Currency as Debt: A New Theory of Money
Currency Viewed as Grease
 

My Dear Friend,

My dear friend, I would like to introduce to you a new viewpoint that might be useful in understanding the concept of money.

As you know from your studies, throughout history people have used many different things as currency. Most people are concerned only that the substance used as currency is accepted in trade and commerce.

Some people argue that the substance used as currency determines its character. Specifically, they argue that only gold coin and silver coin are true currencies, that paper currency is fundamentally flawed. They further argue that currency created by borrowing, that is, by monetizing debt, is degraded or perhaps valueless. Because of these beliefs, they claim that the substance used as currency is exceedingly important.

However, what are the essential characteristics for any currency?

Currency can be viewed as grease making the wheels of trade and commerce run efficiently. If we view currency as grease, then what color is the grease?

Let us imagine a world where the currency is actually grease. Yes, a very sloppy and slippery world, but thankfully only imaginary for our purposes! In our story, currency is not gold or silver coin, not paper, seashells, or buffalo chips, but grease. Does the color of this grease make a significant difference in its function?

Let us imagine that there are three types of grease, represented by three different colors: red, white and blue. Blue grease represents gold and silver coin, that is, commodity currency. Monetizing debt creates red grease. White grease represents currency of unknown character. In today’s world, white grease would represent electronic currency such as checkbook, credit card and digital currency. Let us further develop our story with some special eyeglasses. Few people possess these eyeglasses. They are special because they enable the wearer to see the colors of the grease. Observe that, in our story, the majority of the people are colorblind and cannot distinguish the difference among the three greases. Furthermore, most do not care about the color.

Imagine you desire start-up capital to fund a new venture. You approach Mr. Peabody, a local banker, and apply for a loan. After performing obligatory credit checks, Mr. Peabody determines you are creditworthy and agrees to loan you the currency. He asks you to sign a standard promissory note.

Mr. Peabody walks back to the vault and hands the promissory note to the vault guard. The guard wears a pair of the special eyeglasses. The guard sees the note, recognizes the note as monetizing debt, and proceeds toward a special barrel with a unique valve attached. This barrel produces red grease in unlimited amounts. The guard turns the handle clockwise producing an appropriate amount of red grease.

After placing the red grease in a container, the guard hands the container to Mr. Peabody, who then gives the container to you. You depart and begin your new venture, which I expect will be prosperous.

Without special eyeglasses, nobody notices that your grease is red. You spend as necessary, purchasing materials and supplies to support your new venture. Merchants and retailers throughout the area gladly accept your red grease as payment. After all, they cannot see whether the grease is red, white, or blue. Another interesting observation about this red grease is that once used in trade or commerce, the grease changes to and remains white grease forever! From that moment on, even those with special eyeglasses can never see the original color of the grease. In fact, had you opened a bank account and deposited your red grease, the grease would immediately change to and remain white grease forever.

Another industrious and learned fellow, much like yourself, also desires to start a new venture. He too visits Mr. Peabody seeking a loan. However, this person is one of the few possessing a pair of special eyeglasses. When Mr. Peabody returns with a container of red grease, the applicant sees the color and disapproves. Mr. Peabody does not see the color and, although the applicant’s refusal to accept red grease perplexes him, Mr. Peabody nonetheless returns to the vault and tells the guard to provide some blue grease. The guard places the container of red grease on the shelf and hands to Mr. Peabody a container with an equal amount of blue grease. Mr. Peabody then returns to his desk and offers the applicant blue grease. The applicant approves and leaves the bank. Like you, he then purchases materials and supplies to support his new venture. Merchants and retailers throughout the area gladly accept the blue grease as payment. After all, they cannot see whether the grease is red, white, or blue. Once used in trade or commerce and the merchant deposits the grease in his bank account, the color changes to and remains forever white! From that moment on, even those with special eyeglasses can never see the original color of the grease.

Of course, many people choose employment rather than risk new ventures. Although a few people, wearing the special eyeglasses, demand payment in blue grease, most people accept red or white grease. Some employees arrange with their employers to have their grease deposited directly into their bank accounts.

When employees purchase goods and services, they usually pay with white grease. Merchants and retailers throughout the area gladly accept the white grease as payment. After all, they cannot see whether the grease is red, white or blue.

When someone makes a payment toward an existing monetized debt, such as a mortgage payment, the payments are usually made in white grease. Although grease of any color might have been used as the loan for the original purchase, bankers gladly accept white grease as return payment. After all, none of the bankers (like Mr. Peabody) can see whether the grease is red, white or blue.

Some people instruct their bankers to make their note payments for them directly from their accounts. Of course, the banker cannot see the color of the grease and all of the grease on deposit at banks is white, so they invariably pay with white grease.

When receiving direct grease payments on debts, regardless of color, Mr. Peabody hands the grease to the vault guard. If the grease is red or white, the guard places an appropriate portion of the grease in the magic barrel, turns the valve handle counter-clockwise and watches the grease disappear, removing that amount of grease from circulation forever. He then marks that amount of debt off the note and adds the remaining grease to Mr. Peabody’s account. If the grease payment had been blue, the guard would first simply swap the blue grease for an equal amount of red or white grease already in the vault before making his disbursements.

The vault guard in our story chuckles at his easy job. Mr. Peabody pays him to maintain records of the volume of grease in the vault and to keep track of every note. The guard also chuckles that some people care about the color of their grease because he knows that color makes no difference to consumers and merchants in commerce.

Notice that once the grease was in circulation, regardless of its original color, the purpose of the grease remained the same throughout the community—to help turn the wheels of trade and commerce. Few people either saw or cared about the color of the grease; all they cared about was the volume of the grease and whether the grease served its purpose—exchanging wealth.

There are three colors of grease in our story, but once in circulation the purpose of each color remains the same. Therefore, in effect, we conclude that this system operates as if having only one color of grease. System engineers call this a single degree of freedom.

Consider one pipeline with two control valves mounted in series. One valve is designed to control flow at 40 gallons-per-minute and the other valve is designed for 80 gallons-per-minute. If both valves are operational, the valve controlling at 40 gallons-per-minute will limit the flow rate through the pipeline. This pipeline example exhibits a single degree of freedom with respect to flow. That is, there can be as many elements to a system as can be imagined, but there are practical limits for the final system output. Perhaps the fluid in the pipeline is lemonade, maybe even pink lemonade. These additional parameters have no impact on flow. The number of degrees of freedom in a given system is one method engineers use to express limitations on that system.

What happens in a system exhibiting one degree of freedom when people attempt to repair the system at the wrong location? What happens if a repair crew continually receives work orders to repair the 80 gallon-per-minute valve because the flow in the pipeline is never more than 40 gallons-per-minute? Naturally, nobody can repair this valve because the valve isn’t broke. The limiting element in the system is not a malfunctioning 80 gallon-per-minute valve, but a properly functioning 40 gallon-per-minute valve. The proper solution is not to repair the 80 gallon-per-minute valve but to remove the 40 gallon-per-minute valve, or—to understand that the system, by design, flows only 40 gallons-per-minute. In that case, remove or ignore the 80 gallon-per-minute valve.

Another example of a single degree of freedom is the speed of an automobile. The engine and drive gear might be capable of safely traveling at 100 miles-per-hour, but pressing the accelerator and break pedals at the same time is counterproductive. Both influence speed, a single variable, but are customarily used one at a time. If equipped with an operating governor set at 50 miles-per-hour, the automobile never moves faster than 50 miles-per-hour regardless of how hard the accelerator is pressed.

Likewise with our colored grease, we see that there is only one important characteristic for the three colors of grease. The purpose of grease, not its color, determines the degree of freedom in our story. Regardless of color, its purpose is to lubricate the wheels of trade and commerce. Despite having three colors of grease, we see that with only one purpose—to grease the wheels of trade and commerce—the entire system exhibits a single degree of freedom with respect to that purpose.

Therefore, one might conclude that while the substance used for currency serves as an element in its identification, that element is not necessarily critical to its function. The most important thing about any currency is that people recognize and accept the substance as currency, that is, that the currency is functional.

What then is the problem with the current money system? Why do so many people argue that the thing used as currency is critical to its function? People might have good reason to be upset, but if the substance of their currency is unimportant, then why are they upset? I hope to address this question in a future letter.

With all due regard and affection,

Your friend
 

Editor’s Note:

To understand more about the character of currency, please read Back to Basics—The Nature of Money (third page).

To understand how NESARA establishes honest and moral characteristics for the national currency, please read Part I. Banking and Monetary Reform, Section 4 Provisions For United States Currency (Note: Section 4B, the characteristics necessary for Congress to lawfully define United States Treasury credit-notes).

To understand how NESARA maintains stable purchasing power and maintains a stable exchange value of all currencies in circulation, please read Part I. Banking and Monetary Reform, Section 9 Regulation Of The Exchange Value Of Treasury Credit-Notes.
 

Ecclesiastes 10:19