We're FAR FAR more than $7 trillion in debt.
See, the thing thats never talked about is that our money is actcually debt. Every dollar you have in your hand is a promisory note.
What does it promise payment in, silver? gold? No. In Dollars.
Which means that the whole financial system is a shell game built up on paper liabilities.
If you look at the annural reports of your local federal reserve, you'll note that they have every dollar circulating in their area set as a liability, and they have a tiny amount of gold "certificates" and then a lot of treasury bonds on the assets side to balance it out.
Now, the gold certificates do not represent real gold-- they are, just like FRNs, a promisory note from someone who sold the gold and promises to pay it back at some point.
Our whole system is build up on promisory notes that promise to pay back in "dollars" which are themselves promisory notes. So whenever something needs to be paid, but they money isn't there, they can print more....
They can do this forever, and have been doing it for 70 years.
But the system seems to get by because we have a net import economy. We import more than we export, and have to pay for those exports. Which we do. In dollars. Well, the other countries keep those dollars in their central banks as a reserve currency, which undercuts their local currency a little bit, makes their exports cheaper, which makes it easier to export to the US, and keeps their economy going ok. But, that means that vast numbers of US dollars are sitting in banks in other countries doing nothing.
Since they aren't circulating, they are not having the market effect they would on the economy.
Imagine if the US produced 1 million new cars a year. IF you take half of them out and put them in storage elsewhere, then the value of a given car woudl be higher, than if all 1 million were on the market, all trying to be sold this very year.
The free market affects the value of the dollar. As long as there is no major competitor for dollars, and people keep stockpiling them we can keep running the printing presses at an inflation rate of %8 a year and get away with it.
But some things are changing. We're now inflating at %10 a year. The mainipulated consumer price index-- which most people think is "inflation" - it isn't-- is getting ignored because people are actually noticing that things really do cost more than they expet, and more than last year. They're starting to notice it in the gut, especially wit hthe sluggish economy.
Oh, and one more thing, the Euro. The Euro is a decent currency, that is, like the dollar, backed by a fairly large economy. The euro is being considered for a reserve currency. Everybody sees the state of the US economy and the state of the dollar, and suddenly those vaults of US dollars are not looking like such a good reserve. So, supplanting a fraction of that reserve with the Euro seems wise.
We're just on the cusp of them doing that. The euro is gaining credibility, and they are slowly adopting it.
IF they supplant a fraction, %10, thoudh %20-%50 over time would be expected-- of the dollars with euros, the dollar plunges. We saw this this year, just with a recognition of the euro being useful the dollar plunged %20 against it... that was the echo of the crash that is about to come.
They replace %10 of their reserves, and suddenly you have a massive number of dollars dumped onto the market all at once. That can cause a crash.
But maybe they go super slow... in that case, you have the same crash as the dollar supply skyrockets-- but not fast enough for a panic-- and everything gets much more expensive because there are too many dollars out there.
Either way, we're already in the wiemar republic. They cranked up the printing presses very fast... we've done it slower, but are living in the bubble created by exporting so many dollars that they didn't affect the inflation rate percieved. When they come back to roost ,they will be just like us cranking up the printing presses.... and as prices get higher we'll crank up the printing presses as well. Hell, we already are to pay for the war in Iraq.
There's much more to all this, but don't take my word for it. Read "What has the government done with our money" by Murry Rothbard, which you can download free at
www.mises.org. Or go read the Federal Reserves annual reports... they don't actually hide the fact that our money is debt backed by debt backed by a printing press.
Its a shame dollars don't mean anything anymore... but as long as the sheeple keep trading them as if they do, the house of cards will build ever higher until gravity forces the resolution... a painful, resolution.
