If these worries become really serious, . . . [s]mall savers will take their money out of banks and resort to household safes and a shotgun.
— Martin Hutchinson on the attempted EU raid on deposits in Cyprus banks
The deposit confiscation scheme has long been in the making. US depositors could be next . . . .
On Tuesday, March 19, the national legislature of Cyprus overwhelmingly rejected a proposed levy on bank deposits as a condition for a European bailout. Reuters called it “a stunning setback for the 17-nation currency bloc,” but it was a stunning victory for democracy. As Reuters quoted one 65-year-old pensioner, “The voice of the people was heard.”
The EU had warned that it would withhold €10 billion in bailout loans, and the European Central Bank (ECB) had threatened to end emergency lending assistance for distressed Cypriot banks, unless depositors – including small savers – shared the cost of the rescue. In the deal rejected by the legislature, a one-time levy on depositors would be required in return for a bailout of the banking system. Deposits below €100,000 would be subject to a 6.75% levy or “haircut”, while those over €100,000 would have been subject to a 9.99% “fine.”
The move was bold, but the battle isn’t over yet. The EU has now given Cyprus until Monday to raise the billions of euros it needs to clinch an international bailout or face the threatened collapse of its financial system and likely exit from the euro currency zone.
The Long-planned Confiscation Scheme
The deal pushed by the “troika” – the EU, ECB and IMF – has been characterized as a one-off event devised as an emergency measure in this one extreme case. But the confiscation plan has long been in the making, and it isn’t limited to Cyprus.
In a September 2011 article in the Bulletin of the Reserve Bank of New Zealand titled “A Primer on Open Bank Resolution,” Kevin Hoskin and Ian Woolford discussed a very similar haircut plan that had been in the works, they said, since the 1997 Asian financial crisis. The article referenced recommendations made in 2010 and 2011 by the Basel Committee of the Bank for International Settlements, the “central bankers’ central bank” in Switzerland.
The purpose of the plan, called the Open Bank Resolution (OBR) , is to deal with bank failures when they have become so expensive that governments are no longer willing to bail out the lenders. The authors wrote that the primary objectives of OBR are to:
- ensure that, as far as possible, any losses are ultimately borne by the bank’s shareholders and creditors . . . .
The spectrum of “creditors” is defined to include depositors:
At one end of the spectrum, there are large international financial institutions that invest in debt issued by the bank (commonly referred to as wholesale funding). At the other end of the spectrum, are customers with cheque and savings accounts and term deposits.
Most people would be surprised to learn that they are legally considered “creditors” of their banks rather than customers who have trusted the bank with their money for safekeeping, but that seems to be the case. According to Wikipedia:
In most legal systems, . . . the funds deposited are no longer the property of the customer. The funds become the property of the bank, and the customer in turn receives an asset called a deposit account (a checking or savings account). That deposit account is a liability of the bank on the bank’s books and on its balance sheet. Because the bank is authorized by law to make loans up to a multiple of its reserves, the bank’s reserves on hand to satisfy payment of deposit liabilities amounts to only a fraction of the total which the bank is obligated to pay in satisfaction of its demand deposits.
The bank gets the money. The depositor becomes only a creditor with an IOU. The bank is not required to keep the deposits available for withdrawal but can lend them out, keeping only a “fraction” on reserve, following accepted fractional reserve banking principles. When too many creditors come for their money at once, the result can be a run on the banks and bank failure.
The New Zealand OBR said the creditors had all enjoyed a return on their investments and had freely accepted the risk, but most people would be surprised to learn that too. What return do you get from a bank on a deposit account these days? And isn’t your deposit protected against risk by FDIC deposit insurance?
Not anymore, apparently. As Martin Hutchinson observed in Money Morning, “if governments can just seize deposits by means of a ‘tax’ then deposit insurance is worth absolutely zippo.”
The Real Profiteers Get Off Scot-Free
Felix Salmon wrote in Reuters of the Cyprus confiscation:
Meanwhile, people who deserve to lose money here, won’t. If you lent money to Cyprus’s banks by buying their debt rather than by depositing money, you will suffer no losses at all. And if you lent money to the insolvent Cypriot government, then you too will be paid off at 100 cents on the euro. . . .
The big winner here is the ECB, which has extended a lot of credit to dubiously-solvent Cypriot banks and which is taking no losses at all.
It is the ECB that can most afford to take the hit, because it has the power to print euros. It could simply create the money to bail out the Cyprus banks and take no loss at all. But imposing austerity on the people is apparently part of the plan. Salmon writes:
From a drily technocratic perspective, this move can be seen as simply being part of a standard Euro-austerity program: the EU wants tax hikes and spending cuts, and this is a kind of tax . . . .
The big losers are working-class Cypriots, whose elected government has proved powerless . . . . The Eurozone has always had a democratic deficit: monetary union was imposed by the elite on unthankful and unwilling citizens. Now the citizens are revolting: just look at Beppe Grillo.
But that was before the Cyprus government stood up for the depositors and refused to go along with the plan, in what will be a stunning victory for democracy if they can hold their ground.
It CAN Happen Here
Cyprus is a small island, of little apparent significance. But one day, the bold move of its legislators may be compared to the Battle of Marathon, the pivotal moment in European history when their Greek forebears fended off the Persians, allowing classical Greek civilization to flourish. The current battle on this tiny island has taken on global significance. If the technocrat bankers can push through their confiscation scheme there, precedent will be established for doing it elsewhere when bank bailouts become prohibitive for governments.
That situation could be looming even now in the United States. As Gretchen Morgenson warned in a recent article on the 307-page Senate report detailing last year’s $6.2 billion trading fiasco at JPMorganChase: “Be afraid.” The report resoundingly disproves the premise that the Dodd-Frank legislation has made our system safe from the reckless banking activities that brought the economy to its knees in 2008. Writes Morgenson:
JPMorgan . . . Is the largest derivatives dealer in the world. Trillions of dollars in such instruments sit on its and other big banks’ balance sheets. The ease with which the bank hid losses and fiddled with valuations should be a major concern to investors.
Pam Martens observed in a March 18th article that JPMorgan was gambling in the stock market with depositor funds. She writes, “trading stocks with customers’ savings deposits – that truly has the ring of the excesses of 1929 . . . .”
The large institutional banks not only could fail; they are likely to fail. When the derivative scheme collapses and the US government refuses a bailout, JPMorgan could be giving its depositors’ accounts sizeable “haircuts” along guidelines established by the BIS and Reserve Bank of New Zealand.
Time for Some Public Sector Banks?
The bold moves of the Cypriots and such firebrand political activists as Italy’s Grillo are not the only bulwarks against bankster confiscation. While the credit crisis is strangling the Western banking system, the BRIC countries – Brazil, Russia, India and China – have sailed through largely unscathed. According to a May 2010 article in The Economist, what has allowed them to escape are their strong and stable publicly-owned banks.
Professor Kurt von Mettenheim of the Sao Paulo Business School of Brazil writes, “The credit policies of BRIC government banks help explain why these countries experienced shorter and milder economic downturns during 2007-2008.” Government banks countered the effects of the financial crisis by providing counter-cyclical credit and greater client confidence.
Russia is an Eastern European country that weathered the credit crisis although being very close to the Eurozone. According to a March 2010 article in Forbes:
As in other countries, the [2008] crisis prompted the state to take on a greater role in the banking system. State-owned systemic banks . . . have been used to carry out anticrisis measures, such as driving growth in lending (however limited) and supporting private institutions.
In the 1998 Asian crisis, many Russians who had put all their savings in private banks lost everything; and the credit crisis of 2008 has reinforced their distrust of private banks. Russian businesses as well as individuals have turned to their government-owned banks as the more trustworthy alternative. As a result, state-owned banks are expected to continue dominating the Russian banking industry for the foreseeable future.
The entire Eurozone conundrum is unnecessary. It is the result of too little money in a system in which the money supply is fixed, and the Eurozone governments and their central banks cannot issue their own currencies. There are insufficient euros to pay principal plus interest in a pyramid scheme in which only the principal is injected by the banks that create money as “bank credit” on their books. A central bank with the power to issue money could remedy that systemic flaw, by injecting the liquidity needed to jumpstart the economy and turn back the tide of austerity choking the people.
The push to confiscate the savings of hard-working Cypriot citizens is a shot across the bow for every working person in the world, a wake-up call to the perils of a system in which tiny cadres of elites call the shots and the rest of us pay the price. When we finally pull back the veils of power to expose the men pulling the levers in an age-old game they devised, we will see that prosperity is indeed possible for all.
For more on the public bank solution and for details of the June 2013 Public Banking Institute conference in San Rafael, California, see here.
____________
Ellen Brown is an attorney, chairman of the Public Banking Institute, and the author of eleven books, including Web of Debt: The Shocking Truth About Our Money System and How We Can Break Free. Her websites are webofdebt.com and ellenbrown.com.
Filed under: Ellen Brown Articles/Commentary |
WEB OF DEBT BLOG 
The public bank initiative has not gone unnoticed by the financial elites as part of the Trans Pacific Partnership text moves to ban the formation of such public institutions.
The TPP is a nasty piece of work on all levels.
When you refer to the “veils of power” do you mean “corporate veil”? The corporate veil behind which the “tiny cadres of elites” buy other corporations with further veils to hide their profits and losses? It’s all just an elaborate “Dance of the Seven Veils”, isn’t it: one big happy family of global bankers celebrating the renaissance of feudalism in an age of digital ETF, hoodwinking the serfs, righteously indignant at the mere suggestion of corruption.
Incorporation by registration isn’t working. Is it too late to impose terms and conditions on the incorporation of non-governmental institutions? If not, we should be demanding (by petition) an Emergency Article Five Amendment at the local level to end both the FED and the IRS, deny all corporations’ influence over government, and return the issue of currency to Treasury Dept.
Charters should be to corporations what constitutions are to governments; strictly limiting and sternly enforced. Why aren’t they?
Good question. So much to write on!
Are there similar risks with credit unions in the US?
All deposits would be at risk if JPM collapsed, following the OBR plan. Note that in Cyprus the deal was that all depositors got haircuts, even those in the non-bankrupt banks.
More proof that private central banking is a massive criminal enterprise that is destroying most of the world.
A portion of Cypriot deposits will be confiscated — electronically, no less — by the government because that’s what euro zone finance ministers, the European Central Bank and International Monetary Fund demanded as a precondition for a 10 billion euro bailout.
“Bailout” simply means that government accomplices borrow worthless cyber currency for face value plus interest from private banking crime syndicates, then tax you to pay for the fraudulent debt. This gives the government accomplices massive power over your lives, and legitimizes the banking criminals’ scam of buying the world and its population.
The solution is simple: State government banks must make interest-free personal, business, and infrastructure loans, zeroing repayments to prevent inflation. Federal governments must never borrow, but issue their own debt-free, interest-free, and tax-free currency to fund their operations. Private central banks must be outlawed, “debts” owing them disavowed, their assets forfeited to reimburse innocent third-party bondholders, and their employees and owners prosecuted under RICO laws. Time to climb out of the stupid-pit, reclaim our freedom, and advance civilization.
http://elect.ErnestHuberForCongress.com/
Thank you Ellen for this very hot article!
Well, it seems that what is going on in Cyprus will not stay in Cyprus. This little island is a microcosm of what is taking place in the Eurozone, the Ozone, and here – The Shock Doctrine and the Austerity Program.
It is truly awesome and inspiring that the government of Cyprus has stood up for we the depositors, while our government continues to cringe, cave and crawl under the table, and into the beds of the elite gangsters who are trying to strangle us.
We could learn a lesson from the Cypriots. Let us say no to shock and awe austerity programs, no to tax cuts for the extremely wealthy so they can demolish the social safety nets and programs that help the poor, the seniors and the disabled; say no to attacks on women’s reproductive rights; no to stifling voter ID laws; no to continued attacks on the environment, the destruction of public education, attacks on unions and the Post Office; no to emergency managers, and nein to corporate financial fascism.
But let’s say yes to the expansion and strengthening of Medicare and Social Security, yes, to universal healthcare coverage, and YES to creating public banks.
And while we’re at it, let’s do what Iceland did with their banksters – hold them accountable. They won’t stop unless we make them, and where are the pitchforks? Giving us almost zero interest rates is theft by yet another name. Taking our savings? This will happen unless we say nyet.
Given the early “Spring” uprisings in Cyprus and their implications for the American economy it may soon be necessary to expedite an emergency firewall between the Global Banking Borg and what’s left of our fragile Republic. I re-wrote the 28th amendment accordingly:
28th Amendment (The Constitutional Emergency Amendment)
Corporations are not persons and shall be granted only those rights and privileges that Congress deems necessary for the well-being of the People. Congress shall provide legislation defining the terms and conditions of corporate charters according to their purpose; which shall include, but are not limited to:
1, prohibitions against any corporation;
a, owning another corporation,
b, becoming economically indispensable or monopolistic, or
c, otherwise distorting the general economy;
2, prohibitions against any form of intervention in the affairs of government by means of;
a, congressional lobbying
b, electoral sponsorship or advocacy
c, educational sponsorship or publication
d, media news reporting
3, provisions for;
a, the auditing of standardized, current, and transparent account books, and
b, the establishment of state-owned banks like Ellen Brown says
c, civil and criminal penalties to be suffered by corporate executives et al for violation of the terms of a corporate charter.
The 16th Amendment to the United States Constitution is hereby repealed and Congress shall re-write the U.S.Code to reflect the changes embodied herein.
The Joo joo offers high rates of returns on savings in Cyprus.
Investors make their deposits, and the Joo Joo skips down like a big time carnival act.
Now watch Cyprus deflate and the Joo Joo buys it for .10c on $1.00
Money doesnt disappear, it just changer hands.
Hi Ellen, you are spot on as usual. It is an understated fact that growth in the economy is required to service the debt is extremely destructive to the environment. The globe is being chopped up and polluted to support the failed system of the global fiat based monetary system that requires growth to feed it’s usury. The population could maintain or grow without the excessive destruction required to feed the banks. The banks will always require taking more than there is, forcing the environment into the downward spiral that it’s in. They have created an artificial environment where their required inputs exceed the required capacity to sustain the population. This is resulting in the collapse of economic systems in the periphery that can’t further artificially expand their economic outputs. It is the larger global environmental systems that are at risk that eventually won’t be able to support the constraints imposed upon them by this foolish endeavor. If you have ever studied ecology or biological systems, economic systems follow the same patterns of growth, confluence and senescence. Only with bankers that thrive on debt based fiat money, the process is accelerated with never the chance of homeostasis where utilization and regenerative capacity can equilibrate. I’m disgusted by this whole thing but have no place to turn because there is no oasis in this world to escape to.
I don’t really think it’s the fiat money that’s the problem. It’s the usury practiced by the private issuers.
“To all Goldbugs: Fiat money is not the problem – the private issue of fiat money is the problem, which is like a private tax on all society.” Stephen Zarlenga, Director, The American Monetary Institute
Money should only be created by governments and spent, not loaned, into circulation.
“The Government should create, issue, and circulate all the currency and credits needed to satisfy the spending power of the Government and the buying power of consumers. By the adoption of these principles, the taxpayers will be saved immense sums of interest. Money will cease to be master and become the servant of humanity.”
Abraham Lincoln
The federal reserve act should be repealed and the banks nationalised.
There is much talk of the “american empire” when, in reality, america is simply the superpower du jour in the service of the international banking empire. By controlling the world’s debt through its usurious monetary system, the bankers control the world’s nations.
“Once a nation parts with the control of its currency and credit, it matters not who makes the nations laws. Usury, once in control, will wreck any nation. Until the control of the issue of currency and credit is restored to government and recognized as its most sacred responsibility, all talk of the sovereignty of parliament and of democracy is idle and futile.”
William Lyon Mackenzie King, the tenth Prime Minister of Canada from December 29, 1921 to June 28, 1926
YES! YES! ““To all …: Fiat money is not the problem – the private issue of fiat money is the problem, which is like a private tax on all society.” Stephen Zarlenga, Director, The American Monetary Institute
Money should only be created by governments…”
YES YES!, But in reality,in a capitalistic society :It does not belong to the government. It must remain with its true owners-the society, the people of that sovereign nation, otherwise that would be a totalitarian government.
Solution: The Monetary Sovereignty (MS) must be the only issuer of the fiat currency with the knowledge that it is a receipt of a value that is owned by the individuals of the group and must be returned to the group upon demand. The government acquires money for their own usage by taxation of the groups wealth.
““The Government should create, issue, and circulate all the currency and credits needed to satisfy the spending power of the Government and the buying power of consumers.”
Read Soddy, “The Role Of Money”
Read comments by “justaluckyfool” (GOOGLE)
USE THE ITALIAN SOLUTION:BECOME A MONETARY SOVEREIGNTY !
a/k/a justaluckyfool, PLEASE share.
“As Beppe Grillo (Italy) points out, it is not the cost of government but the cost of money itself that has bankrupted Italy. If the country wishes to free itself from the shackles of debt and restore the prosperity it once had, it will need to take back its monetary sovereignty and issue its own money, either directly or through its own nationalized central bank.(This is the solution for any sovereignty).i.e.,the SOLUTION.
For any nation to be a Monetary Sovereignty….
.. it must be the sole creator of its sovereign currency.
…it must have the ways and means to control its sovereign currency for quality and quantity.
…it must under modern money systems be fiat since its money is transferable “thru thin air”.
…it must understand that it is the Guardian of the value of the currency , if it wishes to be capitalistic; otherwise that nation will be totalitarian. As a guardian (recording and exchanging) it does not own the value of the currency it creates.
…it must use that currency knowing that it must also return it back to the community (the rightful owners).
…all transactions using sovereign currency must be “REAL”, meaning backed by 100% of issued sovereign currency.In order to prevent “systemic failure” it must make available the currency as loans at a fixed rate and duration in amounts deemed necessary to allow the private banking system to be solvent at 100% capitalization, while at the same time being able to recapture all that is printed eventually must go back to the total society. As that total society is what is the “good faith and credit ” that is the value of the currency..
WHAT IF….. The new Italian government were to declare,”Italy as a sovereign nation declares the ‘New Lira’ as its national currency and after due consideration declares that the Central Bank of Italy (CBI) has on deposit 5 TRILLION NEW LIRA that sum being the present value of the entire sovereignty at this time.(Cyprus:@ 1 trillion “NEW Cyprus Notes”)(( read where ever “New Lira” appears when thinking CYPRUS solution))
The CBI shall purchase all residential and commercial real estate loans at fair market value and modify these as assumable loans at 2% for 36 years.Payment is to be an equal exchange of “New Lira” for Euro. Personal income taxes will be reduced to zero.
There will also be 1 trillion New Lira available as loans for any private for profit bank at 2% for 36 years since as of this date all monetary transactions must be 100% capitalized by ‘New Lira’ and banks must be solvent or go into receivership.
*All banks charted as Italian must record their balances in “New Lira” and transfer in “New Lira”, which shall carry an equal denominated value as the present Euro.
*All bonds that are listed in Euro shall be deemed in an equal denomination as “New Lira”, and shall NO LONGER pay interest, and shall be paid out to zero by 72 equal monthly payments by the CBI(read Central Bank of Cyprus).
We need to create the oasis. Possible though I think!
[…] This article first appeared at Web of Debt. […]
[…] This article first appeared at Web of Debt. […]
The Cyprian government & Cyprian bankers know that it is imperative that the country not default and the bondholders loose money. Their lives depend upon that not happening.
Many of the bondholders are Russian mafia. If they lose big money, those responsible for the loss and their families will die.
Reblogged this on The Baby And The Bathwater and commented:
It’s time to find a safer place for your money.
I don’t really think it’s the fiat money that’s the problem. It’s the usury practiced by the private issuers.
“To all Goldbugs: Fiat money is not the problem – the private issue of fiat money is the problem, which is like a private tax on all society.” Stephen Zarlenga, Director, The American Monetary Institute
Money should only be created by governments and spent, not loaned, into circulation.
“The Government should create, issue, and circulate all the currency and credits needed to satisfy the spending power of the Government and the buying power of consumers. By the adoption of these principles, the taxpayers will be saved immense sums of interest. Money will cease to be master and become the servant of humanity.”
Abraham Lincoln
The federal reserve act should be repealed and the banks nationalised.
There is much talk of the “american empire” when, in reality, america is simply the superpower du jour in the service of the international banking empire. By controlling the world’s debt through its usurious monetary system, the bankers control the world’s nations.
“Once a nation parts with the control of its currency and credit, it matters not who makes the nations laws. Usury, once in control, will wreck any nation. Until the control of the issue of currency and credit is restored to government and recognized as its most sacred responsibility, all talk of the sovereignty of parliament and of democracy is idle and futile.”
William Lyon Mackenzie King, the tenth Prime Minister of Canada from December 29, 1921 to June 28, 1926
Reblogged on The Baby And The Bathwater.
I’m always amused by the fact that everything Ms Brown writes always seesm to morph into a pretext to attack the EU! What she isn’t saying is that most of the depositors in Cyprus likely to be effected are Russian oligarchs! And few believe that all the money such people have lodged in Cyprus banks was honestly acquired. Indeed, the reason why EU leaders provoked the totally predictable reaction in Cyprus was probably to force the oligarchs to contribute to the bailout: either the banks fail and they lose most of their money or they cough up a bit of money to prop up the banks and life goes on as before. Is anybody other than anti-EU propagandists like Ms Brown going to shed any tears over oligarchs having to “pay to play” in Cyprus?
Two wrongs don’t make a right.
And calling Ellen Brown a propagandist in any context is as laughable as your reference to “oligarchs” .
I am not a Russian oligarch, but a simple Cypriot who had a good professional career and worked hard all my life with a view to enjoy the fruits at a later stage in life. It was a long way. Now that I reached that stage everything is falling apart and all the long planned dreams shattered. Ironic!!!
The so called Russian oligarchs will continue to be around and flourish. Russia did not bother to chase them. The EU has undertaken the bounty’s role on Russia’s behalf? If the real intention was to catch the oligarchs why not issue an international warrant, arrest, chase and confiscate their dirty money?
If the real intention was to stop such practices, it would have been more fair for Cyprus to be warned that she deviated from the moral business practices that prevail in the EU and the whole world at large. Obviously, the EU supervisory authorities failed to perform their duties.
It may be difficult to conceive that normal people live in this microcosm called Cyprus apart from the oligarchs you refer to. However, I assure you that we are normal human beings with feelings and concerns like everybody else. It is heartbreaking to see so many unhappy people around. Unfortunately, we have no alternative but to adjust our lives in a new unpleasant environment. Sooner or later we shall get over the schock and reactivate our economy.
To put your heart at rest the Russian the oligarchs everybody refers to will be around and use other destinations as a transit. Today is Cyprus, but the eve of somebody else.
I just wish everybody, wherever they may be, not to go through the same sad experience.
[…] Brown Web of Debt Friday, 22 March […]
Using the pretext of how the money was allegedly aquired by ologarchs as justification to conficate it is unprecidented. How does the EU decide the source of the deposits to be illegal, just because they belong to Russians doesn’t make that so. It could be inherited, earned, stolen or won, how do they know. The Russian government doesn’t seem too concerned about the funds owned by the Russian depositors. Why aren’t they trying to claw that back like the US does when they find the unreported Swiss accounts of Americans. Based on Putin’s reaction, the Russians are more concerned about the potential EU haircut to their countrymen. “We think you laundered this money, so we get some of it without due process.” Blink, your digits are now our digits. Sorry, drone strike on your bank account. What a world.
Good article. Wanted to add there’s been a joint report from the Bank of England and the FDIC in 2012 that proposes raiding deposit insurance to bailout banks:
http://www.bankofengland.co.uk/publications/Documents/news/2012/nr156.pdf (section 34)
http://www.zerohedge.com/news/2013-03-21/guest-post-whose-insured-deposits-will-be-plundered-next
Great finds, thanks! The plot thickens . . .
Thanks, Dave! But instead of “raiding deposit insurance,” according to what you provided the banks will be stealing your deposits when they “fail.”
This plus Ellen Brown’s article should be making a home safe and shotgun–since we’re lacking in public banks–look pretty attractive to US and UK “savers.”
Thanks for this! It will be my next article. They’re proposing more than haircuts. They’re proposing taking the whole thing and turning it into “bank capital”! All we get is shares in the (failed) bank.
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Sorry if I have missed something here, but, why haven’t the SHAREHOLDERS of the two banks in Cyprus been asked to inject capital into the banks that they own? When the Global Financial Crisis occurred, the Australian Banks all offered share issues to existing holders, to bolster the banks balance sheets.
The first people who should be called upon are the OWNERS of the banks.
The shares I (reluctantly) purchased are now worth double what I paid for them. I think it’s up to the Cypriot banks owners to lead the rescue.
Reblogged this on Current Events and commented:
You put your money in the bank, Know that all you have is an IOU. It is not your money until you have it back, safely in your own 2 hands… Like everything else, it is yours as long as you are ready, willing and able to defend it.
We need to stand on a common sense rooted into the reality which most of the people take for granted.
Money is different from merchandise. Among the financial instruments, some of them are considered same as cash on hand, while some of them are mere investment.
Bank deposits considered same as cash on hand are: deposit on demand(i.e. money in checking account, checkable savings account,..). We must set a fine definition of money as legal tender and a simple and clear rule for every aspect of dealing with it.
Without this clear rule or guideline, no matter how great ideas for bank reform can not bring the expected results.
Simple unified accounting/auditing rule for money as legal tender – this is the one most fundamental issue.
We have to be successful in establishing common knowledge of:
1) What is money(legal tender)?
2) How much is the total amount of it in the form of paper money, coins, and digital money respectively as of today?
3) How is the money distributed in the economy? How much of it belongs to the government, central bank, private banks, foreigners including IMF?
4) What is the due process of managing the statistical change of the total amount of the money?..,etc.
In order to do this, we must discard the idea of fractional reserve system or bank created money concept. Money created by private banks must be re-booked as money borrowed from the central bank.
Once the transparency is secured, newly created money must belong to the public(treasury, central bank or to the citizen) at no interest.
To deal with the public debt, we need to go back to the time when this debt was originated.
When the government initiated the public debt, its intention was: Instead of collecting more tax or printing new money, the government borrowed money from the public by alluring with high rate of interest to encourage savings for the future or to give investment opportunities to the oligarchs.
The government was not required to have a concrete plan to pay back this debt at the maturity.
It was a mere promise to pay back the fixed amount of cash to the creditors at the maturity.
Most of the public debt was never paid back without issuing new debt to replace it.
We have to see the government bond as future money because it is legally guaranteed that at maturity, the face value of the bond is paid in full in cash.
It is regarded as the most important responsibility of the central bank to keep the value of its currency(control the inflation).
Therefore, it is also important to keep the value of future money – the price stability of treasury bonds.
Let’s assume that US government has to pay back 1 trillion dollars to the creditors during the next fiscal year.
To deal with this, the treasury, together with reorganized national central bank(BoUS) should consider the options between re-issuing treasury bonds and creating new money.
Bond yield rate and central bank fund rate must be balanced.
Also, the central bank should be able to buy and hold outstanding government debt with its own money to keep the bond price in target inflation rate.
[…] Ellen Brown Featured Writer Dandelion Salad webofdebt.com March 21, […]
How do credit unions figure into this. With all depositor becoming “members” or “shareholders”, do they still “own” their own money on deposit? Sorry I haven’t had a chance to google this myself.
They will obviously be safer, but in Cyprus the deal was a haircut for all depositors, in safe banks or unsafe banks; so nothing is really safe — except nationalizing the banks (as Sweden did).
[…] Brown at the excellent “Web of Debt” Blog has revealed startling information about our personal savings accounts. As many readers may know, […]
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[…] justaluckyfool on A Safe and a Shotgun or Publicly-owned Banks? The Battle of Cyprus […]
[…] Zealand has a similar directive, discussed in my last article here, indicating that this isn’t just an emergency measure for troubled Eurozone countries. New […]
[…] Zealand has a similar directive, discussed in my last article here, indicating that this isn’t just an emergency measure for troubled Eurozone countries. New […]