Response to Michael Rozeff, “The Many Fallacies of Ellen Brown”

Michael Rozeff has just posted a piece on called “The Many Fallacies of Ellen Brown,” responding to my article titled “Time for an Economic Bill of Rights” (below).  Here is a short reply. 

Mr. Rozeff seems to think that (1) saving the government money is a bad idea, and (2) keeping the status quo, in which private bankers get the inflated cost of money — a cost that is passed on to the consumer — is a good idea.  If he actually believes that, one has to wonder about his competence; and if he doesn’t, one has to wonder about his motives and whom he represents. The post is an appeal to emotion and fear, and mischaracterizes what I said. 

The point of my article is that the interest paid by the government could be returned to the government, if the government owned the bank.  The government could then spend this money into the economy or reduce taxes by that amount.  How this would make government 80% of the economy or turn it communist, as claimed by Mr. Rozeff, is not clear.  Forty percent of the German banking sector is publicly-owned.  Has this made Germany a communist country?  No.  The German economy is the most robust and productive in the EU, and it remains capitalist.  The public banks service the small and medium-sized privately-owned businesses that are the productive strength of the economy.  See my earlier article here.  Similarly in Canada:  it borrowed from its own central bank effectively interest free until 1974, and accomplished remarkable things with this government-issued capital expenditure, including funding its health care system. 

On Margrit Kennedy’s figure of 40% for interest paid on household debt, see her graphs posted here.

The problem with the monetary scheme today is the skyrocketing inequality of wealth, which is mathematically unsustainable; and this gross inequality is caused by the private ownership of credit. “Them that has, gets.”  They are the few at the top, the 10% who collect the interest paid by everyone else.  A major point made by Margrit Kennedy is that interest is a huge regressive tax, overwhelmingly paid by the bottom 80% who can least afford it, overwhelmingly enjoyed by the uppermost 10%, rigging society with a huge wealth transfer in the wrong direction.

A prevailing economic fallacy is that the total debt borne by the people is unimportant, because it is a zero-sum game: “we owe it to ourselves.”  This would be true if “we” and “ourselves” were the same entities, but under the current scheme, they are not.  As if everyone in France being in debt to Marie Antoinette would make no difference no matter how high the total debt, even if interest extracted from the average Frenchman for payment to Marie Antoinette climbed so high they could no longer feed themselves, because after all, it is just money owed within France, and one person’s liability is another person’s asset. 

The current banking system is unsustainable because the populace does not have enough money left over after paying interest and other costs to purchase the nation’s GDP.  Production of GDP therefore drops due to insufficient demand, in a descending spiral called “recession” or “depression.”  If the interest is returned to the public, the system becomes sustainable. 

“Finance capitalism” is the antithesis of real, industrial capitalism.  It is a parasite on industrial capitalism, destroying it from within.  As economist Michael Hudson writes

“To save society, its victims must see that asset-price inflation fueled by debt leveraging makes them poorer, not richer, and that financialization is the destroyer and exploiter of industrial capital as well as of labor.”

Friedrich Hayek, one of the patron saints of Lew Rockwell Libertarianism, wrote in The Road to Serfdom that one price of freedom that needs to be accepted is that it leads inevitably to economic inequality.  He cited the then-prevailing salary of a CEO, which was about 30 times the salary of the lowest paid worker.  That was in 1944.  Today the salary of Bank of America’s CEO is over 400 times larger than that of a beginning teller.  Would Hayek think that that disparity was acceptable?  Would he think the multiple should be allowed to grow without limit? And even if he would, CAN it keep growing without limit? 

When the parasite runs out of its food source, it must and will perish.  When that happens, we need to be ready with something new and improved.  Better yet, we need to be ready before it happens – or we may find ourselves with a “new” one-world currency and a “new” one-world government.

52 Responses

  1. “Gold, however, isn’t a measurement of demand costs for production or labor but of some artificially divined fixed price madated by law (by your estimation). This unit measurement is further distorted by the fact that it is a commodity traded on the open global market. Large monied interests can affect your gold unit account price, indirectly by devaluing it purchasing power, by physical trades or naked shorting . Esentially, a gold backed currency is more volatile, unstable and subject to outside influences in its valuation than a national fiat currency which in and of itself is immune to market trading. ”

    But fiat currencies are traded now all the time, in one of the largest markets on earth called the Forex. And they are shorted or otherwise manipulated by the governments that issue them. Even if what you are saying about a gold backed currency was true – and it isn’t – we wouldn’t be any worse off for that reason.

    It is true that gold is not “a measurement of demand costs for production or labor”, except for the gold itself, if I understand you correctly. So what? Even assuming there’s some meaningful way to measure or even identify those things, you’re still conflating a laudable political or social goal – say, matching production and effort to monetary reward – with a completely different problem: what is a dollar? Currently there is no answer to that question, and it is a question urgently in need of an answer. You can never address the questions you want to address unless and until that question is answered first. It’s like trying to determine whether you have a yard of cloth for dress making when you don’t know what a yard is.

    “I suppose you could try lending gold interest free from a national bank as a fiat currency, You could also fill up your radiator with gasoline and hope that nothing bad happens. Again you’re ignoring the fact that gold is a globally traded comodity. Your vaults would be emptied, and your economy in shambles, as soon as they opened from profiteers making fortunes trading your reserves abroad. i know i’d have a truck backed up the to docks for such a freebie.”

    I don’t follow your reasoning here at all. Gold is a globally traded commodity. So what? If the dollar is defined by law as a quantity of gold, gold trading in dollars will effectively cease, except perhaps as a hedge that the holders of dollars are true to their word. It may continue to trade in other currencies that are not gold backed. This may provide opportunities to manipulate prices and for some to gain unfair advantage over others, but: a) how is that any different from the current situation; and b) how could it not be an improvement to at least know what a dollar is?

  2. Money is like time. Everyone thinks they know what it means until one is asked bluntly for a definition. The following passage from Ellen Brown’s book, “Web of Debt, overcomes this difficult for me by defining what a national fiat currency is and what advantages accrue to it over commodity based currency. Just substitute “greenback’ for ‘tally stick”:

    “Rather than having to borrow
    the moneylenders’ gold, the people relied largely on interest-free tallies. Unlike gold, wooden tallies could not become scarce; and
    paper money, they could not be counterfeited or multiplied by sleight
    of hand. They were simply a unit of measure, a tally of goods and
    services exchanged. The tally system avoided both the depressions
    resulting from a scarcity of gold and the inflations resulting from
    printing paper money out of all proportion to the goods and services
    available for sale. Since the tallies came into existence along with goods
    and services, supply and demand increased together, and prices
    remained stable. The tally system provided an organic form of money
    that expanded naturally as trade expanded and contracted naturally
    as taxes were paid. Bankers did not have to meet behind closed doors
    to set interest rates and manipulate markets to keep the money supply
    in balance. It balanced the way a checkbook balances, as a matter of
    simple math. The system of government-issued tallies kept the British
    economy stable and thriving until the mid-seventeenth century,… [p. 61]

    I hope this makes my position clear.

  3. The concept of money is so hard define because it is so breathtakingly simple – to paraphrase J K Galbraith. It is simply legal tender for all debts public and private as defined by the statutes and trumped in the US by the U S Constitution. Whether hard or soft– no matter. Whether paper or coin — no matter. It is more valuable as more of it is stolen from the poorer classes, who need it the most, whether by illegitimately taken public bank failure bonuses or tax inequities as exemptions for capital gains with high rates for labor, and handed to the 1%… If there were no debt there would be no money, because money is created by banks, when they make loans, and extinguished when the loans are paid back Repeat that 1000 times until it is embedded into your brains. That is one thing that we need to correct. Then there is the private bankster cartel with the right to print money and call it UNITED STATES currency. Combine them and you have our problem today.

  4. Beyond Money, as we know it…

    The currency currently ruling the whole world’s economic system has no value other than that which we have come to accept it has. For transitional purposes, we demand that the Federal Reserve issue $200,000 fiat notes to each Citizen, in the form of a credit card.
    It will be an infusion of hope and the most useful bail out the world has ever seen.
    We all agree to freeze all pricing and continue as usual.
    We make education available to all, for free. This way, a person pursues their life’s passion in learning and learns to be the best they can be…this becomes their contribution to society.
    We develop a society where we work for love…not the acquisition of money.
    All members of this society will contribute toward the betterment of humanity, as a whole; thereby eliminating the pursuit of money as the goal.
    If someone wastes their funds on unproductive ventures, they can go back to school to learn a better way…then, when they learn of a better plan, they get more funds to play the game.
    Between the money that is in circulation, and the influx of new money into the economy, commerce can continue while we seek to eliminate greed and deception, false advertising and inferior, unhealthy products; and develop a learning system that has compassion, consideration and understanding for our fellow humans as the main emphasis in the curriculum.
    By taking the profit out of health care & putting preventative health care, along with free health care, available to all, we eliminate the negative hold the drug industry has on 90 % of us.
    In this Resource Based Economy, energy can be derived from the sun, wind,water & earth’s geothermal energy; to power all the energy needs for all of earth’s people, forever…for free.

    We need to convince the directors of major corporations it is in the interest of all of humanity to create a new world system!
    A few years ago, you might remember an online campaign to boycott to not buy Exon gasoline. They responded by raising their prices to show we were not affecting them. Then prices fell as they felt the pinch. Gulf stations are now where all the Exon stations used to be.
    The face has changed but the game is the same..
    We should not buy Gulf or Mobil gasoline & demand no taxes on the sale of gasoline.
    A good question is, how can we accomplish this seemingly perfect existence?
    The premise regarding the 1% …and the 99% … needs to be re-configured: The 1% has an army of 25%, that protect the interests of the banking cartel, the drug cartel, the religious cartel and the political cartel; of which, none of them represent the majority of us…but they rule us!
    We organize to strike: We do not enter the arena, Mondays and Fridays…The impact of this on the wheels of the present economy would be a powerful statement from the majority. We can’t get arrested for not going to work or school. We can all demonstrate, with no effort at all…right from wherever we happen to be. This act will set us all free. The battles to occupy a park,
    or a few hours of demonstrating at different locations, is not winning anything. It gives the police something to do, along with the news coverage, as fill-in to the usual doom and gloom the media pumps out. We must all get on the same page with respect to priorities, and continue to communicate, with world-wide community councils in place; local councils, national councils, and a world wide council… with participation from all Citizens.
    As Thomas Jefferson said, “The majority of those present is the majority that rules.”
    Every citizen, with a communication device, with one vote, to reflect the majority opinion, regarding each issue, will represent true democracy. The only solution is world revolution.

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