Part 3 of the Money Series.
“Sue,” said Mom Normal. “I don’t understand why anybody would loan America money in exchange for empty air. That doesn’t make sense.”
“You’re right, Mom,” said Sue. “It’s completely, unbelievably simple-minded. But the whole world is doing it. Everybody in the world uses the Dollar as their reserve currency. That means all the other countries promised to keep their savings in U.S. Treasury Bonds. So they are all loaning America money.”
Abe yawned and scratched his belly. “Everybody except Syria, Iran, Libya, Iraq, Lebanon, Somalia, and Iran.”
“That’s an odd list of countries,” Dad said. “Those are the countries General Wesley Clark said the U.S. was going to go to war with, didn’t he? Those countries don’t lend money to the United States, but everybody else does?”
“Sharia Law,” Abe said. “Didn’t want to get involved in usury.”
“Why would countries lend money to the U.S?” Mom asked. “We’re the rich nation. Nobody has to lend money to us.”
“We were the rich nation,” Sue said. “At one time. But times have changed.”
How American Banksters Created a Ponzi Scheme, by Sue B. Normal
Every few days, the Chief kept coming back to the Banker, asking for another loan. He had his Magic Straw, and he was distributing it like crazy. In fact, there was so much Straw being loaned to so many people, that some people were becoming Wampum Makers themselves! New wealth creators were arising, people who were not members of the Cult of the Spoons.
Regular Poor People and Middle People were rising from their poverty, and becoming new Wampum Makers themselves. These people were called the Nouveau Riche, because they liked to use their Wampum to jet off to Paris in their private planes. Some of the Nouveau Riche got rich from Crime Activities, like diamond smuggling, gun running, and drug dealing. Some of the Nouveau Riche got rich from selling things to the Tribal Chief, so he could make bigger wars. And some of the Nouveau Riche got rich from selling Oil. Mostly, there was something fishy about how they got Nouveau Riche, so they generally didn’t hang around a lot with the Bankers. All of the Nouveau Riche had Magic Straw, not real Wampum. They knew a little bit about real Wampum, and some of them bought some of it, but mostly, the Nouveau Riche thought it was okay to keep their money in Magic Straw.
They weren’t allowed into the club, where the Cult of the Spoons met, so they didn’t really understand the difference between Magic Straw and Wampum. But they were a little bit confused about how Magic Straw worked, because they weren’t allowed into the Trade School to learn about the Federal Reserve yet. So these Nouveau Riche people didn’t want to keep their Magic Straw in the Bank, like obedient Spoons did. They kept going to the Wampum Window, and trying to get Wampum to hide in a different hole, outside of the hole at Fort Knox. One crazy New Rich Person, whose name was Qaddafi, hid his gold in Africa, and tried to get all the African people to use Gold Dinars instead of Promises made of Magic Straw! It was unthinkable!
This made the members of the Cult of the Spoon nervous. They called the Witch Doctor and he had a talk with the Banker.
“What are we going to do if these new Wampum Makers won’t put their wampum in the vault?” the Spoons asked the Witch Doctor and the Banker. “All wampum has to go through the Vault. It’s the only way that Straw can turn into 100 X Wampum. All the New Rich People must buy into the Federal Reserve, and keep their Wampum safely in the Vault. Our personal fortunes are tied to repayment of our loans to the Tribal Treasury, six generations ago. It’s how we stay unspeakably wealthy. We can’t allow these Nouveau Riche to keep their Magic Straws out of the Banking System!”
“We’re going to have to get some help from the Tribal Chief,” said the Witch Doctor. “Banker, you must tell the Chief that we do not need to have limits on our American Exceptionalism. It should not just be the Spoons who are rich. We can make room for all the New Rich Capitalists who are contributing so productively to our nation. As long as all capital trade is conducted in Magic Straw, there should be no need to tie the Magic Straw to physical Wampum. Then the Chief will get everybody to keep putting all their Straw in the Bank. We do not need any new rich people having any physical Wampum-Gold. It’s not necessary. It limits our growth as a nation.”
So the next time the Chief came to the Banker for a loan, the Banker said:
“Chief, there are many people out there who want to get more and more wampum. This is a problem because there is not enough wampum to pay all the people who come to the wampum window. These are evil speculators, who want to hoard the wampum all for themselves and not put it to work driving the forces of our Capitalist System. But I believe we should not yield to such evil speculators. I believe we should take the Tribe off the wampum-standard. Then those bad people who are asking for their wampum back cannot interfere with our American Exceptionalism.”
The Chief did not know that the Banker was tricking him. The Chief did not know that the Promises from the bank had physical limits, and that untying the Straw from the Wampum was going to change everything. The Chief did not know that the Banker was doing something that would tie the Bank economy to the Underground Cash economy, cutting it off forever from physical Gold. The Chief did not know that allowing Cash to flow freely, without a physical tie to solid Gold-Wampum, was going to allow the Mobsters who sold drugs and diamonds and guns a free pass to launder their money through the staid and sturdy national banking system.
And so the Chief nodded. He was happy. It was going to work! The Banker was going to give him another loan! Hurray! Sure, the Chief says, Let’s go off the Wampum-Standard. Where do I sign?
And so in 1971, Richard Nixon turned the Federal Reserve into the Bankster system. And the Exceptional American Tribe has been borrowing Air ever since.
“Sue,” Dad said. “I’m starting to think this story is an Allegory. What are you saying, in real life?”
“Well, Dad,” said Sue, “At the end of World War II, all 40 of the Allied nations were in economic chaos. The war had taken a big toll, and the United States of America was the conquering hero. The Allied nations all sent delegates to a conference in New Hampshire, called Bretton Woods. The Allies were the winners of the war, but they didn’t feel like winners, because their economies were devastated. The United States of America, however, was doing well. War manufacturing stimulated the economy, and it was strong.
Up until then, countries traded goods and services by physically sending gold to even up their trade deficits. If one country bought more than it sold, it would have to make up the difference by sending a ship full of gold to the nation it owed. This was the only way to figure out a trade imbalance, because the currency of one nation could not be compared to the currency of another. Nations’ economies were unstable, so other countries would not accept payment in anything but gold. This is why there are so many sunken pirate ships in the ocean.
But after the war, nobody wanted to keep fighting off pirates. Pirates were all over the ocean, attacking ships, and stealing gold. So the United States proposed that America keep all the gold in the world in Fort Knox. Then everybody could buy Dollars, which would all be worth exactly $35 per ounce of gold. It would be a currency that didn’t fluctuate. Everybody would be safe from the Pirates.
This sounded like a good deal at the time, considering that people had just seen Germany get hit by an inflation that made all their currency worthless. So all the countries signed a deal. All the gold would physically be stored in the United States, and other nations would hold U.S. Treasury Bonds (that is, I O Us from the United States of America) for their portion of the gold.
From 1945 until 1971, this system allowed countries all over the world to loan money to the United States, by buying U.S. Treasury Bonds, which were consistently pegged to a physical ounce of gold, at $35 per ounce. The gold was stored in the vault at Fort Knox.
And then one day the Bankster let the Tribal Chief in on a secret. There wasn’t enough gold in there.”
“So Richard M. Nixon took the Dollar off the Gold Standard,” Mom guessed.
“But don’t worry,” said Big Brother. “He put it on the Oil Standard instead.”
Next: The Impact of the Petro-Dollar on Acts of War