I’m a Fiat Slave, And So Are You

Fiat money is at base a form of indirect wealth transfer from those forced to hold the money to those issuing the money.

I describe the pernicious servitude created by debt as debt serfdom, as serfdom implies a neofeudal arrangement that requires serfs’ acceptance of this financial yoke of servitude. In other words, debt is freely accepted as the line of least resistance in a system that incentivizes debt and places high barriers to debt-free independence from a Status Quo operated to benefit the owners and issuers of debt, not the debtors.

Correspondent Jeff W. has identified an even more insidious form of monetary servitude that he calls fiat slavery, as the servitude is enforced by fiat (unbacked government-issued) money.

In other words, being forced to use state-issued fiat currency is a form of servitude, as fiat money is at base a form of indirect wealth transfer from those forced to hold the money to those issuing the money.

Beyond this state-enforced wealth transfer from citizens to the state, there is a secondary wealth transfer going on in any fiat-money system: the neofeudal financial nobility who are closest to the money spigot get to buy whatever real-world assets and income streams offer the best return before the money trickles down to the debt-serfs paying interest and taxes.

For example, the financial nobility can borrow billions of dollars at near-zero interest from the Federal Reserve, and use this nearly-free fiat money to buy student loans that pay 7+% annually. They can also snap up houses for cash that the nobility then rents to debt-serfs who have been outbid by those with the extraordinary advantage of unlimited access to the Fed’s nearly-free fiat money.

Here is Jeff’s commentary:

In a world where every country prints fiat money, the entire human race today, except for its money masters, is subjected to fiat slavery.

Almost everyone understands what it means to be a tax slave. It means that people must work several months of the year for the benefit of the taxing authorities. Taxes in the U.S. today are several times higher than they were 100 years ago, and at present-day tax levels, today’s Americans are rightly called tax slaves.

What it means to be a debt slave is also easy to understand. It means that one must spend a large fraction of one’s time to earn money to pay creditors. Millions of Americans today are mired deeply in debt, but today’s America is also a country where if you personally stay out of debt, the government will go into debt for you.

Each American taxpayer is on the hook for his or her share of over $17 trillion in debt that government admits to; the real debt total is much higher. Government leaders are eagerly plunging us ever deeper into debt each year.

Most Americans also have personal experience of being a wage slave. It means that a person has no way to make a living except by selling his labor into a glutted market. Thomas Jefferson hoped that most Americans could own their own farms and thereby profit from capital improvements that they made through their own efforts. Such Americans could be their own bosses and escape wage slavery. But today we live in an age of huge factory farms, and it is more difficult than ever to establish or run any small business. Thus wage slavery is the norm for Americans today.

But few people understand what it means to be a fiat slave. Being a fiat slave means that one lives in a country where the machinery of money printing is used to maximize wealth extraction from its citizens.

How do they maximize the wealth they can extract through money printing? First of all, it is done by increasing of the volume of transactions that take place in a given fiat currency. Each newly-printed unit of fiat is a drop in the bucket in terms of the inflation it creates, and more fiat can be printed without causing serious inflation if a country has a bigger bucket.

For example, Canada’s GDP is about 11% the size of America’s. At first glance this might be taken to mean that Americans can print nine times more dollars than Canadians. But we must also remember that U.S. dollars circulate throughout the world, and Eurodollars and petrodollars also add to the total of U.S. dollar transactions.

Because of extraterritorial dollar circulation, the U.S. might actually be able to print 20 times more than Canada without causing serious (in terms of causing political problems for the money printers) inflation. From this we see why money printers may want to fight wars to protect America’s dollar circulation areas in the Middle East or in Afghanistan, where much of the opium trade is transacted in dollars.

But a country’s fiat transaction volume is only part of the equation. A more important part of the equation is the inflation level. Imagine two countries: Country A with an annual fiat transaction volume of 100 trillion units per year and Country B with a volume of 50 trillion. Everything else being equal, Country B can only print half as much fiat each year to give to its government and its banking elite.

But suppose further that the inflation rate in Country A is 5% absent any money printing, and the inflation rate in Country B is negative 2% due to global wage arbitrage, regulatory suppression of small businesses, and high unemployment. Suppose further that a real inflation rate of 5% is the money printers’ upper limit because it is the maximum asset erosion that wealthy bondholders will tolerate. Now we see that potential money printing in Country A is reduced to zero, while potential money printing in Country B is 3.5 trillion units (50 trillion times seven percent).

American money printers thus have trillions of dollars in incentive to support deflationary policies, which may include global wage arbitrage (sending work to the country where labor is cheapest), suppression of job creation by small businesses, suppression of private-sector labor unions, support for open borders immigration, commodity price suppression through market interventions, support for genetically modified seeds so as to push agricultural prices down, support for owners taking a larger share of corporate revenues so as to reduce labor’s share, and support for high levels of consumer debt so as to dampen inflationary pressure in a nation of demoralized debt slaves. All of these oppressive policies enrich the money printers at the citizens’ expense.

Tax slavery, debt slavery, wage slavery, and fiat slavery are four methods that elites employ to extract wealth from the people. To this list we should also add their encouragement of Ponzi gambling. Ponzi asset bubbles are constantly being created and citizens are encouraged to go into debt to “cash in” on bubble profits (or get wiped out in bubble crashes). Those five methods are the major wealth extraction methods they use.

Those who support the cause of human freedom must resist tax slavery by insisting on a government that keeps its spending down to the bare basics. Free people must also support a culture that discourages people from getting into debt and encourages them to get out of debt and stay out. They must demand that government debt be rolled back to zero.

Policies that favor capital accumulation in families and a supportive legal environment for small businesses are the antidotes to wage slavery, and free people must also demand that there be zero wealth extraction from the citizens through money printing. That can best be done by requiring 100% gold backing for currency and eliminating fractional reserve banking. Eliminating the inflation that comes from money printing will also go a long way toward eliminating asset bubbles and Ponzi gambling on asset bubbles.

Older Americans have watched as a once-free people have been reduced to slave-like conditions. Not only has wealth been ruthlessly extracted from the people, but today’s surveillance state is more intrusive than ever, and the police are increasingly insolent and imperious.

What are we going to do? A necessary first step is to take the blinders off and to see clearly how elites are victimizing you. A second step is to figure out what practical steps you can take as an American to secure the blessings of liberty for yourself and your posterity. Freedom is not free, as the saying goes, and the price of freedom is not only eternal vigilance, but also intelligent action. We should begin this work today. 

Thank you, Jeff, for describing our fiat bondage. Awareness of the sources of wealth transfer and monetary servitude is the first step forward.

Of related interest: Bernanke the Sophist: The Deception Behind QE

Want to give an enduringly practical graduation gift? Then give my new book Get a Job, Build a Real Career and Defy a Bewildering Economy, a mere $9.95 for the Kindle ebook edition and $17.76 for the print edition.

This entry was posted in General and tagged , , , . Bookmark the permalink.
  • jim55

    I have to say though my mortgage intersest rate is 3.6% and I just financed a new tractor for 5 years at 0%. You can say that some of these low interst loans have carried over to the consumer.

    • rogersan

      And according to the above the person you owe money to cannot refuse payment if FRN even if they become absolutely worthless. That seems like a great reason to stay in debt with monopoly money especially if you are buying a tangible asset like a tractor, gold, silver etc. If the value of dollars is depreciating at a rate of 18% per year you are making money locking in that tractor at a fixed payment amount and 0% interest. Same thing with a house. The government ultimately will have to start issuing the paper to the serfs to stave off a revolt and when it takes 100,000 million dollars for a loaf of bread you can pay off your farmland, plow your field with your tractor and eat the food you grew yourself and laugh all the way to the bank.

  • Voice of Reason

    This is pretty much a totally bogus post. In the first place, almost ALL of the world’s – and certainly this country’s – money is created on the books of banks, shadow banks and financial institutions. The fiat money is just there for show, so you can have something tangible if you start getting nervous about the trillions and trillions being created ‘out of thin air’ by the bankers and their buddies on Wall Street.

    But even treating money as wealth is a joke. It is DEBT not wealth. It is a claim on society’s wealth – a legally enforceable claim when it takes the form of ‘legal tender’. (Take a look at Frederick Soddy’s “Wealth, Virtual Wealth and Debt” for an 80 year old discussion of the subject.) Jeff apparently believes families should be allowed to accumulate these claims on society’s wealth in an exponential fashion until the end of time.

    For the last century we have been doing everything we can to provide a full employment for money program including wars, sabotaging the efficiency of the economy by adopting technologies that provide the most ‘economic rent’, i.e. a free lunch to the holders of money who have done nothing to earn or in many cases even steal it. (What’s the saying? “Behind every great fortune there is a great crime.”)

    It is way past time for ‘reformers’ and progressives to stop worshiping at the feet of Mammon (money).

  • It’s not just the fact the people use fiat. It’s the fact that they use a promise to pay. There is a significant difference in legal rights when payment is deferred versus payment is immediately satisfied.

    You end up with an equitable interest instead of title to property.

    • Voice of Reason

      I guess this is supposed to mean something?? But it doesn’t to me. Please explain.

      • OK.
        It’s hard to figure out were to start.
        It starts with intrinsic versus extrinsic value.
        A bar of gold = intrinsic value
        A piece of paper promising to pay gold = extrinsic value

        Those 2 types of values have significance in law.

        Exchange of intrinsic value (i.e. gold bar) for intrinsic value (i.e. a chicken) is called an executed contract. the transfer of rights between the parties is absolute. No act need be done to complete the transaction. Neither party has a legal claim in any way , shape or form against the other party. The deal is done.

        On the other hand , and exchange of intrinsic value (i.e. gold bar, chicken, labor, real property etc ..) for EXTRINSIC value ( a promise to pay {some intrinsic value in the future}, note , bill, bond, debenture, security, or evidence of indebtness) is an executory contract. The person that received the promise still has not been paid. There is a claim still outstanding. The claim against the person tendering the promise is extinguished but the debt is not gone yet. Legally this is called a debt in rem. it remains.

        Mechanically it works like this.
        I sell a bar of gold to Party A for a FRN.
        Now I have a claim for value against the FED and party A has a bar of gold , The FED has nothing
        The debt was never paid. The liability was merely transferred from party A to the FED.
        The FED now has an equitable interest in the bar of gold because they paid for it but received nothing!

        The FED enforces their equitable interest via the income tax. If party A does not pay his income tax, the FED via the Treasury will seize the gold bar.

        Now to take it from the another angle.
        I go to the FED to redeem my FRN and they won’t accept it.
        What is my recourse?
        Like I said. The IN REM debt remains.
        I can not sue the party A for the value of the gold bar. However I have a lien on the gold bar and can take legal action to seize it because of the unjust enrichment.

        As you can see party A has no ownership of of the gold bar. They merely have an equitable interest.

        It even goes deeper than that because all Federal Reserve Notes are payable in Washington DC. Couple that with the fact that a contract is made were it is paid and you will notice that all FRN’s are technically foreign bills of exchange.

        Corpus Juris Secondum explicitly states the Federal government (whose seat is Washington DC) is a foreign corporation with respect to the States.

        There is more to this but that’s the reader’s digest version.

        The point is paper money has very very very significant ramifications when it comes to legal rights. Combine that with ignorance of the law is not a valid defense and you have a recipe for disaster.

        • Voice of Reason

          Your explanation would seem to defeat the whole purpose of the legal tender clause – allowing the exchange of something with intrinsic value for something with extrinsic value, i.e. money. (And the only intrinsic value of gold, incidentally, is the cost of digging it out of the ground and refining it. When people are not concerned about money losing its ‘extrinsic’ value, the gold in the less productive mines is often not worth the cost of digging it out of the ground.)

          You say that when you exchange FRN for an object with intrinsic “The person that received the promise still has not been paid.” From a legal standpoint what other interpretation could you put upon “This note is legal tender for all debts public and private” but that the party supplying the intrinsic value has indeed been legally paid?

          • This is a very difficult issue to distill. The section on Bills and Notes is a nearly 1000 pages in Corpus Juris.

            Gold has intrinsic value because it has a use i.e. electronic circuits. A notes value doesn’t come from the paper. That’s why it’s value is extrinsic.

            Gold coins can have an extrinsic value though. A legal tender value is stamped on the face. That value has no correlation to the physical characteristics of the gold. It is arbitrarily chosen by the STATE.

            Legal tender, simply means formal offer. The laws making FRN’s legal tender do not exclude any other type of tender i.e. checks , money orders etc…
            What makes FRN’s different is that you can not sue if someone uses them to discharge a debt.

            There is a distinction between paying a debt and a purchase.
            When there is a purchase you can refuse FRN.
            When there is a debt to be satisfied you can not refuse FRN. Well you can. Well technically you refuse FRN’s but can not sue for non-payment. The courts are bound to accept it.

            Discharge means the personal ( in personam) liability is extinguished. That individual can not be sued for non payment.

            The person that accepted the FRN is still owed. Just not from that person. The FED is their debtor. Like I said the paper has no intrinsic value and can only satisfy an obligation via legal fiction i.e. the paper is the object of value it purports to represent.

  • clarioncaller

    I can honestly say that this subject will never be taught truthfully in a Common Core school.