From time to time, salesmen offer to sell me something that I don't have the money to buy. They propose that I use "Other People's Money" (OPM).
It would be nice if other people were willing to let me use their money. But Americans are more interested in spending their own money on themselves. Americans have a very low savings rate -- at times even a negative savings rate (meaning they dip into their savings to buy a big-screen TV). Most people don't have any money saved away.
The facts are clear: Each day America's debt increases, with no increase in Americans' savings.
Every day Americans use "Other People's Money" but other people are not letting anyone else use their money.
How is this possible?
How is it possible for me to use "other people's money" when other people are not saving any money, and are not willing to let me use it?
The government has given my salesman an answer to this question. The salesman can direct me to a bank which the government has empowered to create money for me. Economists call this money "Fiat Money" (pronounced like the Italian sports car: "FEE-ott."). In the Latin version of the book of Genesis, God said "Fiat Lux!" -- "Let there be light!" -- and there was light.
Today's government thinks it is god, and can create money out of thin air: "Fiat money!" "Let there be money!"
Another word for creating money out of thin air is "inflation." The government inflates the money supply by creating "fiat money."
Most people think "inflation means" "higher prices." Higher prices are the result of inflating the money supply with "fiat money." When a borrower goes to a bank that doesn't have Other People's Money in it and asks for credit, the bank doesn't loan out Other People's Money; the bank has the government's permission to create new money for the borrower. The bank simply creates an account for the borrower and fills it with computer digits which are called money. This new money competes with Other People's Money in the market, and this causes prices to rise. What most people think of as "inflation" (higher prices) is caused by the inflation of the money supply.
People think they want more money, but what they really want is more purchasing power. If the government gave everyone a million dollars tonight at midnight, tomorrow a loaf of bread would cost $100.00. The new money simply forces up prices, but doesn't give anyone additional purchasing power. Creating more dollars simply makes each existing dollar worth less.
When I use "other people's money," what I'm actually doing is stealing from Other People's future. I'm stealing from their retirement fund. I get to buy what I want today, but Other People will not be able to buy what they thought they were going to buy tomorrow. My creating new money at a government-chartered bank makes their future worth less. I get purchasing power today, they get worthless dollars tomorrow.
This is why I do not use my credit cards unless I have already earned the money, and I pay the credit card off at the end of the month.
For Further Study: How Using "Other People's Money" Steals from the Poor
FIAT EMPIRE - Why the Federal Reserve Violates the U.S. Constitution
