I was fortunate to have grown up during the 50’s and 60’s. It was a time when American’s could do anything, opportunities were plentiful, people enjoyed a high degree of freedom, and the country still had a moral compass. However, the seeds of our destruction had already been sown.
The first nail in our coffin was the creation of the Federal Reserve Bank (FRB) in 1913 with the cooperation of Woodrow Wilson. The Federal Reserve Bank is neither federal, nor a reserve. It is a privately held bank1, owned by a handful of families2. With the Fed’s birth, congress abnegated their constitutional duties to “coin money and regulate the value thereof”3. Decisions made by the FRB are not required to be ratified by any branch of the US Government. Essentially, the FRB has free reign over our money supply, a responsibility constitutionally assigned to the House of Representatives. The only involvement by the US Government in the FRB is in choosing its chairman of the board. However, the chairman of the board hold no legal responsibility to the government, and therefore to this country.
Once that happened, America began paying interest to the FRB for money it borrowed. This interest now amounts to an astounding figure. Think of 5% of trillions of dollars every year. Every year, we are paying 5% of this countries wealth to a few private individuals. Remember the golden rule: “He who has the gold makes the rules”.
A word about currency is in order for those readers who have never thought about it. A Federal Reserve Note is not wealth, it is an IOU. It even says that it is a ‘note’, which is a document that acknowledges debt, not a payment. The IOU is against the citizens of the US which means YOU. When we purchase goods with US dollars, we have not paid the debt, we have merely issued an IOU, or a promise that the holder will be able to collect or exchange that IOU for something of real value on demand. Originally, paper money was a receipt issued by a bank for silver or gold deposited with it. Whoever held the receipt could go to the bank, present the receipt and obtain the amount of silver which was represented by the receipt. (Yes, the British Pound was a Troy pound of silver at one time!). There is a world of difference between having a pound of silver, and an IOU.
For years, we have been buying cheap goods from China, Japan, Mexico, etc with IOU’s against the citizenry. This would not be so bad if we actually created anything useful those countries could trade our IOU’s for, but we do not. The IOU’s are accumulating, and we have nothing real to pay the debt with. At some point (actually now), the foreign countries like China are wising up to the fact that our IOU’s are no good, and that will eventually (soon, very soon) mean that they will stop supplying the essentials of life and leisure which Americans can no longer produce within our borders by our own people.
There are several economic fallacies which the American people have fallen for over the years. Some are obvious, and some require some thought.
#1: Money is wealth. No, paper money itself is not wealth but can be traded for wealth. People can have little money but a lot of wealth, a lot of money but little wealth, etc. Wealth is goods and services. Money is an IOU.
#2: Businesses pay taxes, so let them pay more. No, every penny of tax a business pays comes from its customers. That’s you. So when the populace wants to tax businesses more, they are really volunteering to pay more taxes themselves.
#3: Public servants pay taxes. No, like businesses, every cent a government worker, school teacher, or other public servant pays came from a taxpayer in the private sector. The worker employed in the private sector pays all of the taxes in America.
#4: Government or unions can mandate a persons worth to society by decree or by threat of violence. No, a person’s worth is determined by what he does for society, and what society deems his services to be worth. This is why minimum wages ultimately fail. It is why we buy so many things from foreign countries instead of making them ourselves. It is also why unionism ultimately weakens the economy and the country.
#5: Money in a savings account, certificate of deposit, or other interest bearing investment makes a person richer. No again. Banks always pay less than the inflation rate which means that even though you are gaining money, you will lose wealth. Banks would lose money if they didn’t charge more in interest than the real inflation rate. As long as the government insists on creating inflation, you will lose.
#6: People are entitled to health care, housing, food, etc. No indeed, for one person to be entitled to the services of another, another person must be forced to provide those services. This leads to either slavery or the inability to provide the entitlements. People are entitled only to life, liberty and the pursuit of happiness. No one is automatically entitled to health, wealth and happiness. These things must be worked for. Our founding fathers knew this to be true, and it is still true today. People cannot be free and be ‘entitled’ to anything that requires the wealth and services of others. Entitlements only lead to loss of freedom, and ultimately a loss of wealth.
#7: Poor people pay no taxes. No, anyone who buys anything is paying taxes that are hidden in the price of the item. This includes property taxes, excise taxes, fuel taxes, phone taxes, etc. A significant portion of every purchase is tax above and beyond any sales taxes levied on the item, and since even poor people buy things, they are still paying taxes; just not income tax
#8: Rich people do not pay taxes. Of course they do. The top 5% of wage earners pay 57% of the personal income tax collected in America. The bottom 50% of wage earners pay less than 3%. This does not even include all the hidden taxes on goods and services that they buy. This is according to data from the IRS.
These seeds were planted right out in the open, and few people noticed, or cared. They have been carefully nurtured though, and now the American public is reaping their harvest.
The lack of knowledge about economics, and the belief fostered by government that people are entitled to things they did not work for are literally destroying the fabric of this country. I doubt it is possible to repair, and the end result will be total collapse, both economically and politically for the United States of America.
1) The Federal Reserve Bank is a corporation, with all of its stock held by member banks. The US Government holds no stock in the FRB.
2) See Who Owns The Fed for a detailed analysis.
3) Article I, Section 8, Paragraph 5 of the US Constitution.