Here are some frequently asked questions (or variations of them) and my answers. Feel free to add more!
Q:
I understand how the current system might require extra money to be created in order to payback a loan. Day 1, I borrow 100; Day 30, I repay 110. But does it have to be like that? Most loans are repaid in installments, so Day 1, I borrow 100. Day 10, I repay 40. Bank spends or invests 30 back into the economy. So money outstanding in the economy is the 100 I originally spent minus the 40 I earned back and gave to the bank plus the 30 that the bank reinjected into the economy (through other-than-lending) equals 90. And what I owe to the bank is 110-40=70. So if money is turning over in the economy, it seems like there is no necessity to create new money in order for me to satisfy my obligation. Do I have that wrong?
A:
That is how they get away with it; it’s a huge shell game, so it’s hard to tell what’s really going on. But take the simplest case: we have a 100% gold currency, no inflation or deflation. Lenders lend out 20% of it at 5% interest. Two dollars lent at 5% compounded annually become $10 in 33 years. That means in 33 years, the lenders own all the gold. The only way to avoid this is for the money supply to expand, creating inflation.
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Q:
Isn’t the best solution to return to the gold standard? That would prevent inflation or deflation. The money supply would remain fixed and stable.
A:
Same as answer #1 – in 33 years, the lenders would own all the gold. The only way you could have a 100% gold currency that continued to circulate and perform the normal functions of “money” would be by eliminating interest from the system.
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Q:
Why does the stock market keep going up? Is it simply pricing inflation in? Population growth and expansion of markets to other economies? If the price of a share today is the present value of all future expected dividends (which I think is the definition but I could be wrong), then do the expectations for dividends really rise all that much?
A:
The stock market keeps going up despite a falling dollar, a subprime mortgage crisis, a credit crisis, and economic conditions that many people have already characterized as a recession because central banks around the world are inflating the money supply at double-digit rates. The money has to go somewhere. Real estate is no longer a good investment, and interest rates on government bonds are too low to be very appealing. Dividends have very little to do with the price of a stock. Look at Amazon’s stock, for example: it doesn’t list earnings, and it’s trading at a price/earnings ratio of 130, a huge multiple (10 or so is considered good). Yet it keeps going up. The stock market is a giant casino, where investors are just betting they can sell the stock for more than they paid for it.
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Q:
I note your delicacy in not specifying WHO exactly these money-lenders are. Why are you so afraid to say the word “Jews”?
A:
Your assertion is too broad. J.P. Morgan was an Episcopalian, and John D. Rockefeller was a Baptist. The Jews were allowed to practice usury when no one else was, and that’s why they dominated the field; but that’s not really the point of my writing. It’s that the SYSTEM is bad. We should not be allowing private money creation. If you allow people to pretend they have money and lend it at interest, you’re going to wind up with a spiral of debt and inflation, until it can’t spiral any higher, when it will have to collapse. If you forbade the whole Jewish race from being bankers and still let bankers create money out of nothing and lend it at interest, you’d still have the problem. Pirates will rush in where there is bounty to be had.
WEB OF DEBT BLOG 
I have just found you and I like your ideas. My question is how to protect ones assets before things hit the fan?
The housing bubble made me start looking deeper into things. I wondered who would ever be able to buy my home in the future, so I ended up selling it right before peak in California.
Cash is king if things crash, but how do you deal with such in today’s climate?
I know gold and oil, but one must be diversified and one can not have ALL gold. No one knows for sure exactly how this will all unfold.
Then there are the banks. I must have some money in banks and I put some into pounds and euros long ago when the dollar was high ( I am traveling very frugally in Europe).
So what the hell bank is safe? Is there even such a thing as a safe bank these days? I have some in an off shore bank in Europe and some in the U.S.
Some say you must have everything in physical gold, but jeesh I think that seems pretty hard in real life
Before I can concentrate on helping to fix this major world problem, I want to find ways to keep my family above water. I am sure others must be concerned about these things.
Any answers on these kind of topics or suggestions on where to find them?
Thanks in advance!
Hi Jeanne, that’s something we’re all struggling with! The solution of the central banks around the world seems to be to inflate inflate inflate, and all that new money has to go somewhere. It’s not going into real estate anymore, as people are leery of it; it’s not going into mortgage-backed securities, because of the toxic subprime problem; and bonds don’t pay enough in interest to keep up with inflation. So that leaves the stock market, which is liable to keep inching up, at least in certain sectors. The banking sector will collapse, and the housing sector and maybe the consumer products sector. But there will always be something that’s going up. Gold is being heavily manipulated, but the PPT is losing control because they’re running out of central bank gold to dump on the market; and there’s a huge demand abroad. So it and other commodities are good bets right now. Alternative energy stocks such as geothermal and solar are also doing very well. An excellent newsletter that gives a daily blow by blow account of what’s really going on in the gold and commodities markets and what the manipulators are up to is http://www.lemetropolecafe.com.
Thanks Ellen! I do appreciate your time and answer.
Yes I suppose it is the question of the day.
Funny you should mention lemetropolecafe as that is how I found you! 😉
There is a lot of information out there about what a mess things are in, but I wish there was more around about how to take care of yourself no matter which way this ends up going.
Some say the stock market will crash, some say some or all banks could crash, some say only physical gold has real value, some say fdic will do know good if things are crashing hard, some say gold will go thru the roof, some say it won’t and lots of people lost a lot last time it tanked so quickly.Some say other currencies and some say all fiat currencies will tank. I sometimes get dizzy reading it all and do not know who to trust.
Sigh. These are not easy times for the little guy who is retired even if he is aware of the problems and has taken wise actions. Nobody knows exactly how it will unfold.
There are some bright minds at lemetropolecafe, but my husband is the subscriber as I am not quite as adamant a goldbug. I like your arguments about why we need to be connected to something other than the Gold standard. Nevertheless we are long on gold and oil.
Are there any banks not involved it this? Is a bank in Europe ( off shore) any safer than a US bank? ( I have cash in a few currencies which I got when the dollar was high).
One person from the cafe said to put cash into swiss treasury bills which sounded like a good idea, but it turns out they are only available to Swiss citizens.
I sold at peak in 2005 because I had seen the problem for some time by reading wise people that make sense ( Turks book and others made sense).
Still I am not certain that the dollar will collapse or that the PPT will not come up with something as there are smart ones there as well. I do know there is pain ahead for many.
I would like the monetary system to work better and more fare, but if that is not going to happen I would at least like to be one who can keep her head above water and care for my young child. Thriving from good or lucky choices would be even better.
Hi Jeanne, I’m in pretty much the same situation you are and can commiserate, but I wouldn’t rely on my own stock advice! When everything is heavily manipulated, it’s pretty hard to predict how things will come out. How they SHOULD go rarely seems to be how they DO go, because somebody with the power of the printing press is tampering with them. The result “they” seem to be aiming for is what somebody at a Bilderberger conference called “the world company” — private control of the world through aggressive mergers and takeovers. We can ride in on their coattails if we can figure out what they’re up to, but my own thing is to expose them and try to change the system. I play the stock market more as an addiction (it gets me up in the morning) than because I really know what I’m doing; though I must say I’ve done well lately, which I attribute to paying attention to lemetropolecafe, financialsense.com, etc.
Dear Ms. Brown,
I just ran into your book, have not read it yet but KNOW it will be excellent (and needed). I will the name along to all my friends.
My question, though, is in regards to Forbidden Medicine. Any chance that you will reissue it (maybe as an ebook)?
Best,
Pedro
Thanks Pedro. Yes, I thought I would reprint “Forbidden Medicine.” It’s on my list of things to do! In the meantime, I have a few copies available. Cheers, Ellen
Alan “Creative Destruction” Greenspan and The Permanent Revolution
An open letter and Patriotic Plea to all Patriots:
The combined American Patriot Elite and Patriot Elite Organizations must read Alan Greenspan’s recently released autobiography, The Age of Turbulence: Adventures in a New World. This is not an endorsement to buy the book. It is a request that legitimate Patriots make the sacrifice to go to their local library, check it out and read it.
Why?
This book is potentially the equal (if not more so) to Dr. Carroll Quigley’s
Tragedy and Hope as the single most influential expose and description of the sinister/unseen “Secret Elite’s” New World Order. The two books are not synonymous.
Quigley’s Tragedy and Hope identifies the “Secret Elite” as members of Cecil Rhodes’ Round Table Groups that supposedly founded the infamous (used to be very secretive but now is very public) Council on Foreign Relations (CFR). Quigley goes out of his way to totally ignore (leave out of historical analysis) the
continued existence of the Fabian Society in Tragedy and Hope (page
949)…describing the Fabians as a “myth, a folk fairy tale”…non-existent.
Greenspan’s The Age of Turbulence, in contrast, totally recognizes the great influence and dominance of the Fabian Society upon Western, American/British Capitalist society. Greenspan goes one step farther than Quigley.
“Unlike Marx, the Fabian Socialists of the late nineteenth century were not looking for revolution. The group named itself after the ancient Roman General Fabius, who held off Hannibal’s invading army with a military strategy of attrition rather than all-out confrontation. Similarly, the Fabians aimed not to destroy capitalism…
…The Fabians laid the groundwork for modern social democracy, and their influence on the world would end up being at least as powerful as that of Marx. While capitalism succeeded brilliantly in delivering higher and higher standards of living for workers throughout the nineteenth and twentieth centuries, it was the tempering effect of Fabian socialism that many argued would make market economics politically palatable and keep communism from spreading.” (P. 264-265)
Greenspan recognizes a different “true-enemy” to this Republic’s Perpetual Union based on the concept of National Sovereignty (Nationalism/Nativism) and state sponsored Protectionism.
What is this “true-enemy” of our Nation?
The answer to this question requires real Patriotic-Courage to accept. The Patriot Community Elite has based their perception of the “true-enemy”described in pages 950-952 of Tragedy and Hope for 50 years. Quigley describes a flesh and blood “Secret Elite” (people/conspirators).
Greenspan, in contrast, identifies a quite different “true-enemy.” This
“true-enemy” does not gather in groups of “secret-conspiracies.” It has no finger prints, blond hair, blue eyes, big ears or strong-Semitic features for that matter. Greenspan’s “true-enemy” is an it, a thing…a system…an economic process. It is even considered the “basis of all life” in this Republic.
All long-standing Patriots (to include all the Ron Paul Patriotic newcomers) are requested to remain seated if they choose to read on.
The enemy Greenspan clearly identifies is the process known as Creative Destruction. Greenspan, former Chairman of the dreaded “Secret Elite’s” Federal Reserve, has known about the existence of Creative Destruction his entire adult life. Yet, 50 years of Patriotic-Prophecies has said literally nothing about the existence of Creative Destruction…due to Patriot Elite blindness that has been self-induced with the worship of Quigley’s Tragedy and Hope. There is another reason for this Patriot-blindness. This is where Patriotic Courage comes in. Recognition of Creative Destruction requires the Patriot Elite to commit what would be considered a very “Treasonous-Marxist-Thought.” Acceptance of the actual reality/existence of Creative Destruction requires the Patriot to understand…the “true-enemy” of the continued existence of the Perpetual Union and the Republic is…American/British Capitalism…not International Terrorism, not communist Revolutionaries and not Tyrants that promote War.
What is Creative Destruction?
Alan Greenspan did not invent the concept of Creative Destruction. The term Creative Destruction was the brain-child of Joseph A. Schumpeter. Joseph Schumpeter is considered Harvard’s most esteemed professor of Economics for the 20th Century. Schumpeter was an exile from the Austrian School of Economics (1920s) and spent a short stay at the Fabian London School of Economics before coming to America. If “you know where to look” you’ll find Creative Destruction (Neo-conservatism) was the basis of the Reagan Revolution…something the Patriot Elite Community missed completely back in the 1980s…just as they do today.
At the end of his long economic journey Schumpeter wrote a real block-buster of a book in 1942…Capitalism, Socialism and Democracy. This book is more than an “equal” to Tragedy and Hope and The Age of Turbulence. The Patriot Elite have been silent about Schumpeter.
Schumpeter described the economic process of Creative Destruction as follows (from Capitalism, Socialism and Democracy),
“…the history of the productive apparatus…is a history of
revolutions…” (P. 83)
The above term “productive apparatus” is a simple reference to the means of production known as CAPITALISM.
“…The opening of new markets, foreign or domestic, and the organizational development from the craft shop and factory to such concerns as U. S. Steel illustrate the same process of industrial mutation…that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one.” (P. 83)
This is a clear description of present-day CAPITALISM….a result of
constant-mutation, a continuos-cycle of revolution..
“Those revolutions are not strictly incessant; they occur in discrete
rushes which are separated from each other by spans of comparative quiet. The process as a whole works incessantly however, in the sense that there is always either revolution or the absorption of revolution, both together forming what are known as business cycles.” (P. 83)
Translated: Capitalism’s existence is dependent on a constant state of
revolution…Permanent Revolution.
“This process of Creative Destruction is the essential point about Capitalism. It is what capitalism consists in and what every capitalist concern has got to live in.”
In 1942 Joseph Schumpeter described CAPITALISM as a constant State of Permanent Revolution and Creative Destruction.
Please Patriots…ponder this Paradox. Do not feel ashamed, many others have missed the point,
“The essential point to grasp is that in dealing with capitalism, we are dealing with an evolutionary process. It may seem strange that anyone can fail to see soobvious fact which moreover was long ago emphasized by Karl Marx…
Capitalism, then, is by nature a form or method of economic change and not only never is but never can be stationary. And this evolutionary character of the capitalist process is not merely due to the fact that economic life goes on in a social and natural environment which changes and by its changes alters the economic data of economic action; this fact is important and these changes (wars, revolutions and so on) often condition industrial change, but they are not the prime movers. Nor is this evolutionary character due to quasi-automatic increase in population and capital or to the vagaries of monetary systems of which exactly the same thing holds true. The fundamental impulse that sets and keeps the capitalist engine in motion comes from the new consumers’ goods, the new methods of production or transportation, the new markets, the new forms of industrial organization that capitalist enterprise creates.” (P. 82)
Please re-read the above quotes several times.
Make sure you understand what you have just read. If you do not comprehend the above reality, you won’t realize the problem,
“In other words, the problem that is usually being visualized is how capitalism administers existing structures, whereas the relevant problem is how it creates and destroys them. As long as this is not recognized, the investigator does a meaningless job.” (Emphasis added)
Point #1: The Patriot Elite has done “a meaningless job” for 50 years. Why?
Long-standing and the “most respected” Patriot Elites have continually failed to recognize (seemingly by choice) an undeniable reality (the obvious). This reality (the obvious) is a Constant State of Permanent Capitalist Revolution known as Creative Destruction. Alan Greenspan, former head of the dreaded and most feared Federal Reserve, precisely observes in his An age of Turbulence,
“Working with heavy industry gave me a profound appreciation of the central dynamic of capitalism. ‘Creative Destruction’ is an idea that was articulated by the Harvard economist Joseph Schumpeter in 1942. Like many powerful ideas, his is simple: A market economy will incessantly revitalize itself from within by scrapping old and failing businesses and then reallocating resources to newer, more productive ones. I read Schumpeter in my twenties and always thought he was right, and I’ve watched the process at work.” (P. 48) (Emphasis in the original)
Point #2: While the Patriot Elite “worries/terrorizes” their readers about
abortion, life style choices, racial divisions, ethic clashes, immigration, the North American Union, Public Private Partnership, NAFTA , WTO, GATT, (and this list can go on and on) the Constant State of Permanent Revolution known as Creative Destruction continues unabated, unchallenged and unrecognized…unseen and unheard of.
Please do not assume this essay is written by a lone-paranoid with a weird and unbelievable Conspiracy Theory. Just because Patriot-Icons have not mentioned or have publically recognized the constant reality of Creative Destruction…does not make this Constant Sate of Permanent Revolution any less real.
Not convinced? There are others that do correctly understand and recognize the reality of the Permanent Revolution. For a recent-random sample off the internet (from “The New Capitalism,” Financial Times, Martin Wolf, June 19, 2007),
“It is capitalism, not communism, that generates what the communist Leon Trotsky once called “permanent revolution.” It is the only economic system of which that is true. Joseph Schumpeter called it ‘Creative Destruction.’ Now after the fall of its adversary, has come another revolutionary period. Capitalism is mutating once again.”
It is not hard to verify the reality of the Permanent Revolution…that is if you want to.
Point #3: It is most important to recognize the existence of Creative Destruction. If one does not, any attempt at historical analysis will be fruitless and completely useless…for example, placing Adam Smith correctly in the history of CAPITALISM. Many Patriots (from across the false political Spectrum) would all agree this Republic’s economic success was based on the “Free Enterprise” concepts (the Hidden-Hand) of Smith’s Classical Economic Theory of Development. But this is not a correct analysis because the many political and Patriotic Pundits have failed to recognize the process of Creative Destruction.
If you add a dash of Creative Destruction to Adam Smith the historical analysis goes like this (from p. 260 of The Age of Turbulence),
“It is striking to me that our ideas about the efficacy of market
competition have remained essentially unchanged since the eighteenth century Enlightenment, when they first emerged, to a remarkable extent, largely from the mind of one man, Adam Smith. With the demise of central planning at the end of the twentieth century, the forces of capitalism have had free reign, prodded by ever-expanding globalization…
…Still, in a sense, the history of market competition and the capitalism it represents is the story of the ebb and flow of Smith’s ideas. Accordingly, the story of his work and its reception repays special attention…which addresses the great problem inherent in capitalism: that creative destruction is often, and by a great many, viewed as destruction. The history of Smith’s ideas is the history of attitudes toward the social dislocation capitalism brings and its potential remedies.”
Point #4: There is no difference in the economic and political theories of Adam Smith, Karl Marx, Leon Trotsky, Joseph Schumpeter, Reaganomics and Alan Greenspan…they are all about and describe the same process…the Constant State of Permanent Revolution, today known as Creative Destruction.
Point #5: The Fabians hold major Political sway in the 21st Century. They dominate almost all important political positions of the Queen’s (and Future King’s) government. Fabians (and their unseen agents of penetration and permeation) have dominated the American Neo-conservative movement, most notably the Heritage Foundation, since 1979. Fabians dominate the Republican Party through the Fabian creation known as the International Democrat Union (an international socialist organization). Fabians also dominate the Democratic Party through the Third Way (founded by the Fabian Tony Blair)…again the Patriot Elite has been mostly silent to even this most basic reality.
The 20th Century bares witness to the State of Permanent Revolution of Creative Destruction…The 1905 Russo-Japanese War, the 1905 Russian Revolution, WWI, The 1917 Bolshevik Revolution, the Fascist Revolution of Italy the National Socialist Revolution of Germany, WWII, Korea, Viet Nam, Iraq, Afghanistan. “All these Wars, Revolutions and so on” give proof that American/British Capitalism is the “true-enemy” of all existing governments and societies.
To ignore this reality…just because it “offends” existing “political myths”… is a very large mistake.
Alan “Creative Destruction” Greenspan estimates Globalization (the final
implementation of American/British Capitalism as the sole means of production for planet Earth) will be complete around the year 2030 (27 short years from now). Globalization is a cover-term for…the Constant State of Permanent Revolution and Creative Destruction.
Patriots must decide the future path of this Republic and its Perpetual Union…not the Fabians. Surely the Patriot Elite must come to openly understand the path of The American Revolution of the Founding Fathers is not the path of Permanent Revolution. It is impossible to produce an accurate description of the present reality (and recent historic past) by not recognizing the reality of the Permanent Revolution.
As the Patriot Elite continues to ignore “the obvious” reality of the Permanent Revolution the state of American Patriotic Alternative Politics will remain in a useless limbo. Or, as Mark Danner observed on page 47 of his 2006 little read book The Secret Way to War, concerning the on-purpose ignoring of “the obvious,”
“In the United States when it comes to this central issue in our politics we have in general been treated to the vaguely depressing spectacle of a great many intelligent people struggling hard to make themselves stupid.”
Wake up America, time is running short. The choice is really simple. And yes…it is at the same time a most difficult choice to make…accepting the sad reality American/British Capitalism has become the “American Way of Life,” replacing the American Revolution.
Which path America? Nationalism or Globalization. Can’t have both at the same time. One or the other.
Just remember American/British Capitalism has continually destroyed entire long-standing societies for the better part of 100 years with a continuous cycle of War, Revolution and Terror. And as yet…there is no cure for Capitalism….short of its total elimination. As long as American/British Capitalism continues to exist and expand completely unfettered, the American Republic and its Perpetual Union will continue its present path to the “Scrap-Heap of History.”
In summary: Conspiracies and Conspirators have come and gone over the last 100 or so years. The only constant (still unseen) thread during this same period is the continual existence and evolution of CAPITALISM…and so far the present and past Patriotic Elite has completely missed (on-purpose or otherwise) this most simple and obvious political reality.
I’m half-way through reading The Web of Debt, and am simply amazed at (and grateful for) the information you present. It’s fascinating and a real eye-opener. I’ve long referred to myself as an economic slave, and your book reaffirms my conclusions.
I’ve managed to save some money and would like to own physical silver or gold, but can’t figure out the best way to store it. I’ve considered safe deposit boxes, but am concerned that they may be subject to confiscation if the banking system and the economy collapse 1929 style–are these fears unfounded? Please comment.
Thanks Jo! I don’t think I’d trust a safe deposit box. I asked at my own bank what would happen if the bank went bankrupt, and was told that the doors would be locked and we wouldn’t be able to get into our own safe deposit box. Evidently it has to go through the court system like everything else. I read of a woman who lived through the collapse of the Argentine peso. She said one gold coin lasted the family for a month. At that rate, you don’t need too many gold coins for emergency purposes. A few coins can be secreted rather easily about the house. Hopefully you’ll never need them, but they add a sense of security. You might pose your question in the section of this blog called “Join in the Debate.” Many goldbugs there have strong opinions on these issues. Best, Ellen
Knowing that the markets are being manipulated, and that there is more to what’s on display in the media and behind the statements of government and business interests is enough to give you a healthy suspicion of what’s really going on. Now that we’re peering at the curtained controllers instead of the distraction their fomenting, it would be helpful to build an ongoing translation of the tactics being trotted out.
For example, the current ‘debate’ in the US Government over how to boost the economy by throwing tallysheet dollars at ‘consumers’ (who used to be called citizens) and businesses is being offered as a way to hand us money to spend into the economy. But what they’re really suggesting is a sudden increase in the government’s debt to the commercially owned Fed by that same amount. I conclude that their objective is to incur that debt, and they really don’t care how it’s accomplished. All of the argument over how to use the new debt-money is simply window dressing. (I may be off-base, but that’s what it looks like to me.)
Anyway, if you and your readers could use this blog to translate the action as it unfolds, it would help us to recognize the patterns of behavior, and prepare us better to call ‘foul’ when deceptions of this natures arise.
Regarding Jeanne’s question above, The same question was recently posed in my own blog (klurgsheld.wordpress.com). Risking money on a fixed game like the stock market seems counterproductive. Domestic land can be confiscated by the government in a ‘taking’, just as the gold or jewels in a safe deposit box can be taken by the government’s court in a bank failure. And even so, the contents of that box are only worth what someone is able to pay for them, so I suspect their value as a hedge wouldn’t work too well, anyway. But what does that leave? Is there a parallel economy that we can shift the value of our labor into, and still be able to interact with those in the Wizard’s fictional economy? I’m at a loss as to what to do.
On the market, I can’t advise! Probably time to pull out and put it in Treasuries and think about something else. Not that Treasuries are that good, but gold is so high now, it’s hard to put my money down on that either. I’ve got some stashed away that should last for the first 6 months or so of a major collapse; by then the vegetables will be coming up and I can go subsistence. Not that I have any vegetables in the ground either, but I will. That’s how they survive in Third World countries, a few feet of land outside the lean-to packed with greens, and some chickens running around. On market manipulation, it’s out of control. Actually it’s IN control — theirs. I suspect world markets crashed as they did on Monday because it was a U.S. holiday and the PPT wasn’t in there massaging things, and CNBC wasn’t squawking that it was a buying opportunity. If I get a chance, I’ll post some articles on that. I’m swamped with work right now! It’s all of my own devise, but I’m doing revisions, two new books, and articles. Best, Ellen
As an ordinary Englishman I have been concerned for a long time by the interdependence of UK and US politicians and the way we are drawn into conflicts like the War on Terror…..and into the ruinously expensive European Union..not because UK residents have a political will
desire to follow these policies but because it appears to support some aspect of American political or economic foreign policy.
Just recently we were obliged to nationalise a financial institution (Northern Rock) because their managers were following the questionable policy of borrowing their money for lending from other (US) banks who were in turn caught out by the Sub Prime lending crisis.
(Why were the reckless sub prime lenders not proceeded against by the US financial regulators?)
What is the point of claiming to spread freedom and democracy in the world when the economy of our own countries frustrates the will of the electorate in our own nations?
Having been in South Central LA and the inner city slums of Britain I think it is time to revise the politics and economics of our own societies before making any more aggressive moves outside our own borders.
Neither the US nor the UK is a functioning democracy while the political choices we have amount to selecting from people who are bereft of policies and can only repeat the word “change” …..even though they are empowered to change nothing at all once they are in office….unless it suits Big Business!
Hi Jim, I agree. The root of the problem though, I think, is that what used to be called the Money Power has bought the media and politicians, and they’ve done it by usurping the power to create money from the people themselves. It could all be fixed; we just have to go back to the system of the American colonists, and particularly the Pennsylvania colonists (the best of those systems). We’ve had a privately issued money supply for our entire history as a nation.
Dear Madam,
in your recent writings about the world money system, you mention the F E D being something like a private owned bank consortium. This seems to be credible – but – who are the owners? Would it not be most eliciting for your readers, to know who pulls the strings in the background? Very few people in this world seem to know who and what the F E D really is.
Keep up your good work!!
Best regards
Dear Ellen,
Do many attorneys who might handle forclosures, know about the issues in your artcle, THE SUBPRIME TRUMP CARD: STANDING UP TO THE BANKS.
If derivatives market is 10X world GDP, and prone to implode if defaults increase, could the governent just bail out the initial borrowers of sub-prime mortgages (etc) (who are at the apices of the inverted pyramid), and thereby prevent a collapse of the derivative market (the base of the inverted pyramid), at a much lower cost?
This next question will show my ignorance. Is there a balance that can be found between privatized and nationalized banks. For instance, could all “newly produced” money be federally taxed. This would ensure a flow of money to govenrnemt programs, and may decrease the incentive to make risky loans, and decrease the incentive to loan out money at “margin” (eg. analogy of banks wtih only 10% reserves on their debt obligations)
Hi John, I can’t say how many attorneys know about that issue, but some do, because I understand foreclosures are getting denied by the hundreds for inability to prove standing to foreclose. The UCC is still the law of the land, and it requires proof of real contracts with real signatures of both parties to the suit. I clerked for 3 judges in my youth, and the clerk who trained me said our first job was to find some procedural defect that would save the judge from having to address the merits of the case. No proof of standing to sue is such a defect.
On bailing out the subprime borrowers, that would take a pretty large chunk of change, and where is the government going to get the money? Short, of course, of taking over some big bankrupt banks and taking back the power to create money itself, which I think is the solution. The problem is that derivatives don’t only teeter on subprime debt. There are derivative bets for all sorts of things — currencies going up or down, for instance. Supposedly, you’re placing a bet that will protect you if one of your investments goes down, but the catch is that what if the counterparties to the bet don’t have the money to pay up? That quadrillion dollars in bets (the sum it’s up to now per the BIS) is mostly bluff, but everybody is afraid to make the other players show their cards because it will become obvious that nobody’s bets are worth the valuations they’ve stated on their books. A lot of big derivatives banks will have to admit to bankruptcy. What I would do is put a tax on the derivatives. Even a small tax would bring the game to a halt pretty quickly.
As for taxing private banks’ ability to create money, it just isn’t likely to happen, because the banks are already known to be in serious trouble, and politicians want to save those big campaign contributors, not bring them down. That’s no doubt also the problem with taxing derivatives, but at some point we’re going to have to take back the system and insist. I think we need a coalition for justice in banking or something of the sort, with some major lawsuits by subprime borrowers (class actions under truth in lending, for example), investors (for fraud in the triple A ratings of dodgy investments), and state attorneys general (a squeeze play like in the tobacco cases, to get back abandoned properties in their district falling to the subprime debacle).
Hi Ellen, I’ve finished reading your book, I agreed with everything. However perhaps you could answer this for me. I was listening to your interview with Al Korelin on the the kereport the other day and you stated that the problem is the ponzi scheme, due to interest charging, and therefore we would need the government to issue more credit to make up for the lack of the necessary payment for the interest. But I was reading Michael Rowbothams Grip of death he stated a very real problem of paying off the debt is that it would inevitably diminish the money supply as debtors payed off their ‘loans’, wouldn’t this lead to a collapsing of the economy? And doesn’t the problem, inherently, of having the majority of the credit in supply as debt mean that inevitably most people would have to go into debt in order to satisfy the need for a means of payment? But in turn is this not inflationary as it would always encourage interest to be priced into the final cost of goods and services, meaning that interest would always have to be carried on the books of everbody(government apart), isn’t this something that the monetary reformers are trying to avoid, the inevitable probelm of not having a permanent means of exchange means that there would be fluctuations, periodcally, in employment levels.
Would it not be easier to follow the social credit route of Clifford Hugh Douglas, with everyone receiving a national pay check(dividend), over a certain age, say 16, this would inevitably avoid the problems of central planners having unlimited credit control and building vast monuments of their ideal.
Thanks.
Hi Adam, if you switched from privately-generated credit to publicly-created credit, you wouldn’t eliminate debt. The interest would just go back to the public purse. In the colony of Pennsylvania, the provincial land bank issued and lent paper money to farmers. The farmers paid back principal and interest to the government. The interest was generated by extra outlay by the government for roads, bridges, etc., avoiding the spiraling debt syndrome of a system in which only the principal is put into the money supply. I do think the social credit idea is a good one, but it’s a bit more radical than switching from private banks to national banks. Our private banks are failing and are about to be nationalized anyway — might as well start there!
On the social credit idea, it would essentially be social security for everyone, not just the elderly. The problem as I see it is that it would kill the motivation to work. Assume everyone got $1000 per month, as has been proposed. SOME people would want more and would work anyway, but many people, particularly young people used to minimal student lifestyles, might be more inclined to just play. You can actually live on $1000/month in modest circumstances. That would be a definite boon to artists and writers, but it seems to me that it might be more efficient to assign the money to government-sponsored projects that contributed to the Common Wealth — roads, bridges, sustainable energy development, research in natural health alternatives, permaculture development, and the like. The money would be paid to workers, so it would still go into the community and stimulate the economy (unlike today, when a huge chunk is drawn off the top to pay interest on loans of money that never existed until it was lent, a non-productive use of funds). But it would be funneled in a collective, directed way, making it more socially productive than just paying a dole to individuals for doing as they pleased. The reason we don’t trust government to make those decisions now is that it’s not really representative; it’s been taken over by the Money Trust. If we got the money power back, I think our government could be truly representative again.
Hi Ellen
Thanks for your book, “Web of Debt” it was very interesting and informative and I think you’re doing a great job of exposing this centuries-old scam for ordinary people.
My question is: how does it work when a government (such as in Australia) has paid down the government debt – we now have in fact years of surplus and their problem is what to do with all that liquidity, so it is being stashed in a managed “future fund”?
At the same time private debt has sky-rocketed and the economy has boomed, providing the government a huge windfall in company tax receipts. Is this simply shifting the burden of borrowing from the public to the private sector, thereby injecting the necessary liquidity (debt) into the economy? I’ve read that per capita, Australia is the most indebted nation in the first world – isn’t this simply a mortgage on future productivity; in other words our children and grandchildren will be enslaved by this debt?
By the way, Australia’s central bank (Reserve Bank of Australia) was created by an Act of Parliament in 1956 and is a wholly government enterprise as far as I can tell. Does the ruse still work the same way, because it appears that the government is simply borrowing from itself (when it does borrow)?
Thanks, again.
Dean
Western Australia.
Hi Dean, that’s very interesting! I just looked up the Australian situation; I hadn’t realized the Reserve Bank of Australia had split off from the Commonwealth Bank (now privatized) and is publicly owned — or that the Australian government is now debt-free! The Bank of England and Bank of Canada are both nominally government-owned, yet the government continues to BORROW from them, putting the government in debt. Money reformers in both countries have been saying for years that their central banks should just issue the money outright, as sovereign nations have the right and privilege of doing. I agree that with a private banking system lending to private parties, you would still be vulnerable to the same debt and inflation spiral in the economy, since banks lend the principal into the money supply but they don’t lend the interest necessary to pay their loans off. What we have today is pure “fiat” — merely an accounting system tracking exchanges between users of the national currency. If private parties are allowed to extend “credit” and cream profits off the top of the system as “interest” on their “loans,” the system will remain skewed. If the banks were nationalized, the interest would go back to the government; and the government could then spend that interest-money back into the economy, insuring that the money supply always contained enough to pay principal and interest on bank loans. I wonder, though, if that function couldn’t also be served by a government-owned central bank, even if the rest of the banks were private. I’ll have to keep an eye on Australia. Thanks!
Hi Ellen. Thanks so much for your “Web of Debt” book. It is the best book that I’ve read so far on the topic.
I have been working full time and saving for 25 years, all this time living in a decent but inexpensive rented apartment. I’ve now got a modest savings (+$230k) in the bank in simple time deposits. I’ve been looking at condos for several months, found one that I like and wonder if it makes sense for me to stop renting and buy the condo (I have enough in savings to pay cash for it) for the purpose of getting my money out of the bank where I feel it is serving the lendors more than it is serving me. Would you agree that buying a condo now is a better way to defend my hard-earned dollars than leaving it in the bank? Or should I wait before I buy a house or condo? Many thanks. I hope to have news from you soon.
Thanks John! I’m really reluctant to give advice on what to do with your money. I’m actually in the same position, except that I live with my mother who needs help so I can’t really move right now. Our cash holdings could get wiped out in a Weimar-style hyperinflation, making real estate that’s fully paid for an attractive option. But real estate could go down even more, and for me at least, remaining mobile in these perilous times seems important. Central America could be an attractive option! It’s a quandary.
Thanks for opening up my mind. I am interested in gold and silver and the influence of short holding on price. The ‘8 or less’ bullion banks in the Commercial category hold 83.7% of all the gold short positions on the Comex and 80.8% of all short positions in silver. Ted Butler (I hope you are familiar with his work) believes this is manipulative. Would it be analagous to the power and manipulation of the Fed? If so, gold and silver holders are like puppets and not likely to get free of the strings until a financial catastrophe occurs. I have the feeling they are all in cahoots. Thanks, Jack
Definitely in cahoots. Financialsense.com (the Saturday talk show) had a really good 4-part series on naked short selling recently. They said every market is heavily manipulated; and that there is so much naked short selling going on that if it were exposed, the market would collapse.
Disclosure: I am not trained in economics or economic theory so my analysis may appear a little puerile to some. I am in fact an Arts graduate with honours, with about 10 years experience in government and lately in a private sector IT consulting firm.
Whatever, the situation in Australia, I think it is obvious that we are not “de-coupled” from the US economy, nor the US Federal Reserve System, as our banking and financial sector was “de-regulated” in 1987 or so, when the $Aussie was floated, allowing private international banks greater access to our credit markets, and putting us at the mercy of the market makers.
So far, our politicians have been lying to us about the imminent serious impact we face in relation to the US sub-prime fiasco, but it is becoming clearer every week that we are facing a severe credit crisis because some of our major private banks are “leveraged” beyond their ability to write down the amount of bad debt they are holding. This may in fact be a manoeuvre by the “shadow world government” to bring Australia’s reserve system into private hands – hence both sides of politics (that is the supposed “left” and “right”) in the last 12 months have been at great pains to point out to the public the “independence of the Reserve Bank”, who they say, is solely responsible for monetary policy, whilst the government looks after fiscal policy. Perhaps the Reserve’s independence would be unequivocally established if it were controlled by a board consisting of private bankers.
Even though the government has been able to pay down its debt, due to high tax receipts, the boom we have experienced is only partly due to our massive resources sector (where we are digging up the country and selling it to China). What also precipitated the boom and the unsustainable growth in the real-estate market was extremely lax fiscal policy (similar to what you in the US call “stimulus checks”, in our case it was “baby bonuses”, “family payments” and the doubling of the first home buyers grant. All of this was in the wake of the last bubble/crash in 2000).
Further, we have seen “credit on demand” resulting in a massive increase in credit card debt, confusion in the roles between the Australian Stock Exchange regulator and operator (the same body, “ASIC”), leading to some very dubious pratices, and a huge promotional campaign by the banking and finance sector to leverage home equity (ie, “apparent equity” based on inflated prices) to invest in the stock market. People were able to buy a house with no money down, and having paid very little back, they could still within a year have $30,000 or $40,000 or more in “equity” for leveraging in a stocks portfolio.
It appears to me that when the financial tsunami hits, Australia will have no choice but to dance to the tune of the international bankers, cede our sovereignty, and join in a regional (or perhaps global, but I think that will be a later step) privately controlled financial system and currency.
Thanks for the link to the Economic Reform Australia Network, and I’ll be watching the UK and Canada with some interest.
Keep fighting the good fight.
Kind regards,
Dean Britton
Western Australia.
I am a South African. As far as I know, the SA Reserve Bank is NOT privately owned, so is not analagous to the US Fed & the Bank of England. Our monetary system is nevertheless in just as parlous a state as the US & UK et al, even though the SA Government creates it’s own money ,as required, out of nothing, which you suggest should be the case. So if this is not a case of private bankers getting rich out of the creation of money, why does the effect to our monetary system seem to be the same?
Hi Allen, here’s what Wikipedia has to say on that:
“The South African Reserve Bank is the central bank of South Africa. It was established in 1921 after Parliament passed an act, the “Currency and Bank Act of 10 August 1920,” as a direct result of the abnormal monetary and financial conditions which World War I had brought. The SARB was only the fourth central bank established outside the United Kingdom and Europe, the others being the USA, Japan and Java. Unlike the Bank of England, which provided the model for establishing the SARB, it has always been privately owned.”
It is privately owned. Evidently it operates just like the Federal Reserve: it prints the national currency and LENDS it to the government. Even the Bank of England does this, though it is technically owned by the government, something British money reformers are forever pointing out as being irrational, but to no avail. The Bank of England was only made a public entity in the 1940s, when a new Labor government threatened to shut them down otherwise; but they’ve carried on as if they were separate, and their first order of business is still to serve the banking system.
Thank you Ellen for your amazingly quick reply at 9 pm on a Saturday!
I am a Chartered Accountant & we studied our banking system, but were never told that the SA Reserve Bank was a private institition. I am simply gobsmacked by this information, & wonder how many South Africans know this!
I am thoroughly enjoying your book (now on Ch 7) I have been studing the world economy (particularly the USA), the gold & stock market manipulation by the PPT & a frequent visitor to lemetropole & other sites for years, but I am now getting a whole new perspective on the gravity (& depravity) of the situation from your book, esp the power of the Central Banks.
Thanks Allan! I and my computer are one . . . I really need to get a life! I was blown away myself when I started to understand what was going on with the whole global money system, and I still keep uncovering shocking things. Not to the bottom of it yet. I used to live in Kenya; very nice (or it was then).
Central Bank Dollar prop:
Perhaps it helps to look as the treasury.gov page and drill down to the Reserve Position. The astute reader would note that after the last May 08 report, about $ 6bln worth of Euros have “dissapeared” and show up under “other currencies” and swaps. (The overall position did not change). This suggests that the Treasury might have sold Euros in the amount of $ 6bln, which would be the biggest intervention on record. This “dissapearing Euro” seems to co-incide a) with a distinct drop of the Euro since July 15 and b) a first public statement by Bernanke (who usually does not comment on the dollar) that the CB favors a stronger dollar.