It is well enough that the people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning. — Attributed to Henry Ford
In March 2014, the Bank of England let the cat out of the bag: money is just an IOU, and the banks are rolling in it. So wrote David Graeber in The Guardian the same month, referring to a BOE paper called “Money Creation in the Modern Economy.” The paper stated outright that most common assumptions of how banking works are simply wrong. The result, said Graeber, was to throw the entire theoretical basis for austerity out of the window.
The revelation may have done more than that. The entire basis for maintaining our private extractive banking monopoly may have been thrown out the window. And that could help explain the desperate rush to “fast track” not only the Trans-Pacific Partnership (TPP) and the Trans-Atlantic Trade and Investment Partnership (TTIP), but the Trade in Services Agreement (TiSA). TiSA would nip attempts to implement public banking and other monetary reforms in the bud.
The Banking Game Exposed
The BOE report confirmed what money reformers have been saying for decades: that banks do not act simply as intermediaries, taking in the deposits of “savers” and lending them to borrowers, keeping the spread in interest rates. Rather, banks actually create deposits when they make loans. The BOE report said that private banks now create 97 percent of the British money supply. The US money supply is created in the same way.
Graeber underscored the dramatic implications:
. . . [M]oney is really just an IOU. The role of the central bank is to preside over a legal order that effectively grants banks the exclusive right to create IOUs of a certain kind, ones that the government will recognise as legal tender by its willingness to accept them in payment of taxes. There’s really no limit on how much banks could create, provided they can find someone willing to borrow it.
Politically, said Graeber, revealing these facts is taking an enormous risk:
Just consider what might happen if mortgage holders realised the money the bank lent them is not, really, the life savings of some thrifty pensioner, but something the bank just whisked into existence through its possession of a magic wand which we, the public, handed over to it.
If money is just an IOU, why are we delivering the exclusive power to create it to an unelected, unaccountable, non-transparent private banking monopoly? Why are we buying into the notion that the government is broke – that it must sell off public assets and slash public services in order to pay off its debts? The government could pay its debts in the same way private banks pay them, simply with accounting entries on its books. What will happen when a critical mass of the populace realizes that we’ve been vassals of a parasitic banking system based on a fraud – that we the people could be creating money as credit ourselves, through publicly-owned banks that returned the profits to the people?
Henry Ford predicted that a monetary revolution would follow. There might even be a move to nationalize the whole banking system and turn it into a public utility.
It is not hard to predict that the international bankers and related big-money interests, anticipating this move, would counter with legislation that locked the current system in place, so that there was no way to return money and banking to the service of the people – even if the current private model ended in disaster, as many pundits also predict.
And that is precisely the effect of the Trade in Services Agreement (TiSA), which was slipped into the “fast track” legislation now before Congress. It is also the effect of the bail-in policies currently being railroaded into law in the Eurozone, and of the suspicious “war on cash” seen globally; but those developments will be the subject of another article.
TiSA Exposed
On June 3, 2015, WikiLeaks released 17 key documents related to TiSA, which is considered perhaps the most important of the three deals being negotiated for “fast track” trade authority. The documents were supposed to remain classified for five years after being signed, displaying a level of secrecy that outstrips even the TPP’s four-year classification.
TiSA involves 51 countries, including every advanced economy except the BRICS (Brazil, Russia, India, China, and South Africa). The deal would liberalize global trade in services covering close to 80% of the US economy, including financial services, healthcare, education, engineering, telecommunications, and many more. It would restrict how governments can manage their public laws, and it could dismantle and privatize state-owned enterprises, turning those services over to the private sector.
Recall the secret plan devised by Wall Street and U.S. Treasury officials in the 1990s to open banking to the lucrative derivatives business. To pull this off required the relaxation of banking regulations not just in the US but globally, so that money would not flee to nations with safer banking laws. The vehicle used was the Financial Services Agreement concluded under the auspices of the World Trade Organization’s General Agreement on Trade in Services (GATS). The plan worked, and most countries were roped into this “liberalization” of their banking rules. The upshot was that the 2008 credit crisis took down not just the US economy but economies globally.
TiSA picks up where the Financial Services Agreement left off, opening yet more doors for private banks and other commercial service industries, and slamming doors on governments that might consider opening their private banking sectors to public ownership.
Blocking the Trend Toward “Remunicipalization”
In a report from Public Services International called “TISA versus Public Services: The Trade in Services Agreement and the Corporate Agenda,” Scott Sinclair and Hadrian Mertins-Kirkwood note that the already formidable challenges to safeguarding public services under GATS will be greatly exasperated by TiSA, which blocks the emerging trend to return privatized services to the public sector. Communities worldwide are reevaluating the privatization approach and “re-municipalizing” these services, following negative experiences with profit-driven models. These reversals typically occur at the municipal level, but they can also occur at the national level.
One cited example is water remunicipalization in Argentina, Canada, France, Tanzania and Malaysia, where an increasing frustration with broken promises, service cutoffs to the poor, and a lack of integrated planning by private water companies led to a public takeover of the service.
Another example is the remunicipalization of electrical services in Germany. Hundreds of German municipalities have remunicipalized private electricity providers or have created new public energy utilities, following dissatisfaction with private providers’ inflated prices and poor record in shifting to renewable energy. Remunicipalization has brought electricity prices down. Other sectors involved in remunicipalization projects include public transit, waste management, and housing.
Sinclair and Mertins-Kirkwood observe:
The TISA would limit and may even prohibit remunicipalization because it would prevent governments from creating or reestablishing public monopolies or similarly “uncompetitive” forms of service delivery. . . .
Like GATS Article XVI, the TISA would prohibit public monopolies and exclusive service suppliers in fully committed sectors, even on a regional or local level. Of particular concern for remunicipalization projects are the proposed “standstill” and “ratchet” provisions in TISA. The standstill clause would lock in current levels of services liberalization in each country, effectively banning any moves from a market-based to a state-based provision of public services. This clause . . . would prohibit the creation of public monopolies in sectors that are currently open to private sector competition.
Similarly, the ratchet clause would automatically lock in any future actions taken to liberalize services in a given country. . . . [I]f a government did decide to privatize a public service, that government would be unable to return to a public model at a later date.
That means we can forget about turning banking and credit services into public utilities. TiSA is a one-way street. Industries once privatized remain privatized.
The disturbing revelations concerning TiSA are yet another reason to try to block these secretive trade agreements. For more information and to get involved, visit:
Public Citizen’s Global Trade Watch
_________________
Ellen Brown is an attorney, founder of the Public Banking Institute, and author of twelve books including the best-selling Web of Debt. Her latest book, The Public Bank Solution, explores successful public banking models historically and globally. Her 300+ blog articles are at EllenBrown.com.
Filed under: Ellen Brown Articles/Commentary | Tagged: fast-track, monetary reform, public banking, TISA, TPP |
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A trade agreement that eliminates tariffs on imports while the nation has continuing negative trade balances will necessitate the continuing use of deficit spending to counter the deflationary loss of money from circulation. Buying imports drains money out of circulation. Deficit spending involves creation of new money by the government as it ‘borrows’ money from private banks as per law and spends it into circulation. This has been in effect since 1917.
In fact deficit spending will be needed as long as there are continuing drains of money from circulation to imports, M, to taxes, T, to saving, S, and to repayment of bank loans, P.
The theory of monetary flows requires continuing sources of inflows into circulation to counter the losses from these drains. Major inflows are money from exports, E, government spending G = G’ + D (where G’ is government spending balanced against tax revenues T and D is the deficit spending portion of government spending), I is investment into the business and manufacturing sector, and L is bank loans created out of thin air by the banks.
A basic equation for monetary flows borrowed from hydrology which concerns water flows is
IF – OF = ΔC
where IF is the net quantity of inflows of money and OF the net quantity of outflows from circulation and Δ means ‘change of’ and C is the quantity of money currently in circulation. Inflows minus outflows equals the change in quantity of money in circulation.
If ΔC is positive, the quantity of money in circulation is growing. If ΔC is negative the quantity of money in circulation is shrinking. If ΔC = 0, then there is no change in quantity of money in circulation.
To grow an economy you need to run ΔC as positive until C = a quantity C’ where there is full production and employment at stable prices and wages. Running a positive ΔC after this only introduces excess money into circulation which cannot increase production or employment, since it is at its maximum. Excess money causes
inflation as those with extra money can bid up prices to make their purchases of goods that cannot increase in number because production is at a maximum.
During inflations you need to run negative ΔC’s to reduce the money in circulation.
We can expand our formula above as
[E + (G’ + D) + I + L] – [M + T + S + P] = ΔC
The fungibility of money, like the fungibility of water, means we can substitute and exchange like quantities of money without effecting the amount.
On the inflow side government spending is currently the most flexible option for increasing or decreasing inflow. If tariffs are not allowed then M can only be modulated by voluntary withholding of purchases of imports. (The pending law to remove country-of-origin labels from goods would remove even that option).
We can see by examining the above expanded equation that if exports E are less than imports M, with other things being fixed and overall outflows are greater than inflows, then ΔC is negative. By increasing deficit spending D until the net inflows are greater than the net outflows, we may counter the deflationary effect of buying imports. Deficit spending should produce beneficial results, as would be the case with infrastructure spending.
While on the surface deficit spending seems to create an insurmountable debt, it does not do so in reality because the Treasury just issues new securities with new maturity dates farther in the future to swap for mature securities held by the banks. The principal is never paid back on deficit spending. Banks accept this roll-over of the ‘debt’ because they created the principal out of thin air in the first place, and the interest money they gain at the swap is what they really want since it will be debt-free. The Treasury gets interest money in the same way as it gets deficit-spending money, by borrowing from the banks. And the principal it got and spent becomes effectively debt-free.
There is more to this item on the national debt from deficit spending at stanfrommarietta.hubpages.com, where we show that the Fed has been buying up the national debt for deficit spending with Quantitative Easing, so no need for platinum coins. And QE is not inflationary because the Fed’s money entered into the reserves of the banks cancels the govt’s debt to the banks on the securities, making the Fed’s money effectively vanish into thin air, leaving the original borrowed principal obtained from the banks completely debt free.
Dear Stanislaus,
I applaud your knowledge and insight. We are engaged in the fundamental values produced by socioeconomic systems. Every economic system generates its specific values. For example, empires only exist by war and exploitation; dehumanized, perverse values. The bank is among transnational corporations. Transnational corporations are determined to expropriate all public and private property, which impetus is blind and mechanical, stemming from systemic responses to its internal directives for expansion. That “organism,” which is what organizations resemble, is parasitic. Its host is humanity.
There is no possibility for any economic system to generate humane values unless it is structured and purposed for those ends. The challenge we must meet is the creation of an entirely different civilization. http://decentralizationblog.wordpress.com
[…] Fast-track Hands the Money Monopoly to Private Banks — Permanently […]
Dear Stanislaus,
I applaud your knowledge and insight. We are engaged in the fundamental values produced by socioeconomic systems. Every economic system generates its specific values. For example, empires only exist by war and exploitation; dehumanized, perverse values.
The bank is among transnational corporations. Transnational corporations are resolved to expropriate all public and private property, which impetus is blind and mechanical, stemming from systemic responses to its internal directives for expansion. That “organism,” which is what organizations resemble, is parasitic. Its host is humanity.
There is no possibility for any economic system to generate humane values unless it is structured and purposed for those ends. More so, a production-based economy must be developed to replace the consumer-based economy. We must meet the challenge of creating an entirely different, autonomous civilization. http://decentralizationblog.wordpress.com
Agreed, Reed …. but what if that referred to structure is incomplete ? Our overall currency system looks to be greatly flawed. What if the flaw lies in its incomplete status ? Have you considered this ?
Debt can be like a yin looking for its yang in a desire to form a symbiotic relationship of circulating debts and assets, together.
It is light that comes out of darkness in the process of creation.
Dear Jeff,
Thank you for your kind response.
The American Constitution cannot defend us from the encroachment of private banks, because it allows the government to barrow from them. The currency system is not flawed; rather, it is designed to rob the people of everything. I don’t know what you mean by incomplete status. Nonetheless, the banking system is a private transnational corporation, purposed not only to expropriate all public and private property, and to over tax small businesses into oblivion, but, also, to eliminate what is left of our constitutional protections, freedom of speech and freedom of assembly, et cetera. The globalists, who own the monetized organization and the transnational corporations, are fighting to establish ‘international law,’ that serves their impetus for universal totalitarianism. Overpopulation is used not only to perpetually destabilize the third world making it easy to harvest, but to invade developed countries with refugees so the public services can be destroyed so they can be replaced with private services.
Actually no, interest is generated from the hyper harvest of finite, natural resources, which is then converted into revenue in the consumer-based market; economically needless, wasteful and destructive of our biosphere.
The people cannot believe that the conventional government can defend them from the onslaught of globalist totalitarians that cause poverty, war and mayhem, and will reinstate overt slavery, because the globalists in their covert positions of control are necrophilic, magalomanic sociopaths.
Our best defense is our self-organization and our self-management of what will be the peoples’ sovereign, production-based economy. http://decentralizationblog.wordpress.com
You be well!
Yours, Reed
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Reblogged this on Fazl's Blah and commented:
You may have heard of the Trans-Pacific Partnership (TPP) or the Trans-Atlantic Trade and Investment Partnership (TTIP), but you probably never heard of the Trade in Services Agreement (TiSA), as it has been kept more secret. Probably because it’s even more dangerous to the average person…
[…] Faz on Fast-track Hands the Money Monopoly to Private Banks — Permanently […]
[…] The Trade in Services Agreement adds additional barriers to proposed legislation. TiSA involves 51 countries, including every advanced economy except the BRICS (Brazil, Russia, India, China, and South Africa). The deal would liberalize global trade in services covering close to 80% of the US economy, including financial services, healthcare, education, engineering, telecommunications, and many more. It would restrict how governments can manage their public laws, and it could dismantle and privatize state-owned enterprises, turning those services over to the private sector. It would also block the emerging trend to return privatized services to the public sector, by limiting or prohibiting governments from creating or reestablishing public utilities and other “uncompetitive†forms of service delivery. […]
[…] The Trade in Services Agreement adds additional barriers to proposed legislation. TiSA involves 51 countries, including every advanced economy except the BRICS (Brazil, Russia, India, China, and South Africa). The deal would liberalize global trade in services covering close to 80% of the US economy, including financial services, healthcare, education, engineering, telecommunications, and many more. It would restrict how governments can manage their public laws, and it could dismantle and privatize state-owned enterprises, turning those services over to the private sector. It would also block the emerging trend to return privatized services to the public sector, by limiting or prohibiting governments from creating or reestablishing public utilities and other “uncompetitive” forms of service delivery. […]
[…] The Trade in Services Agreement adds additional barriers to proposed legislation. TiSA involves 51 countries, including every advanced economy except the BRICS (Brazil, Russia, India, China, and South Africa). The deal would liberalize global trade in services covering close to 80% of the US economy, including financial services, healthcare, education, engineering, telecommunications, and many more. It would restrict how governments can manage their public laws, and it could dismantle and privatize state-owned enterprises, turning those services over to the private sector. It would also block the emerging trend to return privatized services to the public sector, by limiting or prohibiting governments from creating or reestablishing public utilities and other “uncompetitive” forms of service delivery. […]
[…] The Trade in Services Agreement adds additional barriers to proposed legislation. TiSA involves 51 countries, including every advanced economy except the BRICS (Brazil, Russia, India, China, and South Africa). The deal would liberalize global trade in services covering close to 80% of the US economy, including financial services, healthcare, education, engineering, telecommunications, and many more. It would restrict how governments can manage their public laws, and it could dismantle and privatize state-owned enterprises, turning those services over to the private sector. It would also block the emerging trend to return privatized services to the public sector, by limiting or prohibiting governments from creating or reestablishing public utilities and other “uncompetitive” forms of service delivery. […]
[…] The Trade in Services Agreement adds additional barriers to proposed legislation. TiSA involves 51 countries, including every advanced economy except the BRICS (Brazil, Russia, India, China, and South Africa). The deal would liberalize global trade in services covering close to 80% of the US economy, including financial services, healthcare, education, engineering, telecommunications, and many more. It would restrict how governments can manage their public laws, and it could dismantle and privatize state-owned enterprises, turning those services over to the private sector. It would also block the emerging trend to return privatized services to the public sector, by limiting or prohibiting governments from creating or reestablishing public utilities and other “uncompetitive” forms of service delivery. […]
[…] The Trade in Services Agreement adds additional barriers to proposed legislation. TiSA involves 51 countries, including every advanced economy except the BRICS (Brazil, Russia, India, China, and South Africa). The deal would liberalize global trade in services covering close to 80% of the US economy, including financial services, healthcare, education, engineering, telecommunications, and many more. It would restrict how governments can manage their public laws, and it could dismantle and privatize state-owned enterprises, turning those services over to the private sector. It would also block the emerging trend to return privatized services to the public sector, by limiting or prohibiting governments from creating or reestablishing public utilities and other “uncompetitive” forms of service delivery. […]
[…] The Trade in Services Agreement adds additional barriers to proposed legislation. TiSA involves 51 countries, including every advanced economy except the BRICS (Brazil, Russia, India, China, and South Africa). The deal would liberalize global trade in services covering close to 80% of the US economy, including financial services, healthcare, education, engineering, telecommunications, and many more. It would restrict how governments can manage their public laws, and it could dismantle and privatize state-owned enterprises, turning those services over to the private sector. It would also block the emerging trend to return privatized services to the public sector, by limiting or prohibiting governments from creating or reestablishing public utilities and other “uncompetitive” forms of service delivery. […]
[…] Truthout.org Monday, 15 June 2015 By Ellen Brown, The Web of Debt Blog | […]
[…] Trade in Services Agreement adds additional barriers <https://ellenbrown.com/2015/06/11/fast-tracking-tisa-stealth-block-to-monetary-reform/> to proposed legislation. TiSA involves 51 countries, including every advanced economy except […]
One of the better items i have read in the week.
Graeber’s understanding of money and banking is quite naive. What concerns him is fiat money which is just created out of thin air by banks and the central government (Fed + Treasury + banks), backed by nothing.
While at first this seems counterintuitive, it shouldn’t be once you realize that money is not the physical medium it is recorded in like bills, coins, electronic bits sent through wires and computers. Remember when you played Monopoly with paper money provided by the game? The money was needed to play the game because it was used in trades of money for properties. Without it, there could be no game. But the money itself had next to no value. The value was given by the quantities represented printed on it. Those quantities had to be matched in our experience to many things and services to represent their relative value.
Well buying and selling goods and services and producing them takes money too. We learn to judge how much money to spend on various goods and services. We learn to keep track of our money and the relative amounts of money needed to buy various things. Money has value to the extent that we can perceive the relative value of things and assign quantitative values to them. Money comes in units of account like dollars and pounds and yen and pesos. It does not need specific commodities to back it to give it value. The things we buy and sell create the values as we use the money.
A healthy economy has enough money in it to buy and sell all of the goods produced at full production and full employment at stable prices and wages. Too much money in circulation beyond the optimal level and there will be inflation, with prices constantly rising with diminishing value for each unit of money. Industry cannot produce anymore because it is at full capacity, so there is not enough goods to absorb the additional money, nor people to absorb the additional money in wages, so wages rise without benefit. Too little money and there will be deflation, involving lowering prices and wages, rising unemployment as goods cannot be sold because there is not enough money to buy them with.
Commodities are limited in supply and do not grow always as fast as our populations or our abilities to produce goods and services, and thus can be deflationary by tending to provide less and less money to the economy when it needs it.
Commodity backed money would limit economic growth when our population is growing and our economy is growing to keep up.
Besides public banking would still use fiat money anyway. While money created by banks creates debt, deficit spending by the federal government generally involves the creation of new money without debt.
The important things to consider is that banks lend prudently and not willy-nilly, and have the freedom to create money as it is needed to maintain a constant level of full production and employment at stable prices and wages.
What is scary about TISA is that it would enshrine in treaties limits on the powers our Constitution gives us to create money and set its value, to control imports (which take money out of our economy), to fight inflations and deflations, and make changes democratically in our banking system as we the people see the need for them. Remember that Treaties trump the Constitution and cannot be changed without sometimes going to war against other countries who do not want us to make the changes.
We should strive to keep TISA from controlling us. And I say this as a liberal, but one who wants freedom to make changes as needed by popular vote.
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[…] Fast-Track Hands the Money Monopoly to Private Banks — Permanently by Ellen Brown Posted June 17, 2015 […]
[…] that would thoroughly undermine the role of democratic decision making across the world. Ellen has some brand new analysis too, describing how fast-tracking trade agreements is a predictable response to growing awareness of […]