Saturday, May 28, 2011

Borrowing Dollars And Returning Paper

I just read Ellen Brown's column, Japan shows how to defuse debt time-bomb. If the title wasn't enough to blow your mind, dig the the closer:
We have been frightened into believing that government debt is a bad thing...

The public debt is the people's money, and today the people are coming up short. Shrinking the public debt means shrinking more than just the services the government is expected to provide. It means shrinking the money supply itself, along with the ability to provide the jobs, wages and purchasing power necessary for a thriving economy.
The public debt is the people's money? Huh? Does that make your credit card debt your kids' money? It's like she has lost all contact with reality here. She thinks we should borrow money and pay back our creditors with paper which is worth less than what we borrowed. I wonder if that works in her life.

When you deposit money in the bank, they, in turn, lend it to someone. That's how they make money. In essence, you're lending money to the bank. Well, by her logic, isn't that then the bankers' money? Why do they need to pay that back? Why should there be any results from that loan at all? When Ellen wants to make a withdrawal, the bank should just shrug and say, "It's the people's money, now, Ellen!" Maybe they could give her twenty cents on the dollar. I wonder if she'd like that.

Borrowing money is predicated on your ability to pay it back. Otherwise it's just stealing.

John Dillinger, banker.


Jeff Burton said...

Some people are so confused. Money is debt (which is why dollars are issued as Federal Reserve "notes"), but the federal debt is NOT money and reducing the debt will not reduce the money supply.

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