ARCHIVE
STATE EDITORIAL
Congress needs to change system
Jack Metcalf decries U.S. debt-money system; debt can never be paid off

By Jack Metcalf, U.S. Congressman (R-WA-2nd District)

 
WASHINGTON, D.C.--There is a fundamental flaw in our money system that allows money to be created as a debt instrument. It is called a debt money system, and money must never be created and loaned into circulation. The reason this must be avoided at all costs is that when interest is charged on money at the point of issue, the interest is mathematically unpayable.
 
This can be illustrated. Let me give just a quick example. (it is an oversimplification).
 
Let us say that five people design a money system. They create $50 in currency without intrinsic value, paper currency, say. Each one borrows $10 in one year; and, of course, they will pay interest on it. They will each be paying $1 in interest.
 
Now, this is obviously a flawed system because if only $50 is created, a year later it is impossible for $55 to be repaid. Someone in the system is going to lose the collateral he pledged for the loan.
 
Unfortunately for us, this is the kind of system which has been imposed on this country. The deeper problems do come to light as we look carefully at our monetary system.
 
Now, there will always be some people who are better managers, just good at business or just lucky in their choices. That is the first group. They will prosper in any system.
 
Then there is the upper middle class who will manage a satisfactory standard of living.
 
Then next is the lower middle class, who may manage a satisfactory standard of living by working two jobs or being frugal in their spending or so forth.
 
Number four, there are the working poor, who really do work hard but at low-paying jobs. They can never get ahead at all.
 
Number five, at the bottom are the hopeless poor, who may work some or are on some sort of welfare but have little chance to better their situation in the real world. They are the last hired in good times and the first fired when the economy is slipping.
 
Now, it is easy to say this group does not have the skills (probably true); does not want to work (probably not true), but in any event there is strong evidence that the system, the system we have, plays a critical role in their lack of success.
 
Let us suppose there are five heads of families that live on a new continent. We will just invent a situation. Again, they work hard, bartering for things. The plan proposed would be to issue the certificates, as I mentioned, and they would be the medium of exchange. They issue 50 pieces of paper or 50 certificates, and they have to each repay one certificate at the end of the year, and thus the interest on it is impossible to be repaid. That is, if money is issued as a loan, the interest is impossible to be repaid.
 
Now, it is easy to see in a simple situation like that, or example, but it is impossible to see in our huge national monetary system with hundreds of billions of dollars constantly being created and extinguished.
 
Actually, it is estimated that about $20 Billion is extinguished and created each day in America, causing the fundamental flaw in our system. The fact of creating money out of thin air and loaning it into circulation at interest makes the interest mathematically impossible to be paid.
 
The result is that this system builds more and more debt, which cannot be repaid, resulting ultimately in monetary problems--anything from a minor recession to a major, hair-curling depression such as we experienced in the 1930s. These things are the result, or can be the result, of a flawed monetary system.
 
The point I make is that we must understand the danger of relying on the issue of debt money. It is the responsibility of Congress to understand this issue and its ramifications, and change the way we issue the nation's money.