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posted on 01 July 2016

The 39 Trillion Dollar Vig

Written by , Director, The Kettle Pond Institute for Debt-Free Money

Yes, that's $TRILLION and recognize it might be double that amount.


Let's start with the 'vig' issue here, being a slang use of its parent word (viggorish) which defines the 'interest' paid to a loan-shark, used also to describe the amount in the pot at the end of the poker hand. Speaking of loan sharks, how about the gang that gets to charge you interest 'in perpetuity' on every loan they ever make. Nice work if you can get it.

Here, the use of 'vig' relates to the amount that 'we the people of the United States' have already lost on the public policy gamble of turning our money system over to private bankers. These would be the same private bankers that are issuing all of our money, by lending it first, cheaply, to the most creditworthy borrowers. That's another problem - as relates to driving our income and wealth inequality , but that's also another story. This debt-basing of our system of money is colloquially referred to as fractionally-reserved banking. It's ugly work, some say, but somebody's got to do it.

With passage of the Federal Reserve Act in 1913, we have closed off the path of money creation and issuance by the government. But, reform is again in the air.

To most serious students of political economics throughout history, "money" has been identified as a 'sovereign' construct, its utility being the essential and ultimate authority of the government to determine all the operational activities of the national economy.

This happens first through the national "Money Statutes", the laws and Rules of the 'state' that must be derived from any national Constitution. Those laws and Rules define the goals of operating the money system, carried out through national monetary policy.

Our U.S. Constitution states that the government, and only the government, has the power to determine what is 'the coin of the realm', and also, at least as importantly, the powers to create, issue and regulate its value, and of any foreign coin used in the realm's commerce. The real 'money power'.

Today, the relative value of our currency, vis-à-vis other currencies, is actually market-determined, through a 'floating' rate of currency exchanges. But the other money powers conveyed to government, those of creation, issuance and regulation, should be just as sacrosanct in today's modern monetary economy as it was when we fought our War of Independence to gain us the freedom of having that 'money power'.

Before getting into the how and why we need to reform the present money power, some relevant history, for perspective, and then, let's 'quantify' our U.S. national money system 'vig'. How much have we lost?

The Historic Example - Muscle Shoals

Back in 1921 , when the Muscle Shoals 'Development' Project in Alabama was striving for its existence, a great monetary debate ensued over how to actually pay for the project.

On the one side were the bankers who wanted the government to issue the bonds to fund the project , then estimated at a sizeable $30 Million, borrowing the money from those same bankers, who would create it, out of nothing more than the government's promise to pay it back - with interest. Forever.

Like I said, somebody's got to do it.

On the other side were a couple of giants, patriotic innovators of American industry - automobile manufacturing pioneer Henry Ford and electric industry inventor Thomas Edison. The thing about these two, as then burgeoning revolutionary pragmatists of monetary economics, was that they could both do what Bill Clinton calls - the arithmetic. Which is what I am throwing your way with this article.

The actual cost of the entire project would be $30 Million if done according to the designs of Ford and Edison, where the government would merely 'print the money' and pay it to the workers and contractors of the project, and then maybe $66 Million - depending on the interest rate - if done through private banker bonding of the project - a private gain of $36 Million from the US taxpayers. Again, somebody's got to do it.

The American Money and Banking System - private creation and issuance of the government's money out of nothing, and lending that money TO the government, collecting perpetual interest, from WE taxpayers, on each dollar issued.

Is that 'loan-sharking'?

As the arguments of Ford and Edison are the same arguments I am making here, and the same ones as Nobelists Fisher and Friedman have long suggested for repairing sovereign money, the lesson from Muscle Shoals should be to raise the specter of for how long the bankers have controlled the political process in this good ole USA.

That was 1921, and it's the same today.

Speaking of the national debt impacts from bonding, Edison said

"(Ford) thinks it is stupid, and so do I, that for the loan of $30,000,000 of their own money the people of the United States should be compelled to pay $66,000,000 - that is what it amounts to, with interest.

People who will not turn a shovelful of dirt nor contribute a pound of material will collect more money from the United States than will all the people who supply all the material and do all the work."

Had the Guv used the $30 Million of money printed, there would be a $30 million public 'equity' investment on our national accounts for the Muscle Shoals construction. But rather, there was a $30 million 'debt' on our national accounts, issued against the project. The difference between the two funding methods (private versus public) is $60 million ( from a debt-based minus -$30 million to an equity-based plus +$30 million). Our money system loss is double the amount of all public debts. And, as you will see, that is minimally.

This is true for the totality of the national debt today. And the above dialogue proves that the sum of the vig (the people's loss) will be much greater than the $39 Trillion being claimed. Because it does not include a nickel of interest. Have we ever repaid to zero a nickel of the Muscle Shoals debt amount?

Sorry, can't do that with debt-based money. As proof, haven't we paid compound interest on all the money borrowed for funding that one project, TO THIS DAY, and also for every project funded by issuing our national debt? This perennial compounding interest truth actually makes the $66 Million Muscle Shoals Bankers' School cost estimate a paltry sum. All money created as a debt ( so, ALL money) MUST BE maintained as a debt balance, or the money supply will shrink.

But, hey, who's counting in Washington when the bankers pay for our RE-election campaigns, and thus control our political economy?

It's way past time to stop the insanity of the government borrowing its funding needs, when we have gained the powers of money creation and issuance through gaining sovereignty, being the Money Commons of a sovereign nation.

The Issue, and the 'vig', Defined

Throughout the 240 years since the Revolution, we have taken a series of national economic gambles in our determinations of what will be used as the national system of money. The latest, that of private issuance under the FRBS, is the worst. And it has cost the people of this nation MINIMALLY some $39 Trillion in national public benefits, benefits that have accrued to the private money-issuing class - Yes, I'll say it, the One Percenters - rather than , again, to we the people.

Want to know why the States are broke, and the cities and the counties ?

Somebody took their money system.

It was part of the original Grand Deal with the States.

"If you agree not to issue your money, we'll make sure the national money system serves your NEEDs."

But then, under the FRA, they turned it all over to the capital marketeers, who made no deal with the States, nor with The Restofus. When the Peterson Group searches the cause for this global excessive debt saturation ...... "Must be irresponsible consumers not knowing their limits.".

So, it should be clear that this $39 Trillion public "loss" is the difference between Actual Public Debt accumulated to date, and the potential for an Equity investment of an equal amount that would accrue to our government, had we been politically capable of maintaining all of our Constitutionally-granted money issuing powers, rather than the government NEEDing to borrow the money to fund its deficits.

As I write, our public debt is stated at $19.3 Trillion.

Being that those debts funded public investment, using the 'seigniorage' gained by issuing that money into existence, that would be $19.3 Billion in public equity, wherever it was spent.

We the people would be, should be and could be $39 Trillion richer on the public asset side, and a like amount at minimum, on the operating account side for all the interest we have paid over the years for the national debt.

So, that's it. My minimalist claim is for the $39 Trillion vig, being the public's "loss" on our monetary system operations. While we would like the money back, we'll be satisfied with just taking back the money system. The solution to reverse this accounting has already been twice introduced in the Congress by Dennis Kucinich of Ohio.

Now that we know what we've lost, this is the way to go whenever you're ready, America.

The solution is at hand.

For the Money System Common.

Joe Bongiovanni

The Kettle Pond Institute.

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