What is the Difference Between Counterfeiting and Lending?
Merriam Websters Dictionary defines the noun “loan” thusly:
1) Money lent at interest
1) Money lent at interest
2) Something lent for the borrowers temporary use
T 3) The grant of temporary use.
A loan typically involves an asset that is idle (like spare money, a spare house, or a spare shovel) which someone else can put into economic use; and the rent typically comprises compensation for said use. Rents typically cover wear and tear (if the real asset is a durable good), or are offered as a premium/profit paid in good intention for the purpose of showing your appreciation for the lender’s generosity in extending their financial asset for your use.
But definition number one above is the one I want to focus on here. Money lent at interest. Recently, the wheels seemingly fell off the wagon with that one, because since early 2009, the Federal Reserve has been “lending” money to the commercial banks at effectively 0% interest.
Why is this important? Look again at the definitions above. If the loan involves money, but is not lent with interest, then the implied motive behind the loan must be “for the borrower’s temporary use” meaning that the Fed must be expecting the Banks to give this money back to the Fed at some point; since one can only “loan” their real property- Otherwise, the “loan” becomes a “gift”.
What’s more interesting is that (as we all know) the Fed doesn’t even have to HAVE the money on their balance sheet in order to lend it- all they have to have is a willingness to credit the commercial bank’s (or the Treasury’s) account with the agreed upon amount, and voila!... there is now money from whence there was none.
Now, for a moment, just Imagine that your neighbor stopped by on a warm Saturday afternoon and asked you if he could use a shovel for a few hours; and you, possessing no shovel, but possessing the willingness to lend him a shovel, suddenly MADE a shovel magically appear in his hand from nothing. Why, you would be as powerful as the Federal Reserve, by golly….
So, in reality, what the Fed is doing is issuing dollars (creating currency), but merely calling it a “loan” without any expectation that they will ever see those funds again.
So, why do they call it a loan? Because the term “loan” always carries with it the connotation that there is a claim (a lien if you will) against the borrower. When the lent asset is currency, then the counterparty is most often the Treasury, who assumes a debt (a bond) in exchange for the lent funds. This debt is then shifted onto the backs of the population as a lien- a claim on someone else’s productivity.
So, we have the few (Central Bankers and Treasurers) pledging the future productivity of others (the masses) against their free will, and without their direct consent. This is an interesting dynamic, since Central bankers and Treasurers are not elected by the masses. The question must logically follow as to how they are legally authorized to represent the masses, or to burden us with the debt that they create when they “lend” more currency into existence.
The Constitution clearly states in simple language what federal money is (a dollar is 371 grains of fine silver). It also states clearly that only Congress has the power to emit bills of credit, and to coin money and regulate the value thereof.
The Federal Reserve’s official bio says that Congress abrogated this power to the Fed via law, but nowhere is there a constitutional amendment that says congress is authorized to abrogate that power.
So the Federal Reserve is out there emitting bills of credit into circulation, and calling them dollars, in spite of the fact that they do not meet the definition of a dollar… So I ask you: What is the difference between counterfeiting and lending?
The answer, if you choose to listen to the Fed, is nothing.