The Cause of Poverty and Our Present Global Economic Crisis

Written November 29, 2008

I’m not usually one to offer challenges, but in this case it seems like the appropriate thing to do; considering children’s lives may be (actually are) at stake. Let me get right to the crux of the matter. There are approximately thirty-five thousand (35,000) children starving to death each day in this wonderful world of abundance we happen to be occupying. And my difficulty seems to be that I know why and nobody’s willing to listen or prove me wrong. [At least, I think I know why.] It’s not that I haven’t tried to find someone that’s able to show me the error in my thinking. Paul Martin, a past Finance Minister and Prime Minister of Canada declined my offer. Steven Harper has declined my offer in the past, but I’ve given him and our present Finance Minister a second chance. A Notice dated November 6, 2008 was sent to them requesting their response if they noticed any errors in my thinking. They were given thirty days to respond. December 4, 2008 has passed with no response as yet. [As of today, November 16th 2010, there has still been no response.] So my challenge to any and all is to find the error in my thinking and prove me wrong. To start that prosses you need to prove my Formula for Debt wrong. You can find that by clicking this link.
http://formulafordebt.blogspot.com/2010/11/formula-for-debt_09.html

There is a great effort throughout the world by many well-meaning people aimed at eliminating poverty and hunger. Entertainers like Bob Geldof and Bono as well as organizations like Make Poverty History encourage people to give so that the hungry can be fed. But still, the number of children starving to death grows. In 1997 there were only about ten thousand (10,000) children starving to death each day. With all the hundreds of millions of dollars (maybe even billions) that have been given to the cause of eliminating hunger so far, humanity has limited that daily number in this year of 2008 to only thirty-five thousand (35,000) a day.

Could it be that more money is not the solution? Could it be that there is no amount of money that could solve this problem? And, could it even be that money is the problem? I will argue that the answer to all three questions is: Yes. To understand how this could be, we first need to understand what our present form of money is.

It is commonly believed that money is an asset. It is not! Each paper note that you have ever had in your hand is a record of a debt. It’s basically an IOU that records the amount of the debt. A $5.00 bill is a record of a $5.00 debt owed by someone to the Bank of Canada. If you happen to have one of these notes, and you aren’t the borrower, then it seems to be an asset to you. You can now trade this note for some goods or a service. But no matter where this note travels or into whoevers hand it may arrive, it is still a debt note. The person, corporation or government that borrowed it must one day repay it to the lender. And while it circulates within our society the borrower must pay the lender a fee for its use. This fee we all know as interest.

I know. You’re all saying, “Well of course. That’s how our economy works.”

To this I say, “Of course that’s how our economy works, and that’s the problem!”

Let me explain. Our economic system is called a Private Debt Money System. A Private Debt Money System is one in which all “money” circulating within a society has been borrowed from a private corporation. Some will argue that the Bank of Canada is not a privately owned corporation. I would argue otherwise but that is not the determining factor to my main argument. The determining factor is the interest charged on the money. If all the money circulating within the Canadian economy has been borrowed from the Bank of Canada, and an interest fee is charged, then more money must be paid back than was originally borrowed.

This formula of money creation MUST result in a debt. It’s not even complicated calculus folks. It’s simple arithmetic. We all learned this in grade school.

Consider this:

1. Every dollar within our economy has been borrowed directly or indirectly from the Bank of Canada.
2. All these dollars must be repaid directly or indirectly to the Bank of Canada.
3. Interest must also be paid to the Bank of Canada for the use of this money.

This means that more money must be repaid than was originally borrowed.

One way in and one way out

Money enters our economy in only one way; it is borrowed from the Bank of Canada. A Borrower may go to a chartered bank such as the Bank of Montreal for a loan but the money for the loan ultimately comes from the Bank of Canada. And just as ultimately, all money must be repaid to the Bank of Canada. Think of the Bank of Canada as a big building with a large conveyor belt running out of it. This belt carries one hundred percent of the money entering our economy. There is no other source of money. All money has been borrowed and at the time it is borrowed it is added to the outflow conveyor belt. Once this outflow belt leaves the Bank of Canada it splits into two. The size of these two belts varies depending on the interest rate at that time. For the sake of argument let’s agree that interest is at five percent. In that case one belt would be ninety-five percent as large as the original outflow belt and the other would be five percent the size as the original outflow belt. Both belts together would equal one hundred percent of the original outflow belt. The belt carrying ninety-five percent of the money now carries on into our economy. The smaller five percent belt now leaves the money supply and immediately returns to the Bank of Canada building. This is the first year interest payment being returned to the Bank of Canada.

At the end of every year that the remaining money circulates throughout our economy another Five percent belt is added to return the interest payment to the Bank of Canada. If the average loan is for four years the original loan money will have been reduced to eighty percent by the bank taking their yearly five percent interest payments. Now only eighty percent remains to repay one hundred percent of the loans. But even that is not a true number. Many billions of dollars have been accumulated by the wealthy, those with no loan payment to make. As long as these people hold onto “their money” other people will not be able to repay their loans. Again, it’s simple arithmetic. Somebody must fail the meet his or her payment obligations and bankruptcy is guaranteed.

Once money has entered our economy it is put to many different uses. It is used to pay wages, invest in mutual funds or the stock market, start a business, take a holiday, purchase cars, buy homes, etc. But all this must be done with money that has entered the economy via loans from the Bank of Canada. There is no other source of money. And, because this money is on loan it MUST return to its source. There is one way in and one way out.

The simple question is, “How can one hundred percent of all loans be returned when twenty percent is skimmed of the top as interest and the haves and the wealthy hold on to another large percentage of the original loans? The simple answer is, “It can’t.” There is a guaranteed shortfall built into the Private Debt Money System.

Once you understand this you will also realize that there hasn’t been a Finance Minister or a Prime Minister of Canada for the last one hundred years who did not know that debt was a result of this system. And none of them told you. They all told you lies instead.

Many have said that under this economic system the interest can never be paid because the money to pay it is never lent. The truth is that the interest is the first thing to be paid. That guarantees that there will never be enough money left to repay the principle of the original loan. This is why banks love mortgages so much.Under the Private Debt Money System poverty is an assured result, poverty, unemployment and homelessness.

Study this system long enough and you’ll also see that inflation too, is a guaranteed result. Inflation lowers the buying power of the existing money supply and increases the amount of new borrowed money needed to buy the now higher priced items. Now part of the newly borrowed money can be used to pay the principle on the old loans, thus giving the appearance of a strong economy. The end result of this continued practice could best be understood by studying the exponential function. Dr. Albert A. Bartlett describes this will in the following series of eight videos: 

Part 1:  http://www.youtube.com/watch?v=F-QA2rkpBSY&feature=related

Part 2:  http://www.youtube.com/watch?v=Pb3JI8F9LQQ&NR=1

Part 3:  http://www.youtube.com/watch?v=CFyOw9IgtjY

Part 4:  http://www.youtube.com/watch?v=yQd-VGYX3-E

Part 5:  http://www.youtube.com/watch?v=t-X6EpvWWu8

Part 6:  http://www.youtube.com/watch?v=-3y7UlHdhAU

Part 7:  http://www.youtube.com/watch?v=RyseLQVpJEI

Part 8:  http://www.youtube.com/watch?v=VoiiVnQadwE

No money is ever created within our society. Producing a product and selling it for a profit does not add one penny to the existing money supply. Investing money and receiving a larger return adds not one penny to the existing money supply. Hiring employees and paying good wages adds not one penny to the existing money supply. All these activities merely rearrange where the existing money is located. It merely moves from one pocket to another. The final result will always be an over-all debt to the central bank. And this debt the central bank uses to increase its control over our government. Central banks are not concerned with monetary profit. They are debt farmers. Debt is their avenue to control.

~~~~~~~~~~~~~~~~~~~~

Comments has been disabled as this in not meant to be open for public discussion. However comments to the author are welcomed.

david.ealing@gmail.com/