The world in 2012 is in the midst of the most protracted and insolvable debt crisis ever experienced by humanity. Re-elected President Obama faces a daunting fiscal cliff for which there are no solutions, even with heroic attempts to balance the budget.

While countries inch closer to the edge of their respective fiscal cliffs, there appear to be no options for a ‘golden parachute’ or a ‘silver lining’ to how this story might end. Must the world go over the edge of the unrepayable debt cliff and free fall into potential chaos? Or is there another path that is might lead us to a new economy based on well-being and genuine happiness?

The US national debt currently exceeds $16.2 trillion, over 100 percent larger than the total GDP (gross domestic product of the nation); a liability that exceeds the value of the entire US economy. Total debt is expected to grow to almost $26 trillion by 2020.

According the US 2012 Budget expenditures are expected to be $3.8 trillion while only $2.5 trillion will be collected in taxes, with an expected deficit of $1.3 trillion. Government expenditures are broken down according to a) mandatory expenditures (social security, Medicare, Medicade) = $2.25 trillion, b) appropriate programs (security (military) and non-security) = $1.32 trillion and c) ‘net interest’ of $225 billion.

There is a problem with the budget item titled ‘net interest’ because it hides the total or gross interest payments that are owed on the $16.2 trillion outstanding federal debt. When I examined the US budget documents I found no official accounting of the actual interest payments on this debt, which Congress must pay. Why is that?

Using the average long-term interest rate on 20-year US Treasuries, which exceeds 5%, I estimate the total interest costs on the $16.2 trillion of federal debt at roughly $818 billion. If this were true, gross interest costs would exceed all other budgetary items in the US budget including the 2012 military budget of $716 billion and the social security budget of $773 billion.

Most Americans are not aware that the majority of the US federal debt is actually owed to private banks, when it is Congress, which could in theory issue money as debt without interest charges. Congress is completed addicted to debt through borrowing from private banks.

Thomas Jefferson (1743-1826) once noted:  “I believe that banking institutions are more dangerous than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation and then by deflation, the banks and corporations that will grow up around the banks will deprive the people of all their property until their children wake-up homeless on the continent their fathers conquered.” Jefferson understood that money creation is a sovereign right of ‘we the people’ and not a bank corporation’s birthright.

Americans and Canadians need to hear the truth about the debt crisis that threatens to sink our economies. At the heart of this debt crisis is the fact that the outstanding debts owing can never be repaid through more economic growth. The power of compounding interest costs causes outstanding debts to escalate and rise exponentially.

Even more daunting is the fact that total outstanding debt in the US from all sources (household, business, state and local government, federal government, financial institutions and foreign) now exceeds $58.8 trillion (and counting by the second) incurring an estimated annual interest costs of $3.918 trillion. Total outstanding debt in the US is now 389% of US GDP.

I’ve estimated that interest costs embedded in each $1 of consumer expenditures is now $0.365 in interest costs; in Canada it’s a little better at $0.25 per $1 of spending.

That means that the average American is spending over 1/3 of their working days, working to pay for interest on all outstanding debts that affect the entire economy. Assuming there are 238 working days in a year it means the average American is working 87 days to pay for unnecessary interest costs in the total outstanding debt. In Canada, the average Canadian is working 60 days a year simply to pay interest on the total outstanding debts of all Canadians!

I believe the greatest threat the pursuit of genuine happiness and well-being is our current debt-money system, fractional reserve banking and the impacts of compound interest, which like cancer destroys the genuine wealth of nations. The US and Canada could soon follow the same path that Greece is experiencing. Must we also court the possibility of chaos and anarchy? Are there not alternatives to this protracted debt crisis?

Fortunately there are alternatives to this debt money crisis. They can be found in economies of ancient civilizations. For example, in ancient Israel, economic ethics of debt Jubilee and wealth redistribution was practiced. Every seven years all outstanding debts were forgiven and every 49 years (seven times seven) the wealth of Israelites was redistributed to the original 12 tribes. The world could use a collective Jubilee now. Though this would require a heroic act of global collective leadership with all nations forgiving each other’s debts.

These changes will require courage, wisdom and strong leadership amongst the nations. It is perhaps as big of a project as the Manhattan project or Bretton Woods, if not bigger.

Genuine leaders would reflect honestly on past civilizations and what led to their respective collapse. They might understand how history is repeating itself as debt crisis and rising wealth inequalities led to the collapse of the Roman civilization and Chinese empires. But does history have to repeat itself?

I believe it is time to consider a new economy based not on eternal GDP growth and growing mountains of unrepayable debt money, but one based on a new economic paradigm of well-being and happiness as proposed by Bhutan, which has adopted the Gross National Happiness economic model. My colleagues at Genuine Wealth Inc. – a new cooperative enterprise committed to building new economies of well-being – believe that in the midst of this crisis a new form of capitalism, based on our model we call Genuine Wealth, is dawning.

In an economy of well-being progress will be measured in terms of well-being returns on investment rather than simply financial profits. Wealth will be redefined according to its original Old English definition: ‘the conditions of well-being.’ Nations will keep account of the five capital assets of their genuine wealth on a genuine balance sheet that tracks the conditions of well-being of human, social/cultural, built, natural and financial capital. The goal of economies will be to optimize well-being while ensuring risks and liabilities to well-being and the assets that define a good life will be minimized. Moreover, we will pay attention to the equity portions of our balance sheets to ensure inequality does not grow too much thus threatening the social cohesion of society.

Most importantly, monetary policies, including banking, will evolve to one where money will be created not as debt but rather in relationship to the goals of optimizing well-being conditions for communities and nations, in harmony with the ecological conditions of nature. Banks and money need no longer issue debt with interest charges attached, but rather issue ‘genuine credit’ and serve the role of good financial counsel and coach to business and households with a focus on wise financing of their pursuit of good and happy life.

Money creation could migrate from bank controlled debt creation to social control, as Thomas Jefferson mostly likely envisioned.  Money creation would be linked to the total productive capability in the economy; the four or more capital assets including human, social, natural and built capital assets. We would redefine productivity in terms of optimizing ‘well-being,’ which becomes the starting point for money creation. The broad asset potential of society (privately and publicly owned) should be the monetary supply control. And given we presently vastly underestimate total asset wealth in society there is little risk of inflation in the short to medium term.

All crises provide the conditions for genuine opportunities to flourish. While the edge of the cliff draws closer and the capacity to act become more daunting, perhaps there is a golden parachute that some communities and nations might try; the adoption of a new economic paradigm and model based on well-being and happiness, using the principles and model of Genuine Wealth.

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