American credit card debt ballooned rapidly in the 90s and early to mid-2000s leaving many families with total combined balances in excess of $10,000. Some used the easy credit irresponsibly, racking up $50,000+ in consumer debt (not even counting car debts).

Then, in the fall of 2007, signs of weakness in the housing market — and the economy in general — began to appear. By the fall of 2008, the entire economy seemed to be falling apart.

All of a sudden, Americans were struggling to repay their credit card debt. They were even struggling to pay their mortgages.

One commenter on Digg suggested that credit card debt wasn’t the problem, but rather that irresponsible Americans were the problem.

Yes, I laughed. On the surface, it’s easy to agree with. Irresponsible people get what they deserve, right?

But the issue is actually much more complicated because the dollar is a debt-based currency. It is not real money. Every dollar in circulation is actually owed to the Federal Reserve — with interest!

In other words, our entire economy is based on debt.

Credit Card Debt Is Inevitable

The way the American economic system works, credit card debt — and, indeed, all forms of debt — is inevitable. Because the only way the economy stays healthy is if the money supply is expanding.

And the ONLY way new money is created is through debt.

This may be hard to believe. And since I don’t have space in this article to explain how this works, I will simply point you to G. Edward Griffin’s masterpiece, The Creature from Jekyll Island.

In America, every dollar magically turns into 10 dollars, maybe more, all through the dubious practice of fractional banking.

American Blindness

Most Americans don’t really understand how our money system works. They are blind. As a result, they hack at the branches instead of striking the root.

The branches are things like credit cards, irresponsible behavior, etc. These are not the real issue. The root is our debt-based money system. This is what is hurting us.

Right now, Americans are paying off debt faster than they ever have before. They’re tightening their belts, cutting back, using extra money to reduce debts. They are borrowing less.

This is all good. All things being equal, having no debt is better than being in debt. So I commend any person or family that is fighting the good fight (so to speak).

But until our money system gets a complete overhaul (including real money), then Americans will continue to bear the burden of oppressive credit card debt.

The currency news mill is working overtime.

There have recently been more predictions of the imminent collapse of the U.S. dollar. And for good reason. According to some sources, a U.S. default is now certain.

Other sources say that the financial oligarchy — the true men in power in the U.S. — are preparing to drive the value of the dollar down by 30-50% in the next 12 months.

I’ve actually already seen the images of the plates for a new North American currency that could be released by the end of the year (2010). There are no dead presidents on these bills, but rather pictures of each of the founding members of the Federal Reserve.

How’s that for creepy?

No matter whether or not the rumors of a new currency are true, the future of the dollar isn’t looking good. And if it continues to decrease in value, it’s going to spell trouble for Americans. Which is why I think you have to ask yourself…

What If the Currency News Is True?

If the currency news is true, then that means our buying power is going to decrease during the coming months. Which means that we will not be able to buy as many products and services with the money we earn.

It could also mean that your income will go up. But this will only be an illusion of progress. While your income may increase, it most certainly will not increase as quickly as the prices of goods and services will increase.

Now let’s see how this relates to getting out of debt.

Your debt is essentially a fixed number, assuming that you are not incurring debt and you are making all your minimum monthly payments.

But in an inflationary situation, your income may be going up, as well as the prices of everything you normally buy.

This means that it will actually be easier to pay off your debt later with dollars that are worth less. I have read of stories where people paid off their homes in a just a few short years once hyperinflation kicked in.

So if I expect that we will see rapid inflation this year, it doesn’t make much sense to pay down my debt a whole lot. It makes more sense to wait and pay back the debt with cheap dollars that are easily obtained.

Protect Yourself from Inflation

In the mean time: I suggest you use the dollars you have right now to hedge against inflation. In other words, buy tangible goods… things that you think you will need this year and next.

Personally, I’ve used some zero-interest loans to acquire physical goods. I’ve done this with the expectation that the goods themselves will be worth more than dollars will be worth in the near future.

Also: I’m buying gold and silver. Owning precious metals will protect you from inflation in the months and years to come. I have already bought silver myself, and I believe this was a wiser way to spend my money than to pay down my debt.

This is just what I did, and it’s not intended to be financial advice, nor should it be considered as such. You will have to do your own research and due diligence before making any financial decisions.

Staying on top of the currency news is always a little bit discouraging… and exciting at the same time. I hope you’ve found this information helpful and interesting.