Balancing the Budget with Debt Based Money

By Senator Phil Hart | February 17, 2026

In the modern era, the money supply expands when new money is created. Today, the money supply expands when money is borrowed into existence. The moment before a loan is funded, the borrowed money doesn’t exist. Once the loan is funded, a journal entry is made noting the creation of the loaned money. The money is created by the journal entry. The bank created that money in an instant, but you might take up to 30 years to earn the money necessary to pay back the loan plus interest.

There is no money circulating in our economy that has not been created through the process of borrowing. All money is therefore debt. Most people think money is an asset, but since all money was created by borrowing it into existence, money is a liability. If all money is created as debt, there are no assets – only liabilities.

Debt does not exist in a vacuum. Debt needs to be serviced by interest payments. And if 100 percent of all money is debt, where does the money come from the service the debt? It comes from the assumption of new levels of money creation. And the creation of new money creates deeper debt levels, as the new money is borrowed into existence.

If debt is not serviced by an interest payment, the value of the loan declines. If there is an extended lack of payments to service the debt, the value of the loan goes to zero. Unless we have a forever expanding money supply fueled by the expansion of greater and greater levels of debt, the money supply will shrink. Oh, it is much worse than that. A lack of expansion of the money supply will create a catastrophic collapse of the economy as the money supply will implode to zero by way of a domino effect. This deflationary implosion could cause a modern Dark Ages.

Because the United States Government is the greatest borrower on Planet Earth, a debt based monetary system needs the U.S. Government to go into deeper and deeper levels of debt in order to keep this Ponzi system going. In our system, there are only liabilities, there are no assets as everything is mortgage to the maximum amount. We don’t actually have a money system, we have an “anti-money system”. Today money is not an asset, it’s a liability.

The vociferous calls for an Article V Constitutional Convention to Balance the Budget of the federal government is a complete waste of time. It is mathematically impossible to balance the budget with the current money system. Our only hope to balance the federal budget is to switch to an asset-based money system where money actually has an inherent value. What worked best in history is a money system based on gold and silver. Oh, by the way, the United States Constitution mandates “No state…(shall) make anything but gold and silver coin a tender in the payment of debts;”.

Government’s role related to a money supply is not to control it, but only to certify it’s value. Government’s role is not to print the money, but to certify its quality as they do the accuracy of a gas pump or the accuracy of the scales in the fruits and vegetables aisles of a grocery store.

“The Congress shall have the power… to coin money, regulate the value thereof, and of foreign coin, and fix the standard of weights and measures;” Article 1, section 8, clause 5.

“You shall have a full and just weight; you shall have a full and just measure, that your days may be prolonged in the land which the LORD your God gives you.” Deuteronomy 25: 15.

Public Law 96-389, passed by Congress on October 7, 1980 authorized a commission to “conduct a study to assess and make recommendations with regard to the policy of the United States Government concerning the role of gold in domestic and international monetary systems, and shall transmit to the Congress a report containing its findings and recommendations….”

This Commission found:

“In addition to the compelling economic case for the gold standard, a case buttressed by both historical and theoretical arguments, there is a compelling argument based upon the Constitution. The present monetary arrangements of the United States are unconstitutional --even anti-constitutional—from top to bottom.” (vol II, pg. 243).

A viable exit strategy would be to extinguish a fraud with another fraud. Since Congress has the power to coin money, I suggest that Congress make a 15-foot diameter coin, one foot thick, and denominate that coin “38 Trillion Dollars”. Give that coin to the Federal Reserve Bank and their stockholders and call it even. Then switch to an “honest weights and measures” money system based on gold and silver and move forward with that system.

If we don’t do this, we will lose the younger generations who, because they cannot afford a home, will likely conclude that capitalism has failed them. They don’t realize that it is “crony capitalism” that has failed them. We don’t want them to turn to Marxism for their solutions. We want them to embrace the principles of our founding fathers who based every aspect of our constitutional system on God’s word and God’s ways. Let’s get back to those founding principles so that all generations can live in prosperity.

For a good presentation on the mechanics of a debt-based money system, please watch the YouTube video linked here:

Debt - Based Money System

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