Trashing America
Trashed America  

Navigation Bar
Links and resources for more information Assault on Morality in America Money, money, money... They Want It! What has happened to liberty in America? Christians in Politics Jeremiah Project Home Page
Navigation Bar
Deteriorating American Educational System Destroying Health Care in America Taxes and the New World Order Gun Control and the Second Amendment Devaluation of Life


Will the National Debt Destroy America?

Thomas Jefferson warned,

"If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks...will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered."

Debt Crisis
Debt is nothing new to the United States. The American Revolutionary War led to our first national debts and the War of 1812 further expanded that government debt to approximately $75 million. In 1835, President Andrew Jackson who strongly opposed a national bank and ensured its collapse by vetoing the renewal of its charter, reduced the debt of the United States to close to a zero balance.

America again grew its debt because of the Civil War.

Abraham LincolnAbraham Lincoln said of the situation...
"The money powers prey upon the nation in times of peace and conspire against it in times of adversity. It is more despotic than a monarchy, more insolent than autocracy, and more selfish than bureaucracy. It denounces as public enemies, all who question its methods or throw light upon its crimes. I have two great enemies, the Southern Army in front of me and the Bankers in the rear. Of the two, the one at my rear is my greatest foe.. corporations have been enthroned and an era of corruption in high places will follow, and the money powers of the country will endeavor to prolong its reign by working upon the prejudices of the people until the wealth is aggregated in the hands of a few, and the Republic is destroyed."

Lincoln's words were prophetically true. The debt was just $65 million in 1860, but passed $1 billion in 1863 and had reached $2.7 billion following the war. International bankers funded both sides of Civil War ensuring the perpetual debt of either side who won the war.

In the following 47 years America returned to the practice of running surpluses and paid off 55% of the US national debt. World War I pushed America into another $25.5 billion by its conclusion. That was again followed by 11 consecutive surpluses and saw the debt reduced by 36%.

Then, there was the Panic of 1907 where the stock market fell nearly 50% from its peak in 1906, the economy was in recession, and there were numerous runs on banks and trust companies. Complete ruin of the national economy was averted when J.P. Morgan stepped in by organizing a team of bank and trust executives who redirected money between banks, secured further international lines of credit, and bought plummeting stocks of healthy corporations.

It was a classic Hegelian Dialectic where Morgan created a mood in America with his manufactured crisis to believe that a central bank would prevent such a panic from occurring again and thus became receptive to a central bank. The solution was pressure for the United States Congress to accept the proposal by a group of international bankers to pass the Federal Reserve Act in 1913.

The Federal Reserve definitely caused the Great Depression by contracting the amount of money in circulation by one third from 1929 to 1933. - Milton Friedman

John Maynard KeynesKeynesian Economics
John Maynard Keynes' economic ideas were first presented in The General Theory of Employment, Interest and Money, published in 1936. Keynesian economics argues that private sector decisions sometimes lead to inefficient macroeconomic outcomes and, therefore, advocates active policy responses by the public sector, including monetary policy actions by the central bank and fiscal policy actions by the government to stabilize output over the business cycle.

Keynes' ideas influenced Franklin D. Roosevelt's view that insufficient buying-power caused the Depression. During his presidency, Roosevelt adopted some aspects of Keynesian economics, especially after 1937, when, in the depths of the Depression, the United States suffered from recession yet again following fiscal contraction.

Franklin RooseveltSocial programs enacted during the Great Depression and the buildup and involvement in World War II during the F.D. Roosevelt and Truman presidencies in the 1930s and '40s caused the largest increase - a sixteenfold increase in the gross public debt. When Roosevelt took office in 1933, the national debt was almost $20 billion; a sum equal to 20 percent of the U.S. gross domestic product (GDP). During its first term, the Roosevelt administration ran large annual deficits between 2 and 5 percent of GDP.

Gold CoinOn April 5, 1933, President Roosevelt signed Presidential Executive Order 6102, to provide relief in the existing national emergency in banking. All persons were then required to deliver on or before May 1, 1933, to a Federal Reserve bank or a branch or agency thereof or to any member bank of the Federal Reserve System all gold coin, gold bullion, and gold certificates now owned by them or coming into their ownership on or before April 28, 1933. With Roosevelt’s signature, America suffered it's first monetary default; gold as legal money disappeared in the United States, paving the way for the government to engage in near-unconstrained debasement of the currency.

By 1936, the national debt had increased to $33.7 billion or approximately 40 percent of GDP. In the war years from 1941 to 1945, the national debt increased by more than 500 percent as Roosevelt financed much of the war expenditures by government borrowing. By the end of the war in 1945, the national debt had increased to $258 billion and was equal to approximately 120 percent of GDP.

To many, the true success of Keynesian policy can be seen at the onset of World War II, which provided a kick to the world economy, removed uncertainty, and forced the rebuilding of destroyed capital. Keynesian ideas became almost official in social-democratic Europe after the war and in the U.S. in the 1960s.

The Keynesian debt bubble expanded again with the Eisenhower administration launching the biggest public works project—the interstate highway system—and the Kennedy–Johnson administration spending large sums on sending a man to the moon and the escalating Vietnam War. The corresponding economic growth and prosperity during this time led most economists and central economic planners to embrace the Keynesian idea that capitalism works best when spenders cause healthy growth in market demands and thereby generate profits and jobs for the community. In their view, it was the role of government fiscal policy to spend when private industry was not, thus making sure that the total demand for goods and services provided profit opportunities to encourage business firms to hire all workers who wanted a job.

On June 4, 1963, a little known attempt was made to strip the Federal Reserve Bank of its power to loan money to the government at interest. On that day President John F. Kennedy signed Executive Order No. 11110 that returned to the U.S. government the power to issue currency, without going through the Federal Reserve. Mr. Kennedy's order gave the Treasury the power "to issue silver certificates against any silver bullion, silver, or standard silver dollars in the Treasury." This meant that for every ounce of silver in the U.S. Treasury's vault, the government could introduce new money into circulation. In all, Kennedy brought nearly $4.3 billion in U.S. notes into circulation.

If enough of these silver certificates were to come into circulation they would have eliminated the demand for Federal Reserve notes and put the Federal Reserve Bank of New York out of business. This is because the silver certificates are backed by silver and the Federal Reserve notes are not backed by anything. Executive Order 11110 could have prevented the national debt from reaching its current level, because it would have given the gevernment the ability to repay its debt without going to the Federal Reserve and being charged interest in order to create the new money. Executive Order 11110 gave the U.S. the ability to once again Constitutionally create its own money backed by silver.

After Mr. Kennedy was assassinated just five months later, no more silver certificates were issued. Perhaps the assassination of JFK was a warning to future presidents who would think to eliminate the U.S. debt by eliminating the Federal Reserve's control over the creation of money. Mr. Kennedy challenged the government of money by challenging the two most successful vehicles that have ever been used to drive up debt - war and the creation of money by a privately-owned central bank.

In 1971, Republican US President Richard Nixon proclaimed "we are all Keynesians now".

The Perfect Keynesian Storm
Following the Bretton Woods agreement of 1944, currencies were fixed against each other and the dollar still could be redeemed by foreign governments at $35 an ounce. For about 20 years after World War II ended, the arrangement seemed to work. However, in order to pay for the vast expansion of government welfare programs associated with Lyndon Johnson’s Great Society and the escalating Vietnam War, the Federal Reserve System aggressively expanded the supply of money, which not only depreciated the currency at home but also flooded the rest of the world with dollars. France’s government, under Charles de Gaulle, recognized the situation at hand and began to redeem its dollars in U.S. gold, which was stuck at its 1933 price. By mid-1971 U.S. gold reserves were disappearing quickly, leading President Nixon to again default by closing the gold window and imposing wage and price controls. While some price controls were lifted within the year, oil and gasoline controls remained through the decade, causing untold havoc in the economy.

Today, households suffering from high unemployment, decreasing market values for their homes, large credit card debt, and shrinking pension funds are not likely to to buy significant more goods and services. Businesses and entrepreneurs facing declining or at most not rapidly rising market demands are not investing significantly in new plant and equipment. Facing their own financial crises, foreigners such as China appear unlikely to spend more dollars to buy more U.S..produced goods. Property and sales tax revenues are declining in state governments resulting in local and state governments to cut spending on public services and reducing purchases from domestically located firms. That leaves only the Federal government who can borrow more money from its crony Federal Reserve with their power to print unlimited money who can afford to buy significant additional products to stimulate American market demand.

Gross government debt quadrupled during the Reagan and Bush presidencies from 1980 to 1992, and between 1992 and 2000 rose from $3 trillion to $3.4 trillion in 2000. During the presidency of George W. Bush, the gross public debt increased from $5.7 trillion in January 2001 to $10.7 trillion by December 2008. Under President Barack Obama, the USA debt increased from $10.7 trillion to $14.2 trillion by February 2011.

As America's debt continues to skyrocket out of control and Washington continues to borrow more and more money that further increases America's debt, one is forced to ask, will any American leader have the courage to say "no" to the Federal Reserve and international bankers and bring America back to financial sanity? And, if so, is he/she willing to pay the ultimate price for doing so?

What is the National Debt?

The Debt Ceiling
From the founding of the United States through 1917, based on its power granted by Article I Section 8 of the United States Constitution, Congress authorized each individual debt issuance separately. Congress modified the method by which it authorizes government debt in the Second Liberty Bond Act of 1917, in order to provide more flexibility to finance the United States' involvement in World War I. Under this act Congress established an aggregate limit, or "ceiling," on the total amount of bonds that could be issued.

The Public Debt Acts passed in 1939 and 1941 essentially created the modern debt limit, in which an aggregate limit was applied to nearly all federal debt. The Treasury was authorized by Congress to issue such debt as was needed to fund government operations (as authorized by each federal budget) as long as the total debt (excepting some small special classes) does not exceed a stated ceiling. Since 1979, the House of Representatives has pretty much automatically raised the debt ceiling when passing a budget. The Debt Limit has been raised about a hundred times since 1940, when it was $49 billion - about five days worth of federal spending now.

In December 2009, President Obama exceeded the debt ceiling for the first time in the history, resulting in Congress increasing the U.S. debt ceiling to $14.294 trillion in February 2010. This fueled a debt ceiling crisis where conservative members of Congress, pushed by a growing Tea Party movement, demanded that government live within its means. Progressives warned the more conservative branch of government that unless they raised the debt ceiling, many bad things would happen and the U.S. economy could tumble into even worse shape.

In August 2011, the passage of the Budget Control Act of 2011 was signed into law after the United States was threatened by an unprecedented U.S. sovereign default on or about August 3rd. This raised the debt limit initially by $900 billion and eventually by another $1.2–1.5 trillion.

Apparently, the "change we can believe in" memo didn't make it from Pennsylvania Avenue to Wall Street. Following the debt deal, the stock market plunged 512 points, its worst one-day drop since December 2008.

Going back to at least the presidency of Bill Clinton and perhaps earlier, the government has misled the American people about the true national debt. The U.S. Treasury, the Whitehouse, Congressmen, and the media has kept the true figures away from the population because the problem is enormously worse than most Americans understand. The $14.5 trillion debt is just the tip of the iceberg. When you add up all the promises that have been made for spending obligations like Social Security, Medicare and Medicaid benefits, combined with defense expenditures, and you subtract all the taxes that we expect to collect, the difference is $211 trillion. That's our true indebtedness.

For the first time ever on August 5, 2011 the credit rating agency, Standard & Poor's, lowered its credit rating of U.S. sovereign debt one notch to "AA+", with a negative outlook.

Will the National Debt Destroy America?

I believe, yes. The destruction will leave some people surviving the best they can, but the structure of our society will be changed dramatically.

This much is certain. No nation can spend its way into prosperity and no debt will go unpaid. Our debt problem will continue to spiral out of control with an increasing burden of debt service (interest on the debt), rising interest rates for all Americans, and a progressive tax increase that would make Karl Marx ecstatic.

America had better batten down the hatches because the worst is yet to come. Forecasters have predicted inflation and perhaps hyperinflation, store shelves either empty or stocked with products beyond the affordability of most, massive job losses (as if it couldn't already be bad), local and state government defaults, partial federal government shutdowns, and perhaps even martial law imposed when Americans take their frustration to the streets of America. If you haven't started preparing for the worst, you may not have much time left to get prepared. When the austerity measures planned by the progressives hit America's main street, it will be too late.

Written by Vic Bilson
Jeremiah Project

Following the The Money Trail

© Copyright 2011 Jeremiah Project

Trashed America

Jeremiah Project | Politics | Values | Liberty | Money | Morality | Home

Abortion | Taxes | Health Care | Environment | Food | War on Drugs | Guns | Education
Clinton's Socialism | Socialists in the House | Free Speech | Mail | Resources