WEB OF DEBT BLOG

MONETIZE THIS! A Better Way to Fund the Stimulus Package

116 Responses

1. 

   William Beyer, on February 23, 2009 at 2:34 am said:

   Another winner, Ellen. Have you had any luck penetrating the Obama thought process?

   Reply
2. 

   tensordyne, on February 23, 2009 at 4:35 am said:

   It is funny how the economy is forcing the Fed to almost turn itself into what it most despises, a National debt-free currency generator. If only similar contingencies could force credit and investment banks to do the same.
   — NPC

   Reply
3. 

   Bob, on February 23, 2009 at 5:10 pm said:

   300 Million Billionaires coming to a country near you!

   Reply
4. 

   Tim Quast, on February 23, 2009 at 5:33 pm said:

   Thanks for your insights, Ellen. Always appreciate them.

   How does your conclusion jive with the edict to “regulate the value thereof, and of foreign coin, and fix the standard of weights and measures?” You mention the first part of this power vested in Congress by the Constitution but leave off the rest. Creating fiat capital on the ledger through legerdemain, offsetting credit with equity-account liabilities, doesn’t regulate value, it does the opposite. Our Constitution was designed to prohibit the power structure from changing the rules. Creating and eliminating capital through non-cash adjustments to retained earnings or shareholder equity – that’s essentially what you’re talking about – keeps books straight but doesn’t correct systemic loss of value.

   It seems to me that the biggest problem we face is our inability to value things. The market – which is simply the manifestation of human nature defined in terms of creative and productive capacity – is desperately trying to tell us that, with our accounting gimmicks and machinated economic mathematics, that we need a reset. How’s that done? By ridding the system of everything that’s been dabbled with by accounting adjustment, or marked to market, or valued willy nilly, and revealing what we’ve actually got under there that’s worth a damn.

   In basic English language, we need all the crap to go away, from overblown government spending on charity, morality and economics (which can never successfully remain the domains of government, but only of individuals), to overpriced houses, to bloated and corrupt businesses. This will be massively painful for our generation, but grand and beautiful for at least the next several. And then it’ll have to happen again.

   The sooner we realize that disruption is a natural part of societal life cycles, the better off we’ll be. It’s part of the deal. And creating accounting entries to solve value problems is just another bandaid that leaves an oozing wound unhealed.

   Best,

   Tim Quast
   Managing Director
   ModernIR
   Reno NV

   Reply
   • 

     Ellen Brown, on February 23, 2009 at 5:44 pm said:

     If you create money TO MAKE THINGS, you’re just monetizing future goods; you ARE valuing the money, and you’re not inflating prices. ALL money comes into existence as loans against future SOMETHING. GM takes out loans against their future sales. What you don’t want are loans just to service the old loans; these don’t produce anything. It’s money making money for the lenders, but money isn’t a good or service; it’s just a medium of exchange; or in this case, something representing wealth transfer. Loans are just “monetizing” the things you’re going to produce with the money; but it only works if you produce something real, not just debt service.

     Reply
5. 

   tensordyne, on February 23, 2009 at 6:36 pm said:

   It is true, there seems to be a major disagreement on what the role of money is. If you have the idea that only GOODS should be traded for GOODS, then the idea that SERVICES should also be swappable for SERVICES or GOODS (or who knows, some mixture?) is anathema.

   If only GOODS can be monetized and not SERVICES then no one should be able to for instance buy a car now for a promise of work to be performed later. At the root of all GOODS though are SERVICES that have been performed in the past to create said GOODS. So what kind of world would we have if Gold was the standard of money? It would be one where those already holding the GOODS would have all the power.

   I don’t know, the more I look at the way the world of finance runs the more fascinating and repelling it is, and the more I realize I do not know even a tenth about what is going on.

   Look at Central Banks, they have taken it upon themselves to decide how much money in circulation is a good or bad thing in a completely centralized manner akin to how the USSR used to decide how much toilet paper was needed to meet demand using complex algorithms and such. Of course the party apparatchiks could go to specialized stores to buy their toilet paper which was always well stocked and cheaper then any where else.

   The same people who run the Fed and say they believe in the free market use centralized planning no different then the heydays of the Soviet model. Am I missing something here? By the way, I am out of toilet paper, got any to spare?

   — NPC

   Reply
6. 

   Joseph Danison, on February 24, 2009 at 3:54 am said:

   If I am paid wages for work, my money represents an asset in my ledger with no corresponding liability, but the source of that money was originally a transaction between a lender and a borrower.

   My employer may be afloat on borrowed money, staying one step ahead of his snarling creditors, and my government is in the sorry position of having to borrow most of its operating budget through a private central bank….

   It is true as EHB says that all money originates as debt and when you consider all debt public and private and set it alongside the money supply, it would be like matter + antimatter. You’d have no money. You’d probably have less than no money.

   There are a few people who have no debt, no mortgages, credit cards, etc, yet their money represents debt just the same: ultimately the national debt. It’s a wonderful Web of Debt we’ve got when even the most frugal and prudent among us cannot be debt-free. They’ll be taxed on account of that debt unto the 7th generation!

   But if you’re uber-rich, that is to say, the fat spider in the center of that web, most everybody else owes you their living. This is the miracle of compound interest, the means by which a free people are turned into debt peons, that is to say, slaves.

   It isn’t the debt origin of the money that is the problem, however; it’s the interest charged on debt. If all money comes into existence as debt, A debt-based currency does not necessarily lead to a debtor-nation unless the interest charged on debt is too high.

   To commenter Tim Quast above: “to regulate the value thereof” means to do what the central bank does: set interest rates. The value of money is determined by its power to accumulate or grow, ie, its rate of interest. This rate of interest should be a true reflection of the productivity of the economic engine as a whole. If the interest rate is too high, profits are withdrawn from producers and labor in interest payments, eventually concentrating wealth in the hands of a few creditors. This requires producers to take on more debt. It is a cycle that ends inevitably in deflation, such as now.

   This deflation is the result of usury, taken to mean any interest rate that is too high to accurately reflect productivity. Mr. Quast voices a common view among among conservative investors ( Peter Schiff has the same opinion ) that this deflation is a necessary part of the business cycle and we should all just grin and bear it as the deflation guts the economy, destroying life and property, as it returns to true values. This perspective is not only heartless, it is also ignorant, as heartlessness usually is.

   The so-called financial economy is a usury game that in recent years has become less relevant to the real producing economy than it ever was. The hedge fund managers appearing before Congress in the last few months were very pious in asserting their essential role in capital allocation and the creation of liquidity. For whom? For the casino they developed for themselves called the “derivatives market”. It is an ersatz market that produces nothing more than a crushing burden of debt for the many and enormous unearned and unjustifiable wealth for a very few.

   The kindest thing that can be done for the financial economy is to let it choke to death on its own toxic waste while the rest of us figure out a way to protect ourselves from these financial predators, disguised as honest investors, whose enormous sense of entitlement leads them to believe that they have a god-given right to grow wealthy through their destructive game of interest rate arbitrage.

   EHB’s proposals are designed to remove the financiers and their usury-based private banking system from its policy-making role in the national economy so that monetary policy can be formulated by the people’s government in the public interest, or the general welfare, as the Constitution refers to it.

   Very low interest loans from the Fed create money so cheap it almost seems like a greenback, but this will not solve the problem. Not even true greenbacks from the Treasury will solve the problem unless the issue of interest is also considered, because it is excessive interest charged by lenders that eventually sucks the liquidity from the producing economy, sooner or later, inevitably creating the business-cycle Mr. Quast refers to. It is not a natural process. It is created through monetary policy.

   Excessive interest distorts the relationship between money and the productive economy it represents, inflating values, creating unpayable debt and ultimately destroying demand. But when this happens, even now, financiers do not admit that they are not the engine that drives the economy and shout loudly that the financial system must be bailed out.

   They mutter about excessive government spending and advise against any bail out for consumers & producers. It is better to let them eat dirt, while saving the system is the greatest good. This attitude is so appallingly stupid, words fail to describe it, except maybe one word: Reagan.

   But it demonstrates the vast gap between finance and reality. In the real world, labor is the engine that creates production and drives demand. The only way to protect the producing economy and guarantee demand is to control interest rates and set them at the optimal sustainable level.

   If econometrics has any value at all, it is to discover this optimal rate, FROM THE PRODUCER’S POINT OF VIEW, not the financiers. Then this rate must be set throughout the entire financial system. The manipulation of interest rates is not monetary control, it is monetary manipulation designed as an entitlement for the financial class.

   Reply
7. 

   tensordyne, on February 24, 2009 at 9:55 am said:

   Joseph,

   I agree, and only would want to add that econometrics and neoliberal economics should have the same intellectual status at Universities as astrology, numerology, Aristotelian physics, palmistry and whatever the field of study is that corresponds to reading chicken entrails to determine future events, because in the end, the poorly designed non-zero-sum game of compound interest and banking is just as retarded, albeit far more dangerous to our security and prosperity.

   Man, I just realized that the previous whole paragraph is one sentence.

   — NPC

   Reply
8. 

   Joseph Danison, on February 24, 2009 at 1:24 pm said:

   tensordyne

   And it’s a fine sentence, albeit a bit unfair to these ancient, intuitive methodologies. Nancy Reagan’s astrology seemed to worked out well for Ronnie, didn’t it? Better than the econometric predictions of Nobel Prize winners Myron Scholes and Robert Merton in the virtual reality of structured finance!

   Reply
9. 

   Tim Quast, on February 24, 2009 at 4:22 pm said:

   Some fine comments here!

   Would add two observations: the Federal Reserve is responsible for turning money into a product that’s bought and sold like any other product, when it should serve simply as a proxy for value.

   The only solution to this problem is to change the way we create and circulate money — presently the Fed, and the 18-odd primary dealers (nobody has written about the fact that 99% of the destruction in our financial markets relates directly to the primary dealers, and nearly all the bailout money has gone to primary dealers too) do it. We solve this manipulation by eliminating the federal reserve and keeping the pool of proxy currency relatively constant (this of course would immediately bankrupt the government, I realize, but perhaps we need that sort of reset), as our Constitution specifies (“establish the value thereof”).

   And second, this whole line we’re fed constantly by the Obama administration and Congress too that we “need to get credit flowing again” is bogus. No we don’t. We need to first establish the value of things, and foremost, of our currency. Once that’s certain, then we can begin financing things again, so long as assets underpin credit extension. The entire plan of attack by government is wrong, and I believe deliberately so, because the effort here isn’t to help our economy but to try to keep foreign holders of treasuries from jettisoning them.

   I think we need to float a ship into Boston Harbor loaded with dollar-bill-colored confetti and set it on fire as a sign of our displeasure with policy. 😉 After all, to quote Ronald Reagan’s first inaugural address, the Federal Government didn’t create the States; the States created the Federal Government. This simple fact seems to be lost on members of Congress.

   Tim Quast

   Reply
10. 

    Brock Moore, on February 26, 2009 at 8:59 pm said:

    “According to Benjamin Franklin, it was chiefly to get that power back after King George halted the practice that the colonists fought the Revolution.”

    Ellen, this claim about Franklin cannot be sourced back earlier than the post Civil War Greenbacker era. It is apparently a Greenbacker concoction. As evidence, Franklin was the most prominent member of the Committee of Five that drafted the Declaration of Independence. The claim is not in the Declaration.

    It would enhance your credibility if you stop repeating this claim.

    Brock

    Reply
11. 

    Robert Searle, on February 27, 2009 at 10:25 am said:

    Why not give some checkable references to back up your claim so you can be taken with some degree of seriousness?

    Reply
12. 

    Brock Moore, on February 27, 2009 at 1:51 pm said:

    The burden of proof is on you. You will have to find a verifiable citation published during Franklin’s lifetime. The earliest that I have found is post Civil War, from the time that the Greenbacker movement was ascendant. The strongest positive evidence that the claim is bogus is that Franklin was the most prominent member of the Committee of Five, which drafted the Declaration of Independence. It is not in the Declaration.

    Brock

    Reply
13. 

    Brock Moore, on February 27, 2009 at 3:42 pm said:

    Personal Message to Ellen Brown

    Ms. Brown,

    Regarding the claim that I disputed with you that the “real cause” of the Revolution was Britain’s monetary policies towards America:

    You earlier admitted that while the Franklin “quotation” may have been apocryphal, that historians supported that claim. I think that what we can actually find are qualified and reputable historians who say it was the mercantilist policies of Britain in general towards America that were the cause of the Revolution, not Britain’s monetary policy specifically, which was merely an element of mercantilist policy.

    I asked you for references to those historians, not to embarrass you, but toward “cleaning up” the reformist case, to make it stronger and more credible. Much of it is full of blatant falsehoods, many of which date back to concoctions that date no earlier than the Greenbacker era of the second half of the nineteenth century, when the propaganda machine of that then robust political movement was in full swing.

    These falsehoods are so easily exposed, that exposing them by our opponents in public debate blemishes and demeans the essence of the reformist case, which is based on fundamental truth.

    Particularly easy to expose is this “real cause” claim, so often associated with the name of Benjamin Franklin. Franklin was a member of the Committee of Five, which drafted the Declaration of Independence. The claim is not in the Declaration. One would think that the “real cause” for the Revolution would be enumerated in the Declaration of Independence by a drafter of that document.

    The other and perhaps by far the most egregious claim in my estimation is the “debt virus” theory that all money comes from bank loans, but the banks do not create the money to pay interest in the lending process, therefore more money must be borrowed from the banks to pay interest back to the banks, thereby compounding the debt.

    You begin almost every interview that I have listened to or seen with this fallacy. I think it must degrade the essence of your argument to informed audiences, if only through guilt by association.

    Even the consensus of the discussants in this blog is that at least some of it is spent into circulation by the banks, though I would contend and demonstrate that more than enough is spent into circulation to pay interest to the banks.

    There is an alternative theory as to why debt tends to compound. That is the “A + B theorem” of C. H. Douglas, the founder of the Social Credit movement. It is the analytically correct alternative to “debt virus” that explains the endemic shortage of purchasing power.

    In that theory the problem is due to a flaw in national accountancy, that with the broadening and lengthening to the structure of production, what is called in the jargon of Social Credit, “labor displacement,” the ratio of “B” payments is increasing in respect to “A” payments. “A” payments are going to final consumers, while “B” payments are going into the “working capital” balances held by firms. These balances are therefore increasing in respect of balances held by consumers, as the structure of production lengthens and broadens, and more working capital becomes increasingly required for the day to day operations of the firms. The costs of production that are being charged against retail sales through the rules and conventions of accounting equal A + B, while income going to consumers equals A. If the ratio of B is increasing to A, then A must be falling in respect of A + B. This means that an increasing increment of the costs of production are never being liquidated through sales to final consumers, adding incrementally to debt. The solution is to supplement consumer purchasing power in ways that do not enter the accounted for costs of production. For this Social Credit suggests remedies like the National Dividend and Retail Discount. This theory is easily reconciled to the “margrinal utility” theory of neo-classical economics.

    I wish you would consider this alternate theory. I can help explain it to you in further discussion. There is also a Social Credit discussion group at Elistas. I can ask the moderator to invite you to join.

    Brock

    Reply
14. 

    Michael, on February 27, 2009 at 4:33 pm said:

    Brook
    We had this discussion before and you couldn’t refute what I said then and you can’t now either. The only thing you can do is orwellian talk. The new “money” the banks, as you say, “spend” into circulation is credit and is balanced by an equal amount of debt on the balance sheet -they are not money in the form of cash – it is credit even though you want to use an Orwellian language calling it something else. Or are you saying that the banks create cash? – If not, it’s credit and an equal amount of new debt is created – or are there any other forms of money existing that banks create?

    I did some videos showing how banks create money based on their bank reserves(in which cash is a part) according to Basel2.
    The voice sucks – it’s read by a “text to speeh” program. But the alternative was that I read it and hearing the Swedish chef in the Muppet show (but WORSE)

    Perhaps someone with a pleasant voice would like to help me?
    http://www.youtube.com/user/MoneyCreation2

    Reply
15. 

    Michael, on February 27, 2009 at 4:45 pm said:

    I think a distinction between money as credit (debt based money) and more or less permanent money – cash, and their relation, is at place in this discussion. I will try to describe it as simple as possible.

    Imagine an Island where they only use tally sticks as medium as exchange. The tally is split and one part is used as money and the other part is used as reference and kept in a secure place in order to prevent forgery. Lets say they are spent into circulation on the Island by building something that’s useful for the public, let say a school, a library, a road, a hospital or what ever. Nobody is put in debt and the money exist without anybody having to take a loan. Thereby I have proved that the thesis “All money is loaned based on some existing asset placed as collateral.” is wrong.

    It’s true that inhabitants on the Island can lend tally sticks to each other and loans can be made among the inhabitants using the existing tally sticks. But no new money (tally sticks) are created thereby. Conclusion: a debt don’t necessarily means newly created money- if a loan is created using the existing permanent money supply. Thereby I have proved that debt don’t necessarily equals money creation.

    If all those indebted on this Island paid of their debt the tally sticks, hence the money. would still exist. It’s possible to have an equal distribution (or what ever you prefer) of the existing money (tally sticks) without anybody being i debt.

    Now lets consider an Island where they let the only money consists of debts in the form of IOUs. So the only way money can be created is by putting someone in debt. So in order to build a school or a hospital or what ever some people in the community is forced to get into debt in order to create the money. And if all pay of their debt the IOU the money would disappear. So in order for the money to exist there’s got be those in debt and those holding the money asset in the form of a claim. And in order to expand the money supply the disparity between those in debt and those not in debt will have to increase since you can’t indebt those having a money asset since they will be able to pay of their debt and hence destroy part of the money supply – the only way to increase the money supply is to indebt those not having any money asset but have something they can put up as pawns. So an inequality is built into the system escalating with increasing debt = money creation. If all on this Island paid of their debt the money supply would shrink to zero. Money should have the property as a catalytic converter, just being the medium of exchange, not being destroyed in the process – well, as I have showed – debt based money don’t have these properties.

    Now consider a system (as the present) consisting of the permanent money described above competing with a debt based money system (there’s even more competitors to debt based money such as barter, LET:s and so on but let skip them for simplicity). In order to have a competitive advantage to the permanent money the debt based money must seem to grow – if this growth is interest or masked as raising real estates “values” or increases in stock market “value” i secondary. In order to keep those having a claim on the banks (claim on permanent money aka cash, hence bank reserves) from withdrawing their money the banks are forced to make it seems like the debt money has a property that permanent money don’t have – the ability to magically grow – and in doing so by indebting more and more making the disparity more and more clearer. So the problem is the growth of the debt but not what the increase is called – interest or “increased” real estate or phony raising stock values. Because why is people putting money on the stock exchange, because they think they will have a future earning keeping them there – just as interest. And why is a buyer buying a house that cost more then he can afford? If not because he think he can sell it later at a higher price – again a sort of disguised interest. And it’s all made up for preventing people claiming the permanent money (hence bank reserves aka cash as I showed i video part 7).

    But there’s also another property permanent money has (besides being a a competitor) that threaten debt based money (credits). Money should only be a catalyst, it can be used but not being destroyed by doing so. Debt money don’t have these properties but permanent money does. Hence the permanent money can pay of the debt underlying the debt money but still exist ( the tally sticks could as an example pay of the debt based money but the tally stick would still exist after doing so) so permanent money threatens debt money by it’s ability to kill it. That’s another reason why the debt money has to keep up the impression of “growing”.

    This video explains this relationship between cash and credit:

    Reply
16. 

    Brock Moore, on February 27, 2009 at 5:10 pm said:

    Brook
    We had this discussion before and you couldn’t refute what I said then and you can’t now either. The only thing you can do is Orwellian talk. The new “money” the banks, as you say, “spend” into circulation is credit and is balanced by an equal amount of debt on the balance sheet -they are not money in the form of cash – it is credit even though you want to use an Orwellian language calling it something else. Or are you saying that the banks create cash? – If not, it’s credit and an equal amount of new debt is created – or are there any other forms of money existing that banks create?
    ——————————————————–
    ———————————————————

    Of course the money the banks spend into circulation is debt of the banks. Deposits, whether arising from spending or lending, are liabilities of the banks to the public. When they lend money the banks receive in return the promissory notes of their borrowers, representing debt of the borrowers to the banks. I am not calling it something else. Of course I’m not saying the banks create cash. Before the National Bank Acts of the nineteen century, the banks did create cash in the form of banknotes. In the current system, only the Federal Reserve creates banknotes and distributes coinage. You want to use the words “credit” and “cash” in senses that imply they are different things. They are different things but both are “money.” Let me repeat, they are both money. Your semantical argument has no substance whatever, and is just plain goofy.

    Brock

    Reply
17. 

    moneycreation, on February 27, 2009 at 5:39 pm said:

    And you are using an Orwellian language. If the bank “spend” or “lend” out the interest on the the principal is semantic. The thing is that the debt increase in either case.

    Sorry if you’re not able to see the different properties between permanent money (as tally sticks or cash) and non-permanent debt based money (credit). And I understand that not being able to understand can be goofy for you. But I guess you’re not alone – if that’s any comfort.

    Reply
18. 

    Brock Moore, on February 27, 2009 at 5:53 pm said:

    And you are using an Orwellian language. If the bank “spend” or “lend” out the interest on the the principal is semantic. The thing is that the debt increase in either case.
    ———————————————————–
    ————————————————————

    No, in steady state the level of debt would be constant. In steady state the banks are spending exactly the same amount as they are receiving back in interest. Loans are exactly balanced by the repayment of loans.
    –

    Sorry if you’re not able to see the different properties between permanent money (as tally sticks or cash) and non-permanent debt based money (credit).
    ———————————————————–
    ————————————————————

    You are very confused. Tally sticks and cash represent the debt of their issuer to their holders. They are no more “permanent” than any other debt. What you call “non-permanent” is merely the nature of contracts, which are entered into and fulfilled. Money is “creditary” or “contractual.” I assume you didn’t know that. Please read the Innes papers at
    http://www.geocities.com/new_economics/innes/

    Brock

    Reply
19. 

    Brock Moore, on February 27, 2009 at 6:05 pm said:

    Imagine an Island where they only use tally sticks as medium as exchange. The tally is split and one part is used as money and the other part is used as reference and kept in a secure place in order to prevent forgery. Lets say they are spent into circulation on the Island by building something that’s useful for the public, let say a school, a library, a road, a hospital or what ever. Nobody is put in debt and the money exist without anybody having to take a loan.
    ———————————————————
    ———————————————————-

    No, the part of the tally that was used as money, called the “stock,” represents the debt of its issuer to its holder in due course. This is in fact how trade was conducted for thousands of years. See the Innes papers at
    http://www.geocities.com/new_economics/innes/
    The problem or weakness with this system is the limited recognizability and therefore acceptance of the individually issue tallies. This weakness was addressed with the development of fractional reserve banking, where the banks accepted the individual promissory notes of their borrowers in exchange for their generally recognized and accepted deposits, which are effectively the promissory notes of the banks. This greatly expanded the scope and utility of the competitive market, making the Industrial Revolution possible. Henceforth you could spend what you receive in your pay voucher at any store, not just the company store.
    –

    It’s true that inhabitants on the Island can lend tally sticks to each other and loans can be made among the inhabitants using the existing tally sticks. But no new money (tally sticks) are created thereby.
    ———————————————————
    ———————————————————-

    You’re presuming that some law exists that permits only government to issue tally sticks. But regardless, in this situation government is spending its own debt instruments, which other people spend in continuing trade. This would effectively be a pure Greenback system.
    –

    If all those indebted on this Island paid of their debt the tally sticks, hence the money. would still exist.
    ———————————————————
    ———————————————————-

    But if the issuer of the debt instruments, the tally sticks, accepted them in payment of taxes, the money supply would contract. If the government didn’t collect taxes, but simply spent tally sticks, the money supply would expand without limit. You’re not thinking very deeply, my little fellow.

    Brock

    Reply
20. 

    moneycreation, on February 27, 2009 at 6:53 pm said:

    You still don’t understand the difference between cash and credit – that’s evident. Banks only create credit and the same amount of debt is always created simultaneous. If bank creates extra credit the same amount of new debt is created – no matter the are “spent” or “lent”. Show on the banks balance sheet how you balance it otherwise. I demanded that you should do the math before and you couldn’t.

    YOU are calling it debt! That doesn’t mean it’s need to be defined as debt even if other have used it in that manner! I did difined it intentionaly as a reference mark only as a way to protect it against forgery. If it’s sea shell or stones (as they used on some Islands) without any reference copy (in protection against forgery) is the same. The sea shell would be represent debt in any form. Tally stick in the way I defined it on the Island does not represent debt. Your doing your Orwellian thing again: you try to get interpretation precedence not by arguments but by being arrogant and superior switching definitions at will.
    Again: as I defined the tally stick on the Island the copy do not represent debt, only a protection against forgery. Stick to the definition that I wrote instead of lying and twist things around. The spending of the tally stick don’t inflict any debt to anyone.

    Reply
21. 

    Brock Moore, on February 27, 2009 at 7:08 pm said:

    Again: as I defined the tally stick on the Island the copy do not represent debt, only a protection against forgery.
    ———————————————————–
    ————————————————————

    Except the way you defined it does not conform to reality. Every tally stick that has been spent into circulation in the entire history of the human race represents the debt of the party who issued the tally. During most of history such tallies represented the debt of merchantmen. At some point governments also began to issue tallies. That debt represented the debt of governments.
    –

    Stick to the definition that I wrote instead of lying and twist things around.
    ———————————————————–
    ————————————————————

    But your definition is just goofy.
    –

    The spending of the tally stick don’t inflict any debt to anyone.
    ———————————————————–
    ————————————————————

    Debt is not inflicted on anyone. It represents the debt of the issuer who spent it. It represents an asset to its holder. By the way, let’s stop talking about Orwell. Have you actually read anything written by Orwell? See: http://geocities.com/socredus/compendium/orwell.txt in the compendium of the Social Credit discussion list.

    Brock

    Reply
22. 

    moneycreation, on February 27, 2009 at 7:15 pm said:

    Have stones or sea shell been used as permanent money on Islands without by themself being debt? YES! Are the tally sticks debt as I definied it! NO! Show that my definition inflict debt on anybody on the Island instead of replacing it with your own definition.

    Your are dishonest.

    Reply
23. 

    Brock Moore, on February 27, 2009 at 7:52 pm said:

    You answer yes without having any idea how money actually worked on islands. I have not made a study of that subject, so will defer comment, as so should you.

    Tally sticks are by necessity debt–they were the debt of the parties that issued them. So your no answer does not conform to what tally sticks really were. I am saying this quite authoritatively.

    They did not “inflict” debt on anyone. They were assets to their holders, and debt to their issuers.

    I do not accuse you of dishonesty, merely ignorance.

    Brock

    Reply
24. 

    Allen Charles, on February 27, 2009 at 11:52 pm said:

    Brock,

    The problem with your argument is that after a loan is payed off the note has no further use but the money used to payoff the note (principle and interest) becomes a permanent asset of the bank as permanent money. So you may be correct to say account credit is offset by a promissary note but in remains in existence as part of the money supply after the note or loan is paid in full. Banks are not just paid interest, but are paid principal as well and this is why your asserting is not entirely correct.

    Allen Charles

    Reply
25. 

    Brock Moore, on February 28, 2009 at 2:53 am said:

    So you may be correct to say account credit is offset by a promissory note but it remains in existence as part of the money supply after the note or loan is paid in full.
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    No, the theorem is that loans create deposits; the repayment of loans cancel deposits. Spending by banks also create deposits; the payment of interest to banks cancel deposits. If we define money as deposits, inasmuch as most transactions are conducted through the transfer of deposits, then money is thereby created and canceled.

    Brock

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26. 

    Michael, on February 28, 2009 at 8:10 am said:

    Brock
    That’s your opinion – I don’t care. You have no arguments (or balance sheet 🙂 ) and you have been proven to be dishonest time after time so, I don’t give much for your “opinion”.

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27. 

    Allen Charles, on February 28, 2009 at 11:08 am said:

    If you approach it this way NO MONEY EXISTS none because the currencies we use are ALL NOTES and not money, negotiable instruments yes, but not money only notes or promissary notes to be valid to pay taxes or debts and really nothing else. You are doing what the Fed have done for 100 years, doublespeak. When a creditor goes to court, they collect what is presented and understood to be money. What quacks like a duck, what walks like a duck must be a duck Deposits are made with MONEY or notes that can be used to pay taxes and debts and that equals the definition of money. or LEGAL TENDER. Money is defined as something that stores and transfers value and deposits do exactly that and the value continues after the loan is payed off and the value of deposits can be transferred by checks or by transfer or by with-drawl being exchanged for Federal Reserve notes or what anyone on the planet recognizes as MONEY. Try telling any court in the land that the bank you just robbed only had deposits and they are not money so you did not steal any money and the jury as well as the judge will laugh you all the way to prison. That my friend becomes LAW (case law) or legal recognition as money. You are thinking in terms of book keeping not law.

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28. 

    Michael, on February 28, 2009 at 2:54 pm said:

    Cash is part of the bank reserves. Bank reserves are then expanded as credit (the leverage thats falling in now). Bank deposits, credits, are claims on cash (that’s why bank runs are so feared – the banks have promised to pay much more cash then they posses as bank reserves). Hence the banks credit wouldn’t exist without the cash but the cash can exist without the bank credit. Hence the cash is more permanent then banks credit – this is specially true if the cash is issued without being debt by it self (as I described in my example with the Island). But, as I said, even if the cash represent debt it’s still more permanent then the credit since credit can’t exist without the cash – but the cash can exist without the credit.

    Your right it’s double speak, Brook is very dishonest.

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29. 

    Brock Moore, on February 28, 2009 at 8:46 pm said:

    “Cash is part of the bank reserves. Bank reserves are then expanded as credit (the leverage thats falling in now). Bank deposits, credits, are claims on cash (that’s why bank runs are so feared – the banks have promised to pay much more cash then they posses as bank reserves).”
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    Actually, the promise is to redeem deposits in legal tender or its equivalent when, and if, demanded. The concept is actuarial, akin to insurance. The promise with a life insurance policy is to pay when, and if, the insured dies. The banks haven’t promised to pay more cash than they possess as bank reserves. That would be a completely different promise that they haven’t made. The purpose of both bank and insurance reserves are to cover the contingency that the banks or insurance companies will have to pay out.
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    “Hence the banks credit wouldn’t exist without the cash but the cash can exist without the bank credit.”
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    This is factually incorrect. The main purpose of reserves is to settle accounts between banks. The secondary purpose is to redeem deposits in currency or coinage when demanded. The requirement for redemption mostly occurs when deposits are transferred between banks. In this regard, if there is perfect coordination between banks, the banks would have no need for reserves whatsoever. Bank credit derives from their ability to credit customer deposit accounts. In no way, shape, or form does bank credit derive from their reserves.
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    Hence the cash is more permanent then banks credit – this is specially true if the cash is issued without being debt by itself (as I described in my example with the Island).”
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    But the “cash” that is issued is debt of the issuer, whomever that might be. In a central banking system, “cash” is debt of the central bank. Also, the deposits the banks have at the central bank represent central bank debt to its depositors. You’re very confused to claim that it isn’t debt. That is to say, it represents central bank credit. Central bank credit held in the form of “cash” or deposits at the central bank is debt of the central bank to the parties holdings that credit.
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    “Your right it’s double speak, Brook is very dishonest.”
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    It is not dishonest to state facts. If the facts conflict with your world-view, the problem is with you, not me. You appear to be very close minded and unwilling to learn. In other words, an ignoramus.

    Brock

    Reply
30. 

    Jere L Hough, on February 28, 2009 at 9:07 pm said:

    First, I’d like to congratulate Ellen on another really fine article. The suggestions she made do not require any legislation or money reforms, only the government’s exercising of powers they already fully possess. It would fund the stimulus package in a way that could save taxpayers hundreds of billions, even trillions, in interest over the life of this money that is being *borrowed* into existence for this economic stimulus and infrastructure package. EHB has hit on one way we could use the Fed *as it exists now* to save taxpayer money! Now it is up to US to pressure our congresspersons to do it this way. Kudos Ellen!

    Secondly, I want to express my disappointment that so few of the many words posted here have anything at all to do with EHBs article, or how the Fed monetizes debts, and then “leverages” it into mountains of money through the fractional reserve process. This private, money creation Ponzi Scheme is killing America, and the perpetrators of this massive fraud are laughing at us all the way to their banks. When the counting of costs is someday finished, Allen Stanford and Bernie Sanders will look like boy scouts in comparison to the crooks that are running the international banking syndicates. You think that is hyperbole? Come back and talk to me in ten years! There has never ever been a criminal syndicate on a scale approaching this one.

    Finally: “Oh, what a tangled web we weave, When first we practice to deceive. But when we’ve practiced for a while, How vastly we improve our style!”

    This tells us why the circuitous, fallacious and misleading anti-reform arguments above are unworthy of engagement. They are a textbook examples of deceptive rhetoric. Straw men, red herrings, non-sequiturs, and other techniques of sophistry are his tools, and the writer uses them well. The American people would have never been sold this false bill of goods if not for an army of smooth-talking private money advocates spinning their webs of deceit.

    Lord Acton is famous for his saying that “power corrupts and absolute power corrupts absolutely”. But few people know the context of that quote, or “the rest of the story”:

    “And remember, where you have a concentration of power in a few hands, all too frequently men with the mentality of gangsters get control. History has proven that. All power corrupts; absolute power corrupts absolutely. The issue which has swept down the centuries and which will have to be fought sooner or later is the people versus the banks.” – Lord Acton

    Reply