Remember that line and where it comes from?

Good, because it took less than twenty four hours from the time I posted my last ticker pointing out the threat before enough flesh went on a "modest proposal" that would inevitably and immediately lead directly down that path.

I am going to take specific aim at one particular line of nonsense today that has been trotted out on the forum and elsewhere, and its proposed "solution" - that is, that "all fiat monetary systems collapse when the debt service amount exceeds the money in circulation."

This of course implies that we are irrevocably going to collapse, as there is $800 billion in currency in circulation and far more than that in debt service due, which then serves as the basis for a "solution."

The claim is flat out false.

A simple example will make clear what the truth is:

I loan you $100. You agree to pay me 6% interest, or $6, for one year.

To pay the bill you can either (1) produce $6 worth of "something" valuable (e.g. corn, etc) or you can tap some other stored value you own (e.g. a bushel of wheat you already have in your silo.)

So long as your assets plus production are not exceeded by your debt, in both principal and interest amount, you are not insolvent.

That's clear, right?

Ok, so we have a lot of debt.

But what is the asset base? It is everything that is owned and of value in the United States; that is, all the houses, commercial buildings, inventory, machinery, cars, trucks, improvements to the land such as utilities, roads, etc.

This wealth is vast and radically exceeds our debt.

So therefore, collapse is not inevitable. Period.

This does not mean that there will not be much pain and austerity necessary! Quite to the contrary - as soon as you have to start eating into assets to meet both your debt service and "operating costs" (e.g. your food, gas for the car, heating the house, etc) combined you are in serious trouble and the austerity involved will be extreme, as will your personal degree of pain!

In fact, America has run a "negative amortization mortgage" on its national debt since President Nixon! No President since - including Clinton - has run an actual surplus. (Clinton stole the Social Security receipts to "balance" his budget, as others have before and since; a claim of "surplus" is fraudulent misrepresentation.)

That negative amortization balance has grown to more than $9 trillion and the growth in balance has been tolerated by foreign investors because they have needed a way to "sterilize" the funds that come back into their countries when we buy the jeans they make for 25 cents/day, lest it fuel insane price inflation and ultimately civil unrest.

But now our economy is slowing and the pain has to be taken.

However, this does not, individually or collectively, mean that everyone, including the government, will go bankrupt.

Now let's talk about the dangerous part of this circumstance and how we can find ourselves facing Adolph Part II, another Benito, or something similar.

There are people running around talking about ditching our current monetary system and replacing it with a non-interest-charged, non-debt-bearing currency that is controlled and issued by the United States Government directly. This garbage has been "whispered" on the forum for a while but it finally got fleshed out in the last couple of days to a point that I was able to close the trap door behind the promoters as the foot finally went in the mouth.

Think folks - this inherently means that only the government would be able to make loans.

I guarantee you that if you're sitting there with a 30% credit card interest payment, this sounds real good to you, doesn't it? If you are sitting on a mortgage reset that is about to ruin your cash flow and force you into bankruptcy, this sounds like The Holy Grail!

Did you read the previous ticker about false Gods and people offering "solutions"?

Well go back and read it, then come back here and read the rest of this.

Let's explore what happens under such a model.

All existing "Federal Reserve Notes" (and money representing them digitally) is "replaced" with "Congressional Dollars."

Ok. If you have assets denominated in dollars, you still have them. Only "the pigmen" get screwed, right?

Well, so it appears.

But that's not the truth.

One day after this is done, you ring up the government loan office (GLO!) and ask for a loan. See, you'd like to offer "reproductive health services" in your community. Of course some women will come in there who are pregnant and don't want to be.

GLO tells you to go to hell (rather directly), stating that this is contrary to public policy, and thus, you can't have a construction loan. Your clinic does not get built.

You wish to work on stem cells. You get told the same thing.

You wish to build a church. You're refused the loan because of separation of Church and State.

You are running a business and need a revolving short-term line to cover receivables so you can make payroll. A new Congress is elected and your line of business is considered "evil" by the new Congress; your loan is denied. You are instantaneously put out of business.

You run a car factory. The government decides that you need to pay your union workers 10% more tomorrow. If you refuse, your operating line of credit "disappears."

You are a hospital. You can't possibly manage to treat all the illegal immigrants for everything they show up with. You're reasonably sure that the balance of payments will fix itself in a few years. You want to issue a bond to fund your operations in the private markets but can't, as that's illegal. You are told to either treat everyone, now, or all credit will be rescinded. You go bankrupt either way, and have no means of managing your exposure or selling off private debt to finance your operations for a while.

Now admittedly, some of these are rather extreme cases.

But do you believe that politics will not become the means by which funds are rationed if we were to go to such a system?

Now go back and read that previous ticker once again.

This is the precise sort of nonsense that I was warning about and it did not take long at all for it to appear. There will be many more similar entreaties to "fix" what has gone wrong with our lending, monetary and banking systems.

They all must be examined with an extraordinarily skeptical eye, with a key point being whether someone who is aggrieved can circumvent the roadblocks they attempt to put up.

If the answer is no, then the absolute control they vest is the path to immediate loss of freedom, and the person or persons promulgating these ideas must not be allowed to proceed, irrespective of how good it sounds when you first hear it.

There is an ulterior motive and the bad consequences are not theoretical, they are immediate and intentional!

Note that when I challenged the "people" running this on the forum and asked how they derived this as a "solution" or a "better way" and who else might be advocating this and/or who put the bug in their ear on this being a good idea I got in reply stony silence and excuses instead of answers.

Do not for a second think that I am in some way defending what has gone on for the last 30 years. I am most certainly not, and if you have read any of the previous tickers you know this to be true.

I am here to warn you - these sort of "false Gods" always - and I do mean always - appear in times of great social and financial stress. They always promise a "better way", but they never point out the "compromises".

Let me be clear - there is 5,000 years of human history that says that one does not go from a representative republic as a government form to something "more free" or "better" for the people.

Never in 5,000 years of recorded history has it worked that way.

NEVER.

If and when a democratic (by representation) form of government fails the nation involved always goes through fascism and dictatorship and only once the people are in bondage is freedom again achieved.

You cannot circumvent the steps in the center and in passage through those forms of government all that we currently enjoy and treasure as Americans will be lost!

We have two choices - we can either fix what is wrong in this nation but not give anyone the ability to destroy it, or we will with certainty pass through those other forms of government with disastrous consequences for freedom and individual liberty.

Do not be fooled, for down the promised primrose path is how freedom dies - to thunderous applause.