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Democrats and Republicans--the path to friendship

Jul 30, 2011

Ever since the advocates of "free trade" convinced Congress that it would be good for America to send the jobs overseas to low-paid workers willing to work for a few dollars a day, we have seen an increasing flow of work going overseas.

The result has been rising unemployment and less money that average Americans have to spend on products. Government spokesmen have convinced us that we are better off anyway, since we now have lower prices. Those lower prices, of course, are the result of lower overhead, because overseas workers will work hard for a few dollars a day.

Hence, we have a shortage of money on main street in America. Less money in circulation normally would mean that the value of each dollar would increase. In other words, prices ought to go down, because the value of each dollar is going up.

Prices have indeed been holding steady, but not for the traditional reasons. Prices are low because the cost of producing goods in foreign countries keeps prices low. The problem is that we do not benefit much from this, because we also have less money to spend. Thus, the "deflation" of prices is a benefit--but for the wrong reason.

So the recession continues. The government tries to solve this economic problem, not by repealing "free trade," but by creating more money in various "stimulus" programs. This puts the government further into debt, while sending most of the stimulus money to the big corporations and banks on Wall Street. Supposedly, they are the "job creators." We pay them to create jobs--and they do. They create a lot of jobs overseas.

The creation of trillions of dollars in new money dilutes the value of the dollar world-wide, while doing little to relieve the shortage of money in America itself. When the Fed recently created $16 Trillion in new money and loaned it to banks and corporations around the world, this was not your tax money being sent overseas.

It was NEW MONEY. Every time new money is created, it dilutes the value of the dollar. Thus, the Fed injected $16 Trillion more into the world, which was the greatest hyper-inflationary act in world history (as far as I know). This single act created more money than the US government has created since the establishment of the Fed in 1913.

Will this new money help Americans? Not at all. We still have the same shortage of money in America. The only ones who benefit are those foreign central banks and the multi-national corporations who received the low-interest loans from the Fed. They are now awash with cheap cash, while Americans still suffer from high unemployment because of a shortage of cash.

Hence, we now see that it is possible to have opposite diseases at the same time:

(1) too much money world-wide;
(2) a shortage of money in America

The problem is that our government policies are creating a lot of money, but they are shipping it overseas or stashing it in Wall Street to subsidize the export of jobs.

Meanwhile, all of these stimulus programs have resulted in huge government debts, and now we are seeing a backlash among Republicans. Their solution is to balance the budget and stop the stimulus spending spree. It is a bit late for that. If the government balances the budget and refuses to create more money by borrowing from the Fed, we will see the entire economy fall off the cliff within six months. We already have a shortage of money and are on the brink of bankruptcy. To stop the flow now--without nationalizing the Fed and cancelling the debt--would only crash the economy and make us a nation of renters.

Under the current system, we cannot expect the government to balance its budget like the rest of us are expected to do. Americans do not have the ability to create money. If we do, we are arrested for "counterfeiting." So we have no choice but to balance our household budgets.

But the government has to create money in order to keep the household economy functioning. Either it creates money itself and spends it into circulation without interest, or else it asks the Fed to create more money so it can borrow it at interest. Or it can get loans from private parties by selling them interest-bearing bonds, which does not create new money but merely re-circulates old money that the Fed had created earlier.

Since 1913 the government stopped creating interest-free money. It gave that power to the privately-owned Fed bankers, who now get to create trillions of electronic dollars with the stroke on the computer keyboard and then demand billions of dollars in interest each year in perpetuity for services rendered.

Since money is created out of nothing, the size of the debt is not the real problem--believe it or not. The problem is our ability to handle the interest payments. The debt will never be paid off--or even paid down to any appreciable degree. Paying down the debt is what takes money out of circulation and causes depressions. In any event, there is not enough money in the entire world to pay off America's debt.

The interest payments represent the degree to which the nation is enslaved to the big banker families. The system worked well enough as long as our economy grew at a normal rate. But what killed the system was the free trade agreements, especially the GATT treaty of Nov. 29, 1994.

The GATT treaty began an avalanche of jobs going overseas. Once one company did it, all their competitors had to do it as well in order to remain competitive. Those who refused were put out of business, because Americans like to buy cheap goods from overseas rather than pay more for American-made items.

This caused the greatest transfer of wealth in world history. The money went from America to Asia. This was great for Asia, of course. Money became plentiful for them, and they have quickly become the center of gravity of world economics. This will soon translate into education, military strength, and civilization itself.

Western Babylonian civilization has committed suicide. The tide of history has shifted from West to East. Big multi-national corporations will continue to do well, because when Americans run out of money and cannot buy their products, they will simply sell them to the newly wealthy people overseas. Only American small business will find it difficult to survive. Companies that sell to the American public will have to compete for their fair share of a shrinking amount of money that is spendable on main street.

The Congress and Senate seem oblivious to the big picture. The Democrats fight to go further into debt. The Republicans fight to stop all stimulus spending and balance the budget. Both sides continue to worship the Sacred Cow (Fed) and fight for the seats of honor on his right or his left. Neither side questions the policy of free trade.

The Republicans want to reward multi-national corporations for sending the jobs overseas. The Democrats want to borrow more to fund social projects--which at least send some of the money down to main street. The problem is that both parties worship the Fed, and neither has even questioned the policy of free trade.

If we nationalized the Fed, and traded all privately-owned bonds for real dollars, and cancelled all bonds owed to central banks, our economy would turn around immediately. The private sector would have enough money to take care of the elderly and the sick, enough money to educate the youth, enough to fund the police and fire departments, etc. The Democrats would be happy.

With the debt cancelled, the budget would be balanced, too. That would make the Republicans as happy as the Democrats. They could fight over less contentious issues. They might even become friends.


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Dr. Stephen Jones


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