Today was the last day to submit entries to the President’s Open Government Brainstorm page. I submitted the one below. The website has a place to vote (“Looks Promising!” “Not So Sure.”) If you feel like voting, the link is here —


The Constitution states, “Congress shall have the power to coin money and regulate the value thereof.” This power has been abdicated to private bankers. Today, 99.99% of our money is created by private banks when they make loans. This includes the Federal Reserve, a private banking corporation, which orders Federal Reserve Notes to be printed, and then lends them to the U.S. government. Only coins are actually created by the government itself. Coins compose only about 1-10,000th of the M3 money supply, and Federal Reserve Notes compose about 3% of it. All of the rest is created by banks as loans, something they do by simply writing numbers into accounts.

Congress could take back the power to create the national money supply by:
(a) Nationalizing the Federal Reserve.
(b) Reviving the Reconstruction Finance Corporation, a government-owned lending facility used by Roosevelt to fund the New Deal. Rather than merely recycling borrowed money as Roosevelt did, however, the RFC could actually create credit on its books, in the same way that banks do it today, by fanning its capital base into many times that sum in loans. Assuming $300 billion is left of the TARP money approved by Congress last fall, this money could be deposited into the RFC and leveraged into $3 trillion in loans. That’s based on a 10% reserve requirement. If the money were counted as capital, at an 8% capital requirement it could be leveraged into 12.5 times the original sum. That would be enough to fund not only President Obama’s stimulus package but many other programs that are desperately short of funding now.

Many references are available which will be furnished on request. See generally http://www.webofdebt.com/articles.

Community Currency Goes Global

This was posted by Robert Taft of Upton, Wyoming on the “Join in the Debate” page, but it adds an interesting ferment to the debate and bears repeating here.  Noting that Ithaca Hours (local community currency) are  expanding as far as China, he suggests that both interest AND gold act as a break on trade, and that neither is necessary for a freely circulating medium of exchange.  This is what I’ve been trying to say about a truly “national” bank — if the national community owned the bank rather private bankers, the bank could be a profit-free, interest-free venture that simply provided ready credit to the people.  Controls would have to be imposed (no interest-free credit for speculation, etc.), but basically we would just be monetizing our own promises to repay.  That is, in fact, the credit system we have now, except that parasitic privateers get to draw a perpetual tribute off the top.  Robert Taft writes:

According to the Ithacahours website http://www.ithacahours.com their debt-free money is going global. Great slap at the central banksters. While they may not state it in wording they have apparently discovered the basic axiom for debt-free money:

“There is a basic axiom on money that is either unknown by monetarists or ignored in favor of the many schemes used to enrich the few at the expense of the many. It goes like this:

“As universal prosperity is dependent upon the ability of Money to flow (its “velocity”), nothing may be done to money that would in any way impede that flow.”

“This would exclude things like using commodities for money (gold, silver), adding bankers’ gimmicks like interest to money, or in giving money additional uses beyond its sole legitimate use as a “medium of exchange.”

“Money needs to be “created” into circulation by a system’s wealth producers, never “borrowed” or “spent” into circulation by its bankers or consumers. It needs nothing backing it but the integrity of its issuers (in a second-rate democracy there can be no integrity).

“That is the rule, though it cannot be applied in this time and place. Money issuance is government’s most sovereign prerogative, yet in honest form is as unobtainable as is the only workable FORM of self-government, a Republic.

“Had we a Republic, one of the very few prerogatives granted to the upper levels of government would be money issuance, a completely worthless medium of exchange, which being worthless would never be hoarded but would be quickly spent for something that one coveted for its intrinsic value. This velocity is what produces UNIVERSAL prosperity. Lack of velocity is what creates wealthy and impoverished classes of people, plus the struggling middle class that actually produces the wealth, and unfortunately, their ranks are constantly diminishing.”

While debt-free money cannot be instituted at this time by corrupt governments, obviously it can and is being utilized by some communities around the world. This is the biggest advance in monetary policy since the ’30s when thousands of communities and counties across America issued currency that circulated during the Roosevelt bank holiday. Damn shame they quit it when the banks reopened. They proved we don’t need the banksters leeching off our productivity. Another great advantage with Ithicahours or any local currency is that it is not acceptable outside the local economy and is therefore not siphoned off like a national or international currency would inevitably be. Central banks, including and since the first Bank of the US started by Hamilton do nothing for local economies but allow wealth concentration in the hands of the few while impoverishing the many.

This budding concept needs widespread distribution. It must be instituted when present governmental structures and the monetary systems they spawn collapse of their own internal rot and putrefaction.

Three short subprime videos and a power point

“Tent City” – signs of things to come



“The Last Laugh – Subprime” – how we got here



“Fight Foreclosure: Make ’Em Produce the Note!” – how to get out of it



And one clever power point with stick figures . . .


“The Subprime Primer” —    



Are you ready for economic collapse? Americans are less prepared than the Soviets were

The train has already derailed, but our media are barely reporting it.  Dmitry Orlov lived through the collapse of the Soviet Union during the cold war.  In his book “Reinventing Collapse” he compares the preparedness of the Soviets prior to the cold war to the preparedness of Americans today.   
Below is a link to an excellent review of his book.  A little knowledge and prep now will be priceless later . . . .

Here are some interesting responses I got when I forwarded this by email:

Tore Dahlin wrote: 

It is interesting that Orlov discussed this matter a year-and-a-half ago, as though he had a crystal ball into 2008.

I believe that all of our economic problems boil down to nothing but problems with macro organization and management. From a strictly technical point of view, all of our present problems are easily solved. The question only becomes, how do we get the needed consensus to enact the simple, but sweeping, solutions to almost instantly turn things around? It is like we are all sitting together in an old wreck of a car that is sputtering along and about to blow, when we could all just get out and get into a sleek new model. I guess as a society we get too attached to the old jalopy and think it’s the greatest thing to be driving even as we see the oil leaking out and the steam escaping the radiator. (Well, enough of that metaphor).

Patrick Hedemark wrote:

Thank you – both for this analsysis and again for the “antidote” to it – your book “Web of Debt”. 

What I find so amazing now for me – after studying all of this for so long now is the fact that even the “predictions” of dire consequences by so many “experts” amount to a back handed acceptance of the “system” as reality – when in fact – it is really illusion. 

The “notional value” ascribed to our money itself – as well as its by- products – the stock exchange and its myriad of “ponzi programs” as well as the housing and mortgage “industries” – are alll supported with the original “presumption”; that pretense is the equal of reality. 

“Collapse” is tantamount to “disillusionment”. To be in illusion is unwanted, yet most people associate the term “disillusioned” with an uncomfortable and/or unwanted condition. Like the spouse that would rather suffer uncertainty as to the fidelity of their “other” rather than knowing he or she is in fact a scamp and that the only genuine solution to their ignorant condition is to know the truth, leave the bum and find “the real McCoy”. 

Collapse is both inevitable and desirable.  The destruction of all fictitious notional value is the very best thing that could happen to us all.  Real Money – for Real Labor and Real resources – created by WE THE PEOPLE (THE GOVERNMENT) and delivered – IN SPITE OF THE SCREAMS OF THE PARASITES – will be the ACTUAL FULFILLMENT OF THE AMERCAN REVOLUTION!!


Richard Cook’s tale of the national dividend is explored in this look into the future.

Finally: Economic Sanity Returns to America

by Richard C. Cook / February 28th, 2008

It started with the crash and depression of 2008-2009. Consumers had finally lost the ability to float global business with their credit cards and home equity loans.Finally even the politicians had to face the facts. Ever since the 1980s, when the economy was handed over for plundering to the banks and the Wall Street plutocrats, ordinary people had struggled just to survive.

How to Start Your Own Bank

How to start your own bank:
Idea: we get 6 investors with $100,000 each to become the directors.  Their $600,000 is the 10% needed to get started; we raise the other 90% by issuing stock.  That gives us capital of $6 million, enough to charter a bank.  Then we’re allowed to create and lend . . . $200 million!  (See first article above.)  Today you only need 3% reserves if you’re a small bank.  The BIS (Bank for International Settlements) capital requirements are a bit higher — 8% — but even at 8%, our $6 million lets us lend $50 million.  We lend interest-free to various worthy causes that will generate a profit if they don’t have the burden of interest, such as alternative energy projects, low-cost housing, Permaculture farming projects and the like.  Rather than charging interest, we take a modest share of the profits, on the model of Islamic banking or investment banking; but our real purpose is to set up a working model of what community-oriented banking could be.   We use the principles developed over 300 years by the private banking system and turn them to public ends. 

After the collapse – a short story

An entry below titled “Up to $6.5 trillion in mortgage-backed securities may be in jeopardy.  Subprime borrowers may have an escape hatch — no paperwork providing standing to sue!”, got this response from short story writer Philip Zack:

The situation inspired me to write a short story called “As Is” about life after the collapse. It starts like this…

Ryan Svorlin stood in front of the big house, gaping. The keys hung loosely in his shaking hand, clattering against one another in rhythmic reflection of the waves of shock coursing through his troubled mind. “It… it’s… mine,” he stammered, unable to comprehend what had just happened.

“Well, sure,” the real estate lady told him. “You did sign the papers, didn’t you?”

He slowly turned to look at her. Paper-thin skin stretched across unnaturally prominent cheekbones. Overdone make-up. Probably over seventy, he guessed. “Of course. But I never expected to —.”

“To be selected? Well, someone had to be. They couldn’t afford to let these places go vacant, after all.”

Less than a year had passed since the first cannonade in the financial meltdown destroyed the façade of normalcy masquerading as prosperity in the United States. Some faceless blogger had instigated a mortgage strike, an incautious response to the revelation that the reason the government was so determined to protect the masses from being dispossessed in their forced insolvency was the dirtiest little secret at the heart of the country’s high-flying economy – that nobody really owned all those high-risk loans, and therefore the houses could not be foreclosed. No one could have predicted what happened next.

Read the whole thing here:

The “Real Bills” Doctrine: A Modern Application?

A blogger named Syzygy just wrote this comment to the entry called “Why Not Gold?” below.  The query was about the “real bills” doctrine, but I’ll quote the whole thing, as it was nice! —   

“Am one-third through your book now.  Of the hundreds of non-fiction books I’ve read, yours easily deserves a place in the top ten.  Astonishingly well done and important.

“As for this Fekete/Hultberg stuff, I don’t understand a word of it.  Will you please post your understanding of it on your site?

“I confess I’m pretty skeptical of gold/silver standards; what’s to stop foreign creditors from simply sucking out all the specie?  If the Saudis, Chinese, and Japanese could exchange their declining US dollars for gold and silver bullion, wouldn’t they do that in an instant?” 

                                                                 — Syzygy

 Thanks Syzygy.  I agree that gold would just be vacuumed out by dollar-holding foreigners.  That’s exactly what happened before 1971, when Nixon finally closed the “gold window” to preserve what little gold was left at Fort Knox.   Fekete and Hultberg propose fixing the gold system by supplementing gold with “Real Bills” as was done in the 19th century.  (See Hultberg, “The Future of Gold as Money,” Gold-Eagle.com, February 1, 2005.)  I’m currently doing a book revision (to be available hopefully in early January) that contains a brief discussion of the Real Bills Doctrine, which I’ll post it here:

The “Real Bills” Doctrine

If using gold as a currency is plagued with so many problems, why did it work reasonably well right up to World War I?  Nelson Hultberg and Antal Fekete argue that gold was able to function as a currency because it was supplemented with a private money system called “real bills” – short-term bills of exchange that traded among merchants as if they were money.  Real bills were invoices for goods and services that were passed from hand to hand until they came due, serving as a secondary form of money that was independent of the banks and allowed the money supply to expand without losing its value.8 

The “real bills” doctrine was postulated by Adam Smith in The Wealth of Nations in 1776.  It held that so long as money is issued only for assets of equal value, the money will maintain its value no matter how much is issued.  If the issuer takes in $100 worth of silver and issues $100 worth of paper money in exchange, the money will hold its value since it can be cashed in for the silver.  Likewise, if the issuer takes I.O.U.s for $100 worth of corn in the future and issues $100 worth of paper money in exchange, the money will hold its value, since the issuer can sell the corn in the market and get its money back.  Or if the issuer takes a mortgage on a gambler’s house in exchange for issuing $100 and lending it to the gambler, the money will hold its value even if the gambler loses the money in the market, since the issuer can sell the house and get its money back. 

Professor Fekete observes that the real bills system works to preserve monetary value only when there is gold to be collected at the end of the exchange, but other commodities would obviously work as well.  One alternative that has been proposed is the “Kilowatt Card,” a privately-issued paper currency that can be traded as money or cashed in for units of electricity.10  The nineteenth century Greenbackers relied on the “real bills” doctrine when they contended that the money supply would retain its value if the government issued paper dollars in exchange for labor that produced an equivalent value in goods and services.  The real bills doctrine was rejected by twentieth century economists in favor of the quantity theory of money, but it is actually the basis on which the Federal Reserve advances credit today: it takes mortgage-backed loans as collateral, then “monetizes” them by advancing an equivalent sum in accounting-entry dollars to the borrowing bank.9 


That was what I had written, but in response to Syzygy’s question, I too don’t understand how adding “real bills” would allow a modern-day gold standard to work any better than it did in the 19th century, when it precipitated periodic serious depressions.  Why not just use the “real bills” and skip the gold?  Roosevelt took the dollar off the gold standard domestically for the same reason Nixon took it off internationally: people were cashing in their dollars for gold, draining gold reserves and collapsing the supply of paper dollars, which in 1933 were backed by 40 percent gold reserves.  That meant that whenever two paper dollars were cashed in for gold, three other paper dollars issued as loans had to be called in as well.  If Roosevelt had let it go on, the money supply could eventually have collapsed completely.

What I like about the real bills doctrine, though, is that it defines the difference between money created out of nothing just to pay off loans to banks (the sort of loans being madly extended right now by central banks in an effort to bail out commercial banks) and Greenback-style money issued  as receipts for real goods and services (as Lincoln and the Guernsey Islanders did it).  The latter was “backed” by something; supply balanced demand, so no inflation resulted.  The Fed/central bank version is HIGHLY inflationary, because it pumps ever more “demand” into the system without creating anything productive to balance it in the way of “supply.”