Response to Gary North

This is in response to your critical post on LewRockwell.com of October 8, 2010. 

First, I would like to thank you for bringing attention to these issues.  I’ve done a detailed response to your itemized list of 31 errata, here.  I found a few that were useful; thanks for those.  I’ll incorporate them in my next revision.  I will take out the challenged quotes, not just qualify them (as done now), since they’re so controversial.  It won’t change my argument, which isn’t based on what famous people said or didn’t say.   

As Eric Blair noted on his excellent post on the Republic Broadcasting website here, “It finally appears that after nearly 100 years of absolute economic control and near complete debasement of the dollar, the Fed’s reign may be coming to an end.”  I don’t think you are appreciating that I helped with that.  I brought attention to the subject by being an engaging writer, something I have worked very hard at.   I loved the comment someone posted on my blog, that he wished Ron Paul’s short “End the Fed” book had ended sooner and that my long book had gone on longer.   I was actually afraid I was spending TOO much time on details; my fear was that the whole economy would collapse before I got my book out. 

An excellent defense and discussion of the larger issues, written by a blogger unfamiliar to me, is posted here

My main focus is the need for monetary reform, which can achieve these important goals, among others –

– shift the money power from the creation of a national “debt supply” through parasitic bank loans – a power now held chiefly by Wall Street — to a non-debt money supply created as a public service, operated by and for the benefit of the people.

– provide public benefits including the elimination of the national debt and its interest payment of ~$400 billion/year.

– make the government the employer of last resort, creating full employment and falling prices due to wise investment of this labor (infrastructure, education, etc.).

– create credit at cost as a funding mechanism for public services/goods, with state-level credit creation an important option.

– provide total benefits of at least a trillion dollars a year that we can quickly calculate, and probably more.

Now to your piece.  This is my favorite part:

“As of early October, 2010, a Google search for ‘Ellen Brown’ and ‘Web of Debt’ generated close to 600,000 hits. This is huge.”

You have to admit that’s not bad for a self-published author without staff or funding – no foundation backing me, and whether you believe it or not, no political agenda.  As Mike Whitney says, I’m just a writer in search of a good subject.  People do read my articles and I have a following, enough of one by now that I’ve become a sort of lightning rod for information.  I’m in a gateway position between the internet culture and the mainstream media, and I work very hard at being a good, clear writer, throwing light on obscure subjects.   

Why do Tea Partiers read my articles?  Because I’m strongly for States’ Rights, People Power, Going Local.  I don’t just talk about them; I have a viable plan for getting there. 

For the last two weeks I’ve been focusing on ForeclosureGate (see my latest two articles, posted on Truthout here and Huffington Post here).  That subject is more compelling to me at the moment than the validity of some quotes from the 19th century, but I’ll take some time out to address that issue briefly. 

The fascism you say I endorse is actually what I’m fighting to break up.  We have fascism today: government control by massive corporations.  How are you going to wrest Congress from the grip of Wall Street?  Here’s my plan: (1) break up the “too big to fail” banks by freezing foreclosures – ForeclosureGate – something that is happening right now; and (2) eliminate the “too big to fail” mystique by setting up an alternative banking system, one run by the people for the people, involving a partnership of publicly-owned banks and local community banks.  (I have many articles on that on my website here, and my public-banking google group has a comprehensive website on it here.)

I don’t have time to respond to all your points now, although I may update this post later.  Here are some things I wanted to address to start.

First, since you’ve made so much of my Hitler example and I’ve taken so much grief over it, I’ve quit using it to illustrate my point, even though the transformation of Germany’s absolutely bankrupt economy into one powerful enough to take on the rest of the world in World War II was pretty dramatic.  I now turn to less controversial examples of countries that pulled themselves up by their own bootstraps simply by drawing on the credit power of the nation.  My favorite one right at the moment is the Commonwealth Bank of Australia, but another was featured on NPR just this week.  The clip, called “How Fake Money Saved Brazil,” describes how Brazil transformed a collapsed economy and money supply into the nation’s present state of vibrant health, just by issuing a new currency. 

On Hitler’s remarkable popular following, I was simply reporting.  He DID have a remarkable following in the early thirties, and they were not marching in lockstep for no reason.  It was because he had turned an utterly destitute economy around; and he did it basically by putting people back to work, paid for with a new currency backed by nothing but the credit of the government and the people.  Your argument that this necessarily leads to fascism is belied by history.  It did not lead to fascism when employed in Australia in the first half of the 20th century, or in New Zealand or Canada during that period, or in Guernsey for the past 200 years, or in the American colonies, or in this recent case of Brazil.  

On errata in Web of Debt, the book is in its fourth (2010) edition, and it has actually had a few updates in between those four.  I collect errata as people point them out to me, and I correct them in the updates if I think they have merit.  I’ve said in an author’s note at the beginning that some quotes have turned out to be apocryphal, and where I’ve left them in although questionable, I’ve qualified them with language such as  “attributed to.”  They are left in, not because some famous person made the statement, but because they make a point.  For example: you state in your list that I have “a bogus quote from John Adams on debt as a means of conquest.”  Here is what my current text says:

“President John Adams is quoted as saying, ‘There are two ways to conquer and enslave a nation. One is by the sword. The other is by debt.'” 

He IS quoted as saying that, by many people; and whether he said it or someone else said it really makes no difference.  It is a true and quite revealing insight, which worked at that point in my chapter to carry my story forward.  I’m trying to make economics interesting for the busy housewife, who isn’t going to spend the time unless I can make it a page turner. 

My favorite early review was by someone at the American Free Press, who said Web of Debt was “a book as thrilling as any Tom Clancy novel, except that this book is true.”  I loved that!  That’s what I was trying to do, turn economics into a Tom Clancy novel.  Quotes help with that.  I didn’t make them up; I gleaned them from six years of exhaustive research and writing.  

Much of that time was spent on improving my prose; I worked and reworked the text to make it into a page turner, which it evidently was, judging by the response.  Somebody once said, “Works of art are never finished, just relinquished to the world,” and I only relinquished this one when the two Bear Stearns hedge funds suddenly collapsed in June 2007.  (You were off by a year on my publication date.)  The book was in print two weeks after that, and it discussed that watershed event in the text.  I wasn’t really done fact-checking, but the shoe had dropped and it was time to march.  In one of the books that emboldened me to try self-publishing by print-on-demand, I read that you didn’t have to worry too much about errors, because your readers would point them out to you and they could be corrected just by submitting a new pdf (and paying a fee); which is what I have done, perhaps eight times now.  

Meanwhile, ForeclosureGate beckons to all of us in the freedom community, and I’m disappointed to read that you somehow see me as the opposition.  I think we agree on the source of the problem– a fatally flawed banking system — and the solutions will work themselves out over time.  But first we need to get into a position where we can try out our solutions, and for that we need to join forces.  As Benjamin Franklin said (I haven’t fact-checked this), “We must all hang together, or we will all hang separately.”  I like many of your writings, and I quoted you favorably in Web of Debt.  Wouldn’t you rather be fighting the real enemy– a parasitic financial system that is devouring economies globally?

_____

Additional thoughts (10-21-10): 

On “fascism,” the Merriam-Webster online dictionary defines it as “a political philosophy, movement, or regime (as that of the Fascisti) that exalts nation and often race above the individual and that stands for a centralized autocratic government headed by a dictatorial leader, severe economic and social regimentation, and forcible suppression of opposition.”  Germany under Hitler was fascist, but it was not because he broke free of the international banking cartel by printing the nation’s own money.  Australia and New Zealand did the same thing in the first half of the twentieth century, and neither was called fascist.  The American colonists originated that solution and were not called fascist.  I read somewhere, long ago, that Hitler got addicted to amphetamines in his later years, something that could well have driven him to the dark side.

10-28-10, response to your Historical Response 11 posted today:

The relevant change was not “notoriously.”  It was “is quoted as saying”, which is quite true, as your 40,000 hits attest.  You have no place on your site to respond, which is why I don’t.  You’re making your readers search my site for a response, if they have that much interest, which I doubt.

207 Responses

  1. Gary North’s style is familiar to me. It is an attack style that is designed to require the greatest time and effort possible to defend. If he was interested in arguing issues, he would have put put those issues front and centre knowing that Ellen is busy and would most likely respond to them that way. As it is, he hopes she doesn’t get that far because then he can claim himself an easy victory. If she does get that far, he has an arsenal of useless rebuttals propping up one or two perhaps valid points that will prevent him ever having to accept defeat. You can never prove scientific theory right, you can only fail to prove it wrong consistently. Constructive criticism will help refine the theory, but obstructive criticism will only slow down its advance.

    That is what North is trying to do.

    • What Gary North is trying to do is show people that Ellen Brown’s advice on what we should do can’t be trusted because she is a variety of socialist and doesn’t understand economics. (The two go hand in hand.)

      “She made Greenbackism exciting and understandable: for ignorant people who think Hitler’s National Socialism was based on economics.”

      If we want to put our country’s future prosperity on a sound basis we have to realize it is based on sound money, not on public or private issuance of paper money. Gary North and all people who love peace, liberty, and property must speak about any popular movement or person, no matter how well meaning, who promotes public or private issuance of paper money.

      Ellen Brown is making the classic mistake of many proponents of socialist thought. Assuming that something done for private gain if done by the state will be for public gain. http://mises.org/daily/4686

      Unfortunately bad actions done for private gain at the expense of the public will still be bad actions at the expense of the public if done by the state for public gain. State issuance of fiat currency devalues the fiat currency holdings of the entire public for the benefit of whoever gets their hot little hands on the new currency. It divides society in to two opposing classes.

      Hoppe and others have shown that the private undertakers of bad actions at the expense of the public are often more responsible than state officials who undertake bad actions at the expense of the public for the ostensible benefit of the public. A king and feudal lord has a long term interest in keeping up his property, while the bankers have a vested interest in keeping up the value of the currency to counterbalance their interest in inflating the currency to make more loans (Quigley’s Tragedy and Hope has a good discussion of this balancing act, which I think informs his history.)

      Having read her responses to Gary North that he hasn’t responded to yet, I see she doesn’t really get economics or many of his rebuttals.

      Read her response to 29. Foreign currency speculators caused Zimbabwe’s inflation. Gary North is here http://www.garynorth.com/public/7011.cfm . She makes the statement “the hyperinflation was caused by speculators who charged exorbitant rates for US dollars” and “We both have our sources. Mine disagree with yours on the cause; you haven’t shown that yours are more legitimate than mine.” Legitimate sources make economic sense. Her quote just goes to show that she doesn’t understand economics – if there’s a huge supply of Zimbabwe’s currency vs. US Dollars then of course the price of US dollars will be high. She doesn’t explain why speculators who notice the exorbitant rates don’t undercut the people selling US dollars and make a huge profit by selling at slightly less exorbitant price. That’s how things work in the real world – unless there’s government interference – and even then one need only look at the market for illegal drugs in the US to understand that people will supply product.

  2. This is an interesting response. I’d never heard of your book until I read Mr. North’s critique of it last week. Although I am solidly against any currency, of either public or private print, that is not backed up by some kind of real commodity, and so am very much against any theory of money that is based on “the credit of the nation”, this discussion has gotten me interested in your work. I’ll try to find it next I’m in a library. If nothing else, I imagine your book will be entertaining!

    One note. If you’re looking for ways to appeal to busy, every day folks, you can’t go wrong by getting your book out in an audio format. That’s how I get about half of my “reading” done these days.

    Good day,

    • Thanks. I really have tried on the audio format; I’ve been through FOUR readers. The last one got two-thirds of the way through and then his wife, tragically, got a brain tumor. Waiting on that . . .

  3. To Gary North and all libertarians:

    Money is a license to take products of people’s work from the social pool of wealth. The only proper thing that entitles people to take out of the social pool of wealth is having put an equal value of goods into the social pool of wealth by their own work.

    We have a social pool of the products of work because we specialise in tasks. So we pool the products of work so that everyone can get out the variety of goods they need and desire. Ideally, the money we get paid for work accurately measures the amount of work we put in to the social pool of wealth, and gives us license to take out the same amount of work, in the form of a variety of goods, so that no one takes out more or less than they put in. The proper function of money is to facilitate the remixing of goods that have been separated by job specialisation.

    Justice, nontheft, demands an equality in workvalue between what each person puts in and what they take out. That is, the work that has gone into the goods and services they take out has to equal the quantity of work that went into the goods and services they put into the social pool of work and wealth. Otherwise theft has occurred, which causes the endless escalation of anger and violence. Bill Gates puts in an hours’ work, and on a very good day, takes out US$10 million. That is, US$10 million of other people’s work. In return for one hour of his work. For example, 10 US$1 million dollar houses. Every hour, on a very good day. His lifetime average is only half of a $1 million dollar house every hour of work. Whereas of course Bill Gates, even with all his putative talent, could not design the door handles, nor make one beam, in one hour. So are we wrong or are we right to allow this? Are the arguments for doing this sound, or are they biased by myopic, incorrect ideas of self-interest? Do overpay and underpay exist? We are handicapped by assuming that whatever is, must be right, an assumption that applies in nature, not in society.

    Business risk is just another excuse for higher-than-average hourly payrates which is universally but incorrectly swallowed.

    Our compassion and empathy seems to be in proportion to money. Our irrational desire to compensate for risk has evaporated when it comes down to the streetvendor, the prospector, the fisherman, and the worker. Risk and workers hardly seem to go together in our minds, although thousands of workers die yearly because of their work, and virtually no businessmen do. The underpaid pay for all, in pay and lives, and are too meek even to know that they do. Protection for the worker in mines, in the fishing industry, protection for the worker against layoffs, danger, unemployment, is slow and ever-too-little. But compassion for the brave and heroic businessman, willingness to allow him unlimited profits because he is taking a risk, is boundless. The poor businessman, venturing his own capital for our benefit, taking risks for us all. Saviour of us all. Kingpin of the system. Let his reward be liberal, unconfined.

    We do not see that 99% have to pay financially for this payment, and 100% have to pay in loss of 99% of happiness for this payment.

    It seems to us that we do pay for business risk and that we ought to pay for business risk. Whereas the facts are clearly and simply that we do not pay for business risk, we cannot pay for business risk and we ought not.

    It is true that there is business risk, and that businessmen make profits, but there is no causal connection between the two. In the first place, we would have to be able to measure risk, we would have to measure risk, and we would have to assess a proper reward per unit of risk. None of which we have done or can do.

    There are high risk, low risk, high rewards and low rewards. But no causal connection between risks and rewards. The very meaning of risk prevents there being any connection, any correlation between risk and reward. Risk is risking losing ‘your’ money. I say ‘your’, because capital in unlimited-fortunes systems, like communism and present capitalism, is mostly others’ earnings, capital is mostly overfortune.

    Do we have any intention of paying the riverside fisherman for his risk? Do we have loving compassion for the lonely prospector who returns with empty bag? The businessperson is risking a sprat to catch a mackerel, as they say. He is engaged in the pursuit of money, often without proportionate work. His aims are for himself alone. And yet we treat him as a hero who deserves our unstinted support, and pay him without knowing we pay him. The egotism of the businessman, his assumption of his heroism, infects and brainwashes us into support. Which we don’t feel for the smaller player – who is more likely to be risking his own earnings, his own life and health. We feel for the merchant who sends a ship out on stormy seas to win a fortune, but we have no thought or care for the sailor who climbs the mast in freezing weather around the wild Cape Horn, who was often thrown from freezing mast to freezing sea with frozen thumbs.

    We don’t give knighthoods and other honours to little girls dragging coal through freezing tunnels, nor to the child chained to a carpet loom, nor to the world’s workers, whose wealth-creation is greater, but to the top man, whose contribution is smaller and merely symbolic.

    Is there any correlation between risk and reward? To answer that, we would have to be able to measure risk. By the definition of risk, we are unable to measure the risk. We lock on to the instances where there seems to be risk and profit, and assume a correlation. We ignore the instances where there are high risk and low returns, low risk and high returns, which weaken the correlation to nothing.

    In addition, the plums of low risk and high reward are reserved for the big players, and the higher risk and lower rewards are the lot of the small players, the 99% suckers.

    There is always some degree of inside information, which makes investment safer for those in the know. The gross tendency of the stockmarket is to shift money from the small players to the big players. Just as in gambling. The small player has less information, slower information, and mis-information put out by the big players. As we see portrayed in the film Trading places.

    The English Rothschild makes sure he receives news of Waterloo first, and then very visibly starts unloading his English shares, convincing everyone that England has lost the battle, and then secretly buys up English shares at rockbottom prices, which then rocket. This is clearly big money for very little work. Which means a lot of work for very little money for others.

    Can we afford to allow a fool and his money to be so easily and limitlessly parted, when we are all money-fools relative to the most money-smart person? Can we be smart enough to put a cap on overfortune at the maximum that one person can earn by his own work in a lifetime, and thus limit overfortunes to the maximum just fortune?

    In this Rothschild example, the risk is very low, the rewards very high. And what is true in this example is true in all markets in all places and times. The small player can never be sure that the information he receives is true or is misinformation put out by big players. I say, let such legal theft and all legal thefts be limited to the maximum self-earnable fortune, and not escalate to infinite violence, universal misery and global extinction.

    The big player has enough money-muscle to control the market. The big player can buy and sell in sufficient quantity to affect the stock price. So he can buy in, thus raise the price, sell out, thus lower the price, buy in again, and so on endlessly. Simply a money pump.

    And the same applies to private control of the money supply. And to public control of the money supply without intelligent and effective vigilance against price manipulation for private gain. There is no use in putting a lower functionary in charge of inspecting the work of a higher functionary. The higher functionary will just pull rank, and go on doing what he likes. The more powerful the individual, the more reluctance there is to inspecting his work. This failure to effectively monitor high-ups is just issuing them a license to commit theft.

    Stocks go where the big institutional money managers send them. Buybacks boost share value, and CEO income. American companies are putting more money into buybacks than into R & D.

    The French Rothschild had enough overfortune to be able to plunge the stockmarket by selling his shares, in order to force his acceptance into high society.
    There must always be someone or some group who receives stockmarket-affecting news first. And these are generally those with most money to buy information, and with more money to hire people to follow the market for them. And the ones who have more money are those who can get greater benefit from the information by investing more. Those who have most get most. Everything conspires to drive inequality, legal theft. More money grows faster, less money grows more slowly, or shrinks to fund the overpay or legal theft.

    When you think of it, money makes money has to mean that the person didn’t make the money, which has to mean others made the money. But people are chanting money makes money as if it was salvation instead of catastrophe. Get rich quick and aid global catastrophe. Open season on the social pool of wealth, grab all you can and be a dead hero. There is no doubt that the current philosophy is: Everything I can grab is mine, whether by private inheritance, gambling, unjust profits, interest, or lottery. Interest is the product of profits. Equally, there is no doubt that overfortune is injury and that injury is not tolerated.

    It is logically impossible, that is, selfcontradictory, for risk to be rewarded, since risk means risk of losing money.
    And risk is a personal affair, in which others are not at all obligated to reward, nor to allow legal theft.

    • Why shouldn’t the people take half my money from me? I took it all from them. Edward Filene.

    The people should take from him all that they have earned, and leave him with all that he has earned. Nothing else is justice.

    • Either virtue is an empty name, or honor and recompense are due to the person who nobly enterprises. Horace.

    It sounds stirring and wonderful, but it is just egotism and confusion. Sense tainted by emotionalism. The enterprise is for his gain, a sprat for a mackerel. We don’t need to get carried away and throw money at him in return for nothing. It is like being moved to give money to a fisherman for risking his bait. We don’t get sentimental like this about the workman’s risk, or the prospector’s risk. The credit for the fact that some people are more energetic, enterprising and active, aggressive and greedy, is due to nature, not the individual. The individual who enterprises only when there is recompense is not naturally enterprising. The natural range of energy is sufficient. It hardly helps us to impoverish ourselves to create artificial enterprisers surplus to requirements. Natural human energies are plenty sufficient to provide. We are not animals that need to hunt and eat all day.

    • Men must have profits proportionable to their expense and hazard. David Hume.

    Emotionally, it sounds so reasonable. The man is suffering, let him have profits proportionate. But the sentence is selfcontradictory. If he makes profits, where is his expense? And if he must be compensated, where is his risk? And what rational argument can justify taxing others to fund this pursuit of wealth? The gorilla beats his chest magnificently, and the others feel impelled to give him a banana. Instead of the modesty of the worker who risks and asks nothing, this one demands gifts when he comes home tired from the hunt. If a person opens a restaurant, and fails, as so many do, no one feels emotionally driven to compensate him. The pirate goes out and returns with plenty of Inca gold taken from Spanish pirates. Look at his fine house. Yes, he deserves it. He could have been killed.
    You are poor? Ah, but you didn’t risk, you see.
    A thief robs a house. You got a good haul? The owner had a gun? You could have got killed. You deserve it. If the owner hadn’t had a gun, I would have said you should give some of your haul back.

    We have this inexplicable and quite mad generosity towards the rich. We swallow all their false arguments for the right to unlimited pay.
    You worked 60 hours a week? My goodness, that is working almost as long as the person who grew this apple. You singlehandedly invented, designed, built, packaged, marketed, and distributed these millions of PCs? You singlehandedly created the demand for these things and thus created jobs for thousands of people? You risked US$5 million your parents gave you? You actually risked all that money? My hero! Here, take this US$50 billion. You worked 60 hours a week writing songs and performing them? Please accept this half billion with our sincerest thanks and our deep love. You swing a mean golfclub? Please, take this $100 million a year. You work 60 hours a week heading a talk show? Please, I must insist on you taking this half billion a year. You must be tired. You must keep your strength up for your wonderful work. You must have a very rare talent, because you are so wellpaid. Don’t worry. There’s plenty where that came from. I economised on protein for millions of children’s brains in Africa. I save 4c a person by not spending on vitamin A to prevent 2 million people a year going blind. I’ve got a million new girls every year pulling in big money from sex slavery. I’ve got up to US$200,000 donations coming in from 99% of families in the world.

    • The matter I allude to is the exorbitant price exacted by the merchants and vendors of goods for every necessary they dispose of. I am sensible the trouble and risk in importing gives the adventurers a right to a generous price, and that such, from the motives of policy, should be paid, but yet I cannot conceive that they, in direct violation of every principle of generosity, of reason and of justice, should be allowed, if it is possible to restrain them, to avail themselves of the difficulties of the times, and to amass fortunes upon the public ruin. George Washington.

    • Is the paltry consideration of a little dirty pelf to individuals to be placed in competition with the essential rights and liberties of the present generation and of millions yet unborn? Shall a few designing men, for their own aggrandisement, and to gratify their own avarice, overset the goodly fabric we have been rearing at the expense of so much time, blood and treasure? And shall we at last become the victims of our own abominable lust for gain? George Washington again.

    Washington failed, and everyone failed, to distinguish what should and what shouldn’t be paid for. If anyone should have been paid for risk, it was the ones at the bottom of the sea who didn’t make it through the British blockade of imports, not the ones who did make it through, since they didn’t lose. And they shouldn’t have been paid for the scarcity, which again was no sacrifice on their part. Paying for scarcity is paying them for the things they didn’t import, is paying them for absence. America was well-enough established that it was not dependent on imports for food and shelter. The imports had to be more at the luxury end of the spectrum of necessities and luxuries. Insofar as the imports were necessities, America would have done better to put the money into guns and ships to defend their necessary imports, than to throw it away so that a few could play lords and ladies, and America could be weakened by wealth-poverty differential. Giving the money away to a few did nothing to protect shipping. If the merchants got rich, they therefore didn’t spend it on guns to protect their ships. And the payment was in inverse proportion to risk, as the bigger players could afford more defenses for their ships, and could spread their risk over more ships.

    It is sad to see Washington’s agony of confusion. He says they should be paid for their risk, and then that paying them for risk is going to kill the nation, which is true. And it is a pity that there is not more such egalitarian sentiment in the world. How many people are as passionate and caring and real as Washington was?

    • Wow, I seriously suggest you do some proper research
      Just listen to some of these:

      http://mises.org/media.aspx?action=category&ID=47

  4. I am convinced that the economic collapse was all staged by first consolidated the expansion of money into the multi-National sector , which would manipulation the average income level in the labor force , then playing off people vanity they buried everyone in Credit by feeding the willing that give into their disires , and they know this would be the case all they had to do was deregulate a little more and a little more till everyone was all in , and gluttony resulted , and brought to the point we are today
    Read this article its has some keen insight .

    http://ning.it/coGzC9

    and then ask yourself why they let it get this far knowing it wouldn’t multiply the money supply to balance a ledger ever . US Government ‘hiding true amount of debt’ http://ning.it/afsiTF

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