We live in an economic system engineered to prop up the financial class. Many pockets of everyday life could be optimized if it were not for structural constraints put in place by the bankers, stock brokers, and Federal monetary policy.
Take your mortgage for example. Imagine if bankers changed the terms of lending so that you could pay off your mortgage early and save on interest payments to the bank. Is that conceivable? No, and for a simple reason: because banks and mortgage broker firms make a killing off debt payment plans. It does not matter whether an alternative solution is available that makes it possible for more people to own property. If such a scenario means a lesser role for banks in the mortgage process, then it probably won’t happen. Why would the banks optimize the overall economy if it meant less profit for them? They would not.
If you are skeptical about the mortgage industry changing, then you probably doubt the Government will ever get out of debt. A series of financial crises in the past two decades have done little to change the architecture of the American economy. The Republicans and Democrats in Congress debate the merits of a corporate or consumer tax cut to spur the economy. In the background, the Federal Reserve goes about its businesses setting terms for lending and propping up a debt-ridden government. Even though it was created to prevent significant economic uncertainties, a solution to the debt issue will not come from the Federal Reserve. Why would it, when the Fed monetizes debt in the form of treasury bonds and keeps lending rates low no matter what.
Is Taxation A Possible Solution?
Taxation is one solution to the debt problem. The logic is pretty simple: increased tax revenue can go directly into paying off the national debt. However, merely increasing taxation is not the solution. Tax hikes hurt the American consumer and the American business alike. They take hard earned money away from people who would otherwise spend it on goods and services. Without much warning, this can lead to deflationary pressure, which shrinks the economy. To get out of the debt cycle, we need a solution that grows the economy fast enough so that borrowing money loses its appeal.
The Debt Solution: Grow the Economy By Redesigning the Federal Reserve
There is a better way to get our national economy out of debt by re-structuring the Federal Reserve in two fundamental ways:
- Institute Direct Deposits. Years of complex fiscal policy have restricted our economy and made it hard for money to get into the hands of the majority — the working population who spend money and thus drive real economic growth. A direct deposit from the Federal Reserve makes it possible for the average American to save money. It makes everyone a job creator because financial security is assured. It also makes borrowing money far less attractive. Regarding dealing with government debt, the Fed can target specific growth goals and start raising taxes when growth is stable. Once growth hits 3–4% each year, businesses and consumers alike will have no issue with a small tax hike.
- Increase Interest Rates on Loans. Once the burden of growth shifts away from the Fed, the average interest rate on loans must be increased. It must become harder for the government, companies and individuals to borrow money because borrowed money does not help the government pay off its debt. It only helps the government stay afloat. Demand created from borrowed money is an illusion because the demand has to be payed back later. Demand created from direct deposits is real as long as inflation is counteracted with higher interest rates.
There is no simple solution to the debt issue in America today. All we can do is redesign the most ineffective policies and start building an economy that supports growth that doesn’t come from borrowed money.. The only way to get the economy out of debt is to implement policies — like a direct deposit from the Federal Reserve — that stimulate consumer demand. After all, demand created from borrowing today is demand lost from debt repayments tomorrow, like spinning your wheels. The RPMs of a car spinning its wheels makes it seem like we are going fast just like the GDP of a debt driven economy seems impressive yet it’s going nowhere.