Let us look at another analogy of how “discharge” operates in
contradistinction to “payment.” Let’s say that you go to a restaurant where you see the one and only Bill Gates arrive with an entourage of people for dinner. At the end of that dinner the waitress presents Mr. Gates with a “bill/check/ticket” for $1,700.00. Mr. Gates adds a $300 tip to round out the debt to $2000.00. He then signs to accept responsibility and hands it back to the waitress as if to put it on “his tab.” He then inadvertently leaves the restaurant without “settling” or “paying” the bill. The next day the restaurant supply truck arrives and after delivering a load of alcoholic beverages presents the man- ager with a bill for, coincidentally, $2,000. The manager informs the beverage supplier that he has misplaced the company checkbook and would like to know if he would accept a signed/accepted dinner bill from Bill Gates’ visit the night before. Knowing that Bill Gates had visited the area the day before and frequents that particular restau- rant, the supplier calls his boss who agrees to accept the bill from Bill Gates once it is endorsed by the restaurant manager. Since the bev- erage company has “faith” that Bill Gates is “good for” his debts the company gladly “discharges” the debt owed to it by the restaurant. Now the debt owed to the beverage company is attached to the bill signed by Bill Gates and the country’s wealthiest man will, perhaps someday, have to settle that debt with the bearer of the original bill/ check/ticket signed by Gates himself. Notice that the debt has not yet been “paid” because Bill Gates still owes it. It has only been dis- charged. Let’s continue to follow this negotiable instrument. It is negotiable because it has not been labeled as NON_NEGOTIABLE by the restaurant and it has been endorsed which makes it available for circulation. The next day the beverage company owes the diesel fuel company $200 for each of ten trucks that were refueled. The bill, once again, is coincidentally, $2,000.00. The owner of the bev- erage company asks the fuel company if their accountant would be willing to allow them to accept the endorsed and accepted dinner check signed by Bill Gates. Upon a faxed inspection of the bill, now, “negotiable instrument,” in circulation, the fuel company agrees to accept the “dinner check” in “discharge” of the beverage company’s debt to the fuel company. Now keep in mind that the debt to the fuel company has not been “paid” but has been “discharged” away from the beverage company and is now the obligation of Bill Gates via the “dinner ticket” that he accepted with his signature. The “dinner check,” as you can now see, is being circulated as currency because of the “good faith and credit” of Bill Gates. It is now a debt based cur- rency that could continue to be circulated indefinitely without ever being settled or redeemed and, Bill Gates, could, in deed, perhaps, never be forced to “pay” his obligation because of its popularity or acceptability of the people for circulation. If Bill Gates continued this practice, he has just created his own currency and would never have to use his own wealth to purchase goods and services and/or dis- charge any debt. The Federal Reserve Note is no different than Bill Gates bill. The Federal Reserve Note is often referred to as a dollar “bill” or a five dollar “bill” or a one hundred dollar “bill.” Bill Gates “promise-to-pay”, or Note, in this example, is a two-thousand-dollar “bill.” - Wealth of the Wicked, Steven Johnson Now let us consider America's Wholesale Lender, an ORIGINATOR. You, FRED, desire to live your days out at 933 Paradise Avenue, and the builder or proprietor, or ORIGINATOR, desires to go to Tahiti and do whatever they do in Tahiti. He wants some money, and he wants a little cash flow that we can draw on and have Amazon bring him stuff he needs in the future, he knows not what. You both strike a bargain. You promise to buy him transport to his island, and keep sending him stuff from the mainland for up to twenty years, or prepay him off a maximum amount earlier if you become wealthy. You are wondering how the ORIGINATOR is going to buy an airline ticket to Tahiti for $17.23, and how he will be able to manage living in the expansive style to which he has become accustomed, for $1.45 per month. Maybe things are cheap in Tahiti. I Really Don't Care. Do U? In polite society, the subject of death is not discussed. But... The ORIGINATOR has a plan. He has 14,832 people like you. That gives him $255,572.59 for his travel, and $21,507.85 per month for Amazon to bring him anything he needs from the mainland. It is actually very SWEET. But... The ORIGINATOR is plagued by doubt. What if you die? What if you join the Rastafarians and stop sending money? He decides to take a HAIRCUT, and give all of his RESIDENTIAL MORTGAGE BACKED SECURITIES to the FEDERAL RESERVE BANK OF THE UNITED STATES. They laugh, and reply 'FRED promised you money? Is that the FRED I know? The coal miner in Odwalla? Next year we'll have windmills everywhere! Good luck with FRED!' The ORIGINATOR is distraught. He meets up with Bear and Stearns at the saloon that night. The next morning all his troubles are gone, he has a new haircut, and $100,000. With a little belt tightening, he can borrow another $400,000, cut a deal on that Oceanis 541, and get to Tahiti by November. He is willing to do whatever they do in Tahiti, after. But... The Oceanis, TUMBLING DOLLAR, get squished in the locks at Panama. Nobody even notices. A little smoke on the water. Bear and Stearns fall on hard times, clean out the safe, and flee to Tahiti. Select Portfolio Servicing cleans out Bear's office, and senses opportunity. They call FRED...and LARRY...and SUSAN...and ORESTES...and DEBBI...and some dude in Oregon...
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AuthorDave McCrae is a retired engineer now settled in Oatmeal, Texas. I trained as a nuclear physicist and for a brief time was able to hold positions operating a small cyclotron, a large computer (CDC-6400 BITD) and as a medical researcher. After a weekend in Cleveland, and learning to weld, I left academia and joined Clan MacRae, constructing large buildings, setting complex machinery, devising manufacturing processes, and operating deepwater submersibles. I had too much fun, and made too much money. The cyclotron was kind of quaint, punch card computers are pretty much extinct, and we still have issues with cancer. Archives
November 2018
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