I’m off to Ireland tomorrow to participate in the Kilkenny Festival and to help with the movement there for a network of publicly-owned banks. The Public Banking Forum of Ireland sent a quite promising report on developments that I thought I would post in the meantime, titled Exploring the Sparkassen Model of Local Savings Banks in Ireland with the Savings Bank Foundation for International Cooperation (SBFIC). It can be read here:
Many authorities have said it: banks do not lend their deposits. They create the money they lend on their books.
Robert B. Anderson, Treasury Secretary under Eisenhower, said it in 1959:
When a bank makes a loan, it simply adds to the borrower’s deposit account in the bank by the amount of the loan. The money is not taken from anyone else’s deposits; it was not previously paid in to the bank by anyone. It’s new money, created by the bank for the use of the borrower.
The Bank of England said it in the spring of 2014, writing in its quarterly bulletin:
The reality of how money is created today differs from the description found in some economics textbooks: Rather than banks receiving deposits when households save and then lending them out, bank lending creates deposits.
. . . Whenever a bank makes a loan, it simultaneously creates a matching deposit in the borrower’s bank account, thereby creating new money.
All of which leaves us to wonder: If banks do not lend their depositors’ money, why are they always scrambling to get it? Banks advertise to attract depositors, and they pay interest on the funds. What good are our deposits to the bank? Continue reading →
The Pennsylvania Project hosted the East Coast edition of the Public Banking Institute national conference in Philadelphia last Saturday. Thanks Pennsylvania team!
I thought I would post my power point presentation (the sixth I’ve done since July), since it has a more complete discussion of the pressing issue always on the minds of elected officials: “Where will we find the money to capitalize our new public bank?” The relevant slides are at 21-26, expanding on the plan suggested in my article of October 12th titled Building an Ark: How to Protect Public Revenues from the Next Meltdown. The power point is here:
The Up and Down Theater did an original comedy routine for the Santa Fe Public Banking Conference on September 28th, which was added late to the post below. It’s here — very clever!!
Concerns are growing that we are heading for another banking crisis, one that could be far worse than in 2008. But this time, there will be no government bailouts. Instead, per the Dodd-Frank Act, bankrupt banks will be confiscating (or “bailing in”) their customers’ deposits.
That includes local government deposits. The fact that public funds are secured with collateral may not protect them, as explained earlier here. Derivative claims now get paid first in a bank bankruptcy; and derivative losses could be huge, wiping out the collateral for other claims.
Trading in derivatives is basically just a form of legalized gambling, and the “too big to fail” banks have transformed Wall Street into the largest casino in the history of the planet. When this derivatives bubble bursts (and as surely as I am writing this it will), the pain that it will cause the global economy will be greater than words can describe.
In the worlds of economic theory and “acceptable” economic discussion, the terms “Socialism” and “Marxism” acquired an anti-patriotic stain during the 20th Century, despite the significant social economic progress realized by early American populist movements. Noted economics professor Dr. Richard Wolff, who has taught at many esteemed universities, has been overlooked for decades because of his Marxist/Socialist specialties; but suddenly he is out and about making the rounds on major media outlets talking about the failures of Capitalism, how they helped bring about the collapse of the American middle class and set a stage for continuing economic decline. Ellen talks with Dr. Wolff about a way forward that marries American values and sensibilities with the goals of these maligned economic theories.
The Santa Fe Public Banking Conference last weekend was a great success. The videotaped event can be seen here.
Our guest on “It’s Our Money” on PRN next Wednesday, October 8th, will be Richard Wolff, the keynote speaker in Santa Fe. Listen at noon PST/3 pm EST or on archive here.
The Praxis Peace Economics of Sustainability Conference is coming up next week in San Francisco. I’ll be speaking at 10:30 am on Wednesday the 8th. Details here.
The Philadelphia Public Banking conference is on October 18. Details here.
Would love to see you at one of these events! Ellen
The broad-based economic destruction brought on by extractive private banking has gotten lots of people thinking hard about alternatives. The Scots came close to starting on a new path in recent weeks that could still materialize with some re-focusing on its banking options, while the possible recurrence of big bank failures has many Americans actively looking for alternatives. In this edition of “It’s Our Money” Ellen holds a
foundational conversation with globally-recognized economic theorist Christopher Cook about how a new world of monetary management could be realized for the benefit of all. Meanwhile, citizens are rallying their national public bank initiatives at the upcoming “Banking on New Mexico” symposium. Co-host Walt McRee speaks with project founder, author and diplomat Craig Barnes about what’s brewing in Santa Fe.
I’ll be speaking at the Philadelphia and Santa Fe conferences described in the press release below, as well as at the Economics of Sustainability conference in San Francisco Oct 6-9 and the Kilkenomics Festival in Kilkenny, Ireland, November 6-9. Should be fun! Ellen
Public bank advocates gather in Philadelphia: Seek to boost local banks over Wall Street
September 15, 2014 (Philadelphia) — Public bank advocates from the eastern U.S. will hold a one day conference in Philadelphia on October 18, to advance efforts to form public banks in U.S. cities and states.
A similar conference is being held for the western U.S. in Santa Fe, NM on September 27. Santa Fe recently became the first U.S. city to take formal steps to establish its own bank. Continue reading →
[T]he People of Scotland have an opportunity to extricate themselves from the socio-psychopathic global corporatists and the temple of outrageous and excessive abject materialism. However, it is not going to be an easy ride . . . .
If Alex Salmond and the SNP [Scottish National Party] are serious about keeping the Pound Stirling as the Currency of Scotland, there will be no independence. Likewise if Scotland embraces the Euro, Scotland will rapidly become a vassel state of the Euro-Federalists, who will asset strip the nation in the same way that, Greece, Ireland, Portugal and Spain have been stripped of their entire national wealth and much of their national identity.
In an inscrutable move that has alarmed state treasurers, the Federal Reserve, along with the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency, just changed the liquidity requirements for the nation’s largest banks. Municipal bonds, long considered safe liquid investments, have been eliminated from the list of high-quality liquid collateral. assets (HQLA). That means banks that are the largest holders of munis are liable to start dumping them in favor of the Treasuries and corporate bonds that do satisfy the requirement. Continue reading →
You can always count on Americans to do the right thing, after they’ve tried everything else. —Winston Churchill
When an article appears in Foreign Affairs, the mouthpiece of the policy-setting Council on Foreign Relations, recommending that the Federal Reserve do a money drop directly on the 99%, you know the central bank must be down to its last bullet.
Argentina is playing hardball with the vulture funds, which have been trying to force it into an involuntary bankruptcy. The vultures are demanding what amounts to a 600% return on bonds bought for pennies on the dollar, defeating a 2005 settlement in which 92% of creditors agreed to accept a 70% haircut on their bonds. A US court has backed the vulture funds; but last week, Argentina sidestepped its jurisdiction by transferring the trustee for payment from Bank of New York Mellon to its own central bank. That play, if approved by the Argentine Congress, will allow the country to continue making payments under its 2005 settlement, avoiding default on the majority of its bonds.
Argentina is already foreclosed from international capital markets, so it doesn’t have much to lose by thwarting the US court system. Similar bold moves by Ecuador and Iceland have left those countries in substantially better shape than Greece, which went along with the agendas of the international financiers. Continue reading →
Argentina has now taken the US to The Hague for blocking the country’s 2005 settlement with the bulk of its creditors. The issue underscores the need for an international mechanism for nations to go bankrupt. Better yet would be a sustainable global monetary scheme that avoids the need for sovereign bankruptcy.
Argentina was the richest country in Latin America before decades of neoliberal and IMF-imposed economic policies drowned it in debt. A severe crisis in 2001 plunged it into the largest sovereign debt default in history. In 2005, it renegotiated its debt with most of its creditors at a 70% “haircut.” But the opportunist “vulture funds,” which had bought Argentine debt at distressed prices, held out for 100 cents on the dollar. Continue reading →
One thing to be said for the women now heading the Federal Reserve and the IMF: compared to some of their predecessors, they are refreshingly honest. The Wall Street Journal reported on July 2nd:
Two of the world’s most powerful women of finance sat down for a lengthy discussion Wednesday on the future of monetary policy in a post-crisis world: U.S. Federal Reserve Chairwoman Janet Yellen and International Monetary Fund Managing Director Christine Lagarde. Before a veritable who’s-who in international economics packing the IMF’s largest conference hall, the two covered all the hottest topics in debate among the world’s central bankers, financiers and economists.
Among those hot topics was the runaway shadow banking system, defined by Investopedia as “The financial intermediaries involved in facilitating the creation of credit across the global financial system, but whose members are not subject to regulatory oversight. The shadow banking system also refers to unregulated activities by regulated institutions.” Examples given include hedge funds, derivatives and credit default swaps. Continue reading →
For years, homeowners have been battling Wall Street in an attempt to recover some portion of their massive losses from the housing Ponzi scheme. But progress has been slow, as they have been outgunned and out-spent by the banking titans.
In June, however, the banks may have met their match, as some equally powerful titans strode onto the stage. Investors led by BlackRock, the world’s largest asset manager, and PIMCO, the world’s largest bond-fund manager, have sued some of the world’s largest banks for breach of fiduciary duty as trustees of their investment funds. The investors are seeking damages for losses surpassing $250 billion. That is the equivalent of one million homeowners with $250,000 in damages suing at one time. Continue reading →
Mortgage debt overhang from the housing bust has meant lack of middle-class spending power and consumer demand, preventing the economy from growing. The problem might be fixed by a new approach from the Fed. But if the Fed won’t act, counties will, as seen in the latest developments on eminent domain and litigation over MERS.
Former Assistant Treasury Secretary Paul Craig Roberts wrote on June 25th that real US GDP growth for the first quarter of 2014 was a negative 2.9%, off by 5.5% from the positive 2.6% predicted by economists. If the second quarter also shows a decline, the US will officially be in recession. That means not only fiscal policy (government deficit spending) but monetary policy (unprecedented quantitative easing) will have failed. The Federal Reserve is out of bullets.
Or is it? Perhaps it is just aiming at the wrong target. Continue reading →
Ann Pettifor has written an excellent rebuttal to the full reserve banking solution proposed by Martin Wolf and Positive Money, who are in most ways her allies. Her entree is the Bank of England’s recent acknowledgment that banks create the money they lend. She writes:
Because I am a vocal critic of the private finance sector, many assume that I would agree with Wolf and Positive Money on nationalising money creation. Not so. I have no objection to the nationalisation of banks. But nationalising banks is a different proposition from nationalising (and centralising) money creation in the hands of a small ‘independent committee’.
Finance is the new form of warfare – without the expense of a military overhead and an occupation against unwilling hosts. It is a competition in credit creation to buy foreign resources, real estate, public and privatized infrastructure, bonds and corporate stock ownership. Who needs an army when you can obtain the usual objective (monetary wealth and asset appropriation) simply by financial means? — Dr. Michael Hudson, Counterpunch, October 2010
When the US Federal Reserve bought an 80% stake in American International Group (AIG) in September 2008, the unprecedented $85 billion outlay was justified as necessary to bail out the world’s largest insurance company. Today, however, central banks are on a global corporate buying spree not to bail out bankrupt corporations but simply as an investment, to compensate for the loss of bond income due to record-low interest rates. Indeed, central banks have become some of the world’s largest stock investors.
Central banks have the power to create national currencies with accounting entries, and they are traditionally very secretive. We are not allowed to peer into their books. It took a major lawsuit by Reuters and a congressional investigation to get the Fed to reveal the $16-plus trillion in loans it made to bail out giant banks and corporations after 2008.
What is to stop a foreign bank from simply printing its own currency and trading it on the currency market for dollars, to be invested in the US stock market or US real estate market? What is to stop central banks from printing up money competitively, in a mad rush to own the world’s largest companies? Continue reading →
1176. 10-22-23, 10:45 am, speaker, The Weston A. Price Foundation’s 23rd Annual Conference, Kansas City, Missouri.
1175. 10-19-23, The Final Banking Solution, with Simon Thorpe and Colin Maxwell on The Vinny Eastwood Show, YouTube, Australia.
1174. 8-22-23, 10 am, Claremont, CA, Cobb Institute Center for Process, power point presentation: “Restoring Prosperity with a Financial Transaction Tax and Publicly Owned Banks.“ Zoom link is here.
1173. 6-15-23, NIB Zoom town hall, National Infrastructure Bank Coalition.
1172. 5-22-23: Radio interview, 9:30 am est, The Power Hour.
1171. 5-17-23: TV interview, CGTN America, Global Business: “Banking industry in hot seat during Congressional hearings.”
1170. Apr 27, National Infrastructure Bank Coalition webinar, “How to Build the Nation: National Banking vs. Privatization”
1160. 3-16-23, 5 pm pst, National Infrastructure Bank Coalition Town Hall, “Restructuring the American Workforce in a Time of Financial and Economic Turbulence.”
1156. 2-25-23, 15:00-17:00 GMT (Ireland), Think Local Conference 2023, Panel 3 – Money & Economics – New Paradigms
1155. 2-16-23, 5 pm pst, National Infrastructure Bank Coalition, “Washington, Hamilton, Lincoln: National Banking and the Economic Demands of Today’s Crisis,” NIB Zoom Town Hall
1130. Mar. 31, Power Point presentation on youtube, Universidad Nacional de Colombia, Invita: Debates Ensayos de Economia Coordina: Guillermo Maya — Profesor adscrito al Departamento de Economia
1115. Feb. 23, 7 pm est, Eco Justice Collaborative Webinar, “Why the Crises We Face Make Financial Reform Essential,” Religious Society of Friends, Philadelphia
1114. Feb. 17, 11 am, Steff Overbeck, Pod of Gold radio interview
1113. Feb. 18, radio interview, Phil Mikan, wlis1420
1112. Feb. 16, National Infrastructure Bank Coalition Presidents’ Day Webinar 2021 – “National Infrastructure Bank: Standing on the Shoulders of Giants”
1111. Feb. 6, radio interview, Sylvia Richardson, Latin Waves
1097. Oct. 26, Phil Mikan Show, WLIS/WMRD Radio, Conn., pre-recorded for Friday at 10 est or Saturday at 9-11 est
1096. Oct. 22, 1:15 pm EST, power point presentation, “Public Banking, Modern Monetary Theory (MMT) and the National Debt,” Carolina Hills Community, Chapel Hill, NC
1088. July 15, 6 pm EST, Connecticut Public Banking Town Hall, livestream here
1087. July 13, Webinar, Center for Global Justice, “Why Public Banking Needs to Be Run as a Public Utility,” San Miguel de Allende, Mexico, 11am-1pm PDT
1086. Interview with Susan Johnson on public banking for Connecticut, WILI’s Let’s Talk About It Show, 5 pm EST
1044. Nov. 12, interview in New York with Max Keiser, Keiser Report, “Repo Markets and UBI”
1043. Nov. 6, 5 pm EST, The CivicLab Show with Tom Tresser, live@www.facebook.com/tomtree
1042. Oct. 23, 11:30 am-1:30 pm, luncheon presentation on public banking, League of Women Voters of San Diego, Tom Ham’s Lighthouse Restaurant, 2150 Harbor Island Dr., San Diego
1041. Oct. 22, Presentation on public banking, DSA San Diego, Unite Here Union Hall, 2436 Market Street, San Diego, 6-7:30 pm.
1006. Oct. 22, speaker with Gar Alperovitz at Praxis Peace Institute, “Changing the System: California’s Strategic Role in National Strategic Change,” Sonoma, CA, 276 E. Napa St, Sonoma. 7:00 pm.
1005. Oct 19-21, Bioneers Conference, panelist on Oct 20, 2:45 pm, Marin Center, San Rafael, CA.997.
999. Oct. 7, panel, Americans for Democratic Action of Southern California Annual Garden Party, 2-5:30 pm, Santa Monica, CA
998. Oct. 4, 7:30 pm, Living Economy Salon, panelist, Public Bank LA: “Solutions for Social and Environmental Justice”, 3110 Main St., Annex Building C 2nd Floor, Santa Monica, CA 90405
997. Oct. 3, interview on Unmediated, podcast of Reader Magazine, episode title: Making Money The Public’s Slave (The Public Banking Solution), 10 a.m. PT
WEB OF DEBT BLOG 
Why Do Banks Want Our Deposits? Hint: It’s Not to Make Loans.
Many authorities have said it: banks do not lend their deposits. They create the money they lend on their books.
Robert B. Anderson, Treasury Secretary under Eisenhower, said it in 1959:
The Bank of England said it in the spring of 2014, writing in its quarterly bulletin:
All of which leaves us to wonder: If banks do not lend their depositors’ money, why are they always scrambling to get it? Banks advertise to attract depositors, and they pay interest on the funds. What good are our deposits to the bank? Continue reading →
Filed under: Ellen Brown Articles/Commentary | Tagged: Bank of North Dakota, Basel III, public banking | 35 Comments »