To understand this post, you need to first view "Money as Debt" (the link is to Google video), a 47 minute animated feature by Paul Grignon. You can find out more about this video at http://www.moneyasdebt.net/
The Explanation
It is an excellent, nearly perfect primer on how money is created, and what our money actually is, even though it misses a bit in the explanation.
It skips the details of how money is created, the issuance of government bonds and bills. That part of the story is not terribly important since they later point out the ridiculousness of the government borrowing its own fiat currency. So they do point out the big picture part of that point, and I suppose an animated short is not the place for a detailed examination of exactly how we're being ripped off, but I think it might make it more clear to a viewer, and thus easier to accept as truth.
The author either ignores or misses the idea that for money to be useful, it has to represent something that is useful to a consumer - goods or services. I see this as the main reason that people allow this debt creation to go on in the first place. Debt would likely not be so easily incurred if people equated each restaurant dinner, for example, to exactly how many hours of work, after taxes, it will require to pay back principle and interest.
The important point to understand when trying to make sense of these concepts is that money is not strictly necessary for a society to function. People can trade without money, money is just a tool that makes it easier. For a large, modern society to function with a high level of creature comforts, such as ours, money must exist. But separating the idea of money from the idea of products is why when this movie starts to talk about solutions, the viewer feels like they have still missed something.
They have missed something: when the bankers create that money, and receive the interest payments, it is not the money that we miss. We don't care if our money says 1, 5, 20, 100, or 100 million on the front of it, as long as the products we create, represented by our income, can buy us the products we want. What we miss is the spending power, or more specifically: food, clothing, shelter, entertainment, and the capital goods to make these things.
The point to be made here, and it wasn't entirely skipped even in this film, is that the bankers, and the government, are stealing those things from us.
It becomes clear why they omitted this point when they start to propose a solution. A solution that by their own arguments is worse than the problem.
The root problem
The crux of the problem this movie describes is that a small number of people are able to make the decisions about where and how capital is spent, to take a portion of the produce for themselves, and thus to keep people under their control, for the benefit of the small group.
The movie then says the correct solution would be to make that group smaller, allowing only the more powerful part of that group (the government) to make all of the decisions, and that if we do that, the group will suddenly decide that they don't really need very much of what we create, they will be happy to let us keep most of it, and if they don't we will rise up and stop them. There are so many problems with this idea it's hard to know where to start, but I'll try.
If we would rise up when the government started to steal from us again, why have we not done so now? Is it simply that the masses are ignorant? I think not, but if so, how would having a smaller group in charge make them more knowledgeable? I can see how it would change the target of their ire, but the government is clearly responsible enough now (as mentioned in this film), and rising up against it would have as much chance of success now as then. A great man once said:
Prudence, indeed, will dictate that Governments long established should not be changed for light and transient causes; and accordingly all experience hath shewn that mankind are more disposed to suffer, while evils are sufferable than to right themselves by abolishing the forms to which they are accustomed.
If they do not rise up now, when things are facing crisis, what motivation will they have to rise up then? And even if we grant that they would rise up, their chance of success against such a power is no greater than the chance such an uprising would have today.
Leaving only the government in charge of the money supply doesn't fix any of the problems, it just changes the faces of the people in control, and even that is very limited because the people who are currently in control have the resources necessary not just to fight the government, but to become the government. To get elected all you need is money, and that is not something top international bankers lack.
The current system, as is accurately described by the beginning of this movie, has one major advantage that would not be present in the proposed solution: capital investment decisions are still made by investors who must repay loans or face dire consequences. Thus, business decisions currently are made by people who successfully forecast what consumers want, and supply it. Those who don't make the right decisions are drummed out of business by the bankers, thus preventing more capital from being spent where it is not wanted. In a system that has the government making those decisions, we've simply let the people who are currently cheating us have more power over us. Decisions will be made based on political concerns rather than for economic, social, or personal reasons.
We would have beautiful bridges to places no one wanted to go, parks with beautiful statues of the people who make the decisions, large well-lit grocery stores with shelves full of things no one wants, libraries with more beautiful statues but very few books, and certainly none that say anything bad about the people who bought them for us.
My inadequacies
Unfortunately, I'm not a very good writer. I never worked on it because I never thought I'd have anything important to say. I have something to say now, but the fundamental principles are so clear to me that I have trouble seeing the problem from the other side, the side many readers are on. I don't know your objections, or where I'm not making myself clear. Please leave comments telling me how horrible I am so I can address issues I've neglected.
The letdown
I can't find words to communicate how disappointed I was with this film. I have never found anything so close to mainstream that explained the problem so well. I was so excited. Then the proposed 'solution' came, and it's so much more horrifying than what we have now. Granted, what we have now can't last, but how is making the system worse going to make the symptoms better?
The Solution
I do have a solution to offer, and from the way the film mentioned legal tender laws over and over I thought for certain they were going to suggest the same solution I had in mind. I'm flabbergasted at how wrong I was. This film correctly points out over and over again that if it weren't for legal tender laws, we would not accept this worthless currency, and the system would not be able to victimize us any longer. Apparently, the problem is in that tiny misunderstanding: the writer seems to fail to recognize that money represents real wealth, but is not, in fact, the wealth itself.
Wealth can, and does, exist without money. The transition away from the fiat currency will be very painful no matter how it happens. Some people will lose everything. But wealth is created everyday, and it can be created everyday going forward from that point. People will need an easy way to facilitate trade, and they will use what seems best to them, and just as it happened before, money will be re-invented. Gold has inherent problems, but they are nothing compared to the problems of letting small groups make the decisions for everyone. The best part of a free market in money is that no one is forced to use money they don't trust, and systems can be easily put into practice that allow people who don't know each other, wouldn't like each other, and don't trust each other, or each other's money, to easily trade with each other.
It only takes one very simple piece of legislation, maybe one of the shortest ever, to make this possible. It has the added benefit of making the transition away from fiat currency as painless as possible. It has yet another benefit that is almost hard to believe, and that is that it has already been introduced into congress. It is simply a repeal of the legal tender laws. You may use fiat money, or you may use something else: shoes, wheat, gold, snowshoes, candy bars, or even the infamous widget.
The movie does make one telling point against this idea: it won't last forever. Someday, people will forget how bad fiat money is. They will forget how much of their earnings are stolen from them by governments and bankers when they're allowed to control the money. They will forget what we went through to give them sound money. They, like us and our forebears, will not even notice as evil groups again gain control of the people through control of the money. True. But it's not a reason to give those evil people complete control today. Let them wait.
- Trevor.
2008-03-26
Jackson, GA
P.S. For more information, please visit:
DownsizeDC.org A non-profit organization devoted to reducing government harm through relentless pressure where the ballot box always fails.
The Ludwig Von Mises Institute. Advancing the scholarship of liberty in the tradition of the Austrian school.
A book: Economics in One Lesson by Henry Hazlitt. This link will take you to Amazon, if you're interested in the book but don't want to support my blog, please simply type the title into Amazon, as if you buy using this link I will receive a few pennies (fiat pennies).
Congressman Ron Paul's web site
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