THERE'S A GOOD REASON THE DOLLAR BILL FEATURES A PICTURE OF A PYRAMID
In brief, that dollar bill in your wallet is described as a "federal reserve note." A debt instrument. In other words, the federal reserve issues these notes, with the implied promise to pay the bearer what that debt instrument is worth. In this case, US$1. Or US$100, what have you. Easy so far.
But here's where it gets dicey. What backs that debt instrument? Another currency? No. A tangible asset like land or cattle or crops? No. Gold or silver? Hell no! That's clearly not the case, as the federal reserve -- while hording a sizable chunk of the world's gold reserves -- doesn't have nearly enough gold to cover its debts.
None of the above. The federal reserve's debts are backed by the full faith and credit of the U.S. government. Meaning that the U.S. government backs and covers these debts should we all decide to make a run on the federal reserve banks. And where does the U.S. government get the "money" to cover those debts. Well . . . uhhhhh . . . it borrows money to generate its own debt instruments -- U.S. Treasury bonds, T-bills, Treasury notes, each varying by maturity. And from whom does the US government borrow that money? Let's see, we have the U.S. citizenry, whose worth is measured in the amount of federal reserve notes it holds.
And then there's China, who have shown a recent reluctance to keep lending money to the US government. And if things get really tight, the US government can get the "money" to back the debts of the federal reserve banks by borrowing money from . . . the federal reserve.
And where will the federal reserve get the "money" to lend to the US Treasury? Easy! It'll create federal reserve notes from thin air. Which is cool, because after-all, the US government -- with its full faith and credit -- will back those federal reserve notes that the federal reserve is lending to the US government.
And on and on it goes. Get the idea? The inevitable end result? Insolvency & Default. Or Currency Devaluation & Inflation. That's it. There are no other possibilities. This is what constitutes an economy in 21st century America. I have a different name for it:
A Ponzi Scheme.
Anyhow, as I said, this is the fruit of an e-mail discussion. I may well have made some errors here in my description, and I'm sure Applesaucer will correct me. Please, everyone join in. Questions, comments, thoughts, disagreements, suggestions.