Borrowing, Printing, and War: How to Magically Create Money and Spend Forever

Research that shows that the modern explosion of US debt can, as plain as day, be attributed to fiat money. No-risk borrowing, backed by fiat money, allows politicians to spend without taxing. If not able to borrow so liberally such that they had to actually pay for things, the govt would be much more efficient, including in the wars after 9/11.

Let's say we have a frontier community. It's so far away from anything even airdrops can't get through. The people there have a million $1 bills. They have 100 log cabins. There are 75 children, with 25 of those families with children almost old enough to move on to form their own families.

There's some competition for the unused cabins.

The only source of income is derived from growing and selling a special blend of Marijuana (locally only) or a GM herb that provides plentiful fats, oils, proteins, starches and sugars ~ it's called "Schmoo Plant".

There's one bank with one banker. Every Saturday morning people deposit their surplus money from a week's work in the bank. The rest they spend on Schmoo and MJ.

Weekends are essentially one big party.

Eventually the bank gets enough $1 bills it puts up a notice "We Loan Money ~ Cheap Rates ~ Buy a House Now!.

One of the families decides its time for Junior to marry the girl next door (who's begining to show ~ a lot) so they go to the bank and borrow $10,000 at 1% interest to buy a house for the kid. He will, in turn, pay it back to the old man in profits from his MJ sales.

They pay the owner of the house the $10,000 and he takes it to the bank and deposits in his account.

The bank now has some serious assets. It has the $10,000 deposit just made from the home sale PLUS the outstanding $10,000 mortgage, PLUS they can prepare a 5 year plan for bank operations based on that guaranteed income of 1% per year on the mortgage.

So, how did that happen? The bank went from having $10,000 in public assets to having $20,000 in public assets ~ did they print money? Did someone start skinning Schmoo plants and writing out "IOU"?

Remember, with $20,000 in assets/deposits on hand the bank can make loans for the purchase of two more of the now empty cabins ~ and end up with $40,000 in assets/deposits. With 21 more empty cabins to sell in that community, the bank could end up with $250,000 in assets/deposits ~ and nobody has yet printed any money at all.

The cabins (in this case) had no value at all until someone mortgaged one of them. All at once the community with no value totally isolated from the rest of the world and otherwise inaccessible was worth 100 cabins TIMES $10,000 ~ or $1,000,000 ~ which is exactly equal to the cash in their pockets.

They can now go out and find another community somewhere else and buy electric radios, dish washers and maybe even those combo plastic back scratcher shoe horns!

The Schmoos can take a break for a few days. Their banker can also lean back in his executive chair and luxuriate in his new reputation as a RICH BANKER.

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