Peter Palms

RINF Alternative News

After 45 years of collecting premiums for their pension plans, which the government refers to as “Social Security,” Baby Boomers become aware that while normally with contracts for future obligations of this kind the issuer is required by law to accumulate money into a fund to make sure that there will be enough available when future payments become due, the federal government did not abide by those laws. The funds exist on paper only. The money that comes in for future obligations is immediately spent and replaced by a government IOU. So, as those future payments come due, all of the money must come from revenue being collected at that time. Now the government says they have spent the money and can’t honor the I.O.U. Herein lies the doomsday mechanism. These obligations will be paid out of future taxes or inflation. Entitlements currently represent 52% of all federal outlays, and they are growing at the rate of 12% each year. When this is added to the 14% that is now being spent for interest payments on the national debt, we come to the startling conclusion that two-thirds of all federal expenses are now entirely automatic, and that percentage is growing each month.

Even if Congress were to stop all of the spending programs in the normal budget–dismantle the armed forces, close down all of its agencies and bureaus, stop all of its subsidies, and board up all of its buildings, including the White House–it would be able to reduce its present spending by only one-third. And even that small amount is shrinking by 10 to 12% per year. That is a best-case scenario. The real-case is that Congress is accelerating its discretionary spending, not canceling it. One does not have to be a statistical analyst to figure out where this trend is headed.

The biggest doomsday mechanism of all, however, is the Federal Reserve System. It will be recalled that every cent of our money supply–including coins, currency, and checkbook money–came into being for the purpose of being lent to someone. All of those dollars will disappear when the loans are paid back. They will exist only so long as the debt behind them exists. Underneath the pyramid of money, supporting the entire structure, are the so-called reserves which represent the Fed’s monetizing of debt. If we tried to pay off the national debt, those reserves also would start to disappear, and our money supply would be under-mined. The Fed would have to scramble into the world money markets and replace U.S. securities with bonds from corporations and other countries. Technically, that can be done, but the effect would be devastating. Congress would be fearful to eliminate the national debt even if it wanted to.

Debt Ceiling is an Illusion

Congress passed the Monetary Control Act of 1980 which authorized the Federal Reserve to “monetize foreign debt.” That is banker language meaning that the Fed was now authorized to create money out of nothing for the purpose of lending to foreign governments. It classifies those loans as “assets” and then uses them as collateral for the creation of even more money here in the United States. That was truly a revolutionary expansion of the Fed’s power to inflate. Until then, it was permitted to make money only for the American government. Now, it was able to do it for any government. Since then it has been functioning as a central bank for the entire world.

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