Punchinello’s Chronicles

February 11, 2010

The Real Bank of America

How many articles have you read about the corruption and failures in the many recent bailouts? What about the discussions about General Motors, buyouts, and other “too-big-to-fail” situations? Over and over, when you read these articles and listen to people talk, you hear one thing: The American tax payer will be stuck with the bill.

No, we won’t.

Take a minute to think about the actual realities of how a country gets financing. Regardless of the mopes who try to convince us that macro (big) economics is entirely and completely different from micro (small family) economics, they’re wrong! There’s no real difference between how nations handle finances and how you and I and every other family handles money.

Oh sure, there are things like big piles of money, manufacturing and labor issues, production systems and regulations. But when you get right down to it, someone makes something to sell to someone who buys it. The amount of money you have in cash is one thing, and the amount of money you borrow is very different.

When America borrows money, it does so with things like Treasury notes. These are IOUs from the US Government. They basically say, “We, the nation of America, using the production and work of our people, guarantee that you will be paid cash money when you turn in this IOU.”

Ah…but there’s the rub! Everyone these days talks about the backing of the “full faith and credit of the United States.” Some people include “United States Government.” But very few people stop to include the United States population!

Representative government means that we elect people who will act on our behalf. They will represent us in the small physical space of Washington’s Senate and House of Representatives. When those representatives make decisions, they’re making those decisions AS IF they were each and every one of us.

Now think about this: When your senator or congressman decides to borrow $1-trillion, did you agree? Would you have agreed if you’d been asked?

Then think about this: When that representative says “He” or “She” will pay it back, is that true? Of course not! What they believe is that “someone” will pay back that money.

Alright, now follow this next step of logic. An IOU is essentially a loan. I’ll borrow $10 from you. You hand me the ten bucks. I then write out an IOU (I owe you) that says I’ll give you back the ten bucks at some particular point. Forget about interest and all that other stuff for now. Bottom line, I Owe You $10.

A Treasury note is the same thing. Ah…but WHO is doing the lending? Is it the Federal Reserve bank? Is it a central bank? Is it the US Treasury? Is it Mr. Obama and his personal stash?

Whenever the US government prints up a Treasury note, they borrowing money. From…somewhere. Where?

The fact is that the government is printing up an IOU ahead of time. Then they “sell” or “auction” that IOU in the financial markets. Someone buys the note because the government is offering an interest rate. They’ll pay back the money, plus some extra money.

When anyone buys a T-bill or other security like this the US Government says, “We guarantee that we’ll pay it back. If we don’t, then you have collateral in the entire United States—our products, our land, our resources, our oil, our doctors, our teachers. ALL our tax-payer money is standing behind this IOU.”

Hmm…! In FACT, what the government is saying is that “We expect to get some money from each of our citizens in the form of taxes. With THAT money, we intend to pay back our loan, which we’ve written up as a Treasury Note.”

When you examine this closely, you discover that the US Government has “borrowed” money from US…the citizens! They’ve said that they’re going to print up some paper. They’re going to sell that paper. The money they get from that paper will go to pay for welfare programs, food stamps, bridges to nowhere, Nancy Pelosi’s jet fuel, and all sorts of cool stuff. NONE of that stuff ends up in yours or my pocket, but so what?

Fed. Chairman Ben Bernanke said that he wanted to borrow $700-billion to bail out the big banks. When asked where he’d borrow that money from, he was kind enough to at least mention that it was from the US tax payers. When further asked if those tax payers would get ALL their money back, Mr. Bernanke said, “Probably not.”

Do you see that the US Government is BORROWING money from us? Sure they have a gun pointed to our head and the threat of prison if we don’t pay our taxes, but setting that aside, they’re BORROWING that money from the citizens! They’re also putting up our work, our children’s work, and our grandchildren’s work as collateral.

That makes you and me…A BANK!!!! Every time the US Treasury prints up a dollar bill, that bill can represent one of two things. It can represent a real amount of actual work you or I did. Or; it can represent the “expectation” that you or I will do some work. In a viable, sustainable and healthy economy, the first option is true.

In today’s economy, every dollar being printed is another LOAN! It’s the “hope” by the government that “someone” will “somehow” catch up with that dollar and actually produce something! If nobody has a job, nobody is producing anything, no company is manufacturing anything, then where the hell will be the work behind that dollar?

What happens when a bank decides that a given loan is too risky? What happens when a bank worries that it won’t get paid the money someone has borrowed?

The BANK forecloses!

You’re hearing over and over again that if this or that happens, the US tax payers will foot the bill. NO!! That’s NOT TRUE! What will happen is that whomever does not pay back TARP money or other bailout money, they’re not paying us back! They’re not paying back you and me! They’re not paying back the BANK of the American Public!

So let’s foreclose!

What we can (and will) do is that we will NOT lend any more money to the United States Government! They, our supposedly elected representatives, will NOT have the good faith and credit of we, the people! We will NOT pay them one more cent in taxes! We will NOT provide them with our work, our labor, our skills, our efforts!

We the people will continue to build homes, cars, planes, trains. We the people will continue to plant crops, harvest them and produce food. We the people will continue to sew clothing, nail on roofs, pump water, and raise children. We the people will continue to educate those children, collect garbage, run electric plants and so forth. We the people will continue to work!

But a US Treasury note does NOT say that the United States Government will “pay back” the money (cash) handed over to it with an equal value in goods and services! In fact, that government only can pay back those IOUs with money! Cash! And that cash only comes to Washington (and the States) in the form of taxes!

So no, when the US Government goes bankrupt, having borrowed infinitely more money than it can ever, possibly repay to anyone in any kind of life-time, what happens?

The government will fail, that’s what will happen! But do you really believe that you’re going to just hand over the keys to your car to somebody from China or India, Egypt or Russia who wanders over to your neighborhood waving around a US Treasury Note? Of course not!

The key thing here is to understand that every time the government prints up and sells a Treasury Note, they’re borrowing money from you and me! They’re not creating money! They’re not creating a damn frickin’ thing! They’re just printing a piece of paper! They’re not asking you if they can. They’re not asking me if they can print something! They’re just doing it.

They “say” that when they sell that note to China, then “somehow” America will be good for that money. But they never came to us, The Bank of American Taxpayers! They never asked us if they “could be allowed” to print up those IOUs! We don’t get a share in the sale! We don’t get squat!

The United States Government does NOT produce anything! They only spend money. They create no goods, no services, no jobs! They only spend money. When they run out of money, they BORROW money! They do NOT borrow the money from China! They borrow the money from you and me in the form to Treasury Notes!

It’s only AFTER they’ve borrowed the money from us (without asking, without giving us a number) that they then sell that contract to someone else, like China! Remember that, it’s critical! It’s fundamental!

No, you and I and our children and our children’s children will NOT “owe” on the national debt! We will NOT “owe” trillions of dollars to whomever was fool enough to buy all those crap pieces of useless paper printed up by Ben Bernanke, Tim Geithner and the US Congress! Those people “say” we will owe that money, but they have zero authority to make that claim anymore! Nobody gave them permission to print up all those Treasure notes in the first place!

We elected our representatives with the implicit and contractual assumption that they would act in good faith. The contract is the United States Constitution! Those officials do NOT have permission to arbitrarily print up crap pieces of paper with undisclosed numbers on them. They do NOT have permission to assume that you and I will provide our work for free! They do NOT have permission to then sell that work in the form of crap pieces of paper!

In fact, the United States tax payers and citizens of this nation can, will and eventually must foreclose on the loan! We can, will and must put a lien on the United States government! To accomplish that, we simply won’t pay any taxes. Not because we intend to break the law! Oh no, it will be because we don’t have any frickin’ JOBS anymore!

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