Take out some money from your wallet. Go on, humor me.
Look across the top. What does it say? Federal Reserve Note.
Wait! A note is a debt instrument, not money!
We used to have Silver Certificates up until the 1960s. It said silver certificate across the top.
It was real money because it was a receipt for $1 of silver. You could take the dollar bill and go get four quarters made of silver. OK, it wasn’t perfect but at least it was backed by something.
The Federal Reserve Note is a debt instrument of the Federal Reserve Bank. You’ve loaned them $1 and they promise to pay you back.
So let’s say you take your $1 to the Federal Reserve Bank and say you want to redeem your loan to them. What will they do/
First, nothing. You can’t go to the Fed and ask for them to repay the note.
But you could go to a bank ask them. What will they do? They will redeem your note with more notes! Unbelievable.
Take in a hundred dollar note and they will give you five twenty dollar notes. They pay you with more debt!
Wow! I want to be in that business! Oh, wait. That would be illegal!
You loan them money and they never have to pay it back!
What a scam!
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