Currency as Debt: A New Theory of Money
Understanding Money—Debt-Money Systems
Part 2 of 9
 

Sellers exchange wealth for a consideration. Anything that the buyer swaps for that wealth is purchasing power. This clearly includes wealth, currency and credit. Simple barter consists of wealth exchanged for wealth. These transactions are properly called trade, both parties being sellers by viewpoint. When a buyer uses currency or credit as purchasing power, the exchange establishes a debt. Such transactions are properly identified as commerce.

As purchasing power, the use of currency eliminates the buyer’s debt to the seller while the use of his personal credit does not. A buyer using cash concludes the transaction. The seller receives the currency, a token legal claim to part of the community’s wealth, and passes it on indefinitely. The claim circulates as a communal debt to other members of the community and is not canceled. 

A buyer using full value specie as currency pays the seller for their wealth. Payment extinguishes the buyer’s debt to the seller by transfer of the wealth incorporated in the coinage. Strictly speaking, payment requires the delivery of wealth. If the same transaction is made using irredeemable paper currency, the buyer does not ‘pay’ the seller but only ‘tenders’ his debt. U.S. law specifically declares that the settlement of debts with negotiable paper is not payment unless accepted by the parties in that sense.[4]
 

The extension of credit is the ownership of debt. An individual selling on credit gives up possession of wealth. The buyer accepts the wealth and agrees to compensate the seller over some specific period. Two methods are commonly used. The buyer may settle the debt in increments, the total being equivalent to the compensation that would have immediately concluded the sale. More often, the buyer delivers a total exceeding that amount. The seller demands additional compensation for the risk associated with the extension of credit. 

The Founding Fathers did not oppose the wise use of credit, granting to Congress the power “To borrow Money” found in Article I, § 8, cl. 2 of the Constitution. This authority has long been exercised by Congress, acting through its agent, the United States Treasury, with public auctions of its paper instruments, namely treasury bills, notes, bonds and certificates. They sell bearing various rates of interest or at various discounts. Undoubtedly it is within the constitutional authority of Congress to borrow money from willing lenders at any mutual agreeable rate of interest, including an interest rate of zero percent.

One method Congress might use to borrow money is to produce and spend into circulation an issue of treasury credit-notes bearing no interest and no discount. These credit-notes constitute a social contract with the nation to deliver wealth to the holders on demand. The morality of this action is both fragile and conditional. Among the conditions that must be imposed on a moral monetary system of this type are:

1. There must be a clear alternative lawful currency system, one based on gold and silver coinage, available for any individual who does not wish to participate in a debt-money system; and,

2. Compelled acceptance of treasury credit-notes must be applicable only to its creators, meaning the United States Government or its agencies, or to any organization or person who fails to specify in its contracts or personal dealings the type of currency intended; and,

3. There must be an absolute requirement that the records of account of all transactions by financial institutions be scrupulously honest in reflecting the type of currency or currencies used—gold coin, silver coin or treasury credit-notes; and,

4. The public must have continuously available reliable information as to the exchange-ratios between the various currencies used, these ratios being independently verifiable by some published objective method.
    

4 “Payment”—The execution and delivery of negotiable papers is not payment unless it is accepted by the parties in that sense, UCC § 3-410