And… it’s gone! The Fed and US could simply CANCEL all $5 trillion of intragovernmental debt

As we documented here, Congressman Alan Grayson is correct that the Fed could cancel its own US national debt holdings of ~$2 trillion. This could begin public justice from how our current system transfers public assets into 1% private profits: currently conservatively estimated at $30 trillion held in tax-free offshore accounts, and satirized in South Park’s Emmy Award-winning episode on our bailing out the big banks with the catchline, “And it’s gone.

If one understands the mechanics of canceling $2 trillion in debt, there’s equal wisdom to likewise cancel all ~$5 trillion of the debt held by Social Security and other intragovernmental holdings as simple book-keeping because we literally owe this to ourselves.

And in this light, we could enact what is called “monetary reform” for the US Treasury to pay the outstanding ~$12 trillion of debt held by the public as it becomes due with debt-free currency created by the US government (criminal 1% elements in banking would be identified and their crime-gained assets seized).

Ending the national debt once and for all, forever, is just one benefit of the several models (and here) of cost-free government already known, beginning with Benjamin Franklin’s pamphlet on colonial Pennsylvania operating its government debt-free and without taxes, to Thomas Edison explaining debt-free money with Henry Ford in a 1921 summer media tour. Debt-free money could be created to directly pay for public goods and services, and government could be employer of last resort for infrastructure investment. Because infrastructure creates more economic output than investment cost, this results in falling prices. So, we can have full-employment, the best infrastructure we can imagine, and falling costs to consumers.

Nobel Prize-winning economist Milton Friedman correctly concludes that money supply can be kept constant by replacing banks’ authority to create debt with government authority to directly pay for public goods and services with debt-free money. This refutes critics’ argument of inflation, along with the above argument that infrastructure investment reduces overall costs.

I teach Advanced Placement (AP) Macroeconomics (more challenging than most college-level introductory macroeconomic courses), contribute to the ongoing education of ~2,000 AP Economics teachers on our listserve, and had my published research in monetary reform honored by the Claremont Colleges’ international conference on monetary reform in 2012.

This is the paper for my AP Macroeconomics students to understand money mechanics (and paying the national debt), also contributed to our listserve AP teachers. To date, no colleague, student, or parent has found any factual errors or incomplete information. This article is a shorter, non-academic, documented explanation of our debt-condition and solutions.

Our condition, and why paying the national debt is our only good option:

  1. What we use for money is actually debt, created by private banks. The national debt is created by Treasury printing pretty pieces of debt instruments, selling them into a system whereby what is used for money is created debt-free and out-of-nothing by banks. Adding more debt over time, as these mechanics can only do, will only and always increase the total economic debt. This “monetary system” guarantees aggregate public debt is perpetual and unpayable, making the 99% permanent debt-slaves to 1% literal “asset-holes” (documentation here, here, here). The mechanics and mathematics of only being able to add negative numbers to existing negative numbers is certain and simple.
  2. Official government claims of “required austerity” from “budget crises” are easily refuted. Government Comprehensive Annual Financial Reports (CAFRs) have literal multiple trillions in surplus taxpayer assets, as they fraudulently claim deficits “forcing” austerity upon the 99%. For example, California’s own CAFR proves a ~$16 billion claimed budget deficit is absolutely refuted by ~$100 billion in liquid surplus funds and ~$500 billion in claimed investments (explanation and complete documentation here, television interview to explain here, documentation of official lies to keep this information hidden here).
  3. Again, and importantly, 1% “leadership” in government, banking/finance, and corporate media lie in omission by keeping obvious solutions secret: including government directly paying for all public goods and services with debt-free money created by government (and here). Several models (and here) of cost-free government are known, beginning with Benjamin Franklin’s pamphlet on colonial Pennsylvania operating its government without taxes to Thomas Edison explaining debt-free money with Henry Ford in a 1921 summer media tour.

As the links above emphasize, we’ll never have these solutions or even the problem clearly explained until 1% leaders in government, money, and media are arrested for OBVIOUS fraud (obvious because debt is called “money,” and those with fiduciary responsibility in government to explain options to end our debt are silent). If no arrests, we will have only more debt, wars, and lies.

US economic history and US war history show you this.

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  • Tonto

    I take from Carl’s upbeat message about the real state of the economy, that things are not nearly as bad as all the doomsday humbugs are proclaiming. I’ve long held the opinion that the rise in the price of gold is due to government manipulation of commodities. I’m probably alone there, but likely 100% right too.

    Good for you though, Carl. I’m glad you’ve finally come out of the closet about your belief in the inherent strength of the existing system. With so many options to solve the problem, it’s obvious there’s really no problem at all. Is there.

    You see, this whole depression has been concocted to ensure that the American consumer slows his consumption of Chinese and Indian manufactures, long enough to crush the Chinese and Indian economic ascendency. We’ve succeeded, and Europe is lending a hand too.

    http://www.bloomberg.com/news/2013-10-12/china-sept-exports-unexpectedly-drop-0-3-as-imports-gain.html

    Given the economic problem is solved, or easily solved, then I suppose we can move on to the empirical bent problem of society’s scientific pseudo-intellectuals, which is literally crowding-out our human existence on this planet, making each of us drones in a radioactive and chemically dangerous hive of suicidal absurdity. The country should vigorously tax such scientific-byproduct poisons.

    Give Ben Bernanke a medal! But arrest GE’s Jeffery Immelt, and shut down Cal-Tech and MIT!

    • Carl_Herman

      I can find perhaps 20 severe criticisms of a dystopian, criminal, Orwellian economy, but damned if I can find anything upbeat or any “belief” in the existing system.

      The only upbeat message is that the mechanical solutions are present, but not unless the criminals lying and parasitizing us are arrested.

      • Tonto

        Carl, Carl, Carl… It’s not the belief in the existing system you should warm up to. It’s the disbelief in those who offer solutions to address the criticisms of the existing system. All such solutions entail greater complexity. The fruits of greater complexity are invariably greater problems, and more opportunity to rig and corrupt the system that then becomes the existing system. History explicitly teaches this lesson, Carl.

        Look at the reform-solution of ObamaCare. ObamaCare is the perfect contemporary example of the entropy-like cognitive negation reform measures induce, reform measures meant to address the shortcomings of existing systems. Will ObamaCare improve health care? No. Will ObamaCare make health care more affordable? No. Will ObamaCare remedy any of the existing problems with the current health care system? No. Will ObamaCare create new problems that will be even more draconian and more devastating for the American health care consumer? I’ll let you answer that question for yourself. The answer is utterly obvious. So don’t be optimistic about what you might surmise.

        At 64, Carl, I am not and have not been an American health care consumer for thirty-four years. That is the only real solution to the health care problems that have grown up with the existing health care system, which has been exhaustively reformed throughout my lifetime.

        Am I healthy? Damn right I am. I’ll compare my health to any age group of Americans alive today, and in so doing come out well ahead of the average of them all. Of course the end will come for all of us. But so far as I have been able to determine from my contemporaries, engaging the health care system in this country only hastens the end by destroying one’s health. So, I’ll never again be a health care consumer. I just don’t believe in medicine.

        The same thing, this cognitive entropy that is invariably produced by increasing complexity, is true about any reform measures anyone can advocate. The only thing that really works to address what is nagging at everyone, is to help shut the current systems down, by disengaging. This is done through non-cooperation, not advocacy for change. Advocating change is merely calling for increased complexity, which as I have repeatedly said, produces a negative cognitive entropy inducing idiocy in all reform “solutions”.

        Think about it. Advocacy for change is what brought us to the point where we are now, which is an intrusive and convoluted system of ever increasing complexity. Advocacy for change entails an unintended tacit approval of the results of change, which is, as I said, what we have now. No one supports ObamaCare, though some are cornered with the queer posture because they voted for it or advocated for it.

        The current systems are all the result of an ongoing advocacy for change. We cannot live our lives standing in line awaiting our turn to be screwed by the (new) system, lest we simply become part of the all-devouring, newly-reformed machine that is destroying the us and planet.

        Those who advocate change are apparently unaware of the historical results of their predecessors who also advocated for change. Look at the damn mess that their advocacy has given us as a result!

        • Carl_Herman

          I’m glad you’re pro-active and healthy, Tonto. I appreciate and admire your responsibility for actions consistent to that outcome.

          And that said, you provide a strawman argument because I call this system criminal demanding arrests and a process for whistleblowers to come forward so we can discover the full Truth.

          Then, although none of us can imagine it, with a transparent and accountable system, many of us in practical fields would like to present what appears as rational technical solutions to what also appears as fairly simple issues, like banking.

          The conservative approach would be field studies to test such ideas.

          The current system is complex by design to hide criminal behavior. This does not mean that the central issues are complex; with a clean playing field we can discover the real issues all together.

          • Tonto

            “The current system is complex by design to hide criminal behavior.”

            You sound remarkably like someone arguing for the existence of God based on the notion that the complexity of reality (the system) requires some majestic existence more godly than ourselves, but of course made in our image.

            You can demand the arrest of your criminal-gods you wrongfully suppose are acting behind the scenes. It will be to no avail, except to those who would make the system more complex at your group of populist reformers irrational insistence.

            The clean playing field you are seeking is of course, a playing upon which criminals would thrive. Criminal fraud is already thriving in the voids and disruption caused by ObamaCare.

            Let me propose this. Show me one instance in history when the reformers actually made something simpler, and as a result of this increased simplicity, they were able to make things better too.

            Prohibition?

          • Carl_Herman

            tonto: you refuse to engage in the actual arguments and become a waste of time. I am among hundreds who explain, document, and prove OBVIOUS crimes centering in money and war.

            You either cannot or will not see the point, and are no longer worth a response.

          • Don Robertson

            There you go again, Carl. When asked to do so, you belligerently refuse to provide a single example of reformers making something simpler, with the result of this increased simplicity, actually making things better. That was the premise of the assertion in your post, that “The current system is complex by design to hide criminal behavior.”

            You’re in a corner with a paint bucket and a paint brush in your hand, and you simply ignore the dilemma. And you also ignore the fact that what is criminal behavior is solely determined by relativist conventions. Your relentless assertions about the criminal behavior of the so-called 1% are wildly altruist along some fuzzy humanitarian ideology, bordering on a John Brown like opacity. Like Brown, you believe all men should be free, even if it completely destroys their standard of living being free.

            Here’s a new music video I just finished about what is important in this world during a single lifetime, which should be the baseline of any logical discussion, (what is important, not the music video), since that is all anyone really has, the perspective of a single lifetime.

            I’m not overly talented. But I’m having a good enough time doing these. Enjoy.

            http://www.youtube.com/watch?v=PLefly_4cF0&feature=youtu.be

      • Tonto

        Carl, Carl, Carl… It’s not the belief in the existing system you should warm up to. It’s the disbelief in those who offer solutions to address the criticisms of the existing system. All such solutions entail greater complexity. The fruits of greater complexity are invariably greater problems, and more opportunity to rig and corrupt the system that then becomes the existing system. History explicitly teaches this lesson, Carl.

        Look at the reform-solution of ObamaCare. ObamaCare is the perfect contemporary example of the entropy-like cognitive negation reform measures induce, reform measures meant to address the shortcomings of existing systems. Will ObamaCare improve health care? No. Will ObamaCare make health care more affordable? No. Will ObamaCare remedy any of the existing problems with the current health care system? No. Will ObamaCare create new problems that will be even more draconian and more devastating for the American health care consumer? I’ll let you answer that question for yourself. The answer is utterly obvious. So don’t be optimistic about what you might surmise.

        At 64, Carl, I am not and have not been an American health care consumer for thirty-four years. That is the only real solution to the health care problems that have grown up with the existing health care system, which has been exhaustively reformed throughout my lifetime.

        Am I healthy? Damn right I am. I’ll compare my health to any age group of Americans alive today, and in so doing come out well ahead of the average of them all. Of course the end will come for all of us. But so far as I have been able to determine from my contemporaries, engaging the health care system in this country only hastens the end by destroying one’s health. So, I’ll never again be a health care consumer. I just don’t believe in medicine.

        The same thing, this cognitive entropy that is invariably produced by increasing complexity, is true about any reform measures anyone can advocate. The only thing that really works to address what is nagging at everyone, is to help shut the current systems down, by disengaging. This is done through non-cooperation, not advocacy for change. Advocating change is merely calling for increased complexity, which as I have repeatedly said, produces a negative cognitive entropy inducing idiocy in all reform “solutions”.

        Think about it. Advocacy for change is what brought us to the point where we are now, which is an intrusive and convoluted system of ever increasing complexity. Advocacy for change entails an unintended tacit approval of the results of change, which is, as I said, what we have now. No one supports ObamaCare, though some are cornered with the queer posture because they voted for it or advocated for it.

        The current systems are all the result of an ongoing advocacy for change. We cannot live our lives standing in line awaiting our turn to be screwed by the (new) system, lest we simply become part of the all-devouring, newly-reformed machine that is destroying the us and planet.

        Those who advocate change are apparently unaware of the historical results of their predecessors who also advocated for change. Look at the damn mess that their advocacy has given us as a result!

  • John

    What……. I’m supposed to have faith in the US economy?…….. well God did not make Fiat Dollars even though they do say “In God we trust” But he did make precious metals, such as gold and silver. That’s the only faith I have when it comes to monetary value!

    • jadan

      If we have no government we can trust, we’re screwed. That is project number 1, to take back control of the peoples’ government. If people can trust their government, they can have confidence in fiat currency. There is precious little precious metal to go around. If we were to revert to a gold standard we would understand why the colonists of 1763 began to foment revolution. The King outlawed their script and decreed that only gold would be legal tender. The colonists had no gold. Fiat money had allowed them to thrive & prosper and without it they were reduced to debt peons. They created their own government to protect them from the Crown.

      Our problem today is that our government does not operate in the public interest. t has become the enemy of the public interest.

  • Randa

    Well I guess Grayson will just have “work it out with Allah” the way he suggested the Syrians should do when Obama was preparing to massacre them. Grayson knows nothing about international politics, especially the Middle East. That Islamaphobic statement (quoting none other than Sarah Palin) summed up who Alan Grayson is. And he needs to learn that Qaddafi was in no way a criminal. Another one of idiot statements was about what a monster Qaddafi was.

    Were the American leaders to follow the politics of Qaddafi, there would be no debt, no hunger, no EBT cards and no financial hardship whatsoever in America.

  • Randa

    Well I guess Grayson will just have “work it out with Allah” the way he suggested the Syrians should do when Obama was preparing to massacre them. Grayson knows nothing about international politics, especially the Middle East. That Islamaphobic statement (quoting none other than Sarah Palin) summed up who Alan Grayson is. And he needs to learn that Qaddafi was in no way a criminal. Another one of idiot statements was about what a monster Qaddafi was.

    Were the American leaders to follow the politics of Qaddafi, there would be no debt, no hunger, no EBT cards and no financial hardship whatsoever in America.

    • jadan

      Can’t speak to Grayson’s statements, but the destruction of Libya was a bankster’s coup. Not only had Ghadafi funded what sounds like a utopia for all Libyans, but he did it without borrowing from the bankster cabal in the west. He was prepared to establish a North African monetary union. The west funded dissident elements in Libya, Islamic fundamentalists mostly. Before the dust settled, the “rebels” had set up a new, private bank. That was the whole point, to put an end to public banking in Aftrica and install the rule of usury.

      • Randa

        I was so upset when I heard Grayson speak (on democracy now) because I really liked him, but then he is from an area of Florida (northern) where I used to live and it is filthy racist.

        Thank you for your understanding of Qaddafi. Interesting that the rebels he fought are the same rebels who Assad is now fighting. I have a theory that Qaddafi could have well been the last great leader humanity will ever see. Read the “Little Green Book” which Qaddafi wrote if you are inspired to, it is quite profound. Qaddafi was a Divine Being of True Light.

        It will be interesting to see what happens in America this week. I am praying for the children. God I hope those EBT cards are fixed. All morning I have been worrying about children who are hungry right now.

        • Jason Vega

          I’m with you. I was taught as a young American to think Qaddafi was a nutcase. Only when I found the following out did i realize he was the best leader on the planet.

          1.There was no electricity bill in Libya; electricity was free for all its citizens.
          2. There was no interest on loans, banks in Libya were state-owned and
          loans given to all its citizens at zero percent interest by law.
          3. Having a home was considered a human right in Libya.
          4. All newlyweds in Libya received $60,000 dinar (U.S.$50,000) by the
          government to buy their first apartment so to help start up the family.
          5. Education and medical treatments were free in Libya. Before Gaddafi
          only 25 percent of Libyans were literate. Today, the figure is 83
          percent.
          6. Should Libyans want to take up farming career, they would receive
          farming land, a farming house, equipments, seeds and livestock to
          kickstart their farms are all for free.
          7. If Libyans couldnt find the education or medical facilities they
          needed, the government funded them to go abroad, for it is not only paid
          for, but they get a U.S.$2,300/month for accommodation and car
          allowance.
          8. If a Libyan bought a car, the government subsidized 50 percent of the price.
          9. The price of petrol in Libya was $0.14 per liter.
          10. Libya had no external debt and its reserves amounting to $150 billion are now frozen globally.
          11. If a Libyan was unable to get employment after graduation the state
          would pay the average salary of the profession, as if he or she is
          employed, until employment was found.
          12. A portion of every Libyan oil sale was credited directly to the bank accounts of all Libyan citizens.
          13. A mother who gave birth to a child received U.S.$5,000.
          14. 40 loaves of bread in Libya used to cost $0.15.
          15. 25 percent of Libyans have a university degree.
          16. Gaddafi carried out the world’s largest irrigation project, known as
          the Great Manmade River project, to make water readily available
          throughout the desert country.

          • EconTraction

            Could you site your sources for this info? I’m very much interested in looking into this further…

  • Mike Y

    Currency Wars, views — And… it’s gone! The Fed and US could simply
    CANCEL all $5 trillion of intragovernmental debt [Washs’Blog]
    BUT: We in US have exported our self-sufficiency. We are no longer
    independent in food production, in basic strategic needs and
    requirements. . . . So it could no0t work. How would we live if foreign
    nations refused to take our new $ in exchange for their hard work?
    ‘Globalization’ has exported our national traits and pride =
    independence, self-sufficiency, commitment, honesty. . . .

    • Carl_Herman

      Mike Y: the US could quickly produce an abundance of healthy food. There are also about 100 areas of technological suppressions that make economics a whole new ball game. Explore http://www.wanttoknow.info for some of these.

      • Mike Y

        See response to Nonanon25

    • Nonanon25

      We could become self sufficient once again.

      • Mike Y

        Possible. But unlikely given our current conditions and nature of folks in control. It would take time. Time that our external creditors (and likely our internal ones) would be unlikely to grant. Nor do we seem to know the way.

  • Uncle_Meat

    The criminals need to be taken out now for any of these solutions to happen. Until then keep your powder dry.

  • Nonanon25

    Agreed, we could pay off the debt as it becomes due. Unfortunately, there’s still $220T of unfunded entitlements, so these will have to be assessed and resolved. Seize all pensions and private retirement accounts, or means tested Social Security and Medicare for all, and balance the budget? Of course!

    The ACA is a last ditch grab by the feds to put the public purse on the hook for health care for all, as boomers start retiring en masse, and the scales tip toward insolvency.

    Yes, the budget, entitlements, and social issues must be addressed, but the two party system isn’t going to be able to do it, and elections have been potentially co-opted.

    There is an enemy, his name is Satan and the Devil. God help us all. In the meantime, we can vote against the status quo. See above.

  • gifteconomy

    GIFT ECONOMY is future = SHARING & GIFTING (Wikipedia, Linux, Ubuntu. free food, free water, free services…= working out of passion = nobody could buy/sell us for a salary any more)

  • Tracy Buster Hayes

    so all the people who paid into social security that “we” owe the money to.. fuck em? thats rude and supremely unfair to those people that literally paid their dues.

  • desertspeaks

    You don’t have to cancel what never happened! What precisely was allegedly borrowed from the federal reserve? NOTHING!
    Nothing was borrowed, so NOTHING needs to be repaid!

  • MJ Darling

    Know your Mr. Shadow (Government): The names are the names of the wealthiest individuals on the planet, who hide their money so well, but don’t let you hide your money, taxes, that they aren’t even supposed to be taking. It is theft. The criminal Rothschild network bloodline also extends into the Royal Families of Europe, and the following family names: Astor; Bauer; Bundy; Collins; duPont; Freeman; Kennedy; Kuhn; Loeb; Morgan; Oppenheimer; Rockefeller; Sassoon; Schiff; Taft; Van Duyn, and many, many more. They have infiltrated “leading” families in every country but three (Putin booted them out of Russia). Why do you think there is such a focus on the “evil empires” of Russia, Iran and North Korea?

    Again, get to know Mr. Shadow (coined in the movie, ‘The Fifth Element’).
    Read or watch on Youtube: “Silent Weapons for Quiet Wars
    Operations Research Technical Manual TM-SW7905.1”