Hidden Secrets of Money – The Hidden Truth about Money

A bond is a government issued document with which it borrows money from its citizens. In Nigeria the Federal Government through the Debt Management Office offer bonds to citizens and an interest of say 10% for 3, 5, 10 or 20 years. This bond is what leads to the national internal debt profile of Nigeria. The Central Bank of Nigeria prints currency notes and acts as the payer of the principal of the loans back to the citizens, while the Debt Management Office works to record that debt on paper. This debt on paper are currency notes which needs to be pulled out of Nigeria’s financial system as it is contributing to inflation. Here again are the topics and concepts in the series and for which videos will be linked for further understanding.

  1. What is Real Money?
  2. Why is There Inflation and Imbalance of Wealth?
  3. The Hidden Truth About Money
  4. How You Can Make Yours
  5. Fight Inflation Through Multiplication

In the previous posts we looked at what is real money and what causes inflation and imbalance of wealth. Here we focus on one of the major means by which government in US, Nigeria and similarly countries the world over print currency notes.

DEBT

Debt is some money owed by any person. For governments, there is external and internal debt. Debt is incurred by governments in order to fund projects to which they do not have ready cash available to execute. The present internal debt profile in Nigeria is about 15 Trillion Naira. Another way to look at debt is; debt is currency notes (monies) which is in the system and needs to be removed. There is a point beyond which debt exceeds the available currency in circulation. This is because whenever the government takes a loan, there is always an interest placed on that loan. And if the government does not handle debt repayment properly it can lead to debt being higher than the currency notes in circulation.

Photo 1: showing the balancing challenges between currency notes in circulation and debt

Internal debt in Nigeria could increase whenever the Federal government sells bonds to citizens through the Debt Management Office DMO. And since most government projects do not make sufficient monies to pay back the loans from citizens, the Federal government through the Central Bank of Nigeria pays the citizens back the principal and the interest from their investment. When this occurs, the DMO records in their books this monies as internal debt. In my opinion, bonds are a means by which the government acceptably prints more currency notes (money) which in turn increases national debt and inflation. Something to ponder upon is that: “For a country as corrupt as Nigeria, how come the Federal government does not fail in its commitment to paying the interest and principal on bonds?”

Photo 2: showing the domestic debt in Nigeria

THE PYRAMID SCHEME

Many people can easily recall the MMM fiasco in Nigeria and other similar Ponzi schemes the world over. What we may not realize is that the perpetrators of those schemes actually understand the worlds banking systems. The banking system all over the world is a pyramid scheme (Ponzi scheme), but we do not see the banking system that way, because it is useful, it is backed by law and we have accepted them. The pyramid system in the United States of America is coordinated by 1. The Government 2. The US Treasury and 3. The US Reserves. This structure is what is replicated all over the world. See figure 1.

Figure 1: showing the structure governing management of currency notes in US and Nigeria

Roles and Responsibilities of the Units in the Pyramid Scheme

  1. The function of Federal Government of Nigeria is to declare bonds for sale to raise capital for government spending.
  2. The function of the Central Bank of Nigeria is to pay the principal with interest to citizens who purchased bonds.
  3. The function of the Debt Management Office is to record these monies paid by the Central Bank of Nigeria as debt.  
Photo 3: showing the cycle for bonds, and currency notes

The issues discussed in this series are some of the reasons people are actually poor in Nigeria and in the world. Here is the video to better understand the dynamics of bond and debt.

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