Tag Archives: economy

Three ways to wipe out the National Debt

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Spend less, pay down Principal

  • This requires tough budgetary sacrifices to create a budget surplus which can then go toward paying down principal. In order to do this we need to determine what the minimal role of government should be and set priorities from there… politics be damned. This means minimal leadership, law, and law enforcement/security, all else is extraneous.

Convert Public debt to Private debt

  •  If I owe you $100 every month for the next year and you owe me $100 every month for the next year we can simply sit down and cancel each others debt. We can do the same thing with the government’s debt and tax-payers who also own the debt. To do so we create a trad-able financial instrument that represents debt paid off and provides a tax break equivalent to a principal and interest payment on the debt for some duration into the future. It is also a good idea to split out the debt based on the debt to tax revenue ratio so that people understand how much debt is their responsibility.

Create Wealth, pay down Principal.

  • Turn the currency into an investment by making it into shares of a mutual fund of all trad-able goods and services in the market. This is the equilibrium and the definition of stability between markets also it is an explicitly backed currency, both add value. As the economy grows so does the shares of currency in your accounts through stock splits. This will help drive up demand for our currency increasing the number of shares in people accounts as the fed maintains share stability.
  • As you transition to the new currency first move to a full reserve system by increasing the federal reserve requirement on new loans thus shrinking fractional reserve created currency which the fed will replace by creating it out of thin air and introducing it to the market by the purchase and cancellation of Government debt. This creates a more stable banking environment and removes currency created via debt increasing the value of the currency. Yield for the Government $10.75 trillion dollars of debt wiped out. Add the $2.54 trillion dollars the fed currently owns and new currency needing to be created to keep up with economic growth and the full debt can eventually be wiped out. Yield for currency holders is more money, less debt, greater economic stability, and a higher economic growth rate.
  • Move the banking industry away from lending financing and toward non-lending financing. Lending financing has a tendency to place people and businesses in difficult positions that are not conducive to real wealth building, often credit financing invests in non-performing assets, businesses, and ideas simply because they can make the payment. Non-lending financing is essentially joint investment and wealth creation is the name of the game. This leads to higher economic growth rates meaning more tax revenue and fewer of the costs of debt upon society (divorce, stress, failed relationships, difficult to recover from financial situations, etc).

*As a note I believe that we will need all three approaches to wipe out the National Debt quickly but my preference lies in reverse order, create wealth, convert debt, and then spend less.

With all Hope,
Joshua Smith, Brier WA

Wiping out the National Debt Part 2

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In part one I presented the best of ideas that would eliminate debt without raising taxes or cutting spending. Ideas like moving from a fraction reserve system to a full reserve system, eliminating intragovernmental debt, handing the debt back to the tax-payers many of which also own the debt, and increasing the value of the currency so that everyone becomes wealthier. Now lets talk about cutting spending and raising taxes. In order to cut spending to it’s max we need to have a discussion as to what the minimal role of government should be. What does a bare bones government look like? A minimal government has someone to govern and a people to be governed. The act of governing is one of laws and law enforcement/security. In short; leaders, law, law enforcement/security.  All else is extraneous and not a primary function of government. With respect to US Federal law a minimalist approach would be to limit Federal government and law to only that which is explicitly addressed in the constitution rather than to that which is not expressed. While a bare bones government may not be popular, it is an essential mental exercise necessary for determining spending priorities and the limits of scaling a government down. What is the minimal amount of leadership that we need? What is the minimal amount of law that we need? What is the minimal amount of law enforcement/security that we need? With respect to leaders in a representative government we need enough leaders to be represented well. We need enough leaders to oversee the government and keep it in check. The minimal amount of law enforcement/security is dependent upon the law that need enforcing, how they are enforced, the level of societal morality, and the external threat level. Determining the right amount of government is difficult and is a battle  that is waged everyday. Because of the controversy that surrounds it, it remains the most difficult way to pay off the debt as the country would have to run surpluses for a long time. For taxes Revenues to consistently be greater Government expenditure is nearly impossible with the interest of Politicians being as short-term as the next election cycle. Never the less it can be done and with a goal in mind it is important to work every angle.

The Consequences of Debt “Reputation”

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“Your only worth what someone will lend you” This is an old quote and is foolishly evil. A human beings worth is better stated in terms of their reputation and even better stated in terms of who they are as a person in private as well as public. Someone’s lending reputation is just a small part of their greater reputation and even a good reputation can fully overcome the current financial situation of an individual if it is bad. With debt we start view the value of individual in terms of debt and it devalues many. In our society credit reports are pulled for job interviews someone with a lot of debt may be a job risk as they be tempted to steal or betray, someone with too little debt may not be a good employee because they can walk at anytime unenslaved by debt. The United State sent gunships to Ecuador to enforce debt payments and Ecuadorians have a reputation of borrowing and not paying debt back. I had this Ecuadorian roommate once…. Investors are wary to lend money to countries that are a credit risk and their enemies view them as weak. Countries use debt risk of money they lent as an excuse to invade. In a nation with a fractional reserve system where the fed only has partial control over the money supply a citizen could be stuck with debt he is unable to pay because there is not enough currency flowing in the system for everyone to meet their debt obligation. Drawing the short straw or being a little vulnerable at that moment could mean the destruction of his reputation, his investments, and his life for being only a little at fault when most of the blame lies with the immorality of the system. Yeah that’s me. It sucks.

The Consequences of Debt “The Ease”

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Debt can be a convenient and easy way to finance anything you like. The money comes easy and cheap and little work has to be done to attain it. However this is also a problem with Debt. Because Debt is so easy to attain it isn’t always invested wisely leaving people with debt remorse. Suppose that you borrowed money to buy a boat. You bought the boat to get to work because you happen to live on an island. This boat would be a good investment as it provides you a return which is the ability to live on the island and provide for yourself. Now suppose you bought the same boat on credit for the purpose of water skiing one week a summer and the rest of the time it rots in your suburban driveway. While memories are great, this may not provide that great of a return for the cost. Boats require a lot in maintenance making them an ongoing expense unless they are providing a return it may be better to borrow or rent. Borrowing for memories is living beyond your means and is made possible by the lack of oversight that lending provides. This is a consequence of Debt that dampens lasting real wealth creation.