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Collapsing the System

I've told you a lot of spooky things on this show and I'm hoping a lot of those things are wrong.

On Tuesday, I asked you the question: Does it matter if these people are Marxists?

Does it matter that the guy rebuilding our automotive industry has no experience and believes that the free market system doesn't work? Or that the manufacturing "czar" said that the free market is "nonsense?" Or that we have communists and radicals serving in the administration and advising the president?

(BEGIN VIDEO CLIPS)

RON BLOOM, WHITE HOUSE MANUFACTURING 'CZAR': Generally speaking, we get the joke. We know that the free market is nonsense...

MARK LLOYD, FCC DIVERSITY 'CZAR': In Venezuela, with Chavez, a really incredible revolution, a democratic revolution...

THEN-PRESIDENTIAL CANDIDATE BARACK OBAMA: I think when you spread the wealth around, it's good for everybody.

VAN JONES, FORMER WHITE HOUSE GREEN JOBS 'CZAR': Give them the wealth! Give them the wealth!

ANITA DUNN, WHITE HOUSE COMMUNICATIONS DIRECTOR: Mao Tse-Tung and Mother Teresa, not often coupled with each another, but the two people that I turn to most...

(END VIDEO CLIPS)

Does it matter?

The answer is yes, if you believe that what makes America, America are the individual dreamers, builders and doers. Not the collective, but the individuals, the dreamers and the inventors.

From the people that brought us moving pictures the assembly line, the light bulb, the elevator, the Chia Pet, those are the individuals that made us great. And that is what is being stifled.

Now, government will tell you what to create, how to create it and what to do with it after you've created it. They'll control your financing, control your education, control your health. They'll control what you watch on television, they'll control absolutely everything — because now, they'll own a lot of the banks and many of the companies.

So now, not only does an inventor have to invent the thing the government says it is looking for, they'll also make sure that you can't go out on your own and try to create something better.

It is total control. And it is also, total insanity.

I've told you before about Cloward and Piven, a 1960s strategy that identified the best way to stop the Republic — the best way to subvert the Constitution and replace it with communism, Marxim or socialism — is to first financially collapse it.

Just a year ago, this stuff sounded absolutely crazy.

We've all worried about the debt. I want to not only show you how bad the debt is, but I also want to arm you with information, you will not accept their answer when they present a solution for what's coming. And what's coming is a system that is unsustainable. A system that is going to collapse. A system that quite honestly, looks a lot like what happened in Iceland.

In Iceland, all three of their McDonalds have been forced to close. Now, that may not sound like a national emergency, but neither does the swine flu. The reason they shut down is that Iceland's currency, the krona, has devalued to the point where the McDonalds' franchise owner could no longer afford to even import the packaging, meat and cheese to run the business.

Remember, four years ago, Iceland was a stable economy. But now, after being in a position where they were importing workers from Poland, they've gone to a 10 percent unemployment rate in one year. Massive debt, coupled with the currency and banking crisis, has caused Iceland's once thriving economy to hit the skids.

Iceland's GDP is around $20 billion; their foreign debt alone is $120 billion — six times their GDP. Would you like a hot apple pie with that debt, Reykjavik? If only their biggest problem was where to find their next Big Mac. If only that was our biggest problem.

Our GDP is $15 trillion. Our actual debt, as you've seen many times on the debt clock, is $105 trillion. Hmm, seven times our GDP.

I want to make this clear: Ours is actual debt; theirs is foreign debt. But do you know the games our government plays with the accounting books? Do you realize we have four separate books? According to David Walker, former U.S. comptroller, everybody involved would be in jail — if we didn't own the jails.

Liberal blogs are having fun with me saying there's more truth from Pravda. Well, let me give you a quote from Pravda last week: "It can be safely said, that the last time a great nation destroyed itself through its own hubris and economic folly was the early Soviet Union (though in the end the late Soviet Union still died by the economic hand). Now we get the opportunity to watch the Americans do the exact same thing to themselves. The most amazing thing of course, is that they are just repeating the failed mistakes of the past."

How is it happening? Well, let me explain how the system works:

A year ago we had a problem with the banks: People took out too many bad loans and the government pressured banks to make those loans, by the way, to people who couldn't afford them and the whole thing melted down.

So the banks didn't have enough money to cover bad loans and we were faced with a choice: Let them fail or bail them out. Well, you know what happened: We passed the Troubled Asset Recovery Program (TARP) to help the banks cover the bad loans and fund new ones.

Now we're hearing that the banks aren't making loans. How is that possible? After all, we gave them all of that money.

It's actually a good thing right now that the banks aren't making those loans. Too much money would be flooding the system. They are not making those loans because they're afraid that the worst is not yet behind us and they need to have that money on hand so they can keep their doors open.

But if things start to get better again, then all of that money will flood out into the system. It's called velocity — the speed of the money coming out of banks into the economy. And for inflation to happen, you need a lot of money in the system.

We don't really have an inflation problem right now, but back in the '70s under Jimmy Carter, for two years we printed too much money. We added 13 percent more money to our money supply for two years. Remember how bad the inflation was? And we started down a socialist utopia with Jimmy Carter.

To stop it, what did we have to do? Fed Chairman Paul Volcker came in and, in an effort to suck all the money back to the Fed and out of the system, he had to raise interest rates.

Remember, the banks have all of this money on the sidelines right now. As soon as they release it into the system, from that time, it usually takes about two years for the money glut to cause inflation.

After printing 13 percent more money for two years, we had runaway inflation of 12 percent. So Volcker raised the interest rate to 20 percent, because whenever you borrow, let's say, $100, you'll then owe $20 — the Fed then takes that $20 and destroys it to get it out of the system and bring inflation back down.

So we had to have a 20 percent interest rate for a 13 percent increase in the money supply for two years. In the last year or so since Lehman Brothers failed, we have increased our money supply by 120 percent.

How high will our interest rate have to be to pull all of that money back out of the system?

The reason I bring this up is that our real debt, as I pointed out, is $105 trillion. You and I both know we can't pay that back, so how do you pull this money back in without completely shutting down the entire economy? Can you afford a house with a 30-year interest of 35 or 40 percent? How about a car payment? How many business loans will be taken out with 25 percent interest rates?

You can't. Everything stops. So how do you keep an economy, based on buying — not building — going when you can't borrow money? You don't. It's the real reason that Chris Dodd wants a cap on credit cards today. They must have your credit cards working. They must have you spending.

Here's what I think they're doing: They will pay off the debt by printing enough money to pay off $105 trillion. It'll be worthless, but we'll give the Chinese and the rest of our debtors, their money. And those people that we've sold stuff to will come and take their assets.

But then what's left to restart the country? We have to have something to back our currency. Well, what about gold? There are $200 trillion in investible assets in the world and just $800 billion in gold to back it. So you can't go back to the gold standard; you need something to buy stuff with — we can't barter forever.

So, we have to have money and we have to base it on something. Let's go back to the people who taught us in the last century what we do when there's an out-of-control money supply: the Weimar Republic in Germany. What did they do? After their currency had become so worthless that they had printed 2 trillion-mark bank notes and their economy collapsed, they dumped the mark, switched to the rentenmark and backed it with real estate — land.

Well, there's certainly enough land and resources in America that we could back our currency that way as well, but the government would have to own all the land.

Hey, good news! Between Fannie and Freddie, the federal government already owns 55 percent of the mortgages in this country. And coupled with all the federal land grabs for parks, polar bears who are crowded but endangered and all the oil we're not drilling for or coal we're not mining, you might be able to base a currency on all that. And what a deal for China when they come in to "help."

I hope I'm absolutely wrong about this, I honestly do. But think about this: Who would the new "regime" responsible for this "new America" have on their side? Who would the federal government, after they've destroyed your future and that of your children, who would they have on their side?

You'll say: Let us fix it; let the free market fix it. But we've already seen those in the government don't believe in you or the free market. The government is going to say: Let the world fix it. They're already saying that — and when you watch Friday's show on global warming, you'll see how they're laying the groundwork for this.

Don't fool yourself. Read history. During the American Revolution and the Civil War, we needed allies: People who would fight and supply money. Our government is making those allies: Russia, China, Venezuela. But don't you think China would be willing to come over here to protect this government, from its people under those circumstances? For a piece of our oil, coal, mineral reserves and land? And to be part of one, big, happy global family?

You bet.

So it boils down to this: What if the dollar collapses in the next three, five, eight years? What if, this is the plan? Does it matter?

And let me ask specifically to all those who support Gitmo being closed, the Amnesty International goofballs, the protect-the-endangered-crowded-polar-bear crowd: Do you really think Russia and China will be better protectors of the planet than we have been? Will Russians cordon off 200,000 square miles of extra space for polar bear roaming or will they shoot them in the head to get a barrel of oil that used to belong to you?

I know I would. Surely, Ivan will.

— Watch "Glenn Beck" weekdays at 5 p.m. ET on Fox News Channel