Colonialism, Debt & Democracy

Almost every country is now in debt, but little is understood by most how this came to be and what its implications are. Put simply, a country in debt is not truly sovereign, but rather it is accountable to its investors who determine the terms under which the debt will be repaid. What´s more, unlike the promises that a politician makes to the public, investors in nations have contracts that are legally binding, meaning that the deals that a nation signs with its investors supercede any demand made by the public. Understanding this situation fully reveals that global investors are the true holders of binding power, not politicians, as regardless of what party or politician gets elected they are ultimately bound by the same contracts.

The next question that follows is, “how did this come to be?”. To answer this question fully we need to take a few steps back and understand the history that lead up to most nation-states gaining their “independance”. Most nations were created by colonial masters such as Britain, France and Spain who setup colonies that paid a fixed percent of their gross production in the form of tribute. During the so called “end of the colonial age” the colonial masters realized that if too many of their colonies rebelled at the same time that they would be unable to fight a war on multiple fronts simultaneously and would loose control over their income bearing foreign assets. The result was that they gave their colonies their own flags and their own parliaments, but the one freedom that they did not give them was their economic freedom. Instead the colonies were issued fiat, or paper based debt whose interest payments were roughly equivalent to their former obligations in the form of tribute. The next things that the colonial masters did was break the interest bearing certificates into bonds that could be resold, and they then diversified so that if any individual colony was to default on payment they would not loose the total value of their holdings. In essence, the best way to prevent people from fighting for freedom is to convince them that they already have it; colonialism never ended, it just took on different forms.

Related articles

Anup Shah, Causes of the Debt Crisis, GlobalIssues.org, Last updated: Sunday, June 03, 2007

How the Fractional Reserve Banking System Works

The first thing that you need to understand about money is that the reason that it goes down in value over time is that the banks print more, and this is called inflation. If a currency is backed by real assets it appreciates over time at the same rate as the assets it is backed by. The margin between what a bank earns on its assets and the inflation rate is called the spread, and it is where the banks make the majority of their money. The inflation on the money supply is acts like a stealth tax that is returned to private interests. For many years The United States had a non-fractional system backed by gold. The current system is based on lending out more money than the value of the reserves. This opens a financial system up to failures. In a non-fractional reserve system the value of all money in circulation is equal to the market value of the assets backing the currency so even if everyone were to pull out their money at once, the wealth from the sale of the reserves would be sufficient to give everyone what their money is worth. The final thing that needs to be understood about the current system is that it can only create debt. Whenever new currency is issued, it is issued as an outstanding debt with interest payable. Since this creates a situation where the amount of money owing is larger than the money supply, the only way that it is possible for people to be capable of repaying their mortgages is for the central bank to print more money (which they again lend at interest). Put plainly the system can only create one thing: debt.

Cracks Along the Seams

Western civilization may seem to be in a great position of dominance but cracks along the seams are starting to emerge. The growing tension between Western nations and many middle eastern countries should be seen as an early warning that our intervention is not always welcomed (to say the least). Our modern day bureaucracies have become corrupt and now pay little more than lip service to the ideals of liberty and freedom that have defined our founding constitutions. Growing prison populations, often for victimless crimes are a tremendous eyesore to the ideals of freedom and liberty. Overextention of intellectual property, and government created monopolies are impeding innovation and missing key opportunities to improve the way that information is disseminated globally, and is reducing the scope of what our democracy could be. Drastic environmental destruction is taxing our biosphere to levels that are most likely unsustainable, creating an environmental debt that we are leaving to future generations. Falling real wages for most people, and the growing disparity between the rich and the poor, not just within Western nations but globally are early warning signs of systemic problems with the prevailing economic paradigm, and left to its own devices will result in growing tensions between economic classes. Government and corporate collusion has given birth to the now prevalent fractional reserve banking system which, with the endorsement of the IMF, has been reproduced globally, and opens up economies to currency failures while depleting the reserves that define the real value of any promissory note.

I would like to add on a note of personal opinion that I believe that, given the great number of nations that now employ fractional-reserve banking systems, that a financial “perfect storm” is being created that will result in a global banking failure. Furthermore, I believe that such a global failure is inevitable as reserve ratios across many major nations are at historic lows, and even the requirement of keeping reserves has been eliminated in many countries. It is my hope that when the collapse does happen, it will not cause us to fall back into command-and-control centrally managed regimes, but rather to reconsider the economic paradigm that our modern day bureaucracies have espoused. It’s time for the West to return to the age-less wisdom of the principles of self-ownership, responsibility and personal liberty. They are not only values that have, at times, defined us, but will sustain us in the future by offering pragmatic solutions that can be realistically implemented.

Famous Libertarian Quotes

“Libertarianism is a philosophy. The basic premise of libertarianism is that each individual should be free to do as he or she pleases so long as he or she does not harm others. In the libertarian view, societies and governments infringe on individual liberties whenever they tax wealth, create penalties for victimless crimes, or otherwise attempt to control or regulate individual conduct which harms or benefits no one except the individual who engages in it.”
– definition written by the U.S. Internal Revenue Service

“In popular terminology, a libertarian is the opposite of an authoritarian. Strictly speaking, a libertarian is one who rejects the idea of using violence or the threat of violence — legal or illegal — to impose his will or viewpoint upon any peaceful person. Generally speaking, a libertarian is one who wants to be governed far less than he is today.”
– Dean Russell, Foundation for Economic Education, 1955

“Libertarianism is, as the name implies, the belief in liberty. Libertarians believe that each person owns his own life and property, and has the right to make his own choices as to how he lives his life – as long as he simply respects the same right of others to do the same.”
– Sharon Harris, President, Advocates for Self-Government

“Libertarianism is what you probably already believe: Libertarian values are American values. Libertarianism is America’s heritage of liberty, patriotism and honest work to build a future for your family. It’s the idea that being free and independent is a great way to live. That each of us is a unique individual, with great potential. That you own yourself, and that you have the right to decide what’s best for you. Americans of all races and creeds built a great and prosperous country with these libertarian ideals. Let’s use them to build America’s future.”
– David Bergland, 1984 Libertarian Party presidential candidate and author of Libertarianism in One Lesson

“Free minds and free markets.”
– slogan of Reason magazine, a prominent Libertarian publication

“As Libertarians, we seek a world of liberty; a world in which all individuals are sovereign over their own lives, and no one is forced to sacrifice his or her values for the benefit of others.
We believe that respect for individual rights is the essential precondition for a free and prosperous world, that force and fraud must be banished from human relationships, and that only through freedom can peace and prosperity be realized.

Consequently, we defend each person’s right to engage in any activity that is peaceful and honest, and welcome the diversity that freedom brings. The world we seek to build is one where individuals are free to follow their own dreams in their own ways, without interference from government or any authoritarian power.”
– from the Preamble to the Libertarian Party Platform

“Libertarians are self-governors in both personal and economic matters. They believe government’s only purpose is to protect people from coercion and violence. Libertarians value individual responsibility, and tolerate economic and social diversity.”
– Carole Ann Rand, Board of Directors, Advocates for Self-Government

The War on Drugs and other Black Markets

Before 1914 in America (and most countries) even the “hard” drugs were legal, Coca-Cola contained cocaine, and “snuff” boxes were available at convenience stores and yet hard-drug use was lower than it is today. The field of economics provides a rational explanation for the ineffectiveness of existing policy: whenever a good or service is made illegal, it reduces the supply of the good or service temporarily but does not effect the demand. This results in greatly inflated prices for the said goods or services, which increases the profitability for providing them. With greater incentive to provide the illegal goods or services, more suppliers are drawn back to solicit them, negating the effect of the prohibition in the first place. Consequently, any solution to sustainably reduce consumption must target the demand not the supply. Drug rehabilitation programs, better job opportunities, and reducing poverty, are examples of policies that effect demand. In addition, the current situation has lead to the imprisonment of countless people whose only crime was to be in possession of “illicit” substances while creating harm only potentially to themselves. Furthermore, drug addiction is a medical condition that should be dealt with by medical professionals. The “war on drugs” has been fought and lost, and has left many victims in its cross-fire.
The prohibition on prostitution, has had similarly abysmal results. Beyond failing to successfully reduce its incidence, laws that criminalize prostitution often deter prostitutes from attaining other forms of employment due to their criminal history- a situation that traps many (mostly young) people in what, by many accounts, can be a highly undesirable profession.

These issues also raise the question of how someone can be considered a criminal if they have not caused harm to others or their property; what is a crime without a victim? It should be noted that the legalization of an activity is not an endorsement of it, but staying true to the principle of self-ownership, people engaged in activities that do not harm others should have the freedom to act as they please, and only moral forms of persuasion should be employed, not the imposition of physical force through legal means. There are tremendous costs associated with enforcing the prohibition of drugs and other black market activities, measured both economically and with regards to civil liberties. At the core of these issues is the principle of self-ownership;how can what one does to or with their own body be considered a crime if they own themselves?

Intellectual Property, Telecommunications and the Artificial scarcity of Wireless Bandwidth

For almost 40 years the sole phone company in America offered nothing but a black telephone. This is because Bell Telephone was a government protected monopoly. The technology required to create a wireless telephone network was experimented with by Nikola Tesla as early as 1900, and the technology to implement a wireless telephone network existed shortly thereafter but could not be implemented due to the government enforced monopoly resulting from the very broadly defined patent on the phone. This is an example of how the overextension of intellectual property rights, and excess government intervention is capable of blocking critical developments in society. The lesson here is that while intellectual property rights can offer incentives for greater research and development, the overextension of intellectual property rights can be an impediment to innovation. Care should be taken to ensure that intellectual property rights do not over extend their value to society. Even in todays supposedly competitive telecommunications market, there exists a tremendous potential to implement policies that would radically advance the internet, telecommunications, and the method of mass media dissemination. This potential lies in opening up the wireless bandwidth, a resource that is over 90% unutilized and is kept artificially scarce in virtually every nation as a result of government intervention. If even an additional 5% of the wireless bandwidth was opened freely it would almost instantly open the option for very affordable (by todays standards) high-bandwidth wireless internet access to become ubiquitous. Such a move would open the possibility for anyone to access almost unlimited DVD-quality television programming via the internet at a very low cost, and  nearly unlimited phone bandwidth would drop the cost of making phone calls (even globally over the internet) to being almost free. Moreover, since anyone could create their own internet radio station or television station, it would create a dramatic democratization of the media and revolutionize the nature of the internet. It should be noted that some of these measures are already being realized to a smaller extent, however the cost of wireless internet bandwidth is still far too high to be a viable replacement for cable TV, and cell phone bandwidth is absurdly overpriced given the availability of unallocated wireless spectra. Such a move would deeply cut into the profit margins of the major media providers and telecoms who are heavily dependent on the artificial scarcity of bandwidth, and its resulting effect of raising the cost of advertising space today. Several explanations of why governments may be so reluctant to open the wireless spectrum exist. The best that I have heard is that keeping bandwidth artificially scarce creates monopolies that generate tremendous profit due to the lack of true competition. These monopolies pay large sums of taxes to governments, making it counter-productive for governments to cut off their own source of revenue. In this sense governments act in their own self-interest, even against the interest of the public, of which it is their supposed purpose to serve. Another reason that governments may be reluctant to open the wireless spectrum is that it would create a radical decentralization of the media, making it harder to control. In both cases opening up the wireless spectrum would bring tremendous benefits to the public, both economically and in providing easier access to the media. If it is true that “freedom of the press belongs to those who own one”, then it is also true that democratization of the media would hold broad implications in favour of democracy. For example, it would become far easier for many small groups to form their own media outlets and access a very large (global) audience with far fewer barriers of entry.

Free Mobility of People and Capital


“Free Trade” is nothing more than a politically correct term for the absence of taxes, tariffs and government intervention. Several free trade agreements such as NAFTA have offered free trade as a concession to transnational corporations, and by virtue of doing so eroded the portion of the tax base that was paid by corporations thereby forcing the government to raise taxes on labor or impose sales taxes that are ultimately paid by consumers. Consequently, whenever one hears the term “free trade”, the first question one must ask is, “free trade for who?” Overall it can be said that more free trade for cross-national-corporations (CNC’s) has meant less free trade for individuals. It is quite reasonable to ask why corporations are now being offered free trade at a point that individuals are taxed more than ever. Moreover, free trade of capital has not been matched with free mobility of people, giving corporations an asymmetric advantage over workers who are less mobile as a result of government intervention in the form of maintaining borders. A libertarian vantage point mandates both free mobility of people and capital, however it should be pointed out that current policy only offers free mobility of capital. Free mobility of people would offer a mechanism for a global equalization of wages, and offer a valuable new freedom to people everywhere: the freedom to live and work wherever they please. While it is true that suddenly opening borders to unfettered immigration would overwhelm the infrastructures of many (mostly developed) nations, it should be noted that if free mobility of people were practiced historically it would have resulted in a more equal distribution of wealth globally thereby reducing the sudden impact of opening borders currently. Moreover, free mobility of people would offer a peaceful method of keeping governments accountable as people would tend to migrate away from nations who have governments that are unaccountable to their people. The reluctance to embrace free mobility of people is also deeply rooted in discrimination that goes unrecognized under the guise of nationality; racism is discrimination based on race, sexism is discrimination based on gender, nationalism is nothing but discrimination based on nationality. If we are to pay more than lip service to the ideal of equality we must be willing to challenge the notion that it is justified to treat people differently simply because of where they happened to be born, a factor that not a single person alive has had a choice in.

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