Fraudulent Debt = Counterfeit Money   (February 2, 2012)


How is borrowing money based on fraudulent claims of asset value and future income any different from counterfeiting money?

Let's compare three financial criminals. The first is an old-fashioned counterfeiter who doctors up paper and runs a printing press to produce fake currency.

The second criminal borrows money based on a fraudulent asset and phantom future income. For example, the criminal might obtain a credit card based on false assets and income, or borrow money against a property that is worth far less than he claims and base his credit on an inflated fantasy income he does not actually receive.

The third criminal borrows money from the Federal Reserve at zero interest and extends a loan to a fraudulent borrower because a government agency has guaranteed the loan. Whatever income the lender receives is pure gravy, and whatever losses are incurred when the fraud is uncovered are made good by the taxpayer.

Since our banking system is based on money being borrowed into existence (i.e. fractional reserve), then how is creating money unsecured by either assets or income any different from actually counterfeiting bills? The outcome is identical: money created out of thin air.

If I fraudulently obtain credit based on bogus claims of future income, borrow a large sum and promptly squander it on consumption, then the lender has no recourse: there are no assets to grab and no income to tap. In effect, I had a good time at the expense of all holders of the currency, as my money-created-from-thin-air diluted the currency without adding any productive value.

The way the debt-counterfeit game is played in the U.S., the lender is also a financial criminal who exploits the moral hazard extended by Federal agencies. If you can't lose money on a loan, then why not give money to fraudulent borrowers? As long as they pay enough interest to cover your origination costs, then the rest is pure profit.

We might also ask: how is writing a derivative based on false claims of asset valuation any different from counterfeiting? Once again the creation of an "asset" that can be sold to unwary investors for cash that is based on fraudulent claims of valuation is the equivalent of counterfeiting currency: both add no productive goods or services to the economy and both are created out of thin air.

Since the Federal Reserve creates money out of thin air to buy assets which can be sold later to credulous investors, then how is the Federal Reserve not counterfeiting dollars? It adds no goods or services to the economy and dilutes the currency, in effect stealing value from all holders of the currency.

The U.S. financial system is one vast, interconnected web of complicity, fraud and counterfeiting.

For more on our counterfeit economy and policies, please see Our Counterfeit Economy and Counterfeit Money, Counterfeit Policy.


If this recession strikes you as different from previous downturns, you might be interested in my new book An Unconventional Guide to Investing in Troubled Times (print edition) or Kindle ebook format. You can read the ebook on any computer, smart phone, iPad, etc. Click here for links to Kindle apps and Chapter One. The solution in one word: Localism.


Readers forum: DailyJava.net.



Order Survival+: Structuring Prosperity for Yourself and the Nation (free bits) (Kindle) or Survival+ The Primer (Kindle) or Weblogs & New Media: Marketing in Crisis (free bits) (Kindle) or from your local bookseller.

Of Two Minds Kindle edition: Of Two Minds blog-Kindle





"This guy is THE leading visionary on reality. He routinely discusses things which no one else has talked about, yet, turn out to be quite relevant months later."
--Walt Howard, commenting about CHS on another blog.


NOTE: contributions are acknowledged in the order received. Your name and email remain confidential and will not be given to any other individual, company or agency.

Thank you, Spike T. ($100), for your outrageously generous contribution to this site -- I am greatly honored by your continuing support and readership.   Thank you, Michael S. ($75), for your supremely generous contribution to this site -- I am greatly honored by your support and readership.




Or send him coins, stamps or quatloos via mail--please request P.O. Box address.

Subscribers ($5/mo) and contributors of $50 or more this year will receive a weekly email of exclusive (though not necessarily coherent) musings and amusings, and an offer of a small token of my appreciation: a signed copy of a novel or Survival+ (either work admirably as doorstops).

At readers' request, there is also a $10/month option.

The "unsubscribe" link is for when you find the usual drivel here insufferable.

 
 
Your readership is greatly appreciated with or without a donation.
For more on this subject and a wide array of other topics, please visit my weblog.

                                                           


All content, HTML coding, format design, design elements and images copyright © 2011 Charles Hugh Smith, All rights reserved in all media, unless otherwise credited or noted.

I would be honored if you linked this essay to your site, or printed a copy for your own use.


                                                           


 





Making your Amazon purchases
through this Search Box helps
support oftwominds.com
at no cost to you:


Add oftwominds.com to your reader:




Music/Songs:

My Big Island Girl
Thrill the players to bits:
buy it via CD Baby or
amazon.com (99 cents)

Instrumentals by my friend
and mentor Coconut Charlie:

Crash Course
Secret Asian Man
Third Stone
Tonic Float

Survival+   blog  fiction/novels   articles  my hidden history   books/films   what's for dinner   home   email me