Gordon just finished delivering an introductory lecture on monetary principles to some new students who were given sunglasses and led out of Plato’s Cave earlier today. Let’s listen in as they ask some followup questions.

Q: So why is there paper money?
A: Under a hard money system, governments had to stop warring when they ran out of gold. When the king’s coffers ran dry, the game was over and the king got rooked. Another king with more gold checkmated the first king and took his stuff (and sometimes his queen), then went after a third king’s stuff. Under a fractional reserve paper money system, war can continue forever. Or at least until all the trees are gone.

Q: So kings of old only killed each other to get the other king’s stuff?
A: And to impress their girlfriends. But most of history’s wars have been fought over natural resources. Once it was just gold. Today it is oil. Tomorrow it will be water. Beyond that it could be air.

Q: Kings are monarchs, and monarchs can be brutal. Aren’t today’s governments kinder and gentler?
A: No, actually, hundreds of millions of people died at the hands of their own governments during the course of the 1900's. Today’s governments are said to be democratic, a word that the public has been led to believe means fair. All democracies throughout history have failed when the majority discovered that they could loot the public treasury at the expense of the minority. From there it was just a short downhill trip to totalitarianism.

Q: I see, but aren’t democracies better than monarchies?
A: That would depend on the monarch. There probably has never been a person born who would not eventually be corrupted by enough power. Aside from myself, of course. Plato suggested that the world would be best served if ruled by an all-wise philosopher king. Perhaps he had himself in mind.

Q: But where do the rulers come from? Can’t the common man get to rule?
A: No, that would be a little too democratic. Certain candidates are selected to emerge, then spend millions in corporate funding to run for office. They’d be more honest if they sewed sponsorship corporate decals on their suits like NASCAR drivers.

Q: Do the people really support these candidates?
A: Usually, but that’s because they don’t see that they have other choices. The author Douglas Adams said it best in an excerpt from his book, So Long, And Thanks For All The Fish. Let’s listen in as two characters, Arthur and Ford, discuss this very subject.

“The people hate the lizards and the lizards rule the people.”
“Odd,” said Arthur, “I thought you said it was a democracy.”
“I did,” said Ford. “It is.”
“So,” said Arthur, hoping he wasn’t sounding ridiculously obtuse, “why don’t people get rid of the lizards?”
“It honestly doesn’t occur to them,” said Ford. “They’ve all got the vote, so they all pretty much assume that the government they’ve voted in more or less approximates the government they want.”
“You mean they actually vote for the lizards?”
“Oh yes,” said Ford with a shrug, “of course.”
“But,” said Arthur, going for the big one again, “why?”
“Because if they didn’t vote for a lizard,” said Ford, “the wrong lizard might get in.”

Q: I think I’m beginning to see the light. So who selects the lizards, I mean, the candidates who get to run?
A: The private foundations and think tanks.

Q: And who chairs them?
A: The bankers.

Q: Where do the millions in campaign donations come from?
A: Largely from corporate donors.

Q: And who chairs the corporations?
A: The bankers.

Q: So where does the government get its army so it can kill other armies?
A: From the people.

Q: And why do the people serve in the army?
A: People who bathe in the light from their living room Telebeam believe that America is actually at military risk from other nations, when in fact America could turn out their lights in a nanosecond. Others serve because they need a job and the army will pay them to kill the other guy and break his stuff. In private life, premeditated murder will get you the electric chair. In the army, you don’t get prosecuted for killing strangers. Do it well and you get a medal. Keep killing them long enough and you get a pension.

Q: But how do the people know which other army to kill?
A: The Telebeam and other media outlets tells them.

Q: And who controls the media?
A: The bankers.

Q: How does the government pay its army?
A: With paper money.

Q: And who provides the paper money?
A: Why, the bankers.

Q: But where does paper money come from?
A: Rag linen from the flax plant is fed into one end of an intaglio printing press and legal tender coupons emerge from the other, each bearing the trophy likeness of a different deceased notable.

Q: Why do you say trophy likeness?
A: Because many of the people depicted on Federal Reserve Notes opposed paper money during their lives. Jackson called the bankers a ‘den of vipers.’ Lincoln referred to them as the enemy to his rear. Jefferson just thought they were creeps.

Q: When you say Federal Reserve Note, don't you mean a dollar?
A: No, a dollar is a unit of measurement, like an inch or a quart. A dollar was defined in the 1792 Coinage Act as 371.25 grains of pure silver. A Federal Reserve Note is about 1 gram of pure paper. The only difference between a $1 bill and a $10 bill is the ink required to print the extra zero.

Q: So who gets to print and spend this fresh paper money without being prosecuted for counterfeiting?
A: The Federal Reserve, of course. It makes them vastly richer, for a while.

Q: So does the Fed just print up all the paper money the economy needs and send trucks around the country to deliver it to the people for their use?
A: Certainly not, for then the people would labor no more than absolutely necessary. They would work mornings for themselves, then take the rest of the day off. Today they labor all morning just to pay the government 50% of their wages in the form of taxes, fees, fines and inflation which, of course, is the biggest tax of all.

Q: To whom are these taxes and fees paid?
A: Why, to the government.

Q: But isn’t’ the government just ‘We The People’?
A: No, only certain people.

Q: But why must everyone’s taxes be so high?
A: Because the government is so large and its workers must be paid. Besides, the government pays huge amounts of interest to the bankers for the use of their credit money, and someone has to pay all that interest.

Q: Couldn’t the government spend its own money to pay that interest?
A: Governments inherently have no money of their own. They get it by taxing it or printing it. The modern way is to do both.

Q: Why don’t governments just print and distribute interest-free money?
A: Because then there would be no inflation and the people would relax and work less. Less work would mean lower taxes. Lower taxes would mean smaller government. A smaller government would collect even fewer taxes and would therefore have even less money with which to pay the interest to bankers to create more credit money for them. It’s a downward spiral that could lead to a very small government and a great deal of personal liberty for the people.

Q: So the government delegates the credit money creation process to private bankers instead?
A: You’ve been paying attention.

Q: Is all of our money paper money?
A: It’s not our money, it’s their money. They just let us rent it from them.

Q: Got it. But, again, is it all in the form of paper?
A: No, paper money is but the small part of the currency iceberg that is visible. Most modern money is electronic and remains beneath the surface. It is born in a computer, travels between computers over electronic pathways and dies in a computer. A modest portion of it emerges as paper from time to time. I will henceforth refer to the whole lot of it as credit money.

Q: But why do ever increasing quantities of credit money need to be created in the first place? Isn’t there enough to go around already?
A: No, there is never enough for ‘tax and spend’ politicians.

Q: So how does new credit money come into existence?
A: When a banker issues someone a loan.

Q: Is this true of all new money, or just some of it?
A: All money, except for coinage which doesn’t amount to much. If every loan outstanding where paid back at at once our entire money supply would cease to exist. We are absolutely without a permanent form of money.

Q: So there is no new paper money created until the act of borrowing creates it, yet the additional money needed to pay the interest on this newly created money does not exist at the moment it is created, is that right?
A: Right. That additional money only comes into existence when even more new money is borrowed into existence.

Q: Wow. So the ever-expanding creation of credit money must be the largest Ponzi scheme in the history of the world.
A: Bingo. By its very nature, credit money is the ultimate ‘something for nothing’ scheme, violating in every way the TANSTAAFL principle.

Q: What does that stand for?
A: ’There Ain’t No Such Thing As A Free Lunch.’

Q: But doesn’t nature abhor a vacuum?
A: Yes, but bankers love one. Fresh credit money rushes into the economic vacuum created through fractional reserve banking. Maybe that’s the giant sucking sound Ross Perot once referred to. Ponzi schemes can be found everywhere but bankers rule the roost. Government sponsored wealth redistribution programs like Social Security where Peter’s pocket is picked to pay Paul stand a distant second. Bernie Madoff was a piker by comparison.

Q: This fractional reserve banking scheme sounds like it could expand forever.
A: No, only until it crashes. All paper monies throughout history have failed. This one will too.

Q: But isn’t our money system too big to fail?
A: Ask ancient Rome.

Q: So why do the people borrow so much money?
A: So they can have more stuff.

Q: Do they really need all of this stuff?
A: No, but the media tells them they do. Social approval requires that people have the same stuff as their neighbors. When new stuff comes out, they sell their old stuff on Ebay or give it away on Craigslist. You can get some great stuff that way.

Q: And who controls the media?
A: Why, the bankers.

Q: Whew, the bankers really have things wrapped up. So who are the bankers?
A: The members of dynastic families who chair the board of directors who oversee the corporations that run the banks that own the shares of the world’s central reserve banks. The knee bone is connected to the thigh bone.

Q: Where does the money come from for governments to make their interest payments to bankers for the use of their paper money?
A: From the public in the form of taxes exacted under threat of force, penalty and incarceration so everyone can be free.

Q: Why do the people pay these taxes?
A: So the government will protect them. Let me give you an analogy. There is a species of ant that herds an insect called the aphid, much as mankind herds sheep. The ant strokes the aphid with its antenna and the aphid produces a drop of liquid that the ant uses as sustenance. In exchange for the aphid’s generosity, the ant patrols the neighborhood and protects the aphid from its only known predator: the ant.

Q: Getting back to money, didn’t a high Fed official once admit that taxes are collected by governments to protect the buying power of their credit money.
A: Yes. Former chairman of the New York branch of the Federal Reserve system, Beardsley Ruml, explained this in a blockbuster 1942 essay titled Taxes For Revenue Are Obsolete. He said that since the government can print all the paper money it needs to pay its bills and meet its obligations, it has no need to collect taxes from anyone. But printing too much paper money would cause excessive inflation, even hyperinflation. So the government forcibly collects taxes so that when the people pay taxes to the IRS it leaves less spending power in their hands, therefore removing much of the excess created credit from the money supply, thereby controlling and protecting the spending power of the bankers’ paper money.

Q: Do you mean to say that the bankers can deliberately create more credit money than is actually needed, then mask the fact by getting the government to siphon some back off the top of the money supply through taxes that wouldn’t need to be collected in the first place if the government just printed and distributed its own money, interest-free?
A: Go to the head of the class.

Q: Wow, that’s quite a feedback mechanism.
A: Yes, it works just like the rubber ball in the back of the toilet tank. When the water gets too high, the valve shuts off. The water is the money supply and the buoyancy of the rubber ball is the tax rate.

Q: Jeepers, why do people put up with all this?
A: Because they don't know what is going on. Besides, they’re happier that way.

Q: Why doesn’t the government run public service announcements on TV to explain it all?
A: No one would watch them. Without wardrobe malfunctions, duck calls, people eating bugs for money and similar forms of entertainment, the people simply aren’t interested.

Q: So why don’t the preachers, priests and rabbis explain it from the pulpit?
A: Because they don’t work for real churches as described in the Bible and other religious scripture. They work for incorporated churches that apply to the IRS for tax exemptions. The IRS then perches on their shoulders like a little bird so it can keep a close watch on everything they say. If they cross the line, they lose their tax exemption and that’s not good for church business. After all, people don’t want to pass the plate if they can’t write it off on their tax returns.

Q: Aren’t there any public school teachers who are aware of these things? Why don’t they teach the children?
A: Because the Teachers’ Union won’t allow them. If they did, the state schools wouldn’t give them their fair share of free cheese subsidies from the federal government.

Q: Wow, they’ve pretty much got this whole thing locked down, don’t they?
A: Pretty much.

Q: But don’t the people want to be free?
A: A pet will not wander far from its food bowl and will love whomever feeds it. A taxpayer, especially a retired taxpayer, will not wander far from his benefits and will love whoever keeps the free cheese coming.

Q: Sounds to me like the public is pretty well conditioned to believe whatever the government and the media tell them. How long has this system of mass mind control worked this way?
A: For thousands of years. Today it’s run by TV. Who knows, maybe tomorrow it may be on a chip.

Q: Is government even necessary?
A: That’s an ongoing debate. Most governments throughout history have been little more than bands of elites in temporary possession of territory. The bankers had a hand in the writing of the U.S. Constitution to make sure that the new federal government would pay off the debts of the colonial government. They had a hand in fomenting the War of 1812, the War Between The States, World Wars I and II, and they’ve had a hand in the perpetuation of war — with occasional interruptions of peace — ever since.

Q: Can’t the people just govern themselves?
A: Apparently not. That was the great American experiment America’s founders had in mind, but it isn’t really compatible with lavish surround sound.

Q: So what can people who want to be self-governing do about all this? After all, the ant is much larger than the aphid, plus the ant has all the guns.
A: Yes, but the aphid has all the juice.