It Is Now Mathematically Impossible To Pay Off The U.S. National Debt

I wrote my Critique of Montagne almost two years ago at the request of a Daily Paul discussant. At that time I searched the internet and was unable to find any replies from Austrians other than the ones quoted in my paper.

In spite of our efforts, however, the debt virus theory is gaining momentum. Probably half of the e-mails I receive are from debt-virus adherents demanding to know how I could be so stupid as to not buy into their "Planet Doom" scenario.

The socialist's denounciations of anybody who employs the axiomatic method as being autistic is a methodological issue. But the primary thrust of modern socialism on policy issues is to give the Treasury Department free rein to print money, a plan whose theoretical underpinnings is the debt virus theory, though they do not always use that term.

This would be catastrophic. I'm no apologist for the Fed, but I can tell you this: If Zarlenga's American Monetary Act ever becomes law, the dollar will be dead in a week. That cannot be said of the Fed, who can be expected to blunder forward in their usual way.

Fiat dollars are based upon the decree of government that they are legal tender. If you think that the FED is independent of or operates solely upon its own behalf then you are sorely mistaken, the primary beneficiary of the monetary policies of the Federal Reserve System is the government, it always has been and that was the purpose of the Federal Reserve to benefit government and allow it to avoid the political implications of heavy taxation of the people. By using inflation of a fiat monetary system the government could, by slight of hand, by-pass normal taxation, which is politically dangerous and in its place implement the hidden taxation of inflation through fiat depreciation.

Fiat is any type of money that arises out of an involuntary market condition imposed upon the people by government legal tender laws which force the people to use the government's money [Federal Reserve Notes]. The FED simply sells U.S. Treasuries and acts as a clearing house for the Fiat Federal Reserve Notes issued by the Treasury. The FED is nothing more than an arm of the political powers in Washington and was the creation of both bankers and politicians in concert with certain socio-political goals that preclude Constitutional Order. At one time however, what was called "paper dollars" were nothing more than receipts, payable to the bearer upon demand actual gold or silver, which was, in fact, the real money that the paper receipts represented.

The fact that the Treasury can coin base metals is no different than if the Treasury prints paper money [all Federal Reserve Notes are printed by the Treasury in the U.S. Bureau of Printing and Engraving, the FED does not print or issue Federal Reserve Notes], the result will still be the same depending upon the amount of increase in the monetary base. If you coin $14 Trillion Dollars in base metal coin, without asset value backing those coins the effect will be the same, the value of the coin will be depreciated through inflation. Treasury Notes would still be issued and sold in the open market so what difference would it make in terms of what type of fiat currency is used. There are several examples of coinage in history where the content of the coin was so diluted that the value of the coins no longer held a utility as a medium of exchange. Between dilution of the precious metal content or chipping of the coins the effect was the same.

It there was an executive order to the Treasury to coin as much money as "needed" [whatever that means?] there would still be no solution to the overall problem, either of the debt or the problem of inflation, the effect would be the same.

At one time in this country Treasury Notes were not marketed as they are now, nor was there a bond market under a gold monetary system since there was no need for one. The bond markets, which is a debt market, provides a system whereby the fiat monetary system has value imputed to the currency, in other words it is the organization of debt into currency, whether it be fiat paper or fiat coin. As I said, at one time a Treasury Note was issued and sold, but it was not payable to the bearer upon demand and required endorsement for redemption, they could not be traded, nor was is used as legal tender in the markets, nor was it a money substitute. It also paid interest to the bearer, but it could not be reissued. The organization of debt into currency [fiat paper or coin] is based purely on a system of government fiat [decree by law] and is always imposed and has never arose voluntarily in the market place.

Oh, keep an eye on the penny...it will tell you a great deal about the real state of the economy; they have tried debasement of the copper penny, which only has a thin layer of copper clad on it, now let's see if they do away with it altogether since it cost more to manufacture a penny than it's worth. The same can probably be said with the other coins in the U.S. Currency System, let's see what happens to them.