The Garden

“All the perplexities, confusion and distress in America arise not from the defects in the Constitution or Confederation, nor from want of honor or virtue, so much as downright ignorance of the nature of coin, credit, and circulations” –John Adams, 2nd U.S. President.

As I alluded to last week, there are many oddities surrounding our financial system that few seem to know about, much less understand. The John Adams quote above suggests that there is little of greater importance to a nation than for its people to understand the nature and function of their financial system. Even though John Adams was writing about this some 200 years ago, his observations are just as relevant today. Currently, the ignorance about the nature of money seems to be rampant in our country, present author included. It is from the standpoint that knowledge about the nature of money is essential to the well-being of society that I wish to examine this topic further.

Money, as we know it, comes into existence from a central bank called the Federal Reserve, or “Fed” for short. Despite the obvious oxymoron, the Fed is considered a “decentralized” central bank because it is scattered into twelve different regional banks throughout the country. The Fed is something of a hybrid between private bankers and publicly appointed officials. How exactly this balance works remains a mystery to me, but suffice it to say that the private aspects of the Fed represent private interests. In any case, the Fed, as I understand it, works by creating money according to its own self-defined principles, and then proceeds by lending (or loaning) this created money to other banks or financial institutions with an interest rate attached. The Fed is then, in theory, supposed to regulate (some might even say stabilize) our economy through the manipulation of these interest rates. That is, when interest rates are low, financial institutions are then more likely to borrow created money from the Fed and spend it elsewhere in the economy, thus circulating more money into consumers’ hands and facilitating more business. Likewise, the Fed can raise interest rates in order to drain money out of the economy and diminish business transactions, presumably to prevent the inflation (or devaluation) of U.S. dollars.

What I want to stress here is that the Fed creates money. This is to say, that every dollar currently in circulation in the U.S. economy originated within the Federal Reserve System. Put another way, there is not one genuine U.S. dollar in circulation today that was not created according to the Fed’s own money-generating criteria. By itself, that fact may very well be benign. However, where things get really odd is when the concept of interest is factored into the money creation process.

Since the Fed is largely comprised of private business interests, these private business are expected to sustain themselves based on their own revenue. That is, part of the Fed is designed to generate profit. One mechanism by which this profit is generated is the charging of interest to those who borrow their created money from them. Briefly, interest is a monetary fee charged to a borrower for the privilege of using a lender’s money. Usually, the amount of interest charged is some percentage of the principal (i.e. the original sum borrowed) and continuously increases until the borrower pays the debt off in full.

Now, there’s nothing particularly bizarre about the idea of charging a customer a little bit more for a good or service than what the good or service was originally worth—this is how businesses generate profit in the first place—however, the idea is not so cut-and-dry when talking about a country’s central bank.

Keeping in mind that the Fed is responsible for creating every U.S. dollar in circulation, and that this money is first circulated into the U.S. economy by different people or institutions borrowing these dollars from the Fed, then it stands to reason that the total amount of money in circulation is equal to the principal of each and every loan ever taken out from the Fed. In other words, there is exactly enough U.S. dollars in circulation to pay the Fed back for the principal of every loan ever issued. No less. No more. However, as I have already mentioned, the principal alone is not enough to compensate for the Fed’s generous loans; the Fed requires that the principal be repaid with interest. But, if every dollar in existence was borrowed into circulation based on the principal alone, then where are the dollars supposed to come from to pay the interest? If every U.S. dollar created only comes into existence through a process where that dollar must be repaid at a price greater than the dollar’s original value, then there is no way to ever repay the debt! There is more debt than there is money to repay it! The only solution to this problem, and the one most often invoked, is to simply borrow more created money from the Fed to pay off the previous interest. However, this only serves to push the problem further, as the newly borrowed money itself has its own interest rate attached. Without the possibility of the Fed either issuing interest-free money, or accepting non-Fed issued money as payment for the interest, there is no way for the U.S. economy to pull itself out of debt; a disheartening concept, to say the least.

Now, I am apparently not alone in this observation, as the above phenomenon has been identified by others as the “debt virus” theory. For example, a book by the same name has been written by a Jaques S. Jaikaran. Although there are critics of the debt virus theory, none of them have been particularly persuasive to me. For example, some have argued that the profits generated by interest fees are recycled back into the economy—interest free—when employees of the central bank use their wages to buy goods and services in the community, or when the Fed itself purchases goods and services per normal business expenses. In other words, the interest earned on the Fed’s loans is used to cover operating expenses, etc. just as any other private business would use profits to cover their operating expenses. While there is merit to this claim (the Fed and its employees certainly make purchases in the economy), this ignores the possibility that much of a business’ profits are reinvested in the business itself—in this case, loaning money and charging interest on it. So long as the Fed perpetually uses any of its profits to create new loans with interest, the nation’s debt can never be repaid, no matter how productive the nation might be. In other words, no matter how many hours Americans like you and I work to make and do things of real value in this country, the Fed will never be satiated. Somehow, I fail to see how this is in the best interest of you and I.

Finally, as I am not an economist I do not presume that the above account is flawless. With that in mind, I encourage anyone to dispute what I have stated either with me personally at my above email address, or by writing The Ranger News itself to potentially have your views published in an upcoming issue. The underlying theme to this is that our financial system is incredibly complex and we citizens are severely ignorant of its functioning. In fact, there seems to be good reason to suspect that the Fed is designed to work against average American interests. Further, amidst the financial turmoil we presently find ourselves wading through, it is imperative that we delve carefully into the whole structure of finances itself rather than assume that major financial crises happen purely by chance. The scale to which Americans find themselves in debt is sorely worth examining. This is why I encourage everyone to ask, “Why is there so much debt?” To illustrate how I might begin to answer this question, I’ll leave you with a quote by the famous international banker, Mayer Amschel Rothschild:

“Permit me to issue and control the money of a nation, and I care not who makes its laws.”

I have never really understood money. I don’t really know where it comes from, who decides what it is worth, or how it is affected by banks and stock markets for example. Granted, I have not actively sought to understand these things, but nevertheless I think it is fair to say that our financial system is way too complicated for the layperson to understand.

In the last week I have heard about major banks going bankrupt, the stock market crashing and plans from the federal government to “bail out” some major financial institutions—something that supposedly costs hundreds of billions of dollars…taxpayer dollars.

Even though I know very little about how money works (not least because I don’t really have any), it still seems odd to me that crises of this magnitude can arise seemingly unexpectedly. When I think about the basic idea of money, or currency, I can develop a fairly straight-forward idea about how it might work; but when I try to apply the same ideas to our current system, I get terribly confused.

Take gold for example. Historically, gold has been a popular unit of currency. The reasons for this are obvious to me. First, it is finite. That is to say, there is only so much gold in existence because it is created through slow, natural processes—kind of like oil. Second, gold is rare. Generally, when objects are rare, they have value—kind of like baseball cards. Third, gold is difficult to counterfeit. This feature entails that wherever you attempt to make a purchase with gold, others will be willing to trade with you.

Our financial system, however, does not operate on these gold-like principles; at least, not any more. Once upon a time, the U.S. dollar operated on the “gold standard” which meant that each dollar of paper money was backed by a discrete amount of real gold. This incarnation of paper money made sense because, after all, gold is a rather heavy, cumbersome item to carry around. The risk with this system, obviously, is that paper notes are much easier to counterfeit than gold.

Instead of using an intuitive system like the gold system, our country uses a system that relies on a central bank, and something called fiat currency. Here is where I get lost. The money that you and I work for, save, and buy things with is all regulated by a monetary system that fluctuates based on loans and interest rates; and instead of these loans and interest rates being determined by some fixed standard—like gold—they are instead determined by a variable and somewhat arcane central bank system. This system, amazingly, has the ability to literally create money; well, at least “paper” money. That is to say, the central bank can seemingly print as many notes as they see fit, irrespective of the fact that more paper money does not equal more value or purchasing power. In other words, the fiat system gives rise to what we know of as inflation.

In a loose sense, inflation is the devaluation of a unit of currency. My grandma used to recount to me how a movie used to cost a nickel back in her day. Presumably, if inflation didn’t exist, movies would still cost a nickel, or very close to it. This indicates how slippery our financial system is, and perhaps provides some insight into how financial crashes like the ones witnessed in the preceding weeks can come about.

Personally, I don’t like the idea that the money I work for and rely on is so unstable that immediate and drastic financial “bail outs” by our federal government are sometimes necessary to prevent the whole economy from imploding. Aside from the obvious questions about where our government even has the hundreds of billions of dollars to perform these “bail outs,” and the implication that taxpayers are going to have to pay for the mistakes of these private businesses, isn’t it odd that our financial system is so unreliable and obscure in the first place?

Think of it this way. The U.S. is supposedly trillions of dollars in debt, right? Well, it’s hard enough to imagine how it is that an ostensibly abundant and “wealthy” nation like the U.S. is actually trillions of dollars in debt (who exactly owns this debt?), and that the U.S. nevertheless continues to spend money that it doesn’t actually have to finance things like roads, politicians’ salaries, and wars (e.g. tanks, helicopters, deadly weapons, etc.), but it is even harder to imagine how it is that a government so far in the red has billions of dollars lying around to suddenly “bail” private financial institutions out of debt. Where, may I ask, is this money coming from? It seems to me that our financial system basically allows for one to use debt to pay off debt—a house of cards operation if ever there was one.

As I’ve said, I’m no financial expert. However, I am an educated person and I can tell when something is absurd. A financial system as intangible and insecure as ours, no matter how sophisticated people in suits and ties may dress it up to be, should not be blindly accepted. Something is amiss here, and if the American people foolishly believe that some ad hoc emergency “bail out” plan by our government will do anything more than temporarily sweep a massive problem under the rug, then the American people deserve whatever economic collapse most certainly will follow.

At the risk of making a hasty generalization, I am going to go ahead and suggest that virtually everything publicized about the ongoing Presidential race is little else but a meaningless waste of time; it is not genuine, it is not informative and it certainly is not important.

First of all, the race has everything to do with popularity and nothing to do with ideas. Candidates are scrutinized for who they are rather than for what they think. Personal issues are brought to the fore for media pundits to belabor at length, and naïve citizens interpret this gossip as if it were pertinent and important. Candidates are portrayed as icons or celebrities instead of careful, intelligent thinkers. And, as a result, the Presidential race, which ought to be a forum for good ideas and informed debate, instead becomes a stage for celebrity gossip, personal insults, and comparisons over looks, toughness and “likeability.” This is not good. In fact, it’s embarrassing. One of the cornerstones of a healthy democracy is the exchange of good ideas. Politicians and political systems depend on prudence, insight and deliberation for their successful functioning; unfortunately, the race for our country’s highest office has been reduced to a glorified episode of “reality” television where candidates compete for acceptance through publicity stunts, cunning advertising campaigns and catchy slogans. None of this should be taken seriously.

Secondly, the mass media does everything to exacerbate this problem and nothing to alleviate it. The mass media is, by its nature, a for-profit business. That is to say, every single U.S. mass media outlet is primarily concerned with selling advertising space and attracting viewers. That is priority number one. The mass media is also the principal conduit through which the general public accesses the Presidential race. It is therefore in the mass media’s best interest to ensure that the Presidential race is as enticing and entertaining as possible for its viewers; so as to maximize profits. This fact, unfortunately, has devastating effects for the citizen who is concerned with the welfare of his or her nation-state; that is, the one who would like to know, in considerable detail, what and where the best ideas are for ensuring the welfare of the country. There is little reason to believe that the for-profit nature of the media in any way enhances the quality and substance of a Presidential race. And, in fact, the current coverage of the Presidential race verifies this. Notice how quickly Sarah Palin was promoted to “superstar” status literally overnight, despite her political ideas being relatively unknown. This could not have been accomplished without the deliberate portrayal of Palin as big and important by the mass media.

Media outlets have borrowed techniques from the entertainment industry and have characterized this race as a battle between “teams” in a way not too different from professional sports presentations. Media consumers are meant to pick a “side” and cheer for their favorite “players” in the heated competition that is the Presidential race. Polls are used to keep “score” of who’s “winning” and candid cameras, as well as on-the-spot interviews, make for great behind the scenes “in the locker room” footage. This is all presented with flashy computer graphics, dramatic music and “Breaking News Alert!” headlines to dupe the audience into thinking they are being informed while they are merely being entertained. Media consumers have largely embraced the idea that matters of political importance can be reduced to little more than celebrity gossip, where judgments are made based on vacuous topics such as looks, faith, age, skin color, stage-presence, family history, interpersonal relationships, etc. Framing the Presidential race in this way seeks to make the candidates more personally accessible to the audience, so that the audience feels like they “know” the candidates. This is no different from the way Hollywood celebrities are personalized by pop-culture. It makes for great entertainment of course, but it does nothing to further the spread of good ideas and sound judgments.

Perhaps it is time for Americans to realize that the exchange of good ideas is not always entertaining, and that no matter how personally public figures are portrayed in the media, you will never really “know” these people like you know your friends and family. To believe that you can judge the quality of an idea by judging the person carrying it is a tragic mistake.

September 11, 2008 marks the seven-year anniversary of the Sept.11, 2001 attacks (hereafter 9/11), and, to this day, there is yet to be a single, systematic charge of guilt assigned to those believed to be responsible for the tragedy. This and other oddities about 9/11 have led many to doubt that we have been told the truth about 9/11. On this seven-year anniversary, I would like to encourage everyone to revisit what they think they know about 9/11 by pointing out a few problems I have found with the story of 9/11.

According to the accepted (or “official”) account of 9/11, 19 Al Qaeda members hijacked four commercial airliners on the morning of 9/11 and crashed two of these airplanes into each of the World Trade Center’s (WTC) 110-story Twin Towers (initiating the complete collapse of both buildings plus a third 47-story building known as WTC 7), one plane into the Pentagon, and another into a field in Pennsylvania. All of this, the official story says, was done under the direction of Osama Bin Laden, who was believed to be located somewhere in Afghanistan.

This account, which government officials offered mere days after 9/11 itself, has endured relatively unaltered for the entire seven years since, despite numerous challenges to its validity by critics. In fact, the most well-known investigations into 9/11 were partially motivated by dissenters who felt the official story was inadequate. These investigations include the 9/11 Commission Report (2004), which was instigated by family members of 9/11 victims unsatisfied with the official account; and two reports by the National Institute of Standards and Technology (NIST) addressing the unprecedented building collapses in the WTC complex: the first addressing the collapse of the Twin Towers (2005) and the second addressing the collapse of WTC 7 (2008).

Despite the amount of effort and money spent on these three official reports, there is still no formal charge of guilt or legal proceeding that demonstrates how and why it is that Osama Bin Laden and these 19 hijackers were blamed for the crime of 9/11. In all three official reports, the guilt of Bin Laden and the 19 hijackers was simply assumed by the authors. In the case of the 9/11 Commission Report, the authors went to great lengths to give narratives about who the hijackers were and how they behaved on 9/11, but no detailed explanation of how it was that these men were determined to be the guilty party was offered. In fact, CNN published a story entitled “U.S. rejects Taliban offer to try Bin Laden” on October 7, 2001—when the invasion of Afghanistan was just getting under way—stating that the Taliban (the ruling body in Afghanistan at the time) actually offered to turn over Bin Laden to the U.S. if the U.S. simply presented a case against Bin Laden. The White House flatly refused to give the Taliban any evidence demonstrating Bin Laden’s guilt, and instead responded with violence. Now, if the White House in fact did have definitive evidence of Bin Laden’s guilt all the way back in October 2001 (as the article says they claimed to have had), it’s bad enough to wonder why they would not simply honor the Taliban’s request for a trial before resorting to intense violence (is not democracy marked by its allegiance to law and order?), but it is even more puzzling to think that now—seven whole years later—we still have not seen any kind of formal case against those accused for orchestrating 9/11. Further still, the FBI’s Most Wanted list, which contains Osama Bin Laden, curiously does not list 9/11 as a crime Bin Laden is wanted for. Given these facts, I believe it is worthwhile at this time to ask, and keep asking, Why is there no formal case against Bin Laden?

In the absence of a convincing case against Bin Laden, vigilant citizens are forced to speculate about what else might have happened on 9/11, and what to make of the last seven years of the so-called “War on Terror.” Some of these speculations have cast suspicions about our own government’s involvement in the events of 9/11. For example, many have challenged the idea that the two alleged airplane crashes at the WTC complex could have, by themselves, caused the total, rapid and symmetric collapse of three steel-framed skyscrapers. The two NIST reports mentioned above were assembled to do exactly that, however the success of these reports is fiercely debated.

The latest NIST report (available at wtc.nist.gov), which addressed the collapse of WTC 7, was released Aug. 21, 2008. This report is highly controversial because it asserts that the 47-story steel-framed WTC 7 building was the first modern high-rise building in history to completely collapse due to nothing other than an ordinary office fire. During an Aug. 21 press conference, NIST’s lead investigator, Shyam Sunder, stated the following: “This study has identified thermal expansion as a new phenomenon that can cause structural collapse. For the first time we have shown that fire can induce a progressive collapse” (emphasis added). Mr. Sunder also referred to this “new phenomenon” as an “extraordinary event” and said that the effects of “thermal expansion” until now have not been “explicitly considered” when testing for fire resistance. Critics, including this author, have been highly suspicious over the last seven years over what in fact led to WTC 7’s demise on 9/11, and NIST’s recent attempt to explain the event by invoking a “new” and “extraordinary” phenomenon does little to assuage this suspicion; in fact, it serves to augment it. New scientific phenomena do not simply appear out of nowhere when unusually tragic events occur. Even though WTC 7 caught fire on 9/11, it still ought to be subject to the same kinds of physical laws as every previous instance of high-rise office fires has been. This appeal to a new physical principle suggests that NIST is desperately reaching to sustain the official story of 9/11 without admitting that something other than the alleged 19 hijackers was involved in the destruction of WTC 7. In short, this report fails to adequately explain what happened to WTC 7 on 9/11, and fuels suspicions of a cover-up.

The above concerns about 9/11 are only a few out of many, but I believe they capture why today, seven years later, the general public still has good reason to doubt the official story of 9/11, and by extension, the legitimacy of their government. If Osama Bin Laden is guilty of orchestrating 9/11, a formal case citing compelling evidence ought to be publicly filed against him. Failure to do so is a betrayal of our judicial principles; and the violence waged against Afghanistan is, and has been, exceedingly unjust. Further, physical anomalies like that of WTC 7 indicate that no compelling case could likely be brought against Bin Laden because the extent of the damage at the WTC complex exceeds the amount of damage two airplane crashes alone could be capable of.

So, on this seven-year anniversary, I encourage everyone to resist the temptation to blindly accept the flawed official account of 9/11, and to revisit the issue with fresh, critical eyes. To illustrate what is likely at stake here, I leave you with the provident words of Voltaire: As long as people believe absurdities, they will continue to commit atrocities.