Comment: Debt-Based Currency vs. Deft-Free Currency

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Debt-Based Currency vs. Deft-Free Currency

As we all are aware of, currently we are under a system, where through fractional reserve lending and the Federal Reserve, any new money is created out of debt. A $100 into the system, will require say $110 with interest in return, but that $10 was never created so it can never actually be paid back. So the national debt is always growing.

Now if we went to a gold-standard, abolished the Fed, and ended fractional reserve lending, there would be an improvement in that money is not created out of debt. Gold is scare and there is a constant given amount. But if the economy grows, gold becomes relatively more scarce, because the economy demands more. The gold to wealth ratio has essentially decreased, and this is essentially deflation. Deflation is good for the lender(the institutions with significant banking power). So in this sense, a gold standard even if it's implemented in a debt-free system, has the potential of being very undemocratic toward the common man. And also, this means that gold, though having a constant supply, will not have a constant value. Again you could have the bears and bulls speculating on market trends, and gold potentially could be very unstable with any economic changes.

But if you went to a debt-free paper currency, you could match the money supply to wealth. This is favorable to the common man, and does not give any deflationary (gold standard) or inflationary (debt-based paper)advantages for the banking powers or national debt. So we need to distinguish in our arguments when we refer to a paper currency, as either being debt-free or debt-based, because they are very different. A debt-based paper currency will always fail, but this does not have to be the case for a debt-free paper currency. Giving the people through their government the power to issue their own money is the same principle as giving the people through their government the power to provide for their own common defense. The market will take care of the money once its in circulation, but the economy and the market is still ours, and we have the sovereign right to set the amount of money.