The Dichotomy of Public Debt and Private Credit: Navigating the Invisible Ledger Lines

This article explains a principle about public debt and private credit, as the author describes it.

Public debt and private credit stay separate

In the realm of financial obligations, there is a fundamental principle that separates the tangible from the intangible, the government-created from the individually created. This principle states that public debt, which government-issued bonds reflect, cannot be intermingled with private credit instruments. Essentially, public debt cannot be directly offset by private credit without violating the law.

When an individual, acting as a private creditor, issues a bond, it signifies a public debt. This bond can settle other public debts, but it must remain on the public side of the accounting ledger. Private instruments, such as personal promissory notes, should not use public identifiers like federal reserve routing numbers. Instead, they should use private routing numbers associated with an individual’s Employer Identification Number (EIN) along with a closed account number.

The UCC-1 filing and the closed account number

Once the individual accepts it and lists it on a UCC-1 filing, this closed account number transitions to the private side, where the individual earmarks it for personal adjustment and setoff. This act of acceptance signifies that the individual has informed relevant authorities, like the Treasury, that they use the account as collateral. In this way, the individual establishes secured party rights.

The filing of a UCC-1 is not to claim these rights, which are inherently private. Rather, it notifies the public side of one’s secured position. This allows the individual to use their account for the adjustment and setoff of public debts. Interestingly, actual currency does not exist on the private ledger. On the public side, however, debt works as a currency substitute to discharge other public debts.

A poignant case in point is a letter acquired from a confidential source. In it, an individual demands from their lender a cash receipt for a promissory note or a discharge of the outstanding balance. This right to claim stems from the assertion that the note itself holds value. According to that assertion, the note has been monetized and should be accounted for, which gives the individual a right to reclaim it or its equivalent value.

The state, the straw man and public debt

In essence, the law maintains a clear separation between the roles of public entities and private individuals, especially in financial dealings. This separation ensures that the state, which operates in the public sphere, cannot lay direct claims against an individual. Instead, it may approach the ‘straw man’—a term that describes the entity public registration creates, such as licenses or business registrations. The state’s interest lies not in the tangible assets registered to the ‘straw man’ but rather in the individual’s credit.

When the state faces a shortage, metaphorically needing ‘paperclips’ for its operations, it seeks out resources. Taxation, licenses, and fees are traditional means, but they are not always sufficient. Therefore, the state often turns to the individual’s credit. If the individual does not provide it willingly, the state may leverage the individual’s failure to comply, or ‘dishonor’, as a means to access it. This scenario underlines the importance of understanding the interplay between personal liability and public claims. It also emphasizes the need for individuals to recognize and assert their rights within this complex system.

Key takeaways

• Public debt cannot be intermingled with private credit instruments.
• A bond issued by a private creditor signifies a public debt and stays on the public side of the ledger.
• Private instruments should use private routing numbers tied to an EIN, along with a closed account number.
• A UCC-1 filing notifies the public side of one’s secured position.
• The state approaches the ‘straw man’, and its interest lies in the individual’s credit.

Learn more about the topic in the Government debt article on Wikipedia.

Related reading on Creative Geniusess

• CREDITORS IN COMMERCE #3- PUBLIC TRUST VS PRIVATE TRUST teaches about the straw man, private trusts, public trusts and debt instruments.
• 1099-A: Acquisition or Abandonment of Secured Property covers secured property and how credit and promises circulate as money.
• COUPON Definition & Legal Meaning defines the periodic cash flow payable by an issuer or borrower.
• Why Forward Flow Agreements and Chain of Title Are the Foundation of Debt Ownership asks whether a company has demonstrated that it legally owns an account.