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 Congressional Order 101 is regarding inflation. This is due to the fact that the Congressional Order 101 initiative is about creating currency, backed by the valuable knowledge diplomas, certifications, and degrees represent in order to fund all the public and private educational systems of the several States and the United States.

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. 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.

Those who take the time to actually look at and read Congressional Order 101’s abstract, rather then prejudge it, will see that 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. This is done for 2 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 some of the value, and; 2) Since the only purpose of monetizing the diplomas, degrees and certifications is to create the funding to pay for all the educational services, there is no need to account for the value beyond this minimal value.

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. 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 maybe) is much greater than what is being accounted for.

Further, 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. Truth be told, the currency is already circulating (remember, the loan process creates currency), so what will happen is that this will provide stable asset based backing and eliminate some of the debt based backing future generations of taxpayers were presumed to be providing for the next 460 years by paying off the National Debt.

On a closing note… 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.

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.

http://money.visualcapitalist.com/visualizing-size-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.

http://simonthorpesideas.blogspot.com/2015/02/global-debt-is-now-25-times-total-money.html?m=1

As you can see, were the money supply to be increased based on sound reason, this would not be harmful either national or globally.

What would be harmful is to ignore the natural law of representative currency by creating currency that represented nothing of value due to the fact this will result in inflation. This is why the idea to create a Trillion Dollar coin was ultimately rejected.

 

Magnanimously,

Christopher Theodore of the family of RHODES

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