[Congressional Record Volume 145, Number 107 (Tuesday, July 27, 1999)]
[House]
[Pages H6427-H6428]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                          A DEBT MONEY SYSTEM

  The SPEAKER pro tempore. Under the Speaker's announced policy of 
January 19, 1999, the gentleman from Washington (Mr. Metcalf) is 
recognized during morning hour debates for 5 minutes.
  Mr. METCALF. Madam Speaker, there is a fundamental flaw in our money 
system that allows money to be created as a debt instrument. It is 
called a debt money system, and money must never be created and loaned 
into circulation. The reason this must be avoided at all costs is that 
when interest is charged on money at the point of issue, the interest 
is mathematically unpayable.

[[Page H6428]]

  This can be illustrated. Let me give just a quick example. It is an 
oversimplification. Let us say that five people design a money system. 
They create $50 in currency without intrinsic value, paper currency, 
say. Each one borrows $10 and agrees to repay the $10 in one year and, 
of course, they will pay interest on it. They will each pay $1 in 
interest.
  Now, this is obviously a flawed system because if only $50 is 
created, a year later it is impossible for $55 to be repaid. Someone in 
the system is going to lose their collateral that they pledged for the 
loan.
  Unfortunately for us, this is the kind of system which has been 
imposed on this country. The deeper problems do come to light as we 
look carefully at our monetary system.
  Now, there will always be some people who are better managers, just 
good at business or just lucky in their choices. That is the first 
group. They will prosper in any system. Then there is the upper middle 
class who will manage a satisfactory standard of living. Then next is 
the lower middle class, who may manage a satisfactory standard of 
living by working two jobs or being frugal in their spending or so 
forth.
  Number four, there are the working poor who really do work hard but 
at low paying jobs they can never get ahead at all.
  Number five, at the bottom are the hopeless poor who may work some or 
are on some sort of welfare but have little chance to better their 
situation in the real world. They are the last hired in good times and 
the first fired when the economy is slipping.
  Now, it is easy to say this group does not have the skills, probably 
true; does not want to work, probably not true, but in any event there 
is strong evidence that the system, the system we have, plays a 
critical role in their lack of success.
  Let us suppose there are five heads of families that live on a new 
continent. We will just invent a situation. Again, they work hard, 
bartering for things. The plan proposed would be to issue the 
certificates, as I mentioned, and they would be the medium of exchange. 
They issue fifty pieces of paper or fifty certificates and they have to 
each repay one certificate at the end of the year, and thus the 
interest on it is impossible to be paid. That is, if money is issued as 
a loan, the interest is impossible to be repaid.
  Now, it is easy to see in a simple situation like that, or example, 
but it is impossible to see in our huge national monetary system with 
hundreds of billions of dollars constantly being created and 
extinguished. Actually, it is estimated that about $20 billion is 
extinguished and created each day in America, causing the fundamental 
flaw in our system. The fact of creating money out of thin air and 
loaning it into circulation at interest makes the interest 
mathematically impossible to be paid.
  The result is that this system builds more and more debt which cannot 
be repaid, resulting ultimately in monetary problems, anything from a 
minor recession to a major hair-curling depression such as we 
experienced in the 1930s. These things are the result or can be the 
result of a flawed monetary system.
  The point I make is that we must understand the danger of relying on 
the issue of debt money. It is the responsibility of Congress to 
understand this issue and its ramifications, and change the way we 
issue the Nation's money. More on this later.

                          ____________________