I’ve often wondered how our economic system doesn’t self-destruct, given that the federal government has borrowed a huge percentage of the money it spends, year after year. This from the Washington Times:
The federal government borrowed 46 cents of every dollar it has spent so far in fiscal 2013, which began Oct. 1, according to the latest data the Congressional Budget Office released Friday. The government notched a $172 billion deficit in November, and is already nearly $300 billion in the hole through the first two months of fiscal year 2013, underscoring just how deep the government’s budget problems are as lawmakers try to negotiate a year-end deal to avoid a budgetary “fiscal cliff.”
At Reader Supported News, Carl Gibson of US Uncut describes our system as a huge ponzi scheme:
We live in a fiat currency system, meaning we can print an endless supply of dollars and not run up inflation, since the US dollar is the world’s reserve currency. Most of the paper money in circulation comes from fractional reserve banking, where banks lend out money they don’t have, which technically doesn’t exist, to anyone who applies for a loan. When banks loan this money, they do so with a promise of real wealth to be taken if the bank’s debt isn’t repaid by a specified deadline. While it costs the borrower all the real wealth they staked as collateral if they don’t pay back the debt owed to the bank, it costs the bank nothing to loan out the money they just created out of thin air. However, the bank turns a profit by collecting interest on these loans, regardless of the fact that they loaned out fictitious money. All commercial banks do this, hence why such a Ponzi scheme is legal. And US dollars are no longer backed by gold, so each dollar is essentially a note signifying debt owed to the private banks that control the Federal Reserve, which has been the sole issuer of US dollars since 1913.
Today, the Fed has lowered interest rates on our debt to 0% to keep the debt level artificially as low as possible to preserve the Ponzi scheme that the banks created with the signing of the Federal Reserve Act of 1913. The act states that the government must borrow money before the Fed can issue paper money, so if the interest rate was at 3% or 4%, the debt would soon rise to such an exponential level that the concept of paying it off would become laughable.
It’s hard for me to get my head around these facts, and these many other troubling facts about the economy. I abhor the right wing “solution” to these issues, balancing this debt on the backs of the poor and working poor. I don’t see any politician frankly discussing these issues, especially the dangers posed by running a massive debtor economy year after year. I’ve heard many people suggest that running a country is not like running a household. OK, why not? Because we can print an endless supply of new fiat money? Because the U.S. dollar is deemed the world’s fiat economy? How much longer can that go on given the way we are printing money? The only “solutions” I’ve seen are Enron accounting and little bandages on huge problems.