of debt money
OK,
Fairfield, here we go again. This is the
third in a series of Daily Republic articles written about America's absurd,
senseless, debt money. So far, we have
seen that our nation's entire money supply has been borrowed from the Federal
Reserve and other private banks, who loan us dollars that they create out of
thin air; that we must provide the Federal Reserve with collateral for their
loans and pay interest on every dollar in circulation; that this system of debt
money is the only reason why we have our national debt; and if we ever started
paying down this national debt, our money supply would contract and throw us
into another depression. Have I missed
anything?
Last
week, I promised to tell you about a better way to create money, by having our
own government make it, without debt. Now
this isn't some wild idea I just thought up, it's actually part of our Constitution:
"Only Congress shall have the power to coin money and regulate the value
thereof." Unfortunately, private bankers
have always issued our nation's currency and have charged us interest for the
privilege, except on two occasions.
In 1862,
with the United States in a state of disunity, President Lincoln traveled to
New York City trying to obtain financing for the Civil War. With stovepipe hat in hand, Lincoln asked the
patriotic bankers for loans, which they were willing to give at 24% to 36%
interest per year. The bankers were
hoping to trade their paper bank
notes, which they had no intention of ever redeeming for gold, for U.S.
Treasury Bonds which provided years of interest payments and payment of the
principal, all in gold coin.
Lincoln
declined their "generous" offer and instead instructed the U.S. Treasury create
its own money. The U.S. Treasury printed
450 million dollars of new bills, using green ink on the back: "greenbacks." For
the first time in the history of the United States, our nation had its own national
currency; money not borrowed from banks.
Real U.S.
Notes, issued by our Treasury, are available even now from some coin
dealers. I have a two-dollar bill that I
bought on Ebay for five bucks that doesn't say "Federal Reserve Note" at the
top, it says "United States Note." It's
actual debt-free money issued by our own U.S. Treasury, not the Federal Reserve. These notes don't circulate much anymore,
they are curiosities. My $2 U.S. Note
was issued in 1963, one hundred years after Lincoln's greenback dollars. President Kennedy had the Treasury issue U.S.
Notes too, and suffered Lincoln's fate.
So what's
the advantage of having our Treasury Department issue our nation's money
instead of borrowing it from banks? If
Lincoln's $450 million in U.S. Notes had been debt money, borrowed from banks
at an average 4% interest for 150 years, the total interest cost to the U.S.
Taxpayers would have been $171 billion. This is interest we taxpayers didn't have to
pay. But, consider that the actual debt
of the Civil War was $2.6 billion, which, similarly compounded, produced an
interest cost of nearly $1 trillion. Fairfield,
we are still paying for the Civil War to this very day. Finally, consider our current $16 trillion
national debt and how much interest we American taxpayers pay each and every
year, for endless generations, just for the "privilege" of having banks issue
our nation's money instead of our own government. Is this eternal curse the legacy we bequeath
our children?
If
debt-free U.S. Notes are so great, why didn't they ever become our national
currency? That story, next Monday, right
here in your Daily Republic.
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