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December 12, 2004

Economic Heroin
by Alex Wallenwein

Debt-based fiat money is the economic equivalent of heroin.

It has the same effect on personal, national, and global economies as heroin has on the human brain. Just like heroin removes the addict from interaction with other humans based on the common ground of everyday reality, debt money removes the financial decisions of individuals, organizations, and governments alike from the common ground of economic reality.

Natural and beneficial economic stimuli, both positive and negative, are replaced by a false sense of prosperity, the false panacea of never-ending global economic "growth", and phony sense of security. This addiction is constantly fed by ever-increasing amounts of additional debt - an empty, zero-calorie fuel devoid of real 'nutrition' that powers this massive, Matrix-like web of illusion, deceit, and enslavement of human productive capacity.

The best way to demonstrate how this works is to briefly look at the genesis of the world wide fractional reserve banking system, which culminated in the creation of the US Federal Reserve. Author G. Edward Griffin has already written "the bible" on that subject, but here is a super-brief synopsis of only the highlights as they pertain to the points made in this article.

In the mid-1600s, successful merchants and money lenders combined to persuade a government (the King of England) to give them a monopoly over the creation of currency for the realm. The pay-off was an unlimited "line of credit" on which the King could draw to fight his at that time losing war against the French. (Needless to say, the King was broke when these "benefactors" approached him.)

Thus, the Bank of England was established. It would have the exclusive right to print currency, which the King could borrow - at interest, of course - to fight his war and finance whatever other spending programs he had in place at the time.

The King in turn could tax his subjects to repay the money, so he didn't need to worry about his "credit rating" with the Bank. Because of this devil's bargain by which the King sold off his independence and mortgaged his subjects' futures forever, the King's money was no longer the King's. The Bank of England was now the owner of the money, and the King ended up forever in debt to the Bank. The more money he received from the bankers, the more he owed them. All was well in Banker-land. Successive waves of bankers convinced their countries' governments to enter the same Faustian bargain - with exactly the same result.

There was a big fat fly in the ointment, though. The money the Banks could print and loan to their respective monarchs was unlimited only in theory. In practical reality, it had to be backed by a certain amount of gold in the royal treasuries, or the public wouldn't accept it. There needed to be 100% convertibility for the money circulated among the subjects, so a minimum of roughly 40% of the paper-bills outstanding had to be backed by gold.

It took a couple hundred years before the public was sufficiently accustomed to using paper as money before a large-scale exit from the classical gold standard could be attempted. It occurred in successive waves until, in 1933, the US as the last major country went off the gold standard internally. About forty years later, in 1971, then-president Nixon completed the dirty deed, and central bankers were now free to finalize their effective control of all the world's political systems through having the exclusive license to fund their spending needs. The transfer of the Money Power from individuals, through governments, to the central bankers was complete.

Since 1971, all so-called "money" (officially created and circulated currency) has consisted of nothing but debt. All you need to do to verify that is to look at a dollar-bill. It states in big fat letters across the top that it is a "Federal Reserve Note". A "note" is defined in law as a written instrument evidencing a debt. This note is now useable in place for real money only because governments decree by law that these notes shall be "legal tender for all debts, public and private."

This so-called debt "money" is backed by absolutely nothing. If you want to redeem your note, the Fed is obliged to pay you - in precisely another note of the same kind.

This currency we call "the dollar" today is nothing but irredeemable debt. It is a sad testimony to how low our republic has sunk to see that it lends its lawmaking power to such an obvious ruse as to call something that is nothing but evidence of a debt itself a "payment" for all debts, public and private!

Americans - like citizens and subjects of any other country in the world - are forced to use this totally denuded currency for utter lack of a viable alternative. They are forced to work for this debt, or acquire it by conducting a business in order to feed themselves and their families. In effect therefore, legal tender laws effectively force you and me to work for nothing - in return for the questionable privilege of being able to "pay" others with the exact same thing!

Fast forward to today's Fed:

In addition to the Fed's outright printing privileges, currency is also created by lower-level banks in the federal reserve system. These banks make "loans" to private and corporate borrowers by creating nothing more than a bookkeeping entry showing a "credit" on the borrower's account. The bank in question simultaneously books an increase in its total "assets" that corresponds to that "credit" - because the borrower now "owes" that debt to the bank, and must work to repay it - or face collection procedures, a "bad credit rating," and eventually a lawsuit or repossession of any collateral.

So, in short, the bank only creates an entry in its books "crediting" the borrower with the sum borrowed. It gives up precisely nothing. No physical cash is transferred. But the borrower must work himself to the bone to repay an essentially fictitious debt. The irony is that the borrower must work to acquire more debt (incorrectly called "money" in common parlance) in order to "repay" its debt to the bank. That's how crazy things have become under a denuded world-wide currency arrangement based not on any kind of real wealth, but on negative wealth instead!

If you step back from this rat-race and look at it from a distance, you can immediately see that you are observing a modern, somewhat sanitized form of slavery.

In the old days, slaves at least knew that they were slaves. They were left in no doubt about that -and accordingly they were able at least in theory to do something about it. But this new and improved form of slavery is something to behold, indeed. As Goethe noted as far back as the late 1700s: "None are so hopelessly enslaved as those who falsely believe they are free."

Involuntary servitude (open slavery) was outlawed in the US with the 13th Amendment. But voluntary slavery (it should be called "ignorant slavery") is perfectly fine to this very day. And the central bankers of the world and their political henchmen are surely taking advantage of that fact.

How this system in effect works is allegorically depicted in the science fiction movie trilogy called "The Matrix." If you haven't seen these movies yet, go and check out all three sequels and watch them, one after the other, this coming weekend. You will immediately understand my allusions to it.

If you are not inclined to waste your time with midern pop-culture nonsense, here is a short run-down:

Humans create machines to serve them, but the machines develop consciousness and rebel. A war ensues. Th machines win, and they enslave humans by suing their life-energy as human batteries to power themselves. They have no independent life force.

In order to keep their human batteries happy and "productive" they plug their minds into computer programs that fake an ordinary, everyday "reality" in which all humans believe they live - while actually existing submerged in liquid and encased in pods attached to huge power plants.

Through an apparent malfunction in the system, some humans awoke from the program and saw their ugly reality. They learned to manipulate the program to enter the programmed "realities" of the other human batteries in an attempt to wake them up to make them join the resistance.

In the process, these new candidates for the resistance are given a choice: Take a blue pill and forget they were ever contacted by the rebels, or take a red pill and wake up to the ugly reality of the lie they have been living.

To decode the message of the movie and relating of the movie set-up to our world economic situation, consider the following:

The "machines" of the movie are political systems, governments, banks, and central banks which humans instituted to serve them, but they developed a mind of their own and surreptitiously enslaved human productive capacity to serve their own ends.

This essay, and a number of others written on the subject, are intended to have the function of the "red pill." Wake up from your mental conditioning, from your peaceful programmed slumber, see the ugly reality, and refuse to serve as a human battery of sorts to work for our economic masters for nothing but debt.

The economic Matrix system we live in can be likened to a number of other real-life scenarios as well. To return to our drug simile, the US Fed as the world's largest central bank issuing the world's reserve currency is acting like the king-pin of a drug cartel. The big-boss pusher gets the US government hooked on his debt-drug, and the government promptly sells its soul to him in return for unlimited blank-check writing powers. The government, in turn, is like a corrupt family father who gets his wife and children (its citizen-subjects) to work for him to make him the money with which he can buy more heroin from the pusher. In other words: the government must tax its citizens to repay the Fed-pusher for the debt-currency borrowed, with interest.

Who do you think has the real power in this arrangement? The supposedly "sovereign" government - or the pusher?

Don't even talk about sovereign citizens here. No one who owes money can claim sovereignty in any way. True, the founders wrote the Constitution so the citizens would be sovereign - but we citizens have squandered our birthright in return for the illusory convenience of this drug-like debt money.

We are debt-addicts, one and all.

Sorry to depict the truth in such a crass and unflattering way, but the truth just happens to be exactly that crass and unflattering. The hope is that this crassness will rattle a lot of people's cages and make them want to do something about the situation, and hopefully not just "something" - but the right thing.

It is time to take the "red pill" and join the resistance.

But we are not advocating armed insurrection here, nor are we advocating any form of sabotage or yet another "voter initiative" or some other useless device that only serves to strengthen this abusive system.

What is being proposed here is the cure. Not just another addiction substituted for the current one (as the fiat-euro happens to be), but the cure for the world's economic ills.

It is very possible to do this. Almost everything needed to make this a reality is already in place.

The US Fed 'drug king-pin' is losing its power because it no longer has the monopoly on pushing its debt-drug 'in the hood.' There's a new kid on the block, the euro, and most of the addicts want to get off the dollar-drug and switch to the euro-drug in the hope that they risk of economic suicide might be lessened.

This causes the 'street value' (forex value) of the dollar-drug to go down as demand is diverted by the competitor. The switch can only be accomplished slowly because the addict-countries economies are so hopelessly dependent on keeping their own currencies low against the dollar (to ensure export competitiveness) that they cannot afford to just 'switch.' However, the trend is already in place, and it is irreversible. The dollar is losing market share.

But the euro is no angel, either. It is just as much a debt-drug as the dollar is. There is only one little difference: The euro's central bank, the ECB, is predisposed against 'opening the gates' and flooding the EU and the world with liquidity. It has a firm non-inflationary policy bias in place, and it is upholding that bias against enormous pressure from member-country governments.

That makes the euro a little less lethal in the eyes of the rest of the world, and thus makes it the preferred debt-drug. The euro can therefore be likened to methadone, a drug often used to get heroin addicts off the 'brown sugar.' But methadone is also an addictive drug - only less so than heroin. The euro acts just like methadone.

In truth, the euro is he central bankers' last straw. They are intelligent and educated people. They know that their fiat-dollar system cannot last, and they are hoping to forestall the inevitable collapse by instituting the euro.

They may forestall - but they cannot cure the fiat disease with yet more fiat. All currencies are debt. Switching from one drug to another cannot cure the world's ills.

Only switching from a drug-laden intravenous feeding tube to real food can cure the disease.

The world's workers, businessmen, savers, and investors taken as a whole are like a mental hospital patient hooked up on intravenous feeding tubes. The patient needs to be kept sedated because, if fully awake and able to make his own decisions, he is far too much trouble for the 'doctors' (central banks) administering the drug. Therefore the economic 'food' these doctors are feeding this patient is heavily infused with economic heroin (dollar-debt).

Recently, the 'doctors' have concluded that the patient won't make it if they continue to give him heroin, so they decided to switch to the monetary equivalent of methadone (the euro). But this patient's salvation does not lie in switching him from heroin to methadone. To make it, this patient needs to get up and rip the entire IV-contraption out of his arm, suffer the withdrawal symptoms, and get on with his life while eating real food. Translated back into economic terms: he needs to get on a strict gold an silver diet.

Sounds simplistic? You bet! It's got to be.

If the solution isn't simple, if it can't be easily understood by ordinary people, then it's worthless - because then the "experts" (the doctors) can take over again and convince the rest of us to "leave these things in their hands."

That's precisely what got us into this trouble in the first place. We allowed "the experts" to obfuscate things to the point where not only us regular folks, but even they don't know anymore what "money" really is. The grand wizard of the fiat-Klan, Al Greenspan himself, has said he isn't sure anymore about how money can be defined! (Meaning: which paper-instruments can be properly called "money" and which can't)

'The cure' is a viable, private, parallel, non-state-sponsored,100% bullion content gold and silver currency, whose value unit (also called "the money unit") is stated in nothing other than its actual bullion-weight.

Why denominate it in bullion-weight?

Because it was the separation of the 'unit of account' function of money from the actual physical bullion content of former gold currencies that allowed bankers to slowly substitute paper-bills for real money. After all, both the bullion coin and the paper-bill were called a "dollar" before 1933, right? So, once the gold coins were confiscated and only paper-bills were left, people still had "dollars" to earn and pay their bills with, didn't they?

No problem. It's still "money", right?

Imagine what would have happened if pre-1933 gold coins had been denominated in bullion weight only. A "one-ounce", "half-ounce", or "0.1 ounce" or whatever gold or silver bullion coin. Now picture that all prices in the economy were expressed only in terms of bullion weight.

First of all, in such a situation it is far less likely that fractional reserve banking could have ever made it onto the world stage in the first place. Can you imagine accepting a piece of paper that claims to be an ounce of gold?

Of course, the paper could still have been a 'bearer note' that said: "Pay to the bearer one ounce of gold". And certainly, such paper could have been circulated in stead of the actual gold - but do you think FDR's confiscation effort would have been successful under those circumstances?

"Hello, Sir. We are from the FBI. We need you to give us all of your gold and accept these paper slips here that claim they are gold."

Don't you think Americans would have resisted a little bit more if they had been used to counting their money - and had been paying for stuff - priced in actual bullion weight units rather than arbitrary "dollar" units?

Under a full-blown Bullion-Weight Standard, the paper-notes would have never been confused with the real thing they represented. Nobody could be fooled into believing that paper is bullion, and it certainly doesn't weigh an ounce, either. But when the paper note and the underlying asset are called the same thing (i.e., a "dollar"), then this confusion is far easier to instill in people's minds.

Can you imagine paying someone the full price of a home in return for only a paper deed to the home - without there actually being a home? Then why would you work for a paper-bill that says it's worth an ounce of gold when you know there is no gold?

This Bullion-Weight currency must be created if the world's economies are ever to get on the right footing again. Anything remotely similar to the old gold standard with its denomination of currency units in arbitrary "dollars", "francs" or "euros" will lead us right back to where we are today.

You know that the world's governments will never be moved to do this because it will stop their unlimited borrowing and blank-check writing power dead in its tracks. So private individuals have to do this.

To find out more on how to help make this possible, you can go to this page.

Gold investors will be sorely disappointed when the expected crash comes and they have to first trade their gold in for fiat before they can buy anything. If there are not even the rudiments of a viable "gold economy" where people can buy and sell for bullion only, and things are priced in bullion-weight terms, and all currency units are counted in bullion-weight units, there will not be much of an economy left to enjoy your investment profits.

This is absolutely crucial.

Got gold?

Alex Wallenwein
Editor, Publisher
The Euro vs Dollar Monitor

Just like driving your car, investing only makes sense if you can see where you are going. The Euro vs Dollar Monitor is your golden windshield wiper that removes the media's greasy film of financial misinformation from your investment outlook. Don't drive your investment vehicle without it!

Copyright © 2003-2008 Alex Wallenwein

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