There is no way the public debt can be paid off

All the countries in the world are presently struggling with a debt problem. In 2005, Canada's federal debt is about $500 billion. And the richest country in the world, the one with the largest production - the United States -is also the most indebted country, with a debt of over $8,000 billion in August, 2005. Why are all the countries in debt? It is quite simple: in the present system, there is no way any country can get out of debt, since all money is created, comes into being, as a debt.

The Money Myth

Simple arithmetics can prove the impossibility of paying off debts, as showed in the following example.

In any society, the economic system can be divided into two parts: the producing system and the financial system. The example is taken from Louis Even's parable, The Money Myth Exploded: On the one side, there are five shipwrecked people on an island, who produce all the necessities of life, and on the other side, a banker, who lends them money. To simplify this example, let us say there is only one borrower on behalf of the community; we'll call him Paul.

Paul decides, on behalf of the community, to borrow a certain amount of money from the banker, an amount sufficient for business in the little community, say $100, at 6% interest. At the end of the year, Paul must pay the bank an interest of 6%, that is to say, $6. 100 minus 6 = 94, so there is $94 left in circulation on the island. But the $100-debt remains. The $100-loan is therefore renewed for another year, and another $6 of interest is due at the end of the second year. 94 minus 6, leaves $88 in circulation. If Paul continues to pay $6 in interest each year, by the seventeenth year there will be no more money left in circulation on the island. But the debt will still be $100, and the banker will be authorized to seize all the properties of the island's inhabitants.

Production has increased on the island, but not the money supply. It is not products that the banker wants, but money. The island's inhabitants were making products, but not money. Even though the five inhabitants worked day and night, this would not put one extra penny into circulation. Only the banker has the right to create money. So, it seems that Paul wasn't wise to pay the interest yearly.

Let us go back to the beginning of our example. At the end of the first year, Paul chooses not to pay the interest, but to borrow it from the banker, thereby increasing the loan principal to $106. (This is exactly what our government do today, since they must borrow to pay the interest on their debts.) "No problem," says the banker, "the interest on the additional $6 is only 36 cents; it is peanuts in comparison with the $106 loan!" So the debt at the end of the second year is: $106 plus the interest at 6% of $106, $6.36, for a total debt of $112.36 after two years.

At the end of the fifth year, the debt is $133.82 and the interest is $7.57. After 50 years, the total debt is $1,842, and all the money in circulation ($100) won't even pay the interest due on the debt: $104.26. Note that at no time can the debt be paid off with the money that exists in circulation, not even at the end of the first year: there is only $100 in circulation, and a debt of $106 remains.

The fundamental flaw in this system is that when banks create new money in the form of loans, they ask the borrowers to pay back more money than what was created. (The banks create the principal, but not the interest.) Since it is impossible to pay back money that does not exist, debts must pile up, or you must borrow also the amount to pay the interest, which does not solve your problem, but only worsens it, since you end up even deeper in debt.

The public debt is made up of money that does not exist, that has never been created, but that governments nevertheless have committed themselves to paying back. An impossible contract, represented by the bankers as a "sacrosanct contract", to be abided by, even though human beings die because of it.

Putting on a chart the debt of the island's five inhabitants, where the horizontal line across the bottom of the chart is marked off in years, and the vertical line is marked off in dollars, and connecting all these points by a line which traces a curve that illustrates the effect of compound interest and the growth of the debt:

The curve is quite flat at the beginning, but then becomes steeper as time goes on. The debts of all countries follow the same pattern, and are increasing in the same way. Let us study, for example, the public debt of the United States of America:

The first significant increases in the public debt took place during war times: the American Civil War (1861-1865), World Wars | and II. From 1975 to 1986, the debt went up from $533 billion to $2,125 billion. In August, 2005, this debt is over $8 trillion. The interest payments on this debt for the fiscal year 2004 totalized $321 billion.

If the debts of governments represent huge sums, they are only the peak of the iceberg: If there are public debts, there are also private debts (consumers and corporations)! For example, in 2005, the physical legal tender currency in circulation in the U.S.A. is a mere $750 billion (with two-thirds of this money outside the U.S.A.), with a total outstanding aggregate debt of over $37 trillion!

In the example mentioned above, the interest rate remains always at 6% over the years. However, there is a big difference between interest rates of 6%, 10%, or 20%, when one speaks of compound interest. The following are the sums that $1.00 will amount to in 100 years, loaned at the rates of interest mentioned and compounded annually:

at 1%............................$2.75

at 2%...........................$19.25

at 3%.......................$340.00

at 10%.................$13,809.00

at 12%............ $1,174,406.00

at 18%...........$15, 145,207.00

at 24%.........$251,799,494.00

And at 50%, it would eat up the world! No wonder Albert Einstein called compound interest the "eighth wonder of the world". All this is to show that any interest asked on money created out of nothing, even at a rate of 1%, is usury.

In his November 1993 report, Canada's Auditor General calculated that of the $423 billion in net debt accumulated from Confederation to 1992, only $37 billion went to make up the shortfall in program spending. The remaining $386 billion covered what it has cost to borrow that $37 billion. In other words, 91% of the debt consisted of interest charges, the Government having spent only $37 billion (8.75% of the debt) for actual goods and services. It is as if the Government had borrowed this $37 billion at a rate of 1043%!

The original principal borrowed represents less than 10% of the debt. In other words, Canada's debt has been paid off already ten times. Don't you think this is enough? True justice is to pay back the principal borrowed only once, not five or ten times because of the interest charges!

The same scam takes place all over the world. Institutions like the International Monetary Fund and the World Bank pretend to help countries in financial difficulties with their loans, but because of the interest charges they have to pay back, these countries end up even poorer than they were before the loans were made. Here are some striking examples:

During the period 1980-1990, Latin American countries paid $418 billion in interest on original loans of $80 billion... and they still owed the capital, even though they paid it back more than five times! It has been calculated that developing countries had already largely paid off their debts, since they paid back to their creditors about nine times the equivalent of their debt of 1980, which is nevertheless four times larger!

If you think this is a silly system, you are completely right! The way money is created as a debt to supply the money for our nations is the most absurd thing that can exist.

The most absurd thing in all of this is that governments persist stubbornly in borrowing, at interest from private banks, money that they could create themselves, interest-free, thus forcing the citizens to pay interest charges on an astronomical debt, when there should be no debt at all! The first duty of any sovereign government is to issue, create its own money for the needs of its citizens. For governments to have given up this sovereign function to private corporations (private banks) is the greatest betrayal of history.

It is not the bankers who give money its value, but the production of the country. Bankers produce absolutely nothing; they only create the figures that allow the nation to make use of its own productive capacity, its own wealth. The Government, through its central bank, can just as well create these figures itself, without going through the banks, and without getting into debt.

Fortunately, more and more people see through this money trick, and denounce it. For example, about fifteen years ago, Mr. Gilbert Vik, of Cathlamet, Washington, wrote a few years ago this very interesting letter:

"America's money is created as a debt at interest... By this simple, little understood trick, the creators of 'money', or 'credit, or 'deposits' (actually debt), have, without lifting a finger or breaking a sweat, siphoned off the real wealth of our nation which is created by productive efforts of people and the providence of nature, and have reduced America's citizens to vassals in their system of debt slavery,

"For every person in our country, there is $20,000 of money in existence. Sounds good! But there is $64,000 of debt! Apply your $20,000 to the debt, and that money will cease to exist, leaving you without any money and $44,000 of debt. Your options are to forfeit your assets, or borrow more money to attempt to pay. You cannot borrow yourself out of debt!

"Since the average person only deals with money after it is brought into existence, perhaps it is not surprising that the cause of the ever-increasing debt is not widely perceived. But it must be widely perceived if there is to be any hope of correcting it.

"Since the method of money creation is itself the cause of the ever-increasing debt, it is not possible to correct the problem using any method that deals with money after it has been created.

"Working harder will not correct it. Working longer hours will not correct it. Having a job for everyone in the family will not correct it. Neither raising nor lowering wages will correct it. Full employment will not correct it. Less spending will not correct it. More spending will not correct it. (And the list goes on...)

"The only thing that will correct it is the one thing that is sacrosanct in the media, in education, in politics, and, yes, even in our social circles. The only thing that will correct it is to strip private companies (banks) of their power to create money as debt at interest, and to adopt a method of money creation whereby the United States Treasury creates money as credit, without interest!

"This issue is the key issue to the financial future of our nation and world! This chicanery is practiced throughout the world! We must turn an entrenched, centuries-old financial establishment on its ear! Read about it. Study it. Understand it. Talk about it. Then raise some hell!" (Note: The best way to do all that is to get people around you to subscribe to the "Michael" Journal!)

Cancel the debts

When one understands that the money lent by the banks is literally created out of nothing, with a simple stroke of the pen for entering digits in computers), then it is easy to understand that debts can be cancelled, written off, forgiven, without anyone being penalized.

Once debts are written off, the only way to stop debts building up again, and allow nations to make a fresh start (in the spirit of the Jubilee mentioned in the Old Testament, which came every 50th year), is for each nation to create its own debt-free and interest-free money, and stop borrowing at interest from commercial banks and international institutions. If you leave to private bankers the power to create money, debts will build up again. This reminds us of the words of Sir Josiah Stamp, former head of the Bank of England:

"Banking was conceived in iniquity and born in sin... Bankers own the earth. Take it away from them, but leave them the power to create money, and, with a flick of a pen, they will create enough money to buy it back again... Take this great power away from them, and all great fortunes like mine will disappear (He was said to be the second richest man in Great Britain.), and they ought to disappear, for then this would be a better and happier world to live in... But, if you want to continue to be the slaves of the bankers and pay the cost of your own slavery, then let bankers continue to create money and control credit."

For those who do not understand how money, is created by banks, the only way a debt can be cancelled is to have someone, somewhere, pay it back. This is what happened with the recent announcement, last June 11, that the G-8 nations had cancelled the debt of the 18 poorest African nations, for a total of $40 billion. However, the real agreement is that this debt has never been really cancelled: it is the G-8 nations that will continue to pay the interest on this $40 billion debt, since they promised to "cover the full costs" of the loans!

To quote the Lord's Prayer, may our debts be forgiven, and the daily bread be given to all, through the implementation of a honest debt-free money system, as advocated by the Social Credit philosophy of the "Michael" Journal!