Basics principle regarding the cause of inflation, and why Congressional Order 101 won’t be a cause of it.

One of the most common concerns people raise about the Congressional Order 101 initiative is regarding inflation. This is due to the fact that the Congressional Order 101 initiative is about creating currency, backed by the measured amounts of valuable knowledge that diplomas, certifications, and degrees represent.

While there are many theories about what causes inflation, one of the most well known examples of the real cause of inflation occurred when the US was still using the Gold Standard. In all simplicity, the banks created more paper currency representing gold & silver than there was gold & silver for the paper money to represent it in existence in their vaults, and this caused the paper money to become worth less (not to be confused with “worthless”). The loss of the value of the paper money is due to the money supply being inflated beyond the amount of actual valuables backing it, or in short: inflation.

Granted, we are no longer on the gold standard, yet the basic principle of inflation remains: When the money supply exceeds the amount of valuables it represents, the individual units of money become worth less (and in some instances, worthless). There are also 2 other major factors involved in causing inflation with New Deal economics, and this is due to: 1) The artificial over-valuing of assets — like houses worth $200k being over-valued at $250k and the like, and; 2) Defaults on loans — this is because a large portion of the money supply is actually backed with the value of the promissory notes created during the loan process, and when these promissory notes are not honored (by the loans being repaid — which is what made them valuable in the first place), they become worthless, and therefore, so does the portion of the currency they created which remains in circulation.

That is the basics principles of the cause of inflation. As you can see, it is all rooted in the cumulative value of all the assets the currency represents, remaining equal to or greater than the money supply.

So, while it is true that if Congressional Order 101 was a proposal to just start printing money or making illegitimate credit entries on the general public ledger, this would cause inflation, this is NOT what Congressional Order 101 is proposing.

Those who take the time to study Congressional Order 101, (rather then prejudge it) will see that CO 101 is basing all the ledger entries on the assessed value of existing assets that have not been being accounted for, and not only is the CO 101 initiative not over-valuing the assets that are being used to back the currency, their value is extremely underestimated. The use of the base value rather than the true value is done for 2 main reasons: 1) The true value of education is impossible to account for accurately & varies drastically from student to student but, by using a minimalistic method of accounting, the complexity of the accounting is simplified to a sufficient degree that it is possible to account for a value, and; 2) The main purpose of monetizing these valuable asset the diplomas, degrees and certifications evidence is to create the funding to pay for the educational services.

As you should be able to see at this point, since Congressional Order 101 is not going to be creating more currency than there are valuables for the new currency to represent, it won’t be inflating the money supply past the amount of value able to be accounted for. In fact, not only will this not cause inflation, but the US Dollar will be even stronger due to the fact that the true value of these assets (whatever that may be) is able to be universally recognized as being much greater than the base value being accounted for.

Further, where there to ever be a re-establishment of the requirement for the ability to redeem currency in the valuable thing the currency represented, it is possible, if this were the only asset being used to back the US Dollar, for the money to be taken to any graduate, and given to the graduates in exchange for the graduates putting the knowledge and education they hold to work for you. Truth be told, using knowledge & education as the asset to back currency is better than gold & silver because the currency can be redeemed over and over throughout the life of the graduates.

The point is, the erroneous assumption many people make who do not take the time to examine the proposal — that this will cause inflation — is simply not true. This will no more cause inflation than mining new gold & silver and turning that into US Coins did. Assets are assets… and capitalism has always been about turning Wealth, into capital.

Also, due to the amount of debt in existence (both public and private), and the fact that the larger portion of the value of these assets is being used to offset the debts, most of this new currency will never enter into circulation. This is because the money being created is money of account on a ledger with a massive amount of debt, and when you add a positive number to a negative number, they nullify each other… even on a ledger:

$20,000,000,000,000.00  +  -$20,000,000,000,000.00 = $0.00

This is the reason why repaying money that is borrowed into existence is destroyed when the loan is repaid. This is also why $20 Trillion+ Dollars will NOT actually be going into circulation. Granted, if the total value of all the already existing assets is a bit more or less than the total of the public debt, there may be some National Debt remaining, or for the first time, a National Credit. In the event of a National Credit, only that portion will move into circulation, for example:

20,002,850,121,873.12 + -20,000,000,000,000 = $2,850,121,873.12 of new money

Truth be told, the currency is already circulating (remember, the loan process creates currency), so what will happen is that when the retroactive accounting is done for all the past diplomas, degrees and certifications, this will provide a large number of debt-free asset based backing and eliminate the debt based backing future generations of taxpayers were presumed to be providing for the next 460 years by paying off the National Debt.

Regarding the size of the Public Debt in relation to the money supply, here are quotes & links to 2 articles regarding both that should offer much needed insight & perspective (and no, bitcoin is not technically recognizable as money, by the author of CO 101).

Global Money Supply vs US National Debt

5. In fact, the national debt is larger than all of the world’s physical currency, gold, silver, and bitcoin combined.

That’s right, if you rounded up every single dollar, euro, yen, pound, yuan, and any other global physical currency note or coin in existence, it only amounts to a measly $5 trillion. Adding the world’s physical gold ($7.7 trillion), silver ($20 billion), and cryptocurrencies ($11 billion) on top of that, you get to a total of $12.73 trillion. That’s equal to about 65% of the U.S. national debt.

Global Money Supply vs The Global Debt

(2015 – it’s a bit out of date)

We are now in the situation where we collectively have $199 trillion of debt, and only $78.8 trillion to pay it off. There is therefore 2.5 times more debt than money!

You surely don’t need to be a rocket scientist to see that this situation is completely untenable. Anyone telling us that we can get out of this debt trap by simply being frugal and paying our taxes like good citizens clearly hasn’t got a clue.

As you can see, when the money supply is increased based on sound sound economic principles, this will not be harmful, either national or globally. It actually solves a catastrophic terminal flaw with using almost exclusively debt based assets to back currency.

What would be harmful is to ignore the natural law of representative currency by creating currency that represented nothing of value (like crypto currency), or to artificially over-estimate the value of an asset like the Trillion Dollar coin, which was ultimately rejected… due to the fact this will result in inflation even though there is an asset backing the currency.


Christopher Theodore of the family of RHODES


Copyright 2017 Christopher Theodore of the family of RHODES

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