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Zeitgeist: Addendum - Part One - Page 4

Author: Edward L Winston
Added: August 16th, 2009

This is page four of part one of four in my series of articles on Zeitgeist: Addendum. Please refer to the introduction if you were lead to this page.

[Ron Paul]
...what is the advice that you generally get, and that is inflate the currency. They don't say debase the currency, they don't say devalue the currency, they don't say cheat the people who are saved, they say lower the interest rates. The real deception is when we distort the value of money, when we create money out of thin air, we have no savings yet there's so called capitol, so my question boils down to this: how in the world can we expect to solve the problems of inflation - that is the increase in the supply of money - with more inflation?

Of course, it can't. The Fractional Reserve System of monetary expansion is inherently inflationary. For the act of expanding the money supply without there being a proportional expand of goods and services in the economy, will always debase a currency.

In fact, a quick glance at the historical values of the US dollars vs the money supply, reflects this point definitively, for the inverse relationship is obvious. One dollar in 1913 required 21 dollars and 60 cents in 2007, to match value. That is a 96% devaluation since the Federal Reserve came into existence.

While the value of the dollar has gone down 96% in 94 years, the film does not take into account that wages have also risen since then and the fact much of the inflation happened after the Viet Nam war and during the energy crisis - there is not a simple 1% inflationary increase each year, it's much lower. 

Now, if this realty of inherent and perpetual inflation seems absurd and economically self-defeating,  hold that thought, for absurdity is an understatement in regard to how our financial system really operates. 

For, in our financial system, money is debt and debt is money. Here is a chart of the US money supply from 1950 to 2006. Here is a chart of the US national debt for the same period. How interesting it is that the trends are virtually the same, for the more money there is, the more debt there is, the more debt there is, the more money there is.

To put it a different way, every single dollar in your wallet is owed to somebody by somebody; for remember, the only way the money can come into existence is from loans. Therefore, if everyone in the country were able to pay off all debts, including the government, there would not be one dollar in circulation.

Even if the system did create "money out of debt", which it doesn't, changing it wouldn't make the system any different for the average worker. The working class competes for labor in the capitalist market because they have no way to create goods or services of their own and even before fraction reserve banking this was true. In fact, back then people were paid a lot less.

Workers are slaves to the capitalist system and their ability to exchange the value of their labor for money regardless of any debt anywhere. Moving away from fractional reserve banking would stagnate the banking system and would never benefit the worker.

Zeitgeist's real complaints are inherent in capitalism and are completely meaningless here. 

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