Debt is Not Money

"Everything predicted by the enemies of banks, in the beginning, is now coming to pass. We are to be ruined now by the deluge of bank paper. It is cruel that such revolutions in private fortunes should be at the mercy of avaricious adventurers, who, instead of employing their capital, if any they have, in manufactures, commerce, and other useful pursuits, make it an instrument to burden all the interchanges of property with their swindling profits, profits which are the price of no useful industry of theirs."

--Thomas Jefferson letter to Thomas Cooper, 1814.

Are we standing at the edge of a Great Inflation (like Weimar Germany), a second Republican Great Depression, or a return to the middle class prosperity of the Roosevelt/Eisenhower New Deal era? Until Americans understand the difference between "money" and "debt," odds are its going to be one of the first two, at least over the next few years.

Money

"Money" is a convenient replacement for barter in an economy. Instead of my giving you five pounds of carrots, so you wash my car, then you trade the carrots for a new shirt, and the clothing store then trades the carrots to a trucker that brings them their inventory, we all just agree to use a ten-dollar bill. Because a nation's money supply represents that nation's "wealth" -- the sum total of goods, services, and resources available in an economy/nation -- it needs to have a fixed value relative to the number/amount of goods, services, and resources within the nation.

As an economy grows -- more factories, more goods, more services -- the money supply grows so one dollar always represents the same number of carrots. (And with a fractional reserve banking system like we have, that growth is created mostly by banks lending money and creating it out of thin air in the process.)

If the money supply contracts, or grows slower than the economy, then we experience deflation -- the value of money increases, goods and services become less expensive (fewer dollars to buy the carrots), but because the value of money has increased it becomes harder to get. When this happens quickly, because of its economically destabilizing influence (businesses and people can't get current money -- cash -- or future money -- credit -- because money is more valuable), it's called a Depression.

On the other hand, if the money supply expands or grows faster than the economy, there are more dollars than there are goods and services so the number needed to buy a pound of carrots increases. This is inflation, and when it happens suddenly and on a large scale, it's called hyperinflation.

Therefore, one of the most important jobs overseen by Congress and executed by a Central Bank (or the Treasury Department if we were to go with the system envisioned by the Founders and Framers of the Constitution) is to "regulate the value" of our money (to quote Article I, Section 8.5 of our Constitution) by making sure the number of dollars in circulation always steadily tracks the size of the overall economy. If the economy grows 2%, then that year there should be 2% more dollars put into circulation. More than that will create inflation; fewer will create deflation.

Debt

"Debt" is not money. Instead, it's a charge against future money. But even though it's a charge against future money, it can still be spent as if it was today's money -- except that it must be repaid with interest. And therefore debt must have some sort of a balanced relationship to the total size of the economy -- albeit the future economy -- for it not to be destabilizing.

In other words, if over the next twenty years (the term of a typical and healthy mortgage) the economy is expected to grow by X percent or X number of dollars, then the total amount of twenty-year debts that can be issued should be limited to X. But if it's greater than X, then when the future arrives there won't be enough circulating money to repay the debt, because the economy (and the money supply) won't have grown as great as the debt repayment demand. The only two options are for debt holders to default (bankruptcies, foreclosures, etc. -- Depression), or for the government to suddenly increase the supply of money (inflation).

The same is true of one-year debt (credit cards), four- or five-year debt (car loans, typically), and all other forms of debt. In aggregate, if the amount of debt is allowed to grow faster than the economy will grow over the term of the debt, when the debt is due there will be a problem, and if it's grown hugely, a disaster.

This is what we're experiencing right now. Over the past three decades -- largely since Reagan -- debt (both private and public/government) has expanded much more rapidly than the economy has grown. "Now" was "the future" when the debt was issued, but the economy hasn't grown to the point where there are enough dollars (in reality, enough value -- goods and services) to repay that debt. Thus we are experiencing a "wringing out" of that debt -- bankruptcies and foreclosures -- relative to the current wealth of the economy.

This is the most critical thing to see clearly -- without adhering to this simple concept, a government or central bank will always either create boom/bust cycles (depressions/recessions) or inflation. Without regulating debt, a government will be taken hostage and an economy destroyed by for-profit institutions that are able to create debt without regulation (banks).

Panics

Although Thomas Jefferson and Alexander Hamilton -- two opposite sides of the national bank debate -- both understood this simple concept, it wasn't brought into the realm of law until the mid-1930s with a series of strict regulations on the abilities of banks to create debt (loan money), and strong political limits on the ability of government to go into debt outside of wartime. That's why from the founding of this nation until 1935, we experienced a "banking panic" at least once every 10 to 15 years from 1776 until 1935.

Then Roosevelt took the banks in hand, by creating a series of regulatory agencies and empowering them with strict laws. The result was that for fifty years in the United States -- roughly 1937 to Black Monday of 1987 -- we didn't experience a single national "panic" or consequential bank failure. The stock market grew steadily (allowing for the blips surrounding WWII).

It was also hard to get a credit card (short term debt), buy a car (medium-term debt), or get a mortgage (long-term debt) without proving that you would be able to repay the amount in the future -- in other words, that there would be future expanded-economy dollars that you could lay claim to because of your particular job and skills. Credit was regulated.

Reagan changed the rules of the game, particularly when he brought in the anti-regulation Libertarian Alan Greenspan as Chairman of the Fed. He ran up a massive federal debt -- greater than that of every president from George Washington to Jimmy Carter combined -- in just eight years, and began the process of loosening the power of bank regulators.

That process was finished by a Republican Congress (particularly Phil Gramm) and President Bill Clinton (with help from Rubin and Summers) and then booted out the door by George W. Bush, who borrowed even more than Reagan. Bush even used an obscure 19th century law to fight states' attorneys general who wanted to regulate or prosecute fraud among banks and mortgage lenders in their states (see the article by Eliot Spitzer in the Washington Post just before his being outed for sleeping with a hooker).

Green Eyeshades

During the "Great Stability" -- that period from the 1935 onset of the New Deal and the beginning of its end with Reagan's massive tax cuts of 1981 and 1986, leading directly to the stock market crash of 1987 and the S&L debacle -- banking was, as Paul Krugman noted in a recent column, "boring." Credit and currency were considered part of the commons, not something off which a small elite should profit. Like the utilities in the game Monopoly, banks provided a predictable but relatively low profit. Nobody got rich, but nobody lost anything, either.

Bankers were the safe and predictable guys who wore green eyeshades at work and pocket protectors in their shirts. The nation's main products were goods and services; nobody "made money with money" in any big way.

Since the serial deregulations of the financial services sector brought on by Reagan, Bush, Clinton, and Bush, however, bankers became fabulously rich. They called themselves the "Masters of the Universe." They came to dominate contributions to politicians, and facilitated the takeover of most major US newspapers, all the while using debt as their mail tool to make money (burdening those newspapers with such debt that many are now going out of business because they can't repay it).

By 2005, fully 40 percent of all corporate profits in the US came from the financial services sector -- a group of people who didn't produce anything at all of value, nothing edible or usable, nothing that would survive into future generations. They invented fancy derivative "products" that they "sold" at high commission rates around the world so others could "make money with money." In fact, they weren't making money -- they were taking money. Behavior that would have been criminal during the Roosevelt, Truman, Eisenhower, Kennedy, Johnson, Nixon, Ford, and Carter administrations became "normal" and was even encouraged: more than half of all the graduates from many of America's top colleges and universities went into finance so they could get in on the very lucrative scam.

They created debt. As Ellen Brown notes at www.webofdebt.com, according to the Bank of International Settlements, they created and sold at a profit over 900 trillion dollars worth of debt- and risk-based "instruments." That's a pretty mind-boggling number when you consider that the GDP of the United States is around 14 trillion and the GDP of the entire planet is around 65 trillion.

All of these "products" were made and sold based on the assurance that when "then" became "now" the economy would have grown fast enough for there to be enough dollars to pay it back. But the reality of a debt bubble that exceeds the world's GDP many times over came crashing in on us in 2007 -- and still hasn't fully crested -- producing the "crisis" we currently face.

Are we there yet?

Are we recovering from it all now? Will things soon be back to normal?

If by "normal" we mean like life during the "Great Stability," the answer is: "Not a chance." Back then we had in place tariffs and trade policies, first initiated in 1791 by Alexander Hamilton, that protected our domestic manufacturing industries. We still made things -- in fact, the USA was the world's largest exporter of manufactured goods, and the world's largest creditor. Like today's China, for over 100 years we'd loaned other countries money so they could buy our stuff!

On the other hand, if by "normal" we mean how things were over the past 28 "Reaganomics" years -- a stagnating middle class, disintegrating manufacturing sector, and piles of money being made by bets and debts -- then maybe. After just the first decade of Reaganomics, we went from being the world's largest exporter of manufactured goods to being the world's largest importer; we went from being the world's largest creditor to being the world's largest debtor.

None of that has changed. We haven't repealed Reagan's disastrous tax cuts, which have exploded our nation's budget deficits. We haven't repudiated NAFTA and the WTO and gone back to an international trade policy that puts American interests over those of transnational corporations. We have not re-regulated the banks, and have not brought back 6000-year-old laws against usury (excessive interest rates on debt).

The bankers, in fact, are fighting it tooth and nail -- the financial services industry in whole has spent over $5 billion lobbying Congress over the past ten years -- and their acolytes like Lawrence Summers and Tim Geithner play major and consequential roles in the Obama administration.

It appears that the plan today is not to regulate the amount of debt that banks can create, but instead to both print more money and do everything possible to reinflate the debt bubble. (Lacking a return to Hamilton's national manufacturing and trade policy, as a nation we just continue to slip deeper and deeper into Third World status as an importer and debtor -- this may be our only choice if we don't wake up soon.)

If followed, the Summers/Geithner policy can have only one of two outcomes: inflation or another, more serious crash. It's possible we could have both. Apparently the bankers and Summers/Geithner's hope is that neither or both don't happen for at least three and a half years...

Thom can be heard daily on his radio show 12pm - 3pm ET visit www.thomhartmann.com to stream live or find a station near you.

 

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Comments

[AMEREURO]

MONEY IS NOT DEBT

Thom, you make some good points, but unfortunately there remains the popular misconceptions of money.

All wealth comes from nature's gifts of resources and humanity's inheritance of knowledge - both of these ingredients are free; we don't borrow and owe them, all we have to do is account for what we do with them. This is where money should be so helpful. Money is numbers used to represent the value of the things we make. But if the money-accounting system is engineered in a way that yesterday's products have to be paid from tomorrow's earnings, then we can never break-even today. This faulty accounting of our money-numbers turns what should be simply a purchasing media into a perpetual debt-trap.

Aristotle 'got it' when he said "Money exists not by nature, but by law." Aristotle was also 'right on the money' when he said "All goods must therefore be measured by some one thing... now this unit is in truth, demand ... money has become by convention a sort of representative of demand... ...money then acting as a measure makes goods commensurate and equates them..." (Ethics 1133) – i.e. money is a human invention and convention; if goods do, or can, exist, then the money to buy them must also be made to exist, relative to the goods, for the goods produced to have any use.

Only the money needs to be made to exist, not debt along with it.

[mbaty]

We've got to blow up this debt bubble again. If we just keep borrowing money the economy will be fine. If we prop up the debt bubble with more created wealth/debt, then we will finally be able to get back to those heady days of bubbling boom. Throw money at the top one percent and let the wealth trickle down, because a trickle is better than nothing, am I right, fellow consumers? We'll take what we can get, as long as it means these banks can get back to business. I just hope the Tarp money is enough for them. But there's more where that came from...sidenote: Do you think TARP is an anagram for Trap?

[AMEREURO]

One has to remember that banks don't have what they 'lend' - the 'borrower' is borrowing nothing, but their kept working hard to pay for it, with interest. We're all kept busy working for it and paying for it, but the harder we work, the more wealth we create, the bigger the debt gets. If it was lawnmowers that were being 'lent' instead of money, it would be an obvious scam. Still, it's a nice 'business' to be in, if you can keep the illusion going, er, I mean 'retain confidence in the system'.

Luckily, the 'experts' all agree that the way to get out of this hole is to dig deeper, that's why they're paid the big bucks. For the rest of us it's a death-trap that means continuous 'economic cycles' with 'poverty amidst plenty' and continuous warfare, depletion of the world's resources, pollution, disease, a wastage of human ingenuity and effort, stuff like that. It will stay this way until people demand that money be created by and for society in proportion to the wealth that society can create for itself, i.e. until people demand that money stop being created along with a fake debt.

[joebhed]

It seems a debatable point among monetary historians whether all debt is money or whether all money is debt. There's a lot to the definitions.
What is not debatable is whether debt-money is a debt. And, whether debt-free money is money.
All money created under the private fractional reserve lending, money-creation system is a debt. By definition.
All money created as a debt-free payment by the Treasury into the accounts of US citizens and corporations doing business with the government is not a debt to anyone. It is debt-free money.
In this case, the money paid into existence is the perfect means of exchange between the government and the receiver of the payment of the money.
That's what money is supposed to do.
That is how the sovereign government is supposed to use its monetary powers to keep the economy growing in a stable manner.

"Until the control and issue of money and credit is restored to the government and recognized as its most conspicuous and sacred responsibility, all talk of the sovereignty of Parliament and Democracy is idle and futile." - Mackenzie King, Prime Minister of Canada in 1935

[IndianaJohn]

Modern economies have systems for moving capital to where it can be effectively utilized. Economies need to have a system for making loans, The question is how to manage the system to keep stable growth in the economy.

[joebhed]

"Modern economies have systems for moving capital to where it can be effectively utilized."
Interbank loans.
No problem, regardless of how money is CREATED.

"Economies need to have a system for making loans".
It's called a prudent lending window, and it works no matter how money is CREATED.

"The question is how to manage the system to keep stable growth in the economy."
I know that's the question.
My answer is according to Milton Friedman's Financial and Monetary Framework - for just that purpose. Do you have a better idea?

The objectives of the legislation to implement the Chicago Plan during FDR:
"to provide an adequate and stable monetary system; to prevent bank failures;
to prevent uncontrolled inflation;
to prevent depressions;
to provide a system to control the price of commodities, and the purchasing power of money;
to restore normal prosperity and to assure its continuance".

The Chicago Plan.
Greenbacks.
The new Way Forward.
Economic Stability rules.

[moonbay]

Obama said he would listen to both sides of the arguement and give both sides the thought it deserves. However, he seems to be happy with Geithner and Summers and doesn't seem to be listening to the "other" side. This is really frustrating as the "other" side is HIS side. That is, they are democrats that want the same results Obama wants, but don't have the "insider" interests of Geithner and Summers. Many of these people, i.e. Krugman, Stiglitz, Sachs, Hartmann are intelligent, twell-educated, experienced, they have important knowledge to add to the arguement. Their points of view should be added to the mix, not disregarded off-hand.

[sposton]

When the "economy" actually starts recovering again the danger will be inflation. As soon as inflation starts appearing the Fed will slam raise interest rates to "cool" things down. Unfortunately, we are entering uncharted waters. Nobody really knows how our system is going to behave. The simple fact is that our underlying system is not healthy and it may start behaving in chaotic fashion. Our traditional tools may no longer work and we may be stuck in a narrow band between deflation and inflation. Instead of pulling levers we will are likely to push on ropes. The overall result is likely to be overall stagnation of our economy with a massive drop in American standard of living. Over time we will relearn what a real economy looks like and will start rebuilding. Unfortunately, will are likely to find the same kleptocratic financial system on our backs ready to suck our blood once again.

[Lorianne]

Also good reading:

INFINITE DEBT How unlimited interest rates destroyed the economy
By Thomas Geoghegan

http://harpers.org/archive/2009/04/0082450

[SCG]

Supply side socialism : The top of the pyramid is shielded from losses, while the bottom is expected to work them off.

[Henry]

For an illustration: There was a guy who had $38000 in his checking account. Imminently and eminetly spendable for anything, this guy decides to pay-in-full the balance of his home loan which happened to have a balance of $33000 at that very same bank as his home loan. So he writes the check to payoff the loan. On that day $33000 is "extinguished" (this is a debit accounting entry) from his checking account (you know how this works...the money is gone) and simultaneously the loan on the asset side of the bank's books receives a credit entry for the same amount $33000, making the balance due -0-. The loan is gone, and the money used to repay the loan is extinguished. The "credit" entry that initially gave it "birth" met the full total "debit" entrys to extinguish it in total.

[GrahamInCanada]

Great explanation.

[joebhed]

from my canadian friend, bill abram

http://www.youtube.com/watch?gl=CA&hl=en&v=9yYEFuN2v08&feature=related

everyone caring about money and economic stability should give an eye and ear to this guy.

[twofish]

Doesn't it go back into the bank's reserves to be loaned out again? Or paid out as dividends to the shareholders? Or even paid to the CEO? Whatever, none of those amount to "extinguished."

[IndianaJohn]

It might seem the money would be loaned again in the case of a single loan, but consider the entire system of millions of loans. The banks don't actually own the money (for the most part) they loan to people, they borrow it from someone else (people who expect to be paid back and would frown on the bank giving it to the CEO). If more people are paying off loans than taking loans out, the banks would pay back their own loans, including the money borrowed from the Federal Reserve.

[Henry]

twofish,
Wish I had a blackboard to show you this, but... think of the same case. I have $38000 on deposit at my bank. I choose not to pay my home loan off, but to purchase a new Toyota Camry for $32000. I write a check for $32000 on my bank to the dealer who deposits it in his bank (a different bank than mine), In this case my check must "clear" my bank's reserve accounts, transferring my bank's reserve balance of $32000 to the reserve bank of the bank where the Toyota dealer banks. In this case the reserves of my bank are lessened and must be maintained at certain levels. When their reserve balances drop they need to do something like sell secruities (U.S. Treasuries) to replenish their reserves so that they meet requirements. This is the domain of liquidity and is not an issue in the first case scenario I describe. (it is really quite simple when you can see it on a blackboard)

[Henry]

Whenever money is created it is a credit to the balance sheet of the creating entity (the fed or your local bank). The thing about currency is that it floats and is unlikely to have the necessity of being repaid. Now when you local bank books a loan (this is a debit and an asset) it is balanced by a credit which is to your (or a) deposit account. The thing about this latter kind of money is that it is always being repaid (along with interest) but when the principal balance of a loan is being reduced (i.e. repaid) money (of the m-1 sort) is being extinguished. There are really two kinds of money, the currency sort which is a liability of the fed (but an asset to whomever possesses it) and the demand deposit sort which is a liability of the bank in which the deposit liability is located.
The big boys (Bernanke, Paulson, Geithner) refer to money as "credits" as it really is something from the domain of the credit markets. Therefore the long and short of it. For the most part, money is an accounting entry. (when the principal balance of loans are repaid "money" is extinguished in the closing accounting entry) Like it or not, that is how it works. Pay some attention to interest rates.

[Truthahn]

We will NOT repay much of our government and consumer debt. The numbers are just too big, and there is no political will to take the painful belt-tightening required to pay it all back. I am 100% certain that this Democratic regime intends to devalue the currency and inflate away the bulk of US debt, both public and private. I can't come to any other conclusion when I look at the budget numbers that Democrats tout. Certainly we had a lot of fiscal irresponsibility under Bush, but Obama is making Bush look like Ebezener Scrooge, and Ben Bernanke is collaborating by printing money by the truckload. The Chinese central bank has already expressed concern that the US government might intentionally inflate away its debt, with good reason. A couple years from now Inflation is going to hit us like a freight train, and Democratics will pretend to be surprised, but most of them will have known all along what was coming.

[GrahamInCanada]

There is some money that governments will never, ever repay. For example there are bonds that the Bank of England issued in the nineteenth century that are so very cheap to pay every year, that the Bank of England never ever intends to pay them off, but just to pay the interest every year. Yes, bonds of the nineteenth century are naturally so cheap in the twenty first that only an idiot would pay them off.

But mostly, governments do pay off their debts, it is just very hard to determine a beginning and an end to government debt, which is a revolving type of thing. The government does not seek to buy a house, pay for it, and retire, it sees itself continuing in a circular annual pattern pretty much forever. Government debt becomes very circular, as government never intends to retire.

When measuring government debt, a very important measurement is debt to GDP. Over and above inflation, today's debt will with any luck shrink as a percentage of the future GDP. In fact, given a few decades, it can become to look like mighty cheap debt, in the future economy.

[joebhed]

ummmmmm, Graham.
On idiots and banknotes.

In the 17th, 18th, 19th and half the 20th century, the Bank of England was NOT the government.

Your point raises the question of whether or not TODAY the Bank of England Corporation is paying interest on the private banknotes from centuries ago.

[Lorianne]

I agree. I don't see any other way this can go.
Repudiated national debt in one way or the other.
Disastrous.

[GrahamInCanada]

The best treatment of a future of US repudiated national debt, wingnutism, and the American Empirical analogy, with great winks at Rome, and shocking content about the morality of future American politicians, was

http://www.amazon.com/First-Citizen-Thomas-T/dp/0671653687

Surprisingly, it has aged well, but of course, some of its meanderings have proved wrong (it is set in the future, but written in the past), and still a fine read!

Fiction, still...

Anybody else have any favorites of the US debt repudiation type?

[maxmcgloin]

Very good post. Too bad we can't force congress to read it.

NAFTA and GATT will see a massive reduction in the standard of living of the average American as there is a small increace in the living standard of other nations. Where the real gains are and will occur is among the richest people across the globe. This crisis is just speeding things up as the US tax payers send money directly to the rich.

[GrahamInCanada]

I'm sorry to be so dense, but will Canada, as a member of NAFTA and GATT, watch the standard of living in the US decline, while ours increases, our did you mean to say that members of NAFTA and GATT will watch their own standard of living decline while non members will see slight improvement?

[IndianaJohn]

You have left two factors out of your calculations. The velocity of money and the savings rate.

GDP is the "value added" to the economy. GDP is also the money supply times the velocity of money. So, while we have seen a huge increase in the money supply, we have also had a decline in GDP without inflation, because the velocity of money has fallen. The increase in the savings rate is causing, or at least contributing to, the decline in the speed at which money moves through our economy.

[GrahamInCanada]

GDP, or Gross Domestic Product, is not a measure of value added, it is exactly what it says it is.

The GDP is not the money supply times the velocity of money.

The savings rate does not directly impact the velocity of money, as long as they are not burying it in their garden, and if they are, they are losing money to inflation.

[IndianaJohn]

Would you prefer "GNP"?

http://www.investopedia.com/terms/v/velocity.asp

"Investopedia explains Velocity of Money
Velocity is important for measuring the rate at which money in circulation is used for purchasing goods and services. This helps investors gauge how robust the economy is. It is usually measured as a ratio of GNP to a country's total supply of money."

Since velocity is a measure of how fast transactions are occurring in an economy, spending for consumption or investment increases the velocity, savings (or retaining of earnings or deleveraging of banks, call it what you will), reduces the velocity.

[noesis]

As the Enlightenment thinker, David Riccardo noted, a central bank {he was referring to the Bank of England} should never be able to control the money supply AND perform its lending practices. He realized that these two functions needed to be handled by separate agencies, for the future health and wealth of the nation.

[GrahamInCanada]

Yes, that is why the central bank should not lend directly to the market, but to the commercial banks instead.

[noesis]

Go back and read the classical economists, and their views on "central banks". We obviously didn't take their wise counsel (to our detriment).

[Rule Of Law]

""Debt" is not money. Instead, it's a charge against future money."

So while Bush was borrowing all that money from the Chinese, Saudis,Japan, etc. for 8 years, he was just adding to the debt, not increasing the GDP as he claimed when they entered that money in the books as profit?

So I guess you could call him and the neo-cons the "Borrow and Spend Party?"

What's worse--tax and pay as you go, or borrow and spend it all like a sailor on shore leave for your kids and grandkids to pay back? At interest!

[Truthahn]

This straw man is always trotted out by Democrats in budget debates. Yeah, the Republicans were fiscally irresponsible, but so what? They're not running the show anymore. Democrats are in charge, and their ideas will be judged on their own merits. Pointing out the defects of the previous adminstration in way excuses the defects of the current administration.

[VHammon]

A straw man is a false proposition against which one makes one's argument.
The fiscal irresponsibility of the Republicans is hardly a "straw man" of "so what?" consequence today. When President Obama took office, less than 3 months ago, over 80% of our $10.8 trillion in government debt had been incurred by just 3 Republican presidents (Reagan, Bush I and Bush II -who ran up half the debt all on his own). In 2008, we had to take 27% off the top of all the funds collected for our federal Operating Fund to pay $443 billion in interest on this debt. Some of the Reagan debt is in non-callable bonds at up to 14% interest, which we will be paying until 2018.

[Rule Of Law]

What Hammon says below re your straw man lie, plus this: We are dealing with, and will be dealing with for years and years, the fall out from those bubble driven borrow and spend lies of the Bush Admin. America doesn't operate in a vacuum where everything changes with a new resident in the white house.

[PATina]

It appears that the plan today is not to regulate the amount of debt that banks can create, but instead to both print more money and do everything possible to reinflate the debt bubble.

That's how I see it too. I also think that the administration has already determined that this is the only choice that we have... although I disagree. There are other ways to fix the banking system w/o reinflating the debt bubble.