Houses of Cards, to the Third Power;

the Basis of Civilization.

Natural-Law copyright by

Anthony Hargis

(Copyright notice:  to lawfully reproduce all or part of this article, the following attribution must be included: “Natural-law copyright by Anthony L. Hargis, http://www.redressofgrievance.biz; 2427 N. Tustin Av Suite B, Santa Ana, California 92705”)

Where men choose to be ignorant – as in drunkenness, nature multiplies the punishment.

See Aristotle

N. E., III, 3, 1113b.

The facts relating to events of 9/11 make many people suspect that the government was complicit in the catastrophe.  The magnitude of the attack and, to a sensible man, the impossibility of concealing the real perpetrators demonstrates the desperation of the conspirators – and that some epochal event is in the planning stages.

They have been preparing for this epochal event for more than two hundred years; and they aim at nothing less than a genuine Old-Testament genocide of the American people.

Its origin traces thru the American Revolution; the English ruling class has never conceded loss of the American colonies; and so, this English ruling class is a prime player in this genocide – they conspire with the Jewish nation, which has perpetrated scores of genocides over the last ten thousand years [see Exodus #23, part 1 and part 2].

Budget Alternatives

My object here is not to repeat what I have written elsewhere, but to examine the mechanism and measure of this genocide that looms on the horizon.  The mechanism is governmental debt; and the measure is the amount of that debt.

To understand this, it is necessary to understand the effect that government has on society relative to whether its finances are a) balanced, b) in surplus, or c) in deficit.

Two facts to recognize here are that governments (1) suppress economic activity with the tax collecting process, and (2) stimulate the economy with the spending of money.  And, in both cases, the suppression and stimulation are artificial; that is, the money spent, for example, would be directed to purposes that a free market would never tolerate: it represents a mal-investment that, eventually, has to be corrected; and the suppression from tax collection compounds and intensifies the mal-investment.  In other words, while governmental spending stimulates activities a free market would not tolerate, tax collections suppress activities a free market encourages.   The correction always includes bankruptcy of favored industries, and a rebuilding of those that were suppressed or destroyed by the artificial spending and collections.  The explanation of this correction points to a disaster that compounds the one we discuss here.  But see, America’s Great Depression.

Another fact that has been proved by all our history books is that (3) governments are the gathering places for idiots and criminals - those who can only prosper thru crime and by submission to those who do so.  This necessarily means that (4) money collected and spent by governments will always be less efficient than if done by private hands; and the waste will grow proportionately with time – as idiots and bandits come to dominate offices of government, and displace those with misplaced ideals.  When we combine these four facts together, we arrive at the following conclusions.

When governments collect and spend equal amounts of money, the net effect will always act to suppress economic activity – with the suppression (proportional to the waste) increasing year by year; and people will tolerate it for only a short time.

If a government were to spend more than it collects in taxes, the net effect would usually be a toxic stimulant to the economy; the controlling factor here is that the net spending has to be greater than the inherent waste of government.  This stimulant, as noted, is artificial – a kind of economic drunkenness.  This net spending by government is made possible by governmental borrowing: borrowed money can be spent in the present without the necessity of simultaneously imposing taxes.

Governmental debt is a two-sided coin: on one side we have government borrowing money for current spending; on the other side there is the necessity to impose taxes, sometime in the future, needed to retire the debt.

In America, over the last eighty years, we have seen only the first side of this coin; the taxes needed to payoff the debt have yet to be imposed.

That is, when government spends more money than it collects, the stimulus of spending is felt without the retrograde effect of taxes.  But the problem here is that the borrowed money has to be paid back sometime: taxes have to be imposed five, ten, or fifty years later to payoff the borrowed money.  The alternative is the bankruptcy of those who trusted, or relied on, government.  At that time, the retrograde effect of taxes would be felt, without the stimulus of spending; and would provoke a massive slave revolt – a situation no bandit could survive.  This is the process by which one generation of Americans can financially cannibalize future generations; and the threat of a slave revolt is the reason it can never be corrected until there is a total economic breakdown.

Another consideration: Americans complain about some activity of government, seek to correct it and end in futility – and wonder why they fail.  When governments spend and tax equal amounts of money, both the hardship of taxes and the stimulus of spending are felt at the same time.  This forces governments to be tolerably sensitive to the complaints of citizens – and keeps its rapacity relatively checked.

When governments spend more than collected taxes, the hardship of taxes is relatively absent – and the easy money of government hand-outs makes citizens grow lax in their supervision of government.  Here, governments can borrow against the future and bribe citizens who would otherwise complain with, figuratively, the flesh of their own children and grandchildren.  The restrictions originally imposed against government disappear – and it perpetrates one crime after another, at an ever-increasing frequency, and magnitude.

In other words: a government, with a balanced budget, is the process where the many are oppressed by the few.  A government with a deficit budget is the process where the many eat their children and grandchildren; and the living have little or no incentive to stop the process – and future generations have no knowledge and no capacity to complain of what was done to them prior to their birth.

This is why nothing less than another revolution will be required to bring government to account.

The Measure

At this time (2006 December), federal debt stands at something like fifty-three trillion dollars – some five trillion more than a year earlier.  There are two parts to this debt: some nine trillion dollars are represented by U. S. Treasury obligations – that is, money that was actually borrowed; and the remainder, forty-four trillion dollars, is represented by future obligations – such as Social Security benefits.

These numbers are reported by the federal government; and they are significantly understated... or, perhaps mis-stated.  The Treasury obligations (nine trillion) are measured in current dollars while future obligations are measured in “present value” dollars.  These are two different units of measure: to add them to one another is like adding apples and oranges; feet and yards, minutes and hours - men concerned with truth neither perform, nor accept, such operations.  To add dissimilar units of measure, it is first necessary to convert one to the other, and then add.  When we convert “present value” dollars to current dollars (that ordinary people use) and then add Treasury obligations and social responsibilities, we arrive at a total of two hundred trillion or one hundred and seventy-five trillion dollars (as of September 2006); these two numbers are according to two sets of assumptions provided by the government, with the lower probably the more realistic set.  See the article Bad News... for a more extensive explanation.

When people lend money to an institution, they do so with the expectation that it will eventually be repaid.  But in this case, the expectation is badly placed.  This debt can never be paid.

Let us consider only Treasury obligations (the nine trillion).  For the past five years or so, the federal government has operated with a deficit of between three hundred billion and five hundred billion each year.  In other words, Americans are cannibalizing future generations at the rate of half a trillion dollars a year – and the American economy is barely surviving.  If America were a farm, we have a whole nation eating its seed corn – which guarantees starvation and cannibalization tomorrow.

As noted, if the federal government were to operate with revenue balancing expenditures, it would act as a continual drain on the economy, and would precipitate a financial crisis far in excess of the depression of the 1930’s.  Bankruptcies and unemployment, turmoil and crime, among other activities would increase to levels this country has never seen before.  Death squads would rule cities and countryside.  For these reasons, a pay-as-you-go governmental policy is a thing of the past in this country – we will never see it again.

But, just for the sake of demonstration, let’s overlook this reality for a moment to see what would be necessary to payoff the Treasury debt. 

Currently, U. S. Treasury debt approximates nine trillion dollars.  If the federal government were to operate with a surplus of one hundred billion dollars each year, it would take nine hundred years to retire this debt.  This omits the other obligations adding to some one hundred and sixty-six trillion dollars.  Remember, to operate a government with revenue equaling expenditures would cause a drain on the economy; this surplus would precipitate a major depression.  And there is nothing like an economic catastrophe to cause people to look super critically at government activity.  When people realize that they have to pay for government actions like Operations Phoenix, Keelhaul and 9/11, they will simply refuse to support the government.  People will not suffer nine hundred years of hardship for the sake of such Operations.

It cannot, and it will not, be paid; John Williams of Shadow Statistics claims that, even if the government imposed an income tax of one hundred percent, the federal government could not balance its books - and this is based on numbers derived by adding apples and oranges; when we correct for this error, we see that a tax on incomes of four hundred percent could not balance the government's books.

This makes US Treasury securities nothing more than a financial house of cards... a piece of paper with less value than if it had no ink on it.

Because of the impossibility of paying the government's debt, the value of US Treasury securities is zero.  People and companies, governments and banks carry them on their balance sheets because they believe the US Treasury will, someday, be able to collect taxes necessary to pay such debt, which, as explained, is impossible.  In other words, the value of a piece of paper, such as a US Treasury security, is equal to the possibility of converting it to real goods.  As this fact works its way into the markets and minds of the world, the value of the dollar will go to zero; for, US dollars are loaned into existence in exchange for US Treasury securities.

This makes the US dollar a house of cards built on top of another house of cards.

What will Americans do when it comes time to pay this federal debt?  Americans will repudiate it – not because of any philosophical or ethical considerations, but - simply because it is impossible to pay.  If a reasonable fraction of Americans had any ethics, governmental debt would never have been allowed.  Americans will repudiate the debt simply because repudiation is preferable to enforcing the cannibalistic intentions of their parents and grandparents.

This is only reasonable; for, when one generation of Americans implements a policy of cannibalizing their children, the process had better be done quickly; for, if it is delayed, it will remain to their children to carry out the policy of their parents.  For this to be successful, it is necessary that the policy be beneficial to both parents and descendents.  Here, it is unrealistic to believe that a man would cannibalize himself.

You can prove this yourself, put your finger in your mouth.  Now start eating it; and see how far you get.

Even if your father were standing over you with a whip, I doubt you would eat your own finger.

Do you see now, why a policy of cannibalization must be executed quickly?  Those who are to be cannibalized cannot be expected to enforce the policy.

The deadline for ‘quickly’ is long past, this governmental debt will never be paid.

As people understand this situation, the consequences will be earth shattering.

Import goods, export inflation.

From barbarism to civilization requires millennia; from civilization to barbarism needs but a day.

See Durant

vi, 190.

Ordinarily, governmental debt causes an inflation of the currency proportional to the amount of the debt.  This is so because governmental debt and the quantity of currency are directly related: that is, US dollars are loaned into existence in exchange for US Treasury securities.  Thus, inflation is introduced when and where new currency is loaned against the debt.  In other words, it is the purpose of the Federal Reserve (America's central bank) to take one piece of bad paper (a ten thousand dollar US Treasury security) and give back a thousand pieces of bad paper (one thousand ten dollar bank notes).

With the current federal debt, only a small fraction of the expected inflation has occurred.  What happened to the remainder of it?  A very simple answer: this country has exported the missing inflation to other countries in exchange for economic goods.

Here is a step-by-step explanation as to how it happens.

Suppose that you buy an automobile made in Red China (or any other article made in any other foreign country).  You pay for the car with a check drawn on your bank.  To simplify this explanation, let’s skip a layer or two of middlemen; hence, the Red Chinese carmaker eventually receives your check for dollars.

The Red Chinese car maker cannot use your dollars; so it takes your check to The Ninth Socialist Bank of China and exchanges it for Red Chinese currency; now the car maker can use your “money” for its expenditures.

But now, Ninth Socialist Bank (NSB) has your check, and cannot use the dollars it represents.  So this bank delivers your check to the Bank of China (China’s central bank); NSB receives new, freshly-printed Red Chinese banknotes in exchange for your check; that is, at this point, your check causes new money to come into existence in Red China – which eventually leads to inflation in that country.

At this point, the Bank of China (central bank) has your check, and cannot use the dollars it represents.  So this central bank sends your check to New York for deposit in its “checking account” at the New York Federal Reserve Bank.  The New York Fed then sends your check to your bank where it is paid against your account.

We are not quite finished with this transaction.  Once your money is in the Red Chinese account at the Federal Reserve of NY, managers of the Red Chinese central bank instruct the Federal Reserve to invest something like ninety percent of your money in “the world’s safest investment”: U. S. Treasury securities.  At least they think it is a safe investment.

This completes the transaction relative to your check.

Thus, you have bought a Red Chinese auto, essentially, with U. S. Treasury securities.  That is, Congress will eventually have to impose taxes on your children or grandchildren in order to pay for your Red Chinese auto.  As I’ve noted, it won’t happen.

The Bank of China is like any other central bank, its purpose is to monopolize the issuance of currency, and to issue such currency against governmental debt.

By the process described, the Red Chinese currency becomes a house of cards built on top of two other houses of cards: debt securities of the Red Chinese government and debt securities of the US government; that is, the Red Chinese currency becomes a house of cards to the second power.

If Red China had demanded real goods, instead of U. S. Treasury notes, for your check, the inflation would have occurred in this country.

The United States has been a net importer of economic goods – that is, a net exporter of inflation – for at least thirty years: the current rate of net imports ranges between half a trillion and a trillion dollars a year – roughly equivalent to the Treasury deficit each year.  Remember, when this country imports goods – and does not pay for them with equivalent goods, an equal amount of inflation is exported; the accumulated total, regarding all foreign countries, ranges from two trillion to four trillion dollars of exported inflation.  That is, foreign banks and investors hold U. S. Treasury notes ranging somewhere between two trillion and four trillion dollars.

(The latest statistics from the Federal Reserve indicate that such notes held by foreign banks ranges between 2.09 and 3.77 trillion; these numbers are derived from table 1.18, line 34 (as of 2006 August) and table 1.41 at line 27 (as of 2006 June).  Owing to the reputation of government related entities to generally understate undesirable facts, I use the range two to four trillion.)

When we see that the purpose of central banks is to convert one piece of bad paper (government debt) into many smaller pieces of bad paper (currency) - and that all but a handful of countries are dominated by central banks (all economic wastelands), we see that all the world's commerce is built precariously on houses of cards, to the first, second or third powers.  The Euro, issued by the European Central Bank, is issued against thirteen European currencies (which are partly issued against their respective governments' debts and partly against US dollars); thus, it is built on top of thirteen houses of cards, which are built on top of another house of cards.

Someday men should come to the conclusion that civilization should be built on something more substantial than houses of cards.  They should... but, I am afraid that too many men have become addicted to the flesh of their young.

The only thing that allows this ponzi scheme to continue is the assumption that, someday, the U. S. Treasury will be able to impose taxes on future generations of Americans – that future generations of Americans will cannibalize themselves for the folly and crimes of their parents.  When a few foreigners begin to demand payment for their goods with gold or other economic goods, the scam will be over.  The exported inflation (two trillion to four trillion) will be brought back to America.  It took forty to fifty years to export this inflation; it will come back in a matter of days.  And the value of the dollar will decline at the same rate as inflation returns – and possibly go to zero value.

Then we will have a demonstration of Will Durant’s remark about civilization and barbarism – on a global scale.

The Multiplication of Drunkenness

There is more, when the central bank of Red China prints new Red Chinese bank notes, this new currency becomes part of the reserve money of Red China.  When this money is deposited in the Ninth Socialist Bank of China, it allows this bank to expand its loans by a factor of at least seven times the amount of the new currency – the same process as in America.  In America, the ratio ranges between seven to one and nine to one; in other countries, it ranges between ten to one and twenty to one.

By this process, every major banking system in the world uses U. S. Treasury notes for a sizeable percentage of its reserves, as a rational banking system would use gold for reserves.  I explain more about this aspect in my article, ‘Money of Cannibalism.’

Thus, owing to this multiplication factor, the two trillion to four trillion of U. S. Treasury notes held by foreign banks, has inflated foreign money supplies (thru the process of foreign bank loans) in amounts ranging, at least, between fourteen trillion and twenty-eight trillion dollars – if the multiplication factor is seven to one; thirty trillion to sixty trillion – if the factor is fifteen to one.

When enough people lose confidence in the ability of the U. S. Treasury to collect taxes, the value of the dollar will decline – possibly to zero.  For every dollar of lost value, the Red Chinese banks will have to reduce their loans by an amount at least seven times greater than the lost value; not just one Red Chinese bank, but all of them.  In other words, just as a deposit of  one hundred dollars (or yuan) in a bank allows it to expand its loans by seven hundred, so a withdrawal (or loss of value) requires it to contract its loans by  seven times the amount.

The same thing will happen to every banking system on the planet.

These men and women who put together this policy of borrow and spend may have congratulated themselves as they imagined they had invented a thief’s paradise; but, the day will come when the Pied Piper will stand at the door with his invoice – and will collect.  Then they will learn they have, instead, built a fool’s paradise; for, the restraints against crime and sleaze, that had been absent for eighty years, will return with a vengeance – and men will have to account for what they have done, in multiples.

The End Game

He who benefits from crime is as guilty of crime as he who perpetrates crime.

Let us paint this picture clearly.

When men give money to a government, whether by purchase of government debt or by payment of tax, exactly the same physical transaction takes place: money is placed in the hands of government.  The only difference is that, in the first case, men expect to get their money back, and do not count it as a loss; in the second case, men count the money as lost, with, ordinarily, no chance of recovery.  Of course, when men in the first category discover that their government notes are impossible to collect, then they will count such money as lost.  And, when men in the second category understand that they have been forced to pay taxes by unlawful authority – and that such taxes have been used to finance their destruction, they will demand their money be returned to them.  The two categories of men will experience a polar shift of attitudes; and, since the second is more numerous than the first, consequence will be fatal for men in the first category.

There is more.

On one side there is a nation of pirates and cutthroats, and their useful idiots, in every country, who have planned and expect to benefit from this genocide against Americans – and they hold some nine trillion (and growing by half a trillion a year) in U. S. Treasury notes; on the other side, there are the clueless American taxpayers – who were not even alive when this debt first established the necessity to eventually impose taxes on them.  This tax was effectively made necessary without a trace of representation – a major requirement for a tax to be constitutional.

On one side this nation of bandits and cutthroats have conducted scores, perhaps hundreds, of genocides over the last ten millennia (see Exodus #23 part 1 and part 2) – and have accumulated the corresponding guilt; on the other side are those American taxpayers whose guilt consists of participating in the finest experiment, so far, in human liberty.

On one side is the nation of cutthroats who have captured every government on earth; on the other side are those American taxpayers who possess enormous power – and haven’t a clue as to how to collect or use their power.

The hammer is poised; that it exists, and will fall, are beyond question; it only remains to be determined on which side it will fall.

If it falls against Americans – and, owing to its magnitude, ten thousand years of civilization will be practically destroyed; if it falls on the other side, the nation of cutthroats – and its useful idiots – will feel the consequences of ten thousand years of guilt; and, with them removed, a new and unprecedented era of human liberty will commence.

We are, like it or not, involved in the end game – a contest like no other in human history.

These are the issues and the perspective you should maintain as you read my article, ‘American Assemblies,’ and then my book, The Lost Right.  There, you will find procedures we must re-establish, grievances we must redress, stories we must re-live.

You see, our history has already been written, starting some four hundred years ago.

See also, ‘Bad News for Alternative Health Advocates‘ the system-dooming effects of Medicare.

Home