Chapter 50 - Government Bonds

A government bond is a method by which a government borrows bank credit. The government will repay the principal when the bond expires at the 'maturity date'. It includes a promise to make regular interest payments.

Most default superannuation funds will have a proportion of their member's money invested in government bonds because they are perceived to have low risk and they give a predictable income. [500] They are low risk until the debt grows to exponential proportions and the asset stripping of the nation is complete. The government then reaches a point where it can only continue to pay interest by taking further loans. These loans are often called 'bailout' to suggest that it is government mismanagement. The Commonwealth of Australia issues bonds called Commonwealth Government Securities. [500] In the UK, the bonds are called 'Gilts'. One million dollars is a typical bond value. What is strange is that the government issues certificates, called dollar notes, which are debt and interest-free, but also creates certificates, called bonds, which are a debt burden and carry an interest penalty. Both are tradeable.

When a person invests in bonds, they are lending money to a national government, a state government or a company. In reverse, this means that the government is borrowing from the bond purchaser. Why would a government borrow when it is capable of creating its own money? At this stage in the book, you should know the answer. At present, the government is only capable of creating paper money called currency which is the legal tender of the nation. There is not very much of this paper legal tender in circulation. Currency legal tender comprises less than 5% of the money supply. The government conducts the bulk of its business using bank accounts which means that government business uses Bank Credit. How then does the government get to increase the amount of Bank Credit in its bank accounts?

  1. Taxation.
  2. Sell-off public utilities.
  3. Sell-off mining and mineral rights.
  4. Resort to credit from money-lenders. The government issues an IOU and pays interest on this IOU. This is called a 'Bond' in some countries, a 'Gilt' in the U.K. and 'Government Securities' in Australia.
  5. Borrow money from a Private Banking Corporation.

Solutions include:

  1. Minting a 'Trillion Dollar Coin' or printing a 'Trillion Dollar Note' and use it to pay off debt. This is the simple solution of creating government money in the form of cash currency and use it to pay off debt.
  2. Create a National Public Bank. Borrow money from this National Public Bank. If the government owes money to a government bank, then the debt is somewhat irrelevant. The public bank is also in the same payments loop as the private banks. Private banks use every manipulation possible to undermine the public banks. Little do they realize that the existence of a public bank helps to prevent their private banks becoming insolvent from uncollectible debts.
  3. Ban the government from going into debt.
  4. Go digital. Create a digital form of cash currency identical in form and function to cash currency. Create real currency notes in a large range of denominations including: $1, ... $1000, $10 000, $100 000, $1000 000, ... $1000 000 000. All are stored in a government vault and all these have a standard serial number,a hidden encrypted code and a jpeg image of the note. The government spends or lends this into society. Ownership of the note is a matter of showing the image and serial number and the officially recorded transactions. These are recorded on a series of computers. The recording does not need to be done at the moment of sale as with 'account balance' systems. Like cash, you can only have a positive number of digital cash notes.

The preferred form of money in the modern era is Digital Money. Because the government does not create digital money, the banks have a monopoly on digital money. It is time for the government to move with the times and create digital money, but not as balances as is done by the bank industry, but by the way the government has always created money, as tokens. Ownership of tokens is ownership of the money. Ownership of the token is by revealing the transaction trail held by the owner and verifiable on any number of transaction-recording computers.

Because the government is not bright enough to create its own digital money, the government resorts to using bonds. These bonds are the future taxation of the people. I have stated expenditure is not related to taxation, but there is an issue. Because people pay the taxes using Bank Credit, and because the government pays its bills using Bank Credit, taxation becomes related to expenditure. Where the government uses digital Bank Credit, taxation and expenditure become tied together.

If the government can issue bonds which are digitally registered, it can issue digital units of currency. The step is small as digital units of currency have the same characteristics as currency notes. It is similar to recording the serial numbers of the notes in your wallet and giving the serial numbers of the notes to the recipient of your money.


[500] www.mywealth.commbank.com.au/learn/choosing-investments/what-are-government-bonds- retrieved 2015-05-06