AN INQUIRY INTO MONEY by Wade Swicord (August 8, 2011)
Let’s just label this writing an inquiry, a poking into the innards of what we all dub the economy. In most less hard-nosed populations the economy is understood to be, in the main, a matter of perception. Once that perception becomes ubiquitous, a somewhat unified belief system takes place solidifying most attitudes as to what constitutes the economy. It is hard not to quip that in respect to our dollar, seeing is believing.
Basically the economy has two parts: assets and dollars or transaction notations. What all the grand insanity that has and will be going on with Congress has to do with dollars and not assets. The subject of the great confab going on is debt: How to pay it, then how to reduce it.
There can be no absolute starting point as to where money sprung loose from its moorings of sensibility and took off on a flight of its own. For the sake of discussion it seems that a meeting was held off the coast of Georgia in 1910 where a plan was developed to deal with the control of the US Dollar and this plan was put into legal existence in 1913 as some sort of law; the Federal Reserve Board was created and given powers to set interest rates and print money. Then there is also the abstraction of keeping tabs on the “money supply.” The gold subject came and went and now has its own abstraction to deal with.
So now to some extent, and it appears to be rather major, the Federal Reserve has “made” or “printed” some, if not a large portion of the money that is now considered as part of our national cash flow and most assuredly a big part of the national debt.
To the best of my knowledge, the Federal Reserve has few if any assets. At least I have not heard them talked about much. Still, it seems that they deal in rather large sums of money. A very great amount, I suspect, is really not printed but is what one might call “notational” money. These are marks on paper or as one not versed in numbers would say, an abstraction.
It so happens that our good government has gotten itself into debt to the tune of say, 14.6 trillion dollars (printing that would create a bunch of jobs). Now when we look around to see just who and where our government found the money to borrow we discover several large countries and some large investment houses or businesses. All of these together own about 60% of the US Government debt.
Now, oddly, the remaining 40% or 5.6 trillion dollars of the US debt is owed to, well just guess, the Federal Reserve who just happened to have a handy printing press and made up the money to loan to the government and then they collected interest on this money which they printed by making notes on paper (in our case, computers).
Now let’s consider actually what is the value of this money that was created not by the activity of production or commerce but by some magical trick of declaring this number on this particular piece of paper to be worth, say, 5.6 trillion dollars, with as far as I can tell, absolute no asset base. Could this be called an Abstraction?
So what if… what if the Federal Reserve “unprinted” that 5.6 trillion dollars, leaving the US Government with only a handy 9 trillion dollar debt. (Using easy round figures here). This money is not made of derivatives which have a similar but different structure but as the best I can tell, really started from zero and went to 5.6 trillion with the help of some sharp computers.
O K, The Federal Reserve un-prints or wipes out the 5.6 trillion dollars that the US Government owes. What effect does this have? In theory, no one should actually own that money since it technically has no basis. Who loses money at this point? Who gains money or business or is there a positive to such an action.
If the removal of this debt actually hurts a business or persons I would like to know why and how.
It could actually shore up our present economic system in that the whole system depends on nothing more than how much the public believes in the economic system as presented. Non-asset based economics is no more than a belief system and can be intentionally tampered with.
This writing has nothing to do with the actual operations of the government or business and possible changes, etc. It is intended to deal with only the abstraction of the US debt to the Federal Reserve and what would happen if it were canceled.
Wade Swicord (Email: email@example.com) See Facebook Comment below:
Hi Paul, Christopher Lawson commented on your link. Christopher wrote: "Really enjoyed that. Thanks for posting. I guess if the Federal Reserve wiped out all 5.6 trillion of the U.S. Government's debt, they would fail to make a financial return in interest. I'd imagine it could only have a positive effect on the U.S. economy if this digital amount of money was wiped off their system. Let's remember the U.S. Government is in a deep deficit because of a false flag attack, so this astronomical debt is most likely part of a bigger picture and direction; which is being pursued behind the smoke and mirrors."