Abstract
The topic
of this paper is the current credit system. My objective will be to
explore and learn more about the credit system. I will be examining it in
an attempt to figure out just what it is and how it works. To achieve
this objective, I will take a look at the history of credit, money, credit cards
and the credit reporting system.
What is credit?
So
exactly what in the world is credit and how did we get on a credit
system? Most Americans don’t even know that the United States and most of
the world for that matter are functioning on a credit system. People have
been hoodwinked into believing that we are on a money system. The true
nature and meaning of money has disappeared from the memory of the
public. First and foremost I would like to clear something up.
Credit is not real tangible wealth. Credit is imaginary. Credit only exists in the mind. When I
say imaginary I mean you cannot touch it or weigh it. It is nothing but
book keeping entries and computer symbols and can only exist while there are
computers and electric power available.
You think I’m wrong? Watch how far your
credit card will get you when there is a blizzard or a hurricane and all the
power in the area gets knocked out. Traditionally
throughout the history of the world, tangible real world items have been used
as money. Items like gold, silver, diamonds and platinum. Credit is
not money. A dollar bill is not money. A dollar is a unit of
measure, and can no more be money than gallons or quarts can be gasoline or
milk. The most powerful weapon of all and the least understood by those
who need to know is money. In a letter to Thomas Jefferson in 1787, John
Adams wrote, “All the complexities and confusion and distress in America arise
not from defects in the constitution, not from want of honor or virtue, so much
as from down-right ignorance of the nature of coin, credit and circulation” or
words to that effect. In today’s world words like money, wealth, credit
and inflation are all shrouded in mystery, add to that the wide-spread
misinformation about tax laws and the result is a system designed to confuse
the public.
A
Brief History of Credit Cards.
The following passages were taken from an article by M. J. Stephey published in
Time Magazine on April 23, 2009. I felt these passages were perfectly
appropriate for this paper.
It was
status and convenience in two breezy words: Charge it. But in these leaner
times, shoppers are thinking twice before pulling out the plastic, even as
analysts predict credit-card defaults could total more than $75 billion this
year. On April 23, U.S. President Barack Obama and his economic adviser
Lawrence Summers met with credit-card executives to discuss how to control our
addiction to plastic--and curb the controversial practices that encourage it.
Charge
cards have been around since the 1920s, when service stations, department
stores and hotel chains began offering them to automobile-loving consumers who
didn't want to trek back to their hometown bank to get cash. But it wasn't
until the postwar boom of the 1950s that credit cards really caught on. In
1950, Diners Club issued its first card--made of cardboard--for use in 27
restaurants in New York City. A year later, nearly 20,000 Americans carried it
in their wallet. American Express, which had specialized in traveler's checks,
created its card in 1958; the same year, Bank of America mailed its first
60,000 BankAmericards (now Visas) to residents of Fresno, Calif.--a harbinger
of the aggressive marketing tactics used today.
Computerization spurred a boom in the 1970s and '80s, as did new methods of
analyzing consumer data to unearth the most lucrative "revolvers,"
those who often carry high balances but are unlikely to default. Critics say
contracts today, with their ever shifting terms and complex legalese, have
helped customers get into more debt than they bargained for. Though Congress
shelved earlier proposals for a credit-card holders' bill of rights, a new
version was introduced in January, and this time, economic hardship coupled
with populist outrage could translate into legislative change. [1]
The Federal Reserve System
This discussion would not be complete without a look at the Federal
Reserve System. The name itself is a
little confusing. When people hear the
word Federal, they think it means the government. That could not be further from the
truth. The Federal Reserve a private banking
cartel made up of U.S. and foreign banks.
The Federal Reserve Act was enacted December 23, 1913. This Act created the central banking system
of the U.S. and granted it the legal authority to issue Federal Reserve
Notes. The Federal Reserve loans money
to the nation at interest. Your income
taxes go to repay those loans.
In 1910
the nation’s leading bankers met at the home of J.P. Morgan on Jekyll Island
GA. They designed the Federal Reserve System
and then threw their considerable wealth and influence behind Woodrow Wilson
and backed him for president. In exchange
Wilson agreed that he would pass the Federal Reserve act. Keep in mind, this act was written by wealthy
bankers. Once Wilson got into office, he
quickly signed the act into law. He
later wrote the following.
“Our
great industrial nation is controlled by its system of credit. Therefore all of our activities are in the
hands of a small group of men who chill and check true economic freedom. We have come to be one of the worst ruled,
completely controlled and dominated governments in the world. No longer a government of the opinion and
duress of a small group of dominant men.”
Woodrow
Wilson
The
credit reporting system.
Now for
credit reporting, here in the U.S. we have three main credit reporting agencies
each having primary responsibility for different regions. These agencies
are Equifax, Trans-Union and Experien. It is important that you know
about these agencies because they are reporting to your creditors information
about you. There are other credit reporting agencies, but these three are
the main ones. Then there is the issue of credit scoring. The
credit score and the credit report are two different things. The credit
report shows a list of your creditors, balances, the number of and type of
accounts, as well as your payment history. It will show your history for
a seven year period. The credit score or FICO score as you may hear it
called was created by the Fair Issacs Corporation. The FICO score looks
at your spending habits, bill paying habits, amount of debt and compares you to
your peers.
The
U.S. Constitution
Article
One, Section Ten of the U.S. constitution states, that “No state shall emit
bills of credit, or make anything but gold and silver coin a tender in payment
or debts." Such bills of credit are declared to mean promissory notes or
bills issued exclusively on the credit of the state, and for the payment of
which the faith of the state only is pledged. The prohibition, therefore, does
not apply to the notes of a state bank, drawn on the credit of a particular
fund set apart for the purpose. [2]
The
Dollar
I would
like to note that the money of accounts for the United States is gold and
silver coin. One dollar is defined as one ounce of silver in the form of
a coin. The dollar bill note is the most common denomination of U.S.
currency. The first president, George Washington, painted by Gilvert
Stuart, is currently featured on the obverse, while the Great Seal of the
United States is featured on the reverse. In 1862 the first dollar bill
was issued as a Legal Tender Note with a portrait of Salmon P. Chase, the
Secretary of the Treasury under President Abraham Lincoln. The first
silver dollar coins were minted and issued beginning in the year 1794.
References
[1] M.J. Stephey, Initials. (2009,
April 23). A brief history of: credit cards. Time, Retrieved from
http://www.time.com/time/magazine/article/0,9171,1893507,00.html
[2] United States Constitution
