Dollars exist, but in what form; who created them, and how?

Dollars exist, but in what form; who created them, and how?

The uninformed may respond that dollars are pieces of green paper printed by the U.S. Treasury.

That answer would be incorrect on every level.

Those green pieces of paper are not dollars. Rather they are bearer titles to dollars. They are official recognition that the bearer owns a dollar.

A house title is not a house. It is official recognition that the named person owns a particular house.

A car title is not a car, It is official recognition that the named person holds a certain car.

Dollars exist only as bookkeeping notations. They have no physical form.

You cannot see, feel, hear, touch, smell, or taste dollars.

The Treasury does not literally print dollars. It just prints titles to dollars, which exist as numbers in bank accounts.

All dollars are created from thin air by marking up accounts. Banks do it every minute of every day.

Consider the following scenario:

1. You go to a store, make a $10 purchase, and pay with your credit card.

Because you have a contract with the credit card company, you essentially have signed a loan document (the credit card receipt) saying you owe the credit card company $10.

That loan document, and all dollar-denominated loan documents, are titles to dollars.

So, your use of a credit card makes dollars.

(The green dollar bill in your wallet is a loan document. It signifies debt. It is a federal reserve note. “Bill” and “note” are words denoting debts.)

2. The credit card company sends instructions (not dollars) to the store’s bank, telling it to increase the balance in its checking account.

When the bank obeys those instructions, new dollars are created. These instructions are in the form of a check or wire transfer.

Simultaneously, the balance in the credit card company’s checking account is reduced, which destroys dollars.

At this stage, your purchase has caused the creation of ten dollars, a few cents of which go to various governments’ banks for sales taxes.

3. Instructions among the several banks pass through the Federal Reserve, while the credit card company sends you a ten-dollar invoice.

To pay the invoice, you instruct your bank to send instructions to the credit card company’s bank, telling it to increase the balance in the credit card company’s checking account.

Those instructions are cleared through the Federal Reserve, and when your bank receives them, it reduces the balance in your checking account and destroys dollars.

Your one-time use of your credit card creates and destroys dollars.

At no time are physical dollars exchanged for there are no physical dollars.

All dollars are nothing more than numbers on financial institutions’ books.

Not being physical, dollars cannot be “sent.” Instead, instructions in the form of checks or wires are sent to banks.

The banks are instructed to create and destroy dollars by changing the numbers in bank accounts.

What if that $10 purchase were made in cash rather than by credit card? Cash, i.e., dollar bills, are bearer titles to dollars. “Bearer” title means whoever has the title in their possession owns the dollars, which are numbers on the Treasury’s books.

All money represents a debt of the issuer, which among other things, owes the user full faith and credit.

You accept dollar bills in exchange for goods and services because you trust the full faith and credit of the federal government.

In, “Understanding Federal Debt. Full Faith and Credit,” you will see this explanation:

All debt requires collateral. The collateral for federal debt is “full faith and credit.”

This may sound nebulous to some, but it involves certain, specific, and valuable guarantees, among which are:

A. –The government will accept only U.S. currency to pay debts to the government.

B. –It unfailingly will pay all its dollar debts with U.S. dollars and will not default.

C. –It will force all your domestic creditors to accept U.S. dollars to satisfy your debt if you offer them.

D. –It will not require domestic creditors to accept any other money.

E. –It will take action to protect the value of the dollar.

F. –It will maintain a market for U.S. currency.

G. –It will continue to use U.S. currency and will not change to another currency.

H. –All forms of U.S. currency will be reciprocal; that is, five $1 bills always will equal one $5 bill and vice versa.

There is no law prohibiting the issuance of other forms of currency. For example, I have every right to issue “Mitchellbucks” to pay my debt to you.

 

Rodger Malcolm Mitchell
Monetary Sovereignty

Twitter: @rodgermitchell Search #monetarysovereignty
Facebook: Rodger Malcolm Mitchell

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The Sole Purpose of Government Is to Improve and Protect the Lives of the People.

MONETARY SOVEREIGNTY