Borrowing: None Dare...pp.45-47

I want to begin this section by summing up my background with regard to knowledge of banking, finance, and economics. I've never taken economics, accounting, or business course. My knowledge of economics comes from reading Adam Smith--cover to cover and some commentary on his writing; most notably from the book "The Worldly Philosophers." I read several books on economics after the 2008 financial collapse, I've seen the Enron documentary "the Smartest Guys in the Room" because that was one of the very few things available on one of the HD channels when those were new. I teach business ethics and have learned a great deal about how business and economies relate from all of the research that I have done to prepare for that course. I also have a considerable understanding of how people like Gary Allen think economics works from all of the conspiracy bullshit I have to read and all of the Ron Paul Libertarians I've dealt with that think "money" is made up. So let's go with this chapter that is finally about money and management. 

Where does money come from? This is a question I ask my business ethics students on the first day to see what kind of class I am dealing with. Money is one of those things that both is and isn't real. Conspiracy theorists focus on the latter part while ignoring the former part. They think that the government just makes it up and then somehow enslaves us with the fiction. David Icke (of lizard alien fame) says this in "The Biggest Secret." When I say money isn't real I don't mean that it's fake, w I mean that the value has to come from something external. These people all think gold is the money of the Apocalypse but if no one wants gold it isn't worth anything. The gold coins people buy from Alex Jones or Jim Bakker are going to be worth more than paper money only because metal can be used for things. 

Allen wants to answer the question fairly accurately for this book: money's source is taxation and borrowing. Allen writes that this latter part is the problem, the debt at the time of the book was 455B. Here is where Allen's argument falls apart immediately, "every cent of it borrowed at interest from somewhere." 

Ok...not really. Nixon didn't approach a bank and ask for a loan. Yet, Allen, his followers, and the contemporary conservative movements in several countries think that this is how it works (or at least they pretend to do so because they condescend to their voting blocks). To be fair, Allen does admit that the debt spending is based on sales of bonds which then "mature" to their full value and this is how governments spend more than they take in with taxes. Hold this idea for a second...because the bait and switch is coming. 

Allen then moves on to describe how a private business gets a loan. A member of the business asks the bank for some money, the bank creates an arrangement, and then secures collateral for the loan. Now back to the above idea I've asked you to hold: you see what is happening here right? Allen is going to convince his readers that this is also how it works with governments. He's explained that international banks* frequently buy government bonds. He thinks that this means that the US government is in a specific debt to the bank, and that the bank can exert an influence over the government in the same way that a bank can take revenue from a business that owes it money. 

Except no. The government owes the debt to the bond. Right now the UK treasury bond yield is at .6. This means that when the bonds mature the holder can trade them in for the value of the bond which is greater than what they paid for it depending on the market price of the bond (as well as several other factors). The holder of the bond of course is the one that gets paid, but they can't make demands on the government because they hold the bond. Large banks that have purchased huge amounts of bonds can influence economic decisions, which is a problem that even Machiavelli pointed out during the Renaissance. However, the problem isn't that the CEO of Goldman-Sachs is going to tell the president what to do: he can't because the president isn't a private borrower. There wasn't a loan, there was a purchase. The sale is done. Goldman can dump the bonds and that can tank the bond market, but that's a future problem not a present one. The economy would suffer, but the US government already has the money from the initial purchase. Goldman can't do anything but threaten to dump the bonds and/or not buy future ones. They can't repossess a nuclear submarine or seize the White House. 

When Allen writes, "Like a business, no government can borrow big money unless willing [sic] to surrender to the creditor some measure of sovereignty as collateral;" he's just wrong. The bond was the collateral. 

This was the problem that people had with the previous president. The US debt not being the issue, it was Trump's personal debt that was a problem when dealing with foreign countries and banks that he, again personally, owed. When a sovereign power "borrows" it's different than when a person does so. 

This kind of misunderstanding permeates all of these kinds of conspiracy theories. It's a false assumption that they then build everything else on, because to them: money is the only motive worth having. Allen then name-drops the Rothschild family as being a primary loan holder over the US...which financially may be true, but again, it's not important in the way that he thinks it is important. 

Things are going downhill from there. He named drop the famous family, and it's going to get anti-semitic (I know this because I intended to do five pages but explaining debt spending took too much time). It doesn't have to, but Allen and his ilk have a hard time avoiding blaming Jewish bankers for the world's troubles. That, we will have to pick up next week.