In my recent blog about gold meeting the perfect storm, I mentioned how it was impossible to get out of the current debt cycle of money that the world currently lives in. It is an experiment that the we have been involved with the last 110 years. It is ever-changing and I am sure that it is getting near the end of its 'useful' shelf life (it has never really been useful for the average Joe).
Understand that this history lesson, like all history lessons, has to start somewhere. And like all history lessons, where we choose to begin is not really the beginning, as we can always go farther back in time and pinpoint a new action or decision that could/would possibly be the start of the history story.
But we will start this lesson with the development of the Federal Reserve, which by now, many know is neither federal nor has any real reserves. In fact, it is a private business held like most private businesses, but with an important-sounding name and government connections. Kind of like the wizard in 'Wizard of Oz'.
Anyway, in 1913 the private bankers finally got their banking institution criteria passed and became the 'bank' to lend money to the US government when trouble arose.
It was also the same year that the federal income tax was started. Before 1913, there was no income tax unless there was war or another issue that extra funds were needed. As much as this seems like a coincidence, stay with me, because there is a very solid tie-in involved.
You see, with the passing of the Federal Reserve, the banks now had the legal ability to print money out of thin air. Yes, there was a gold standard that was supposed to hold that printing to a minimum, and for a period of time, it did. But the door was now unlocked and cracked open, It would just be a matter of time before it went from ajar to fully open. That was the Federal Reserve's job and place in society. The income tax was another story.
This tax was put in place because the Fed wanted payment for the 'service' of printing money out of thin air. That's right. They wanted payment. But where was that payment to come from? Who would pick up that tab?
Why, how about the American people? Let's tax them a little of their income on a very regular basis, and then the Federal Reserve could take a portion of that as payment for services. Basically, interest as we now know it. Let the people carry the burden. Year after year, for every dollar printed out of nothing.
Pretty sweet deal, huh.
You or I print out of nothing, and it is counterfeiting. They get a license and charge us for their effort.
But let's get back to why we are in debt and how under the 1913 decisions, we cannot and/or will not ever get out. Not without a complete meltdown and destruction of the Fed or some other unforeseen intervention.
You see, for every dollar the Fed creates, it wants payment. For ease of doing the math, let's say 10%. That means for every dollar they create and lend out, they want the dollar back plus a dime back. They create and give the USA $1.00 and they want $1.10 back.
The Fed creates and gives the USA $1000 and they want $1100 back.
1,000,000 printed and 1,100,000 expected back.
30 trillion and they expect... WOW!! Do you see where this is going?
This fiat system, money out of thin air then eventually paid back cannot work, it's not designed to work. It was never intended to work. At least not in our favor, because they really don't want it back. Keep the 10% coming. Keep the party rolling. And truthfully, you have to be the printer or first user to win this awful game. Because there is absolutely no way, no way at all, for us to pay back the money printed. We are shackled, slaves in a modern way.
Because as the principal gets paid down, the amount the Fed prints, it still leaves us with the money owed as interest. Eventually, the original money would completely dry up, with not 1 single dollar left in existence, but by contract, some money would still be owed. Technically, a lot of money. Welcome to bankruptcy.
As I just mentioned, the first users are the winners. That is why the government can keep printing and government waste and scams keep getting bigger. They can bring money into existence whenever they want and enrich themselves and their friends. All legal. All legit.
Oh, they will make a big production out of it all, with the debt ceiling show constantly in battle. And crisis after crisis being blamed for all the printing. But if you pull back the curtain, you Will see the wizard as he really is. Just a withered old man pulling levers to keep up an ever-growing charade.
But this story in a nutshell is why the debt will constantly get bigger, and no one, nobody will be able to reduce it without a major meltdown or crash. And that will be the worst financial crisis in all of history.
And at some point, it is going to happen.
(The story 'Wizard of Oz' is written as a story about this very subject. It is quite fascinating and one for a future blog. Make sure you pass this on to all your friends so they can learn about it too).