The Anatomy of Debt & Grading

Over the coming weeks there will undoubtedly be endless and seemingly incongruent commentaries over the S & P downgrading of U.S. Debt and why, with so many countries around the globe with far greater debt-hurdles (Japan for example), only the U.S.?  I know, I really must stop thinking rationally.

Many like myself will wonder why the wait and where exactly are Grading Agencies Moody’s and Fitch after all if the standards of practice are based on so-called fundamentals then is one to assume that uniformity is only measured by the degree of separation and methods which define their application? Or, is one only to conclude that the degree of application is only measured by the uniformity of the desired self-define prophesying upon which these Agencies can agree?

To look at the latest tally of government fiscal policy in action, the TARP adventure, exposure is fast approaching $13 Trillion and the list of beneficiaries are growing: AIG, GM, Chrysler/Fiat, various Unions, Daimler, Bank of America, Wells Fargo, Citi Group, J.P. Morgan/Chase, Deutsche Bank, Glencairn, Barclays, HSBC, Fannie Mae/Freddie Mac, Financial Institutions (code word for Central Banks) in Canada, France, Germany, Britain, Switzerland and the list goes on and on still nowhere do we see any reference to the American People being included in the bailout. This of course should beg one to question: Who, exactly, are we bailing out and why? Let me interject a few quotes:

“The study of money, above all other fields in economics, is one in which complexity is used to disguise truth or to evade truth, not to reveal it. The process by which banks create money is so simple that the mind is repelled.”

J.K. Galbraith, Economist


“Let me issue and control a nation’s money and I care not who writes the laws.”

Mayer A. Rothschild, 17th Century Financier

Now then if we consider the totality of Public Debt that is stated to exist at a mere $18 Trillion (Fed & State) and the total Private Debt at $36 Trillion – now remember this combined debt of $54 Trillion is for the U.S. only – one must consider how in the world would this debt ever be resolved or for that matter is it possible.  There are only three possible ways to resolve debt:

  1. Through durable productive capacity (output).
  2. Through inflation driven debt-swap.  Or,
  3. You write it off.

Durable output is by far the best possible option for the U.S. however with a total GDP of $14.5 Trillion of which a paltry $3.3 Trillion is durable output it is fair to say that not only is this amount insignificant in the grand comparison it also illustrates how perfectly insolvent the globalist-economic concept has proven itself to be. Rest assured, reformulating the U.S. economy is a must and the sooner the process begins the better it will be for every American.

The Debt-Swap model has also proven itself to be irreconcilable and although the Global Banking Concept prefers this approach the fact remains that this too is an insolvent approach and the proof of this statement is in the overwhelming amount of Global Debt to durable output ratio which is as grotesquely disproportionate on a global scale as it is in the U.S.  Moreover all that this approach does is to simply replace old debt with new debt which is then leveraged on the inflated value of the underlying commodity to which it is attached or leveraged and then, as we see with the mortgage crisis here in the U.S., eventually this too collapses for the most fundamental reason of all (which is also the greatest flaw in the debt-swap model); once inflation accelerates beyond the available income required to fund its required inflation-spiraling process, the whole model collapses and vaporizes the equity that was assumed to exist to which the debt was secured.

“The idea of free money, the illusion that spending is the same as wealth and that debt accumulations are equivalent to and also a measure of economic growth not only produce insolvency in practice, they are equally insolvent at their theoretical core. To be even more precise, the greatest illusion of all is the perception that the ability to borrow is the equivalent of wealth.” This observation is taken from Volume II of the Blind-Vision Series: Value Given, Value Received and to my mind, as a clarifying reference, I believe it is fits nicely with the discussion.  It also leads to the following and inevitable conclusion:

Whereas in conventional routines of native business practices, bad debt is simply written-off however in the Global Central Banking routine this simple process is not as easy as it might otherwise seem. The reason for it is simply that if Governments were to determine that they could order their respective Central Banks to vaporize public debt simply by legislative order then think of the influence and control the Central Banks would surrender. Now then, back to our Grading Agencies; if you can use the influence of a Grading Agency to pressure a Government into further endorsement of the Debt-Swap and Debt-Creation Model does the employed scheme of Down-Grading threat now seem somewhat and coincidentally curious? Well it should because that’s exactly what the American People have witnessed over the past few months of Debt and Debt-Ceiling demagoguery; the use of a simple threat-scheme to preserve and protect the influence of a banking system that dare not expose itself to the truth of what Mr. Galbraith had to say (see insert quote above.)

The Anatomy of Debt notion is simply a metaphor for seeing the public debt component of Central Banking for precisely what it is; nothing more than a paper-shuffling routine that uses the appearance of formidability and legitimacy in exchange for the influence that this type of appearance offers and rest assured, the Central Banking routine will do everything in its power to assure that the process continues.

Thomas Jefferson knew well of governments temptation and the collateral risk of self-licensed borrowing and he was not at all shy as to expressing his opinion on the matter:

“I wish it were possible to obtain one single amendment to our constitution.  I would be willing to depend on that alone for the reduction of the administration by our government to the general principals of its constitution; I mean an additional article, taking from the federal government the power of borrowing.”

As it is, all that Congress (recently) has accomplished is to license the wholesale abuse of government as a mechanism for purchasing influence, continued waging of war, the manipulation of public sentiment and the near complete detachment of the process from and away from the will of the consenting governed. Bipartisan compromise indeed!

Perhaps form the words of President Andrew Jackson, the only chief executive to preside over a debt-free Nation, might one gain the perspective I intend:

“It is to be regretted that the rich and powerful too often bend the acts of government to their selfish purposes. Distinctions in society will always exist under every just government.  Equality of talents, of education, or of wealth cannot be produced by human institutions. In the full enjoyment of the gifts of Heaven and the fruits of superior industry, economy, and virtue, every man is equally entitled to protection by law; but when the laws undertake to add to these natural and just advantages artificial distinctions, to grant titles, gratuities, and exclusive privileges, to make the rich richer and the potent more powerful, the humble members of society — the farmers, mechanics, and laborers — who have neither the time nor the means of securing like favors to themselves, have a right to complain of the injustice of their government. There are no necessary evils in government. Its evils exist only in its abuses. If it would confine itself to equal protection, and, as Heaven does its rains, shower its favors alike on the high and the low, the rich and the poor, it would be an unqualified blessing.”

Yes, it is true that select business interests use the coercive legislative feature of government to promote their economic interests however what is far less conspicuous and far more damaging is that these very interests use government to shield them from their greatest fear of all, free market forces.  And, in much the same way as business, intrusive and coercive government’s greatest fear is the market forces of freedom and thus it orients its considerable force to insure the opposition possesses as little influence as possible.  I characterize their sentiment in this way:

“As long as we don’t say what it is, we can make it mean whatever we want!”

What the Public should know from the recent debt-ceiling maneuverings is not only did Congress, once again, abandon all fiscal discipline and Constitutional deference it also licensed further abuse of the process which permits fiscal malfeasance and related excesses to occur. With so many alternatives available, once again they choose the one which the Banking System preferred.

What were and continue to be alternatives to the insolvent practices of Central Banking Ideology?  Here is one of the possible choices not pursued:

  • Congress has the power to “coin money.” It simply could have instructed the U.S. Treasury to “coin” a special currency. Fourteen U.S. Treasury Issued Coins, in gold if you like but it is not necessary, bearing an individual (each) notional value of $1 Trillion and presented them to the Federal Reserve Bank as settlement for an equal amount of U.S. Treasury Certificates.

Though strange and somewhat peculiar as it may seem, this option is actually a lawful settlement of U.S. Debt and here’s why:

  1. Federal Debt is issued by the U.S. Treasury.
  2. The Agent for the U.S. Treasury is the Federal Reserve Bank.
  3. Funding for U.S. Debt occurs strictly within the Central Banking System.
  4. The U.S. Treasury Debt is settled only through the Federal Reserve Banking System accordingly whatever is disbursed, in funds, are actually ONLY Federal Reserve Currency and NOT that of the U.S. Treasury.
  5. Technically, the Federal Reserve Act of 1913 states that, paraphrasing, that debt can only be settled in gold however, the Federal Gov’t passed a law that says although gold can be held outside of the Federal Gov’t it is not a legal tender for settlement of debt, contracts or commerce. Thus, the U.S. Treasury can, by passing a simple law, be enabled to settle with the Federal Reserve by giving what the U.S. Government deems as legal tender.

Now then, for those who doubt the authenticity or durability of this idea you need only consider that this is precisely what the Central Banking System does and yes, it is that simple. Remember, the U.S. Government operates under a very powerful document that is the “supreme law of the land:” That document is the U.S. Constitution and you, my fellow Americans, own that document.

As a final comment consider that a monopoly, in any market, occurs not because of limited supply or availability of a given product but more so because a given entity controls the market with little or no concern as to the product or your choice. With this thought in mind then one should feel quite comfortable with the following admonition:

“Democracy is not just defined by the freedom to choose, it is more so the process of keeping Government from being used to define what becomes of choice!”

Curtis C. Greco, Founder

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