The National Debt Cannot Be Paid Off
By Keith Weiner
GoldSeek.com
Thursday, 27 February 2014
Government spending is out of control and, while most say they want spending cuts, people oppose cuts that impact them. Among those who get government money, there’s practically an unspoken, unbreakable pact to keep the money coming. But when I say that the national debt cannot be paid off, it’s not a political forecast; it’s a statement on the flawed nature of the dollar.
Astute observers call the dollar a fiat currency. Fiat means force. It’s true that we’re forced to use the dollar (e.g. by taxes on gold) but the dollar is also irredeemable. There’s no way to cash it in. The dollar is credit that is never repaid. Today’s dollar is a dishonored promise.
This was not always true. Before 1933, the dollar represented an obligation to pay 1/20 ounce of gold. People could deposit gold and get paper notes in receipt. Those notes circulated, and any bearer could redeem them for gold. Back then, $20 was not the gold price. It was the legal rate at which gold was deposited and redeemed.
In 1971, President Nixon changed the monetary system with the stroke of his pen, making the Fed no longer obligated to redeem dollars for gold. The consequences of using debt as if it were money were soon clear. Rising debt became a more serious problem than rising prices.
To understand debt, credit and the importance of redemption, consider Joe borrowing sugar from neighbor Sue. To pay Sue back, Joe goes to the store, buys sugar and hands it to Sue. Not only is Sue repaid; the debt goes out of existence—it is extinguished. Borrowing money used to be like borrowing sugar. The repayment of debt in gold-backed dollars settled the loan and wiped the debt clean.
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