September 29, 2012

The 47% Theory On Free Health Care

I thought we were always 100% in this together.
By Melvin J. Howard

Imagine I am running for the highest office in the free world the President of the United States Of America and you overheard me say in a private meeting to a group of wealthy donors something like this almost half the voters in this country 47 percent believe they are "victims" and expect the government to provide free health care, food, and housing. And then I go on to say of these people, "I'll never convince them that they should take personal responsibility and care for their lives." What would you think? First off you would think I just alienated and pissed off half of the population that I hope to govern one day. Secondly you would think this was a dishonest and unfair general characterization of the people of whom I am referring too. Unless you are a hardcore trained financial quant analysts you will not get how our financial and free market system really works. It is technically to complex.      

Follow me down the rabbit hole we call our financial system and I will show you why. Did you know that as little as 4% of the money in the world exists as paper cash and coins. To put it in another way, for every $100 or its equivalent in any other currency, only about $4 exists as printed-paper notes or coins, while the remaining $96 exists as (just numbers written on papers and computer disks)! If you walk into most bank branches in the world and ask for more than $10,000 in cash, from your own account, they will politely let you know that you will need to give them a few days advance notice so they can get the money ready for you. If you don’t believe me try it. Unless you live in New York City or some other high finance center, you will be unable to get that much cash in physical form if you just show up unannounced to withdraw your account. You would think that most banks would have enough cash to pay off a person who walks in to withdraw just $10,000. But most bank branches can't do that in this world. Why? The money, in physical form, does not exist why not? To answer that question, we will first pursue the issue of what money is. So back we go OK, now, when you go to the ATM cash machine and look at your bank balance and it tells you that you have $1,000 left in your account, what is that $1,000? What is it? Yes, what is it? Don’t just say, “It is money”; you need to define it for me what it is? Imagine I was from another planet and asked you this question. What would you tell me your $1,000 on that ATM slip is? That is the question.

Once you have gone over several possibilities in your mind, here is the answer. The $1,000 is simply a recorded number.  Numbers written on a paper or computer disk you have agreed to it, your bank has agreed to it, and you even agree to use it in a cashless way by paying for things using your ATM card. The $1,000 printed on the ATM slip does not represent any sort of wealth that the bank is keeping for you. It does not, for example, represent the value of diamonds the bank is keeping for you in a safe. The only difference between the $1,000 written on that ATM balance slip and $1,000 you would write on a piece of waste paper is that the one on the ATM slip is on record as having been agreed upon by whomever you bank with. If you took that slip, or your ATM card, to a country or civilization (on Earth) where they don’t share your system, they would look at you as if you were crazy as you tried to buy real goods and services with a piece of plastic or a paper with a number written on it. The point of all this is to show you that the money we use in what you might call the Western civilization of today is 96% imaginary numbers written on invoices, slips, and computer disks, while 4% of it is in paper and coins. That 96% does not exists in the sense that you cannot possibly go anywhere on this world and hold it, touch it. It is nowhere! It physically exists nowhere at all on this planet. You cannot see it, feel it, taste it, or touch it. It doesn't exist! The only reason it works is that we the people have agreed on it and we act in predictable ways when certain numbers are written down for us in our name. Now that we know what 96% of it is, let us see what the remaining 4% is.

The 4% that exists as physical real ‘things’ is not made of gold or anything valuable at all. It is made of funny colored pieces of paper, and cheap alloy coins not worth their own weight in money (they are made cheap so that people don’t profit from melting them into iron).  So what is real, people and people believing on what they can accomplish if they put their minds to it that is real.

Let’s begin with debt, because here lays one key to much of the puzzle we find our self and the economy in today

Healthy vs. unhealthy debt

There is nothing wrong with debt, when used healthily as a tool. But when it arises, as it mostly does, from fear, feeling of lack, and negative self-worth beliefs, then it is a control game being played, a painful one at that. Additionally, what most people don’t know is that debt, in our current civilization’s money system, is designed to collapse for a certain number of its holders I bet you didn't know that did you?

The Medici The Kings of the Renaissance

Before cash money was invented in it’s present form, people used to trade by barter. They would exchange goods and services. Finally, one day, a powerful merchant family such as the Medici family of Italy (powerful merchants and later bankers who ruled through influence between the 13th and 18th century i.e. the Renaissance) said, “We have another way we can do this. We can make promissory notes we shall call money. They are more convenient to carry than goods and gold.” The first paper money worked as follows. A trader would go exchange his or her goods for gold. They then take this gold to deposit it with the Medici, and the Medici write up a paper with their signature and family seal, a paper that would represent the gold that was deposited with them. This paper, upon return to the Medici, would be exchanged into its gold equivalent. That concept is where the gold standard came from.

Now let us look at debt. Imagine that the Medici have just opened up their first bank and announced the new scheme to the traders. So one trader, let us call him Melvin, goes to the Medici and deposits $100 worth of gold. The Medici make up a paper saying that they promise to exchange that paper for $100 worth of gold upon its return (less a banking fee, plus an interest, whatever). Now another person comes by the name of Alan then takes this paper and goes home. Alan can use this paper to buy things, but let us assume he does not. So far, he is the only customer at the Medici’s new bank. Now James, another person, wants to start a new business, a hotel. He has the land and building but needs some pots and pans. He does not have any goods to trade in exchange for pots and pans, but he hears that the Medici is giving “loans”. So James goes to the Medici and asks for a $100 loan. The Medici says they can do that, but James has to pledge his land and building as a security, collateral, in case of default. The Medici makes up money (money that did not exist prior) by writing up a new paper, sign and seal it, and give it to James. The condition is that on return, James has to give back $100 plus $10 interest. Now freeze that right there. Imagine that James and Melvin are the Medici’s only two customers at the time. 

This means that the economy only has two paper notes out there, one with Melvin and one with James. And James has to return his plus $10. Where will James get that $10, unless Melvin comes and rents a room at James’ hotel for $10? The Medici did not print the extra $10! So even if James is hyper-careful with his loan, even if he does not spend it at all but returns it after a year, the $100 intact, it is physically impossible for him to pay the $10 interest. This is because he cannot print the extra $10 money and Melvin does not want to spend his money at the hotel, yet Melvin is the only one with the only other note printed! Do you see the error in this system? Even if James now has goods to trade, he cannot trade them for paper money because there is no more out there and the Medici wants cash money or the collateral. James will have to lose his hotel to the Medici simply because of a paper shortage error. He has the original $100 they gave him because he did not spend it, but he cannot possibly get the $10 they want in addition as interest, because he can't print money nor does the only other person with bank notes want to stay at his hotel and pay cash. His hotel may be highly successful, renting rooms in exchange for goods, but he still would not have the printed paper for $10 that he has signed to give back to the Medici as interest. So his hotel would have to be seized by the bank.

This example shows exactly how our modern civilization’s debt system works. But because there are millions of people playing this game, the players don’t realize there is a problem because only 8% of people are caught by this error (about 8% of all debts are un­payable). And those that are caught by this error think there is something wrong with them the so-called 47% of the U.S. population they never imagine that the system itself is flawed are you getting this have we gone down far in the rabbit hole yet? Debt, by its very nature, in our current financial system, is designed to fail for a certain percentage of the population, no matter how much effort or care they put into it. And it is so simply because there is not enough money created (printed) for the interest requested. The only reason this illusion has managed to run this far is that there are millions of players rotating the money and it looks like it works for most people, which makes the few it doesn't work for look like something is wrong with them and not the system.

Every now and then, when the debt bubble bursts like in 2008 that some become aware of this glitch. As you are about to see next, inappropriate use of debt is a function of control and fear. Unhealthy debt is a product of fear, and a deep-seated belief in not having and not being able to have. And fear is a means of control. Now, let us consider the mortgage game that many of us whether we like or not are playing right now. Mortgage what does that word mean? Where does it come from? Split it up and look at its origins. Mort, mortuary, morgue... do you see the root? Gage, engage. Engaged till death. Why would your house loan be called a name that has its word origins from the words that mean death and engagement? Why those two? Of all the millions of words, why those two?

Nevertheless, the unhealthy type of debt is a function of fear and self-worth issues. Remember, we are not judging anything here. We are merely observing basic facts.  There is nothing wrong with debt, when used as a tool. But when it arises, as it mostly does, from fear and negative self-worth beliefs, then it is a control game being played, a painful one at that. A game we created and continue to create.

The Federal Reserve Banking System began when, in 1914 and after trying to do so unsuccessfully several times before due to opposition when 300 people and banks put together just $100 each and formed the Federal Reserve Banking System. The job of the Chairman of the Fed is to keep the economy going in a certain direction, and he manages that consistently for many years and that is why people find him powerful. The point is, he can and does shape the economy. That is his job. Now, in the minds of most people, the economy is some wild crazy thing. But what if it wasn't wild at all? What if it was very tame and always listened to the boss? The point I am trying to make is this: (1) the Board has proven itself  able to direct the economy with a fairly high degree of accuracy and (2) this proves the economy is under the direction of the Board (otherwise the Board would be powerless and we wouldn't even have it).

Now, and this is very important, the economy only looks to be out of control to those who are finding themselves in it but hurting. Did you get that? This is very important if you are jobless, you will think the economy is bad and out of control, because that is your personal experience. But that is looking at it from the bottom end. If you look at it from the top end, there is hardly any ‘out of control’ going on. And this is why: At the top, at the level where bankers see things, they control exactly how much money is in the system the government has nothing to do with it since the 1914 law), they control the interest rates, the regulate cash deposit reserves (which determine how much credit/debt you are ‘allowed’ to have), and so on. So what part of the economy is a mystery to them? To you, the interest rate is a mystery and can move either way to end up hurting or helping you. But to them they can predict it better than you can predict the weather – because it is they that set up the rate. To you, you don’t even know what the money supply situation is or will be – but they do because they have the power to print the money. Much of the national debt is money ‘owed’ to the Fed. People think that the Chairman of the Fed is tackling some unknown thing and maybe soHowever there isn’t much in the economic equation that is unknown to him simply because where he sits he has all the tools necessary to make sure the plan works  almost as planned (the tools in this case being the Fed system, banks, money press, monetary controls, etc). So just because the economy may look out of control for you, personally, or even for a few million people that are in hard economic times, does not mean that, at the top level, it is out of control at all. The point of the Board, to control the economy this perspective is very important. The truth can look very different indeed depending on what perspective you use to observe it on the right side or the left side of the 47% . So if you think the Fed did not have to step in when they did to save the economy I would love to show you some swampland I am selling. You probably also thought that the U.S. health care system was just fine the way it was too. Well if you did how about I throw in the London Bridge with that piece of swampland. So before you go and make that critical vote remember seriously think about what you are really voting for.

"A democracy cannot be both ignorant and free" - Thomas Jefferson