The Instigator
clsmooth
Pro (for)
Losing
51 Points
The Contender
Nate
Con (against)
Winning
58 Points

The U.S. economy is a fraud based on the Federal Reserve System of fiat money and legal-tender laws.

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Voting Style: Open Point System: 7 Point
Started: 12/12/2007 Category: Miscellaneous
Updated: 9 years ago Status: Voting Period
Viewed: 3,684 times Debate No: 290
Debate Rounds (3)
Comments (16)
Votes (35)

 

clsmooth

Pro

Virtually every transaction that takes place in the United States involves the exchange of goods or services for U.S. dollars, which, in reality, are "Federal Reserve Notes" (just check your currency). Where do these Federal Reserve Notes (FRNs) come from? Few of us ever stop to ask.

The answer is: debt. When you deposit $100 in the bank, your bank may lend $90 of it, even though you can come back and claim your full $100 at any time. When someone borrows $90 from your bank and takes the check to the next bank, that bank can then lend $81 of the $90, etc. Essentially, for every $1 in bank reserves, it can lend $10. Thus, banks CREATE MONEY when they make loans. Money thus arises from debt.

If everyone were to pay back every loan that's outstanding today, there would be no more money. That's because every dollar in circulation represents a debt to somebody. Your FRNs may outweigh your debts, but someone else's debts outweigh their FRNs.

So why do we accept FRNs? They are not backed by gold or silver, as the Constitution strongly implies they should be. The answer is: Because it's the law. The government accepts FRNs in the payment of taxes, which automatically gives them value. Furthermore, it is illegal to refuse FRNs or to use an alternative currency, such as privately issued gold coins. Yes, this is against the law.

And of course, the federal government is the biggest culprit here. It created the Federal Reserve System in 1913, which is nothing more than a legalized cartel of banks. It gave private banks -- for-profit corporations -- a monopoly on the creation of money. In exchange for this privilege, it is understood that the banks will always buy up all of the government's bonds, whenever necessary.

For example, when the government runs a deficit (as it always does), it cannot just "print" the money. The Federal Reserve, which is not part of the government, has a monopoly on money creation. So instead, it creates a bond issue to make up the difference. It sells these bonds on the open market -- to private investors, foreign governments (China and Saudi Arabia), and of course, big banks. But the biggest single biggest purchaser of federal-government debt is the Federal Reserve itself. Here's how it works:

The Fed can simply CREATE MONEY out of thin air to purchase a government bond. Its rationale is that it is creating the money, but that the money is good because it has a "debt obligation" from the federal government to offset it. The federal government then doles out that money to its corporate-welfare cronies, while we, the taxpayers, have to pay interest on that debt in the future years. Oh, and by the way, when more money is created, the value of the dollar goes down. This is basic economics. You don't get a raise, but things get more expensive. Or if you do get a raise, it is only after the money has circulated through the economy, and by then, more money has been created again. This is, unless of course, you happen to work for one of the favored industries that the government supports through its deficit spending.

REAL money arises in the marketplace as the most commonly accepted means of exchange. This is how gold and silver came to be viewed as money and why they are still held in high esteem today. REAL, non-fraudulent transactions are voluntary. Economic transactions constitute the U.S. economy, and since one half of all (or almost all) economic transactions are premised on "legal-tender" laws that force people to accept FRNs -- which only have worth because they are backed by the government's guns -- then the U.S. economy itself is a fraud.
Nate

Con

I look very forward to this debate and I appreciate you posting it. Unfortunately I don't have time this evening to rebut and disprove every point you've made so far so I'm just going to start with a few of your main points and continue in my second round.

Economics are a fickle thing. The theory behind economics is often changing and being added on to. It's extremely difficult to understand these theories without a formal education on the matter and even then not every aspect is understood. As an economic and business double major I am fortunate enough to have some knowledge of these theories and their practices today. That being said, a lot of your logic in this debate is flawed.

1. While you understanding the basic principles of lending in today's financial system you lack a greater understanding of the concepts. All loans are backed directly by deposits. You are very right that when you deposit $100 into a bank $90 can be lent out. The remaining $10 or 10% represents the required reserves that a bank must have in their possession at all times. Furthermore, even if that $90 was taken to another bank and deposited, the full amount still exists in the financial system. It may seem like the bank is "creating money" when they lend out the cash but, what they are really doing is speculating on the ability of the borrower to pay that money back. If the borrower fails to pay back the money owed then banks will fail because their balance sheets will be offset. That is why borrowers are thoroughly screened before a loan is made. The required funds exist in the financial system, they just need to be redirected by the borrower towards the bank. Furthermore, the basic use of accounting T chart will prove that every balances out in the long run.

2. "If everyone were to pay back every loan that's outstanding today, there would be no more money. That's because every dollar in circulation represents a debt to somebody. Your FRNs may outweigh your debts, but someone else's debts outweigh their FRNs."

You disproved your first sentence by your second and third sentence in this argument. If everyone were to pay back every loan that's outstanding today, we would have all of the FRN's (or currency) in circulation. This goes back again to basic accounting principles and T charts. Everything balances out.

3. FRN's (or currency in your case aren't backed in Gold or Silver because those are unreasonable needs for a developed country. The only reason gold and silver were used to back currencies in the past were because governments were constantly rising and falling and there was no single dominating currency. Modern economics have allowed us to use fiat money (currency not attached to a physical commodity) in every country in the world. At the present time, no countries currency is backed by a physical commodity.

4. The federal reserve was created in 1913 not by the government to create a "legalized cartel of banks", but rather, to promote a stable financial system in the United States. The federal reserve gives banks the ability to lend and borrow money in order to keep required cash reserves. Before the federal reserve was created this was done by debt and security clearinghouses. Nowadays, the federal reserve is even a banks second line of defense, its' first being borrowing and lending money to other banks. Bonds give banks and the federal reserve the ability to earn maximum income on all money within their institutions. A bank buys up government bonds if they have excess money and nothing to do with it because they earn interest and a bank sells government bonds if its' required reserves have dipped below 10%.

This was all the time I had to debate tonight but, I encourage you to post more arguments for me to rebut.
Debate Round No. 1
clsmooth

Pro

If I were your economics professor, I would be very embarrassed by your misrepresentation of the monetary system above. And if I were your parents, I'd ask for a refund.

Banks DO create money. Literally no one who knows anything about the banking system -- whether they be left, right, or center -- disputes this because it is fact.

Loans are NOT backed 100% by deposit. This is just an utter fallacy. That's why what we have is called "fractional reserve banking." You think your bank has currency reserves to match all of its outstanding loans? That's truly laughable. They are required to keep on hand just 10% of the money they've lent. The other currency is created out of thin air, or it doesn't exist at all, except as entries in the books.

I find it quite hilarious that because you are a "double major" in economics and business, you automatically think you know more about the subject than me. What hubris! Our personal knowledge is not the subject here, but I had a degree in business/finance, a Series 7 Stockbroker's license, and I've been cited by the Wall Street Journal and have several articles published in business magazines. You contend that I don't know what I'm talking about when your assertions about the nature of money creation would get you laughed out of any respectable economics class.

This is not a matter of opinion we are arguing at this point. Fractional-reserve banking DOES exist. If you are a Keynesian, neo-classicist, Marxist, monetarist, or Austrian, it still exists, and it still empowers the banking system to create money out of thin air (or more accurately out of debt). You saying it doesn't is like saying the sky is not blue, it is in fact plaid; or there is no sky at all, it's just a conspiracy theory.

Let me explain it to you as literally any economics textbook would:

I deposit $100. The bank can lend $90. The next bank can use that $90 to lend $81. The next bank can use that $81 to lend $72.90. The next bank can use that $72.90 to lend $65.61... Etc. Eventually, the $100 in deposits can result in as much as $1,000 in new money via loans. This is how money is created. This is not up for debate; it is fact. In your imaginary world, how does new money enter the marketplace? Magic?

Next: All money represents debt. If all debts were repaid, there would be no more currency in circulation. It would be in bank vaults and central-bank coffers. This is obvious when you realize that all money arises from debt. The only way to pay back the debt is to spend the money that was created from the debt, or to create more money (which creates more debt). You are 100% wrong in your contention that I'm "mistaken." Of course, it is impossible for all debts to be repaid, and thus, the nation and its people will forever be in debt, so long as fiat-money central planning continues to exist. That's why it is quite hilarious when personal-finance gurus tell everyone to be "debt-free" -- it's impossible for everyone, or even a large number of people, to be debt free.

As for gold and silver vs. fiat money: "Modern economics" does not allow us to use fiat money without penalty. "Every country in the world" uses fiat money because the International Monetary Fund and the World Bank essentially prohibit the use of REAL money, because fiat money systems cannot stand side by side with REAL money. REAL money arises naturally in the marketplace as the most commonly accepted means of exchange. Traditionally, this has been gold and silver. This is why the U.S. has laws against competing currencies. Every economic transaction of FRNs is thus based on government force and fraud. "Modern economics" cannot refute sound economic laws that are not changed by "modernity." What you call "modern economics" is more accurately called Keynesian central planning, and it has been refuted by empirical evidence -- see the stagflation of the 1970s.

Your assertion that the Fed is not a "legalized cartel" is absurd, and again, NO ONE would seriously make this argument, not even pro-Fed economists. American Heritage Dictionary defines a cartel as, "A combination of independent business organizations formed to regulate production, pricing, and marketing of goods by the members." The Federal Reserve System was conceived by the leaders of the U.S.'s major banks in order to regulate production and pricing (interest rates) of money. It is given legal status by Congress via the Federal Reserve Act of 1913. Thus, it is literally a "legalized cartel."

As for "creating stability" -- the Federal Reserve has not presided over stability. It caused the Great Depression via its inflation of the money supply in the twenties followed by severe contraction in the late 20s and 30s, and it has ushered in unprecedented inflation ever since. A dollar in 1913 now has just $0.04 of purchasing power. Fact. You call that "stability"? Why do we need central planners to attain "stability"? All we need is the rule of law. Instability in the monetary system prior to 1913 mostly arose from government policies (such as printing fiat greenbacks, switching to gold, and then introducing silver, etc.) and bailouts of dishonest banks who practiced fractional-reserve banking without a Fed to prop them up when their fraud was realized. In a free banking system, banks would be allowed to fail -- and then they would learn not to play games. The officers of banks who stole people's money (which the Fed does every time it inflates) would be held accountable to fullest extent of the law. No more funny business.

Finally, you misunderstand what the Federal Reserve even is when you say that "other banks" are banks' first line of defense. Well, the banks are part of the Federal Reserve System! What do they call the rate that banks charge each other on short-term loans? The federal funds rate! It is set by the market, but it is targeted through fascist central-planning policy decisions by the Fed's FOMC. And of course, it is directly based on the Fed's own dictated Discount Window Rate, at which member banks can borrow directly from the Fed (who creates the money out of thin air, if need be) to lend to banks to make sure they can ALWAYS make their reserve requirements. Reserve requirements are thus, a joke. The REAL reserve requirement should be 100%, which it would need to be (or very close to that) under a system of REAL money.
Nate

Con

I stated my credentials in the debate not because I was trying to act better than you but, because I wanted to prove that I had knowledge on the subject. That being the case, I am extremely impressed with your credentials, should they be true. They back up your argument extremely well.

Before we finish this debate, I'd like to clear a couple of things up. First of all, the explanations given in your first round were not consistent with the clarity of the rebuttals in round two. Their lies the reason for me accepting this debate challenge. The original concepts presented allowed for criticism and false interpretation. The rebuttals in round two do not.

"Loans are NOT backed 100% by deposit. This is just an utter fallacy. That's why what we have is called 'fractional reserve banking.'...They are required to keep on hand just 10% of the money they've lent."

I never stated that fractional reserve banking doesn't exist. All I stated is that money is backed by deposits in some way or another, whether it is money that was "created" as you like to say or money that was physically deposited into an account. To clarify, money isn't just CREATED, it is backed by some form of loan contract or deposit. Your original statement made it seem like money was created out of thin air with no sort of backing whatsoever.

"As for "creating stability" -- the Federal Reserve has not presided over stability. It caused the Great Depression via its inflation of the money supply in the twenties followed by severe contraction in the late 20s and 30s, and it has ushered in unprecedented inflation ever since."

It's true that the federal reserve caused the great depression. Evidence of that and the other factors that contributed can be found here in one of Bernake's economic reviews.
http://www.uoregon.edu...

As for the years between 1933 and 2005, the Fed has helped to create stability in the U.S. economy. Heck, the overall goal of the Fed is to provide financial stability to this nation.

The nation knows that the U.S. economy is extremely messed up right now but, is it the fault of the Fed, fiat money, and a system of legal-tender laws? No it isn't. It's because the other branches of government fail to utilize proper budgeting techniques and they rely on the Federal Reserve to help bail them out. The federal reserve is here to protect the people and the economy the best it can. Ask yourself this...What would happen if the nation disbanded the federal reserve and immediately adopted an entirely new policy? The answer is chaos; total and utter chaos.

It's clear that you have more knowledge on the subject than myself. I encourage you to keep your arguments clear and not open to false interpretation. I have thoroughly enjoyed this debate and hope that you have as well. Good luck in your endeavours.
Debate Round No. 2
clsmooth

Pro

Credentials are irrelevant. There are PhDs who are Marxists, and PhDs who are laissez-faire capitalists. By definition, they both cannot be right. At least one of them is wrong and all the laymen who follow another theory are right. There are medical doctors who do not believe HIV causes AIDS. It doesn't make them right, and it wouldn't make such a doctor's debate opponent -- be he a high-school dropout or a child -- wrong. And my credentials are in no way "impressive," but essentially on par with yours. That doesn't make either of us right or wrong, and if an economics PhD with an MBA and JD made your points, it wouldn't make them right either. Debates should be one of the merit of the logic presented in the argument!

You now contend that the explanations I gave in Round 2 were different from those I gave in Round 1. I looked over my Round 1 argument and I find that the arguments I presented in Rounds 1 and 2 are essentially the same. The only difference is I was more hostile in Round 2 since I felt you were being an intellectual bully by flaunting your course of study as if it gave your arguments more authority. As we both agree, it doesn't.

So let me re-examine what I said in Round 1:

1. Virtually every transaction that takes place in the United States involves the exchange of goods or services for Federal Reserve Notes. AGREE OR DISAGREE?

2. Federal Reserve Notes (U.S. dollars) arise from debt. When you deposit $100, $90 can be lent, even though the bank still has to give you $100 on demand. In fact, that $90 can be taken to another bank, where $81 of it can be lent. Eventually, this results in as much as a tenfold inflation of the money supply. AGREE OR DISAGREE?

3. Since every dollar is created out of debt, if every debt were repaid in full, there would be no more dollars. Where did all of our fiat money come from if not from debt? Again, I ask: Magic? Please explain. Here is a point where you seem to still disagree. AGREE OR DISAGREE?

4. We, as citizens of the U.S., accept Federal Reserve Notes for three reasons: 1) Because they have value by virtue of being accepted for income taxes (no coincidence that the 16th amendment allowing the government to tax incomes was passed the same year as the Federal Reserve Act), 2) Because the government says we must, BY LAW, accept them as "legal tender for all debts, public and private" (despite the fact that that Constitution says only gold or silver may be "legal tender") and 3) Because alternative domestic currencies are illegal. If you make a market in alternative currencies, such as gold coins or certificates, the FBI will raid you and put you out of business. Just Google "Liberty Dollar" and "FBI Raid" if you don't believe me. AGREE OR DISAGREE?

5. The Federal Reserve System gives privately owned banks a monopoly on the creation of money, and an independent agency (the Federal Reserve itself) a monopoly on monetary regulation of the banking system. This is, by definition, a "legalized cartel." AGREE OR DISAGREE?

6. The Federal Reserve's FOMC purchases government bonds as a tool of monetary policy in order to expand or deflate the money supply and hit interest rate targets. The money it uses to buy these bonds can, if needed, be created out of thin air (or "to counterbalance the debt obligation of the government," which means the same thing). AGREE OR DISAGREE?

7. When the Fed creates money to satisfy government shortfall, it is redistributing wealth from productive citizens and asset-holders to the government and its contractors. The money supply expands and thus more dollars are chasing the same amount of goods, causing prices to rise. Eventually, more goods may be created, resulting in only minor rises in the overall price level, but the government and its contractors get the newly created money first, whereas non-governmental workers and retirees see their wages and savings devalued by the monetary expansion. AGREE OR DISAGREE?

8. The concept of "money" predates governments. It arose from barter. Eventually, goods were accepted not on the basis of need, but on the basis that they were easily exchangeable to other traders. Ultimately, the most commonly accepted means of exchange became "money" and this was often gold or silver. AGREE OR DISAGREE?

If you agree with most/all of the above, then naturally you must agree with #9:

9. In order for a transaction to be ethical and just, both parties must willingly accept the conditions of trade with no coercion. Sine the government mandates (through legal-tender laws) that Federal Reserve Notes must be accepted as "legal tender", then every transaction is premised on the fraud of the inflationary monetary system and the government force that makes it possible. We are forced to accept an evaporating currency instead of choosing alternatives for ourselves. AGREE OR DISAGREE?

And if you agree with #9, then you agree with my contention that "The U.S. economy is a fraud based on the Federal Reserve System of fiat money and legal-tender laws."

These are, almost word-for-word, the points I made in Round 1. I'm remaking them here because you say that the Round 1 points were the reason you took this debate in the first place. What is untrue or illogical above? I would appreciate a point-by-point agreement/disagreement. And please, do not give in. Stand your ground and fight!

Whether I have more knowledge on the subject is not important. I could have more knowledge and still be wrong. The importance is the LOGIC of my arguments vs. the LOGIC of yours. If you cannot prove me wrong, then you must accept the hypothesis of this debate.
Nate

Con

Hey clsmooth,

It has been a pleasure debating you on this topic. I apologize for not getting my final round in earlier, I have been absolutely swamped with other things. Below you will find an answer to all of your questions from round 3. I still maintain my stance that the U.S. economy is NOT a fraud based on the Federal Reserve system of fiat money and legal-tender laws. I do believe that certain aspects of the economy and fed could be reworked over the next 30-40 years but, that is just due to the fact that we are in a post modern era. Technology is not the basis on which we do everything and it should be more prevalent in the antiquated federal reserve and banking sectors.

1. I agree, only because that is the only means of transaction within our economy. This question is a fact and cannot be refuted. It doesn't mean that your thesis is correct, however.

2. DISAGREE, federal reserve notes arise from the issuance of those notes by the U.S. treasury. The money that is "created" from fractional reserve banking is only on the paper or electronic contracts that it is printed on. Banks do not create physical, paper (really cotton based) money from fractional reserve banking.

3. DISAGREE, every dollar is not created out of debt. While the majority of it is, not everyone is neck high in mortgage loans or credit card debt. Also, money would not become nonexistent should all debts be paid back in the economy, it would just be controlled by the banks who would in turn invest it back into the economy, releasing it once again to the public.

4. I agree to those three reasons, however, you must realize that we accept FRN's as legal tender because our economy has created that as our established currency. We must accept that or move to Canada...

5. DISAGREE, banks are not the only entities that are able to "create" money out of loans and fractional reserve banking. Credit unions, savings and loan institutions, and mutual holding companies also have that ability. These institutions may have a monopoly on the distribution of money in this aspect, however, in the banking world everything is still based off of perfect competition.

6. I agree and DISAGREE, these facts are only based off of the federal monetary policies. The fed would not purposely deflate this countries currency unless it HAD to be done.

7. I agree, this is a fact... It's called INFLATION. It's standard economics, how does this support your argument?

8. I agree, it's a lot easier to carry around a bunch of gold or silver coins or small objects (the Mayans used jade for example) then to carry around 100 chickens. Common sense. Again, how does this support your argument?

9. DISAGREE. No one is forced to accept anything in the United States, that is why this country is what it is today. We choose to accept FRN's as a source of currency because it is an establish means of exchange. If you want to buy gold and start using that as a means of exchange go ahead. Services can also be used in this economy as a medium of exchange, FRN's are just easier and more widely accepted.

The U.S. economy is a complex model of modern economic theory and economic practices. It is based on what is accepted worldwide as sound economic practices. The reason other physical commodities aren't used as a medium of exchange or currency is because there is no way to control those physical commodities. If people wanted to have chickens as the medium of exchange then every chicken farmer would be rich (not to mention people would starve). If society wanted to use gold or silver as a medium of exchange then mining companies would have a monopoly on the money supply. FRN's are easy to produce and can be structured to follow any needed supply and demand of an economy. Natural resources are too scarce to be used by 300+ million people as a means of exchange.

I thoroughly enjoyed this debate and look forward to seeing how it turns out.

-Nate
Debate Round No. 3
16 comments have been posted on this debate. Showing 1 through 10 records.
Posted by minervaB 5 years ago
minervaB
TMore states and localities are dealing with growing insecurity concerning the American dollar and are proposing an alternative currency. Whether there is merit to the notion or it's just political grandstanding remains to be seen, but a growing number of suggestions are being put forth for alternative currencies. Alternative currency proposals increasing as it keeps the flow of currency, goods and services within the community that creates it. Alternative currency is a term that refers to any currency used as an alternative to the dominant national or multinational currency systems. Alternative currencies can be created by an individual, corporation, or organization, they can be created by national, state, or local governments, or they can arise naturally as people begin to use a certain commodity as a currency. Mutual credit is a form of alternative currency, and thus any form of lending that does not go through the banking system can be considered a form of alternative currency.
Posted by Fimbulvintr 9 years ago
Fimbulvintr
One of my favorite topics
Posted by jurist24 9 years ago
jurist24
clsmooth gave concise arguments, attacked the issue directly and gave great examples. Of course, Nate did as well. However, smooth's arguments made more sense from a purely economic perspective. Mark a vote for smooth.
Posted by clsmooth 9 years ago
clsmooth
I apologize in turn. Misunderstandings lead to escalations of hostilities, etc. That's what happened with us. It was an original misunderstanding of your comment that led to me making an incorrect statement, which led to you insulting me, which led to me insulting you worse, etc. That's the way it goes on the Internet!

Merry Christmas to you, too. I'm sure we'll mix words again, but let's try to keep it on the up and up!
Posted by easy2know 9 years ago
easy2know
clsmooth, as we have had some words please understand in this cyber world things tend to get out of control more easily than in person, and when I re-read some of my words I honestly wish it could be taken back. Mud slinging, name calling, etc is something we should be showing our young ppls we can do without. Please except my apologies for my petty insults towards you, your views are your views and I respect you for that. I'm sure your Wife and Daughter can be proud of you and your accomplishments. My wishes are the best for you and yours, and even if it wasn't Christmas time..:o)

P.S. The FBI just raided my house...jk..lol..Happy Holidays..!
Posted by clsmooth 9 years ago
clsmooth
That's cool. I just hope the FBI and the IRS don't raid you like they did the Liberty Dollar:

http://www.star-telegram.com...

Oh wait, easy2know? You're being cordial? Wow. Well, it is almost Christmas! :)
Posted by easy2know 9 years ago
easy2know
Hey..clsmooth..we make our own money..lol..
BerkShares http://www.berkshares.org... is a local currency that circulates in the Berkshires region of Massachusetts.

The current exchange rate for BerkShares is 1 BerkShare for 90 U.S. cents. BerkShares are traded for US dollars at 12 local bank locations in the area. As of August 2007, 280 businesses were formally listed on the BerkShares website to accept the currency. Other businesses participate informally. Listed businesses are identified by window stickers and joint promotional material. Exchange occurs between customers and businesses and between businesses. Excess BerkShares may be traded in for US dollars at participating banks at the current exchange rate. Some businesses place limits on their use — the co-op market in Great Barrington lets patrons pay for only 50% of their bill with BerkShares, thereby adjusting the discount to 5%.

Approximately one million, ninety-five thousand BerkShares were issued through participating banks in the first eleven months of operations, worth $985,500 USD.[1]
Posted by clsmooth 9 years ago
clsmooth
If there was no monopoly on the issuance of money, AND if there were no laws compelling people to accept a specific issue of money, then people, on the whole, would only accept GOOD money. The chaos would quickly sort itself out.

In order for people to want to accept a bank's notes, they would have to trust the bank. Reputation would mean everything. Again, in the free market, "money" is the name given to the most commonly accepted means of exchange. I could print bank notes backed by nothing and they would not be "money" unless they were widely accepted.

So let's say gold became the most commonly accepted means of exchange. There could be other forms of money too -- silver, or maybe even something high-tech like bandwidth. But for the sake of easy transactions, the market would not accept too many different forms of "money" -- by definition, it is impossible for more than a few means of exchange to be "most commonly accepted." If there were more than two or three forms of "money" then some would have a premium and others would have a discount; those with a discount would not really be "money" by this definition, and people would be looking to convert those discounted notes into the more preferred notes. Anyway, banks would issue paper notes that were backed by gold. Just as in the old days, the notes wouldn't technically be "money" -- they'd be a receipt for the REAL money that was held by the bank.

Again, the market would sort these things out. It would be in everyone's mutual interest to have certain monetary standards so that notes could easily be converted among banks (notes based on the same commodity, that is). There are many countries where at least two currencies (the U.S. dollar and the native currency) are accepted. But there are none where a plethora of currencies are widely accepted. This is a natural sorting out of the market.

Summation: Money could be created only when backing assets were added to the issuer's balance sheet.
Posted by alvinthegreat 9 years ago
alvinthegreat
clsmooth - good debate and well argued points; however, I have one question for you.
How does separation of government and monetary policy allow for new money to be created in a "honest fashion", wouldn't this just cause complete chaos as each bank issues it's own bank notes?
Posted by clsmooth 9 years ago
clsmooth
Nate - Thanks for the debate. Sorry it got nasty when I thought you were "bullying." We got it straight and finished the debate!

The debate is over, but I will answer your questions, nonetheless:

2. The Notes are issued by the Treasury, but only upon request from the Fed. The Fed actually pays the printing cost of the Notes. The Treasury does not, however, simply print Notes and release them into the economy. Who would get them an by what basis?

3. If every dollar is not created out of debt, then where does it come from? Again, I ask; magic?

4. Our economy didn't create the Federal Reserve System. Congress did, via the Federal Reserve Act of 1913.

5. Good point, but I'm pretty sure these institutions are still regulated by the Fed. I could be wrong. I'll have to research.

6. You assume that the Fed knows what it's doing and would know when a given action "HAD" to be done. History is not on your side.

7. It supports my argument because the redistribution of wealth is fraudulent. Why should bankers earn interest on money lent that they created out of thin air? Why should the money that's newly created go right to military contractors and other government cronies? That's redistribution of wealth from savers and wage-earners to the politically connected class. Not fair. Not honest. Fraudulent.

8. It supports my argument because it proves that money can arise naturally, and there's no need for the government to create, regulate, and distribute money.

Finally, you say mining companies would have a "monopoly" on money creation if a society chose gold as its money. No. Because anyone with the capital could start a mining company. Right now, you can't just start a bank. The Fed monopolizes banking because in the absence of that monopoly, honest competitors would destroy its fraudulent system. There's no need for monopoly if money were created in an honest fashion and no one were forced to accept it, but did so freely.
35 votes have been placed for this debate. Showing 1 through 10 records.
Vote Placed by pcmbrown 8 years ago
pcmbrown
clsmoothNateTied
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Total points awarded:07 
Vote Placed by sully 9 years ago
sully
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Vote Placed by Conservative 9 years ago
Conservative
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Vote Placed by JonJon 9 years ago
JonJon
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Vote Placed by gabriel04 9 years ago
gabriel04
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Vote Placed by tarsjake 9 years ago
tarsjake
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Vote Placed by superninja 9 years ago
superninja
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Vote Placed by HempforVictory 9 years ago
HempforVictory
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Vote Placed by BadBoi 9 years ago
BadBoi
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Vote Placed by Fimbulvintr 9 years ago
Fimbulvintr
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