Column by Paul Hein.
Exclusive to STR
If you watch political commentators on television, you won’t have to watch very long before the subject of the national debt is introduced. That, in itself, is interesting, because the national debt has been around for a very long time indeed. Evidently it has reached such proportions today that it cannot be ignored, and the pundits are wringing their hands, asking, “How are we going to pay this debt?” Sooner or later, someone is going to point out what he thinks obvious: there’s no free lunch.
Yes, there is. It works like this: You have lunch, and when you’ve gotten the bill, you tender an IOU for the cost of the meal. What did that cost you? The restaurateur even furnished the pen and paper! A free lunch!
I can hear you saying, “Free? Wait until you have to pay that IOU!” This is where it gets interesting. You and I, to be sure, will have to come up with payment. But I didn’t say that there was a free lunch for everybody! In order for your lunch to be free, you must have the right connections. Specifically, you must have a close relationship with the rulers, so that when you ask them for a favor, they will grant it for you. The favor you ask of them is this: Please declare my IOUs a “legal tender.” That makes all the difference.
If you obtain another’s goods or services by offering (tendering) a note, or IOU, which you know is worthless, and which you have no intention of paying, you are a thief. There are laws against such things, as there ought to be. It is not legal to knowingly tender (offer) a bogus, or non-redeemable, note. That is why you must have your friends in the government gang declare your notes legal to tender. Once they have expressed their official approval of your non-redeemable notes, money is no longer an object--literally.
The restaurateur is happy to accept your bogus note, because, being legal to tender, he knows that, even though it is not a valid note, he can, without committing a crime, “spend” it to pay his bills, and his creditors are likewise willing to accept it because they can pass it as well. Besides, you have them printed so elaborately that their very appearance gives them an air of importance and validity. In no time at all, the money which bank notes once represented disappears from circulation, and from the minds of the people as well.
Most of what passes for money today is not paper, however, but credit--numbers in a bank account somewhere. The same principle applies, however. When you pay for lunch with a credit card, the total amount due—less bank fees--is credited to the restaurant’s account, and you reimburse the bank. Now the restaurateur does not have a non-redeemable, though legal, “note” in his till, but a number added to his account. Where did that number come from? Someone, somewhere, borrowed “money” from a bank, which provided the loan simply by adding the amount to the borrower’s account. It did not subtract this number from another account, but created it anew. “Money” from thin air, in other words. From the borrower’s account it circulated through the economy, ending up in your account, so you could “pay” for lunch.
But whether it’s numbers on a bogus paper note, or (borrowed) numbers in an account (representing nothing), the fact remains that you and I have to work for those numbers; but the issuer of the note, or creator of the credit, gets them for nothing. He places the “money” he creates into circulation as a loan, and since he and his colleagues are the only source of “money,” this arrangement means that there will be a continuous demand for more loans, since each loan requires that more be repaid than was created. For such a fortunate individual, not only lunch, but everything else is free.
Did I hear “equal protection of the law?” Try printing your own bogus notes and using them to buy lunch, and find out how equal you are!