Tag Archives: Promises to Pay

Debt-Based Monetary System Demands Ever More Debt—Part III—Fractional Reserve Banking


The FOUNDATION for our Debt-Based Monetary System:  PROMISES to Pay that Can’t Possibly be Kept.

For the past several months, I’ve been exploring an hypothesis that strikes me as fantastic, unlikely and yet (probably) true. In broad strokes, it’s the idea that our fiat, debt-based monetary system requires ever more total debt to function.  Going deeper into debt is not optional; we are forced by our debt-based monetary system to do so.  I.e., if the American people ever stop going deeper into debt, the whole debt-based monetary and economic system will collapse like a junkie forced to quit heroin cold turkey.

If my hypothesis is roughly correct, the persistent growth in the National Debt (it nearly doubled under Obama) is not the result of governmental negligence or self-serving politicians who get elected by promising more “free lunches” (services purchased with debt). Instead, our National Debt must increase (perhaps geometrically) in order to feed, protect and sustain our debt-based currency and economy.

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Promises To Pay

A Nest Egg made of Empty Promises [courtesy of Google Images]

A Nest Egg made of Empty Promises
[courtesy of Google Images]

CNN Money reported in “Judge: Detroit can proceed with bankruptcy,” that:

“A federal judge has given a green light for Detroit to proceed with its bankruptcy, the largest municipal bankruptcy in history.

The ruling opens the door for the city to cut billions of dollars in payments that are owed to city employees, retirees, investors and other creditors.

“Unions and pension funds had argued that the city should not be eligible to use bankruptcy court protections. They said that regardless of the Detroit’s financial troubles, city and state officials did not negotiate with creditors in good faith in an effort to reach a deal on its liabilities.”

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Posted by on December 8, 2013 in Bankruptcy, Debt, Debt collection, Economic collapse, Lies


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Credit as a Function of Morality

2010 Budget: Projected deficits and debt incre...

Image via Wikipedia

When it comes to moving money, there are only three fundamental mechanisms:  gift, debt and theft.

If Alfred voluntarily gives $1,000 to Donna without receiving Donna’s promise to repay, the transaction is a gift.

If Alfred gives $1,000 to Donna, and Donna reciprocates by providing Alfred with her promise to repay that $1,000 (perhaps with interest), that transaction is a debt.

If Donna takes $1,000 from Alfred without Alfred’s consent and without providing Alfred with Donna’s promise to repay, that’s theft.

Americans live in a “debt-based” economy.  There is no gold or silver coin (real money) in circulation.  As a result, our fiat currency is loaned into circulation and necessarily debt-based.

The essence of every debt is a promise to repay.  The essence of every nation’s debt-based monetary system is that nation’s ability to make good on their promises to repay their debts—and determination to do so.

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