War On You: Breaking Alternative News

Did you know that roughly 1/4 of all income taxes are consumed to pay interest on the Federal Debt? (National Debt currently 10 TRILLION DOLLARS , or $100,000 per household!) Think about it! Every penny that you pay in income tax from January-March is consumed to pay interest! (*2008 Income Tax revenues: $1.25 Trillion / Interest owed on Debt: $261 Billion) And let’s not even talk about the Government’s unfunded future liabilities, estimated at 50 TRILLION! (an additional $500,000 per household!)

Add those staggering sums to your mortgage debt, car loan debt, student loan debt, credit card debt, State debt, County debt, City/Town debt, small business debt, big business debt, and you will see that the total of these debts actually exceeds (BY FAR) the amount of money supply in circulation.

So, how can these debts ever be repaid? THEY CAN’T! The only way to service just the interest on these monstous debts is to constantly take on new debts!

Finally, on top of all your Federal, State, and local taxes, (30% – 40% of your income) and on top of your personal debt service burden (another 25%-50%), there’s this thing called “inflation”, or  ”the cost of living.” What exactly is “the cost of living?” What causes it? Why does a dollar buy less and less each year while wages stay flat?

Is the stress of perpetual debt and rising prices keeping you up at night? How many strokes, heart attacks, and suicides are induced by financial stress each year? Money and debt may even have led to your drinking problem, or even to severe depression. Perhaps debt was the underlying cause of your divorce, of that of some couple that you know.

You know in your gut that something isn’t right in this country. But you don’t have the “Economics education” to figure it out. It all seems too complicated for you to put your finger on, so you just keep slaving away to pay interest and taxes as your dollar buys less and less. All you can do is keep working like a dog and leave the matter to the Wall Street “experts” and politicians to handle.

But it’s all quite simple really. So simple in fact, even a dummy can understand it when it is broken down to basic elements.

So then, how exactly did you all become such debt/tax slaves? Well, as long as you promise not to tell, I’ll let you in on my little secret. You will be AMAZED at how easy it is to understand!

My name is Mortimer M. Moneybags III and this is the true story of how I bankrupted and enslaved my hometown of Tomatoville, USA:

THE SETUP

One night, Bill, Frank, John, and Mike came over to my place for a friendly game of poker. My four neighbors are all prosperous tomato farmers. Tomatoes actually serve as the currency of Tomatoville, USA.

Before starting, the five of us agree to each put up 10 tomatoes as our “risk capital.” That’s a total of 50 tomatoes. (Gross Domestic Product – GDP)

Play begins and we realize that trading tomatoes during our bets is awkward. I suggest that we utilize paper notes to represent our tomatoes instead. Because I hold a degree from Harvard, all agree that I should act as “Central Banker”.

We place our tomatoes in the center of the table and I print 50 paper notes with the face of  Tomatoville’s founder on them (corresponding to the 50 total tomatoes). Each paper note therefore represents 1 tomato….simple! (sound money/hard money/gold standard)

As play resumes, I have an unseen advantage over my guests. At 30 minute intervals, I repeatedly excuse myself for a “bathroom break.” (Fed Meetings) During this time, I’m actually sneaking into my bedroom and printing up more 1 tomato notes (fiat money).

Upon returning, I gradually gamble and inject ever increasing amounts of notes (liquidity) into the game (the economy). By midnight, the original 50 notes has increased to 500 total notes (fractional reserve banking, leveraging)

After ebbs and flows, the game was remarkably even at midnight. The five of us, who had each started out with 10 notes apiece, now held 100 notes apiece! But the same 50 tomatoes  -the true intrinsic value of the game - (GDP) remain  in the jackpot.

Because we are getting so “rich” from the game, I propose that instead of ending the game, we leave everything as is and resume play the following month.

“Why don’t you fellows spend some of your Tomato Notes, and save some to invest in next month’s play. Tell the shopkeepers that each Tomato Note represents one tomato that is still sitting on this table. They’ll accept the Notes as if they were actual tomatoes.”

“Great idea Mortimer! The paper is so much more convenient to trade than the tomatoes.” replied Mike.

All agree to suspend play and resume next month. Before they leave, I announce that I’m cashing in 20 of my 100 notes in order to make tomato sauce the following day.

At the original ratio of 1 note to 1 tomato, my 20 notes trade for 20 tomatoes. I have doubled my original “investment” of 10 tomatoes (profit taking), and still have 80 paper notes with which to resume the game next month. There are now only 30 total tomatoes remaining on the table.

As I expected, my friends have no intention of cashing in any of their “winnings” because the returns from the game are so high. They each hold 100 notes and really believe that their original 10 tomatoes have yielded a 10 to 1 return from playing the game (Bull Market, irrational exuberance).

THE STING

Bill panics. “I’m trading in!” he declares. He dumps all 200 of his notes and attempts to grab the remaining 10 tomatoes (stock market crash, bank run).

“Not so fast Bill!” declares Frank. “If you get those remaining tomatoes there will be none left for us!” he said.

.

“Oh my God! Mortimer! What’s happened here?” Mike asks.

My expression turns somber as I reply:

“Damn! I was afraid this might happen. Because we were doing so well, the game “overheated”. The Tomato Note fell against the tomato. When that happens, the cost of playing goes up (inflation) and then a contraction occurs (recession).  It’s a natural cycle.”

“So how do we allocate the remaining tomatoes?” John asks.

“Simple.” I replied. “It’s called currency devaluation. You four  each have 200 notes in hand, and I have 160. That’s a total of 960 notes in circulation (money supply). There are 10 tomatoes remaining. Divide the 960 notes by the remaining 10 tomatoes and the new cost of a tomato is therefore 96 notes (hyper-inflation). That means that your 200 notes can buy back 2 of the remaining 10 tomatoes for each of you.”

The paper Tomato Note currency has lost its purchasing power (inflation) and my 4 neighbors have each lost 8 of the original 10 tomatoes they had once owned. I walk away with 42 of the original 50 tomatoes. (real wealth)

But the real problem is that the four suckers, believing they were “wealthy”, had charged up a lifestyle that they can no longer sustain.

That new car Bill bought for his wife? Can you say “Repo Man?”

Franks new restaurant? The chefs and some waiters will have to be laid off (increased unemployment).

Mike’s credit card bills? Soon to be delinquent and destroying his credit rating. (credit crunch, local Bank losses)

John’s new home? Foreclosure, followed by divorce (housing slump).

The merchants who had sold or loaned to them will also be negatively affected. Anyone who had dealings with the free spending Poker players is also holding devalued notes and possibly carrying bad debts. The artificial debt & inflation prosperity had spread like viruses, and now the malinvestment balloon has to painfully deflate.

The bewildered and frightened town folk don’t understand how this  happened. Because of my Ivy League credentials, coupled with the fact that I have accumulated so much wealth, they look to me for expert advice and answers.

I explain to them that we are in a liquidity crisis:

“Friends! This is part of the natural business cycle. Sure, you  have suffered a short term loss, but in the long term we all come out OK as the markets recover. You saw how much wealth you had earned. If you get out of the game you’ll be locking in your losses.”

“The market has hit bottom. Truth be told, you guys helped create this mess yourselves with your reckless consumer borrowing, and the local bank should have known better than to lend so carelessly. This is the problem with free market capitalism sometimes.”  (blaming the symptoms, instead of the cause)

“I will advise Mayor Bulshitz to institute new legislation and more regulation over private enterprise (New Deal) and we will create a social safety net in order to protect you from future naturally occurring business cycles.” (Great Society, War on Poverty)

“Greedy CEO’s, town’s shopkeepers, and your employers created this mess and it must never happen again.” (class warfare)

“We will tax the rich! (Federal Income Tax, established in 1913) Free health care! Free education! (socialism) Liberty! Equality! Fraternity! Change we can believe in! Hope! Yes we can! Workers unite! You have nothing to lose but the chains which bind you!”

“Don’t worry about the town’s Constitution. It’s an outdated document written by a bunch of dead white guys. If we are to fix this mess, then we must ignore its limitations on progressive government action.”

“The tomato must no longer serve as the backing for our currency. To meet the liquidity needs of our new system, it is imperative that we get this town off of that antiquated, “barbaric fruit” Standard (hard money) and transition to my expertly managed paper currency.” (fiat money)

“As far as the poker markets go, now is the time to play even more aggressively. We’ll meet again next month. In the meantime, work harder and bring more tomatoes to the next game, I’ll print more notes to increase liquidity and induce the banks to loosen up credit once again. (pump priming)

“If the local bank runs out of notes to lend, I’ll act as their lender of last resort (Federal Reserve, established in 1913) and lend notes to the local bank at interest (Bank takeovers,Discount Window). I will also lend to the Mayor’s office (Open Market Operations, purchase of T-Bills) , and bail out the Tomato Street Brokerage houses that I deem to be ”too big to fail” (Goldman Sachs, JP Morgan bailout package).

John then shouts out: “Wait a minute Mort! I’m the one in foreclosure here. My family is about to be put out on the damn street!  Why should Tomato Street fat cats get bailed out and I don’t? I pay taxes!”

I calmy reply: “Because John, when the Mayor and I bail out irresponsible Tomato Street Brokers, we are saving free market capitalism. But if we bail out irresponsible homeowners, we would be practicing socialism.”

I continue: “Finally, I will organize an emergency meeting of the Mayors, Finance Ministers, and Note Printers of the European towns (G-7, “world stage”).  Now is not the time for isolationism. (independence, sovereignty)  Global problems demand global solutions! (IMF, World Bank, WTO, UN).”

“We will recover.  So keep spending, secure in the knowledge that the best and the brightest of the world community are on the job. We have nothing to fear but fear itself!”

THE WRAPUP

The men leave my place full of hope, grateful that a financial “expert” and a caring leader are in charge of the recovery plan. Incredibly, I have convinced them that it was free enterprise, tomato  currency, and limited government (the  pillars of their original prosperity!), that caused their problems.

Instead of seeing my inflationary system,my interest demands, and the Mayor’s high taxes as the causes of their lower standard of living, they actually revere Mayor Bulshitz as a savior. Bulshitz gives them all the “free” goodies that our destructive schemes made unaffordable in the first place!

Damn this is fun! .

My European colleagues and forebearers have been running this scam for centuries. Whenever some independent-minded foreign mayor resists our Monopoly game, (Saddam, Putin, Chavez, Ahmadinejad), our friendly mayors (the “free world”) will team up  to bring that town back in line (sanctions,UN resolutions, spreading democracy,CIA coups,wars). Perhaps one day we may even merge our operations under a single global umbrella?

I also play golf with the owners and publishers of the local Democrat newspaper as well as the  Republican newspaper. Through my close friendship with them, I am able to influence the editorial and news content of both papers. It’s sort of a “good ole boys” networking thing.

My “philanthropic endowments” to Tomatoville University guarantee that my twisted version of economics is taught to the students. Awestruck by my immense wealth and prestige, most, but not all (”Austrian School”), of the economists at “TU” are eating out of my hands. So, when the town folk read The Tomato Street Journal, or hear Professor Pointyhead speak on TV, my false theories are reinforced in their minds.(Keynesian Theory, “Chicago School”)

All, except for John – the critical thinker of T-ville. He figures it all out and embarks upon a one man Internet crusade to expose me, calling me a “counterfeiter”, ”usurer”, ”insider trader”, ”warmonger”, and “The Shadow Mayor.”

But Mayor Bulshitz, as well as his rivals from the other Party, are all very easy to get along with. Most politicians only care about getting elected. It doesn’t serve their ambitions to alienate a well connected “bi-partisan” donor like me.

Every few years, for public show, Mayor Bulshitz gets to nominate a printing ”Chairman” from our list of our preferred professors. Because of this “dog and pony show”, most people believe that the central banking operation is regulated by the Mayor’s office. It’s not!

In reality, it is a private cartel, owned and operated by my banking associates and I. It is only our cartel that gets to print (or E-mail) the actual money supply, and then inject it at will into the government treasury (FED purchase of T-bills) and banking systems (FED loans to member banks), as we see fit.

Because debt is the actual currency, you can never stay out of debt. The total of all debt and interest owed always exceeds the total money supply!

So you see, this debt based currency system is actually nothing but a massive pyramid scheme. My international banking buddies and I are on top, supported by all of you worker bees below.