Western Civilization’s Debt Trap
Posted by Orrin Woodward on July 11, 2014
Western Civilization is in the midst of a life and death struggle with its monetary system. The financial elites have bound society with the most oppressive monetary system ever created, where over 90% of the money supply exists through debt. This is a recipe for disaster as people, companies, and governments at all levels are chronically insolvent.
While reform of the total monetary system is essential, individuals should not wait for global reform to begin household reform. Indeed, the best thing for each person to do is launch a financial revolution where he lives below his means and wipes out ALL of his debt. This includes student loans, car loans, and even mortgages. In the process of wiping out out personal debt, one also reduces the money supply created by that debt.
It’s really a simple, but not easy choice. Does society want products and services so badly that it will sell itself into debt-slavery in order to obtain them? Or, on the other hand, can society learn to apply the three keys to wealth to its finances by taking a longer term perspective, delaying its gratifications for trinkets, and start leveraging the effects of compounding to its benefit.
Sadly, our society does the opposite today by viewing everything in the short-term, desiring instant gratification, and having compound interest work against them. LIFE Leadership has committed to play its part in helping people, companies, and governments get out of debt by applying the proper principles of financial management. Indeed, it all starts with the individual. When a person decides to end his debt-enslavement, he becomes the model for others to follow. The Financial Fitness Pack has already helped thousands of people terminate their debt and it can help others do the same. Are you sick and tired of running out of money before running out of month?
The financial debt matrix is real and continues to grow. Ignorance only imperils one’s financial health. British monetary reformer Michael Rowbotham explained the effects of the debilitating debt system upon Western Civilization when he wrote:
The reason for all this monetary scarcity and insolvency is that the financial system used by all national economies worldwide is actually founded upon debt. To be direct and precise, modern money is created in parallel with debt. The reason for the failure of economists to question patently invalid monetary data becomes clear – there is a total acceptance by them of the most extraordinary method for supplying money to the modern economy.
The creation and supply of money is now left almost entirely to banks and other lending institutions. Most people imagine that if they borrow from a bank, they are borrowing other people’s money. In fact, when banks and building societies make any loan, they create new money. Money loaned by a bank is not a loan of pre-existent money; money loaned by a bank is additional money created. The stream of money generated by people, businesses and governments constantly borrowing from banks and other lending institutions is relied upon to supply the economy as a whole. Thus the supply of money depends upon people going into debt, and the level of debt within an economy is no more than a measure of the amount of money that has been created…
If a monetary system is invalid or flawed, then the entire economy is based on the mathematics of error, and must be riddled with the effects. If the financial system upon which our economies are built is defective, and yet monetary considerations dominate our economic decisions, should we be surprised if the results are less than satisfactory?
The major role played by bank credit, which forms over 95% of the money stock in most developed nations, suggests that it cannot but be implicated in these trends. This is further suggested by the way that banking has literally become the focal point of modern economic management, through manipulating interest rates. The stargazers of Whitehall and the Federal Reserve hold their councils, trying to tread the non-existent tightrope between growth and recession by debating quarter percentage-points of interest rates. Alan Greenspan, the Chairman of the Federal Reserve, engagingly describes his task in controlling the American economy through adjusting interest rates as a matter of ‘taking the champagne away once the party has started’. Businessmen around the world hold their breath, measuring his every word, wondering what he will decide. There could be no greater indictment of contemporary financial economics than this; that a fluctuating financial digit on a single computer system in a single street in a single country should have the ability to dominate the economies of an entire planet…
The past thirty years are almost unique by comparison with the previous three centuries in the lack of attention that has been directed at debt and the financial system. Throughout the eighteenth century, there were repeated calls for reform. During the nineteenth century, excessive banking was held by many to be directly responsible for the waves of appalling poverty that swept Europe and America during a period of increasing industrialisation and agricultural development. In this century, during the depression of the 1930s, the financial system effectively seized up and brought virtual collapse to the economies of the world in an age which was, perhaps for the first time, obviously wealthy, and in which technology offered people real freedom as well as material prosperity. One observer judged that over 2,000 schemes for monetary reform were put forward at that time – all with a common theme in their outright rejection of the debt-based financial system as it then operated. The same system continues to this day, modified in small details, but unchanged in principle; and the recent financial crisis in Asia shows the potential for collapse still exists.
However the issue of economic volatility through booms, slumps, crises, and collapses has never been the sole point of criticism. It is the long-term trends that a debt-based financial system fosters which are most destructive. The most obvious of these is declining personal solvency. Mortgages support over 60% (£420 billion) of the money stock in the UK and over 70% ($4.2 trillion) in the US. Housing-debt statistics for the UK and the US show that there has been a dramatic decline in true home ownership as mortgages become higher and ever more widespread. There can be little question that relying upon housing debt to supply money to an economy lacks economic and political justification. However, taken in conjunction with the marked rise in commercial debt, mortgages have a knock-on effect. In an economy where the price of goods is elevated by commercial debt and consumer incomes are deeply eroded by mortgage debt, there is a persistent and subtle advantage given to low-quality, mass-produced goods, and growth is fostered in this direction. The persistent decline in product durability and the growth-culture of a rapacious consumer society can be directly traced to the debt-based financial system…
The more one explores the broad impact of debt, the more apparent it becomes that bank-credit constitutes a dysfunctional form of money. An economy based almost entirely upon bank-credit and debt experiences an intense drive for growth, regardless of need or demand. Bank credit engenders financial dependence, injects instability and fosters growth-distortions, both within an economy and throughout the international arena.
Reform of the debt-based financial system is clearly not a minor issue. It is not a matter of fiddling around with taxes, incomes and allowances to make things apparently more equal, more efficient, or perhaps more straightforward. Changing the debt-based financial system involves gradually altering the very foundations upon which national and international economics is based. Monetary reform is concerned with attempting to determine a new principle for the supply of money to an economy – the purpose being to create a supportive financial environment in which more constructive economic trends are allowed to emerge, and in which more benign systems of overall economic management become possible.