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Zeitgeist: Addendum - Part One - Page 5

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

This is page five 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.

"If there were no debts in our money system, there wouldn't be any money"
- Marriner Eccles
Governor of the Federal Reserve
September 30th, 1941
House Committee Meeting on Banking and Currency

I couldn't attribute this quote to Marriner Stoddard Eccles, I found it almost exclusively on anti-Federal Reserve sites, however.

In fact, the last time in American history the national debt was completely paid off was in 1835, after President Andrew Jackson shutdown the Central Bank that preceded the Federal Reserve. In fact, Jackson's entire political platform essentially revolved around his commitment to shut down the Central Bank, stating at one point, "The bold efforts the present bank has made to control the Government are but premonitions of the fate that awaits the American people should they be deluded into a perpetuation of this institution, or the establishment of another like it." Unfortunately his message was short lived, and the international bankers succeeded to install another central bank in 1913, the Federal Reserve. 

What Zeitgeist doesn't tell you is that we were in debt because of the war of 1812, which almost bankrupted the country. Since there was no central bank, private banks printed their own notes which caused massive inflation. In order to stabilize the country, the Second Bank of the United States was chartered[13][14]. The reason Andrew Jackson, and pretty much everyone else, wanted to shut down the Second Bank was because of mismanagement and not having the protections the Central Bank does now. The nation's money was removed from it and transferred to a different bank[14][15]. When Andrew Jackson said "or the establishment of another like it" he was referring to one like the Second Bank, not all central banks.

Most importantly, the national debt was $127,334,933.74 on January 1st, 1816 (the year the bank was established), by 1828 the debt was half that, and at the beginning of the year the Second Bank was essentially "shut down" the debt was $33,733.05 - that's before the bank was shut down and the lowest the debt has ever been, it's never been zero. Only two years after the removal of the Second Bank, the debt was $10,434,221.14 - more than twice what it was the year before the bank was removed[16].

In other words, the debt was "paid off" when the Second Bank was still in service, and the year afterward the debt went up again, and was over $10.4 million by the next year.

And as long as this institution exists, perpetual debt is guaranteed.

Now, so far we have discussed the reality that money is created out of debt, through loans. These loans are based on a bank's "reserves" and reserves are derived from deposits. And through this fractional reserve system, any one deposit can create 9 times its original value, in turn debasing the existing money supply, raising prices in society.

And since all this money is created out of debt and circulated randomly through commerce, people become detached from their original debt and a disequilibrium exists where people are forced to compete for labor, in order to pull enough money out of the money supply to cover their costs of living.

It doesn't matter at all whether or not the money is debt because in capitalism people must always compete for jobs. They don't complete for jobs because of "debt", they do it because they must sell the value of their labor as a means of making money. They don't own the means to create products or services so they "sell" their labor to someone who does.

The notion that "debt is slavery" to the average worker is asinine beyond comprehension, regardless of debt workers must still sell their labor in capitalism and are slaves to that, not the supposed debt behind money.

For the sake of clarity, I will state this all again:

These problems are inherit in capitalism, even a magical "zero inflation", "zero debt", decentralized banking monetary system would yield the same results as the current one. If you are poor now, you'll be poor then. In capitalism people will always compete to sell their labor, even prior to the Federal Reserve System there was the need to work and everyone had to. Removing the Central Bank will not change history or capitalism.

Let me pose an argument to you: if what Zeitgeist is saying is true, and under Andrew Jackson the debt was completely paid off because he removed the central bank, does that mean nobody had to work, nobody had to interview for jobs to compete in the labor market? Did all of that disappear just because of the null debt and lack of a central bank as Zeitgeist is clearly implying?

No, it didn't.

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