It’s been another big election year, and we’ve heard what we’ve been hearing from candidates for the past twenty-five years. The conservative candidate promised us lower taxes and reduced government spending, and the liberal candidate promised to help the middle class and the little guy. President-elect Obama did a fantastic job of marketing himself as the every-person’s candidate and the candidate of change, explaining his somewhat impressive win over Arizona Senator John McCain. However, I am not that easily sold on a candidate just from the word Change. What are you going to change? The candidates talk about the economy, healthcare, energy prices, and countless other issues. These combined issues have a striking resemblance to symptoms of a greater disease. I believe it comes down to one issue very few people in Washington talk about—money. Sure, the two parties talk about the economy, and how it isn’t doing so well, but they continue to treat the symptoms, not the disease. As college students, our future jobs are at stake. If the United States government does not get monetary policy under control, it will cause a worldwide economic depression, the bankruptcy of the United States Treasury and the American public, and threaten the careers and futures of young people in this country.

To understand why we have recently had such an economic downturn, one must understand how the banking system in America works. The concept is identical to supply and demand of a specific good or commodity, except in this case, the commodity is credit, or money. For example, when ordinary people like myself deposit money into banks, however small or large that amount may be, it gets put into the bank’s on-hand reserves. They use this money from various savings and checking accounts to lend out to those wanting to buy a home, a car, etc. Banks make their money by charging an interest rate on the money they lend out. When there is an abundance of cash on reserve, banks would like to see that cash be lent out so they can make more money; therefore, they lower their interest rates to make it more attractive for people to borrow. When customers take out loans, the cash reserves decrease temporarily until customers start saving and depositing again, and banks subsequently raise their interest rates due to the scarcity of credit. This should sound completely normal at this point because it is completely normal, and for the most part, harmless.

The United States government has spent itself into a political corner. Their only options are to dramatically raise taxes for an extended period of time to get themselves back into fiscal shape, or to change monetary policy and put a painful clamp on government spending.

To understand why this system failed, we have to go back to 1787. The Constitution of the United States delegated the power of coining currency to Congress, and only Congress. However, in 1913, Congress established a central bank known as the Federal Reserve, and delegated its power of coining money to the Federal Reserve. Consequently, the Federal Reserve Bank essentially controls the money supply in the American economy. Recall that banks raise their interest rates when there is a scarcity of cash on reserve in the private banking sector. This naturally causes a temporary decline in economic activity until people work hard and start saving again. The Federal Reserve doesn’t like it very much when the economy slows down. Therefore, to keep interest rates low and “jump-start” the economy, the Federal Reserve buys bonds from private banks to give them cash to lower interest rates and continue lending, and effectively “beat” the law of supply and demand. Again, this sounds almost harmless at this point. However, the critical question is, where does Federal Reserve get this money to buy bonds from private banks? Recall that the Federal Reserve was delegated the power to coin money by Congress in 1913. They simply make it up. They forge credit out of thin air to keep the economy moving. Obviously, this destroys the value of the currency because there’s such a massive influx of dollars in circulation. This brings the system to another critical point: people are still borrowing because of low interest rates even though they haven’t saved or deposited any “real”, non-printed capital. Inevitably, people will not be able to afford their homes, their cars, or their investments, and they will be forced to default. This effect of massive, endless credit expansion has snowballed for several years into what we know as the housing bubble collapse. Sure bank executives probably should not have allowed such risky practices to go on, but why not go after the Federal Reserve Board of Governors who facilitated this risky lending by providing endless credit? Is it not equally or more their fault?

Obviously, the system is completely out-of-whack, but at the same time people like Senator McCain and President-elect Obama have been around politics enough to know what’s going on in the banking system regardless of how much one might agree or disagree with them. Why don’t these people do anything about it? It’s obviously destroying the economy and the currency. Again, we have to look back at the process to understand. Recall that Federal Reserve buys bonds with printed money from private banks to facilitate endless lending. Where do the private banks get these bonds to sell to the Federal Reserve? When the United States government spends on a deficit budget, they have to get the money they don’t receive in tax revenue from someplace. They go to the big, private banks and give them “I O U” certificates known as bonds in exchange for cash to finance expenditures in Washington. This is just one example of where our massive national debt comes from. This is yet another critical point in the process. Where are banks getting cash to loan to the government? The Federal is buying the government bonds to give banks cash to loan to Congress. As you can see, the United States government is essentially getting away with printing money to pay for their massive budget. Now, it’s clear why nobody in Washington wants to address monetary policy. Addressing monetary policy means that they stop the Federal Reserve from printing money. Stopping the Federal Reserve from printing money means that banks will run out of cash to loan. A banking “credit-crunch” mathematically forces the United States government to cut a major portion of the deficit spending overnight. There would simply be no more money to pay for their operations, their earmarks, their social programs, and their trillion-dollar empire overseas.

The United States government has spent itself into a political corner. Their only options are to dramatically raise taxes for an extended period of time to get themselves back into fiscal shape, or to change monetary policy and put a painful clamp on government spending. Raising taxes in an economy they have destroyed by their own hand would be extremely unpopular, and would all but guarantee the end of their careers. If they change monetary policy, they fix the core problem and ensure it would never happen again, but the cuts in spending would be so dramatic that overseas expenditures would have to all but disappear, and entitlements would have to be cut. The bad monetary system will inevitably come to an end. If nothing is done, banks will continue to be bailed out or go under, and more and more cash sources for the government dwindle until there is nothing left. At that point, they will have no option but to raise taxes dramatically, but at the point in the economy, there would be no economic productivity to tax—leaving the U.S. in utter bankruptcy.

What does the perpetuation of current policy mean for young Americans? The answer should be blatantly obvious. Those of us in college will likely graduate in just a few short years. We won’t be looking for summer jobs this time around, but careers. Some of us will want to start families. The major candidates this election year really put their focus on jobs and the economy, but neither one talked about monetary policy not because they didn’t know what was going on, but rather because of the implications even bringing up the discussion has. Young Americans need to start getting active about this issue. We need to start contacting our representatives, and if necessary, threaten them with votes. If they are so concerned with re-election enough to turn the other way on monetary policy, why not beat them at their own game? There is a simple fact we have to come to terms with. Politicians are scared to death of the masses. If one massive voice speaks out against bad monetary policy, Washington’s own logic will force them to change. By becoming active about this issue, we can save America, save our jobs, and show Washington that young people are a force to be reckoned with.

Government is keeping this from us on purpose, and needs to be exposed for what it really is. It should be obvious at this point that neither an Obama, nor a McCain presidency, would change anything. I’ve come to a conclusion that one of two things needs to happen. In 2012, we either need to elect a Republican or Democratic president that addresses the problem of monetary policy, and is focused in fixing America rather than maintaining party lines, much like Texas Congressman Ron Paul was in 2008, or we need to elect an Independent businessman-like president, much like H. Ross Perot in 1992 who would inevitably address monetary and fiscal policy. The obvious solution that could be immediately implemented is complete transparency and a possible probation period for the Federal Reserve, along with prosecution of leading bank executives and most especially the Federal Reserve Board of Governors including Chairman Ben Bernanke. The whole process sounds a lot like “gloom and doom,” but it’s not far from the truth. There would not be such a gloomy outlook if the two parties would have stopped their greed for power and fought for the bigger picture. Americans need to wake up to this. If we change it now, the immediate future looks painful, but down the road, there is a bright light at the end of the tunnel. That’s Change I Can Believe In.