Learning the Disturbing Facts about Credit Card Debt

Richard D. Schrader

When I received my first credit card in the mail at age 18 I was ecstatic, I said to myself, wow now I’m getting somewhere in life. This credit card company thinks I’m worthy of 500 dollars in credit. So I made my monthly payments like a good consumer and watched my credit limit grow. I thought boy this company must think alot of me to take such a risk. I however had no idea how the money came into existence. All I cared about was that as long as when I slapped the plastic down I was approved. Like most young people I had no idea what an interest rate even was much less how it effected my monthly payments. I was like a lot of kids in America today, my parents were not a big part of my early adult life and so I really didn’t have much guidance when it came to making financial decisions. The lessons I learned were hard and I continue to learn as each day passes.

After all what is credit? When you get that “Pre-Approved” application in the mail, does that mean that the credit card companies have been watching you personally and are rewarding you for having so called “good credit,” Of course not, they are looking to make money just like any business, and they are making a lot of it.

Today there are thousands of people who are losing their homes, farms, and businesses because they do not understand the meaning of credit. This article will explain the difference between money and credit and will show you how the banks create "credit" and pretend that it is "money".

There has been a monetary debate in our country for some time now and that debate focuses on two central issues. First that only gold and silver are Constitutional money Article I Section 10 clause 1U.S. Constitution and second that the dollar is defined by the Mint Act of 1792, and that a Federal Reserve Note is not a dollar. There is a third area that is not well understood, but which is very important. It is the most important issue of all because 97% of our money supply today consists of bank credit whereas Federal Reserve Notes and coins consist of less than 3%.Today every bank loan in the United States can be legally voided because it is based on credit instead of money!

YEAH RIGHT, you say. Well I have explored that accusation for over a year now and here is what I have found. One must ask the question, “What is Credit?” after all we throw the word around so freely today, but how many of us truly understand its meaning. Credit is the opposite of money. Money is legal tender for the payment of debts as defined by Congress in 31 U.S.C.A. Sec 392. This section basically describes all coins and currency issued by the U.S. government as legal tender for all debts, public and private. Many will argue that Federal Reserve Notes are Unconstitutional, but for this article it will be assumed that coins and paper currency both represent money.

Now let’s assume you are going to make a purchase say for an automobile or a living room suite. You might say that your credit is good or that your promise to pay is sufficient. In other words the seller trusts that you will pay the money back. At that point you sign a loan agreement in which you pledge the auto as collateral for the security agreement. In other words the auto dealer has accepted your credit, your promise to pay, in exchange for the auto.

Ok here is where it starts to get interesting. Now consider a bank loan. When you go to the bank for a loan, based on your promise to pay and your good credit the bank gives you the loan right? The bank has accepted your promise to pay the money back, but ask yourself this question. What exactly did the bank loan you? Well, the bank will invariably give you a check which is also a "promise to pay" you so many dollars, with interest. What you and the bank have is a bilateral contract when you exchange "promises to pay". In other words you have accepted each others credit, and yet no money has exchanged hands. This is an important point; no “money” has exchanged hands.

Now what do you do with the check? Probably one of two things: either you deposit it in your checking account or you bring it to your car dealer. Either way, when the check gets deposited it goes directly to the banks bookkeeping department and the numbers from the check are entered into your account. Now the bank will say that its deposits have increased, still no “money” has exchanged hands.

These bookkeeping entries are called “demand deposits” meaning that the customer can walk into the bank at any point in time and demand the deposit from the vault. In accounting terms, the money is placed into the banks liabilities column because this is money that the bank owes the people.

Now what do you think the bank has for assets? Well it has a small amount of vault cash which the Federal Government requires them to keep on hand and a whole lot of IOU’s for those entire loan agreements people sign their names to. The bank is gambling that not every customer will come into the bank at the same time and demand their money in cash and it’s a pretty good gamble. All those promises to pay are on paper so also are all of the bank assets.

All this amounts to is a transfer of numbers or book entries from one checking account to another. The same thing happens when you write a check. Numbers called "dollars" are transferred from your checking account to someone else’s. When a credit card is used, bank credit or book entries are created and transferred to another person at the same time.

The next question is, if it so easy for a bank to create “credit”, which is used like money, how then is this “credit”, destroyed? The “credit” is destroyed when the principle of the loan is repaid. However, the interest collected by the bank on the "credit" it loaned, is transferred, to another account for distribution to its stockholders.

What happens is that because 97% of the nation’s money supply consists of credit which is all created by private corporations (banks), and because interest is charged on every dollar of “credit” used, debts are constantly created for which no money or credit exists to repay these debts. Hence our money system can be best described as a “debt usury” money system, for every dollar of credit which comes into existence, a debt is created to the banks and interest (usury) is charged.

Under our present money system, the Federal government will never be able to balance its budget and the national debt will continue to grow exponentially. However, every bank loan made in the United States today is illegal, since all bank loans are based on “credit” instead of “money”! The words “ultra vires” are important words because they mean that “a contract made by a corporation beyond the scope of its corporate powers is unlawful.”(see Black's Law Dictionary)

The courts have consistently ruled that banks cannot lend their credit, but can only lend their money and that all loans of credit are “ultra vires.” Since no bank charter gives them permission to lend their “credit”, and Congress never gave the banks permission to create money, all such loans of credit are ultra vires or unlawful. The bank, by loaning credit, has unjustly enriched itself. It pays no interest for the use of its credit but charges its customers the same amount of interest as if it loaned out its money.

These practices are a high level form of loansharking. It is deception and fraud. The collection of interest on credit is in violation of all usury laws. After all, the bank is collecting interest on money which doesn't exist. There are many programs today such as a particular program which I represent, Debt Solutions International (DSI.) There are over two trillion dollars worth of illegal bank loans out there waiting to be challenged. A program such as DSI’s is a much better alternative to bankruptcy since you get to keep your property and void the bank loans at the same time.

Anyone can walk off his property and let the bank have it, but to do so is to reward them for their fraudulent acts. It would be much better to sue the bank on fraud and usury charges and ask that all contracts which you signed on the day you took out the loan be declared “ultra vires”, null and void. That includes deeds of trust, mortgages, notes and security agreements, but particularly credit cards.

For a long time, patriots have been writing to their Congressmen asking them to give us an honest money system without extortionate interest rates and they have ignored us. I am not an expatriate, I still believe in my country, but our current fractional reserve banking system must be eliminated. If we do not do something our children will pay the price of inheriting our debts. I believe with the power of the internet, consumer education will become so powerful that the banks and the “powers that be” will meet their match. People will see that programs such as those offered by DSI and others are nothing to be afraid of and will become mainstream.

About the Author

I currently specialize in unsecured debt elimination particularly credit cards. If you or a loved one would like more info on these types of services visit my website at www.debtjustice.net.
schraderrick@digital-link.net