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 
Allan, Lemetropole is a site that has been obsessed with conspiracy theories, so I would take their musings with a grain of salt. The problem with conspiracy theories is they are like God, their existence can never be proven. As for the PPT, the same is valid. There is a group of Treasury people and market participants that are concerned with keeping “orderly” markets, and lately there has been a lot of panic FED action, most likely instigated by Wall Street but that is the normal way interest groups work their way through the Government and has been like that for centuries. Of course the CB’s have enormous power, for if they find that too many people have jobs they start killing them. Are they all powerful? I doubt it very much, for why would we have stockmarkets drop between 38 and 70% in the 2000/02 period if they could avert it. Their aim is to make people believe that they are all powerful and in control, when in essence they are not, so they constantly mess with markets rather than letting them go their own way. In the process they create further distortions one of them being the current malaise of the U.S credit system. I think the perception of their resolve is way overrated, for we still have recessions and major meltdowns ever since central banking has taken control of our lives, which is since 1913 in the US. One can observe that inflation increased markedly since we have a Federal Reserve, for there was a mild deflation from 1876-1913 prior to the invention of the Fed. The US fed is structured as a private corporation, with the shareholders being the money center banks in the majority. That is not to say they benefit from currency issuance or any profits the federal reserve makes, except for a 6% TAX FREE dividend which is anchored in the 1913 Federal Reserve founding law.
Hi Ellen
I just ordered your book, but have read some of your writings previously.
As a guy living in a green network in rural Tennessee, I believe there is a decent basement, a limit, to an economic collapse. I see the Ponzi economy as a toxic bubble, trying to suck the marrow out of a distinct but interconnected basic economy, which includes
water resources;
land, fertile, productive and otherwise;
trees, here readily converted to lumber;
knowledge, experience and very practical skills;
infrastructure such as roads and public buildings
In the bursting of the toxic bubble, people will be hurt, our society will become more nasty and dangerous. But people will be forced to work together; perhaps the More-is-Better virus will lose much of its power; perhaps we will have a rebirth of true, loving spirituality as opposed to the god-guns-and-guts hypocrites.
Paraphrasing Jesus, the rich will always be with us, and always wanting some paid service, so I’m not seeing a total Apocalypse.
On a separate note, Ellen mentions Central America, presumably as a “getaway”. From long experience working in Nicaragua: forget about coming down to “live cheap” in a tropical paradise. Not only is it practically difficult but it is ethically problematic to be a wealthy person living amongst people who are really poor. Oh yes, you will help them out. No doubt. But its all complicated. For example, there has been a Yankee-led land rush there lately and even by our standards land is far from cheap.
Nicaragua is okay; maybe try coming on the basis of a project, get to know a locale and its people, NOT as a landbuying gringo overlord. If I did not have roots in Nicaragua, I’d try the southern coast/mountains of Cuba.
Yes, I think the coming endgame is a great opportunity for change and for building community. You’re lucky to be in a “green” community. We here in the big city could find ourselves in Katrina-like conditions in a crisis. I don’t remember the last time it rained in L.A., maybe last spring. Our water is completely supplied by city infrastructure, largely by way of Colorado. It would be prudent to be taking precautions, but I just keep writing, glued to this addictive machine . . .
Ellen:
I’m reading Chapter 25 on Argentina and have a few questions in my mind if you wouldn’t mind answering them.
Pg 244 you state “intentional devaluation…to reduce the debts…”. I have a hard time picturing this. I understand if the currency is inflated (printing press) and this money goes to the profiteers they would benefit. To me, devaluation of a currency, originally say 1 to 1 US is now 2 to 1 US then goods would cost 2x as much in the local currency. What I don’t see is how this benefits someone in power already holding the currency. His cost of goods doubled same as everyone else. What am I missing?
Pg 245 Discussion/Question:
Kirchner is printing pesos locally and using these pesos to buy dollars. These dollars are in the Argentine Central Bank and the fact that total peso/total dollar ratio is stable props the local currency and makes the powers that be happy. Correct so far?
He has debt to IMF of 9.81bn US and wants to take this out of his central banks 27 bn to retire his debt. His money, he’s got plenty and he wants to clear the obligation. Am I still on track?
International Funds threatened to sell the Peso short if he touched these dollars. Is that the reason he doesn’t tell them to pack sand?
The IMF made him issue debt, I’m assuming Argentine bond’s valued in local currency to remove the earlier added pesos from circulation. He sucked up 11bn US in pesos. This removed money from circulation, theoretically causing deflation:
1. Wouldn’t this reduce the value of the assets held already even if they were bought at 20% nominal.
2. To pay off the loan he is reduced his 27bn US reserves by 9.81bn.
3. What’s stopping him from printing pesos to pay the debt afterwards. To suck up the pesos I assume it is the people buying the debt. Is this correct? If not, how is he sucking up the issued pesos?
4. Is the primary issue here the fact that since the dollar is the “de facto” currency of international exchange (oil), the IMF/WB can force countries to borrow $ if they cannot acquire them through trade? Since the dollars are needed for exchange the bankers can indenture the people into perpetuity.
Thanks for the book and I hope you letting me know if I’m looking at this wrong. If I am completely out in left field feel free to let me know that as well as it won’t be the first time and assuredly not the last.
Thanks
Hi, I have to agree that that was a bit vague. I might do another revision if I can find the time, so thanks for that. I was just interpreting the use of the word “liquidification” by my even vaguer source. (There isn’t a lot of information to draw on in English on the details of the Argentine fiat money system!) My understanding is that what was happening was the same thing that is happening in the U.S. today with the bailouts of the banks and of Fannie and Freddie: a banker- and corporate-controlled government has undertaken to underwrite private debts. The men who have usurped control are using the money-creating machinery to do it, but the money is going for debt servicing, not for productive public uses. This will necessarily be inflationary, because nothing is produced with the money. There is no increase in “supply” to match “demand” (increased money competing for the supply). What I was trying to say was that this private usurping of the sovereign money power doesn’t diminish the argument that a government COULD print money for productive purposes (public transportation, energy development, low-cost housing, etc.) without creating inflation. Supply WOULD go up along with demand in those cases, balancing the books; and fees could be charged for the goods and services the new dollars produced, returning the money to the government. On your second point, it’s a bit hard to follow, but I think I agree with you. It occurs to me that the U.S., which has the power to create the dollars in which its debts are owed, never has to declare bankruptcy the way Argentina and Russia did, because it can just pay its debts with printed dollars. My arguments for why this would not be the inflationary disaster that has been assumed are in the last section of the book.
Ellen,
before reading you’re book, I was always confused about the concept of creating and loaning money, financial markets and other related matters. I can’t thank you enough for turning on the financial headlights so I don’t drive in the dark!
In regards to recent events in the US and global banking and money, could the Fed (banking) continue to acquire corporate and personal assets (such as people’s homes) for a period of time, leaving a lot of people in a bad financial position, and then simply forgive a large portion of debt? Maybe just recycling the same financial silliness, again, by reselling acquired assets through new loans?
I hope I’ve stated the question correctly, as I am still only beginning to understand this whole money scheme.
By Act of Congress Effective date 30 September 2008
1 Derivatives are declared Gambling Instruments.
2 Derivatives as Gambling Instruments may not be settled using any form of United States currency.
3 Anyone convicted of settling derivative claim(s) in any state, or Federal court will be taken to a public place within 30 days of their conviction, and hung by the neck till dead.
4 Any officer of the United States, or any of the States who violates the earlier provisions of this bill will be impeached.
Mike — if I understand your question, that’s what has been done for 3 centuries: periodic waves of depressions, where homes and farms have gone into default, the banks have acquired them, then resold them, keeping the game going, meanwhile enriching their own holdings.
John — I agree they should be declared an illegal form of gambling. I wonder what would happen if they were all just declared null and void?
Dear Ellen,
This may be naive and show my ignorance, but a few questions. What effect does 700 billion bailout have on a deriveative market exceeding 680 trillion? If credit is created “out of thin air”, then could the process be reversed, and the credit made to dissapear? In the least, why not just have the interest on all loans from a certain time period just be wiped out, and then proceed with other measures? Are we headed for a drawn out environment of stagflation?
Thanks,
John
Dear Ellen,
What effect will a 700 billion bailout have on a 680 plus trillion dollar derivative market?]
Is there any way to reverse the process of creating credit out of thin air, into one that would destroy the credit out of thin air?
Are we headed for stagflation?
Thanks,
John
Hello Ellen,
Well, I’ve almost finished the Web of Debt, and apparently just in time. It is amazing how prescient some of the chapters are, in the light of what has happened in the past few weeks. It seems that neither the corporate media, nor any of our political candidates have picked up on the extent of the problem, and I wonder how many understand that the Fed is not a government agency, but is owned by the banks. We hear from Washington that the national debt doesn’t matter because “we owe it to ourselves”. But in truth we don’t, we owe it to the banks, increasing international banks.
Ellen, I wonder if there is a way for you to get this message out to a wider audience? Lou Dobbs on CNN has been promoting a populist movement for some time now. Is there any chance you could get on his show to discuss some of these ideas? After all, the public control of money was the core of 19th century populism, as you point out. It is missing from the current discussion, although we may get there by default (pun intended) if the current scenario continues to unfold as it has in the past few weeks.
Ellen,
I am a retired CA lawyer who revolted against the Federal Reserve years ago but have been out of the fight for some time.
I am trying to educate some of my friends here in Costa Rica and could you just give me a short and simple one paragraph of how a US Dollar get from the Fed. to the public and wo owe what to whom?
Thanks,
Rolf
Nowhere have I seen quoted who are the banks that own the Fed. Or is this a state secret?
Hi, I’m traveling at the moment with limited Internet access and am trying to get out another article, so I can’t respond properly to this blog, but thanks for writing! More later.
Hello Ellen,
I have not finished reading your book yet but thank you for the information, it is great. I knew of fractional reserve banking and what the fed was before but I was never able to see the whole picture of what was going on. I have a degree in international business and I have been predicting for years a major collapse in the dollar just from the trade imbalance and the national debt. But now I wonder if we are heading into an inflationary period or a deflationary period?
1) The argument for inflation is that foriegners will drop the dollar along with the treasury and the fed dumping trillions into the money supply causing inflation
2)The argument for deflation is the banks tightening lending requirements and no longer expanding the money supply into the economy. Won’t this cause a deflationary cycle as people scramble to repay debts with a shrinking or even a stable money supply?
I don’t have much in terms of wealth, but it would be a great help in making decisions to know which way the money supply will go. Should I hoard cash, pay off debts. Sell or rent my home, etc etc
Also what countries do not have a fiat money system? Are there any?
Ellen Thanks so much for your book and this blog. I have given a few monetary literacy talks in my community. I have added your book and blog in my blog.
I could browse only 40% of your book and agree with most things so far. I feel an aware and educated citizenry is the best protection for our freedom at home and abroad.
I have some solutions of my own..haven’t put them all especially in view of millenium goals. Do you think this crisis is staged?
http://www.infowars.net/articles/September2008/220908Reporter.htm
Please search for “deep conscious capitalism” and share my blog and articles.
A friend of mine trying to explain some economic mechanics brought up the name Robert Theobald , an avant garde economist , who was on the faculty of Columbia University in the 1960’s. He authored , “Challenge of Abundance and Free Men and Free Markets,” and edited a series of essays, “The Guaranteed Income” , publications I have been unable to find.
According to my friend, Theobald asserts that advances in technology / automation do not create more jobs but less and more leisure time. A crude example would be tilling land with a ‘digging stick’ vs using a horse collar and plow which is faster and created more leisure time.
Accepting this premise could the members of ‘modern-tech’ societies be issued a credit card , a card that would be each individuals share in a guaranteed basic income or national dividend ,issued free , beyond which they could still earn more,if desired , by an art , craft , profession , or trade that has not been displaced by automation ? Is this model practical or realistic ?
Hey Ellen,
If credit can be created ‘out of thin air’, then could not debt be destroyed in a reverse manner? If so, is this what the international banking ‘community’ is trying to do in the bailout schemes?
Thanks,
John
It could. That’s what Michael Rowbotham recommends for canceling Third World debt. It’s just an accounting entry; you only need to change the banking rules. Best, Ellen
G’day Ellen B,
I’ve just come across your site thru Rense.com. Than you for being there.
My question: What do you suppose will happen to retirement IRA’s?
I understand they are “capital guaranteed” — will this apply in the present turmoil?
We have returned to Australia after many years in the US. It took us 2 years to sell our house in San Diego area, but that is another story!! May I say, Australia, outside the bigger cities is a much happier place!!
Firstly, the basic wage here is $16.50 local dollars, so people can almost live like human beings and we don’t have millions and millions of illegals!!
What you might not know — Australia introduced the 40 hour week in ’48 and the rest of the first world followed!
I now have to convince my daughter to frequent your site — she’s a young chemical engineer (no ambition to work in ChemEng.) working for one of the big Europen banks as an MBA analyst — and will have no idea really how the world banking Ponzi scheme works!!
Thank you — DH
G-day! Yes Australia sounds lovely; New Zealand too. I’m not competent to advise on IRAs I’m afraid. My daughter is also in Europe — in Switzerland, 2 blocks from the Bank for International Settlements! The boot they call it. Cheers, Ellen
http://video.google.com/videoplay?docid=1954933468700958565&hl=es
All this is eye opening, keep up the good work Ellen. What do you think of the attached comments from Hal Turner on this Video?
Ellen, Thank you for your contributions to a general raising of consciousness!
My question is, when can we expect the next credit-default swap crisis to hit the market in a very real way? Are there timetables that we can monitor, or reports that we can look out for…in other words, what begins the market cause-and-effect with regard to the default swaps?
I recently read an article that eluded to Nouriel Roubini predicting that the market may be forced to close down for a week or two as another massive quantity of default swaps are soon to go bust. Have you read anything about this, and what do you make of this prediction? Could this have anything to do with the election next week?
And, finally, we read that Bush is “embracing the free-market approach” with regard to talks about redesigning global finance…do you think that this is merely to set him in opposition to, say, a Barack Obama “socialist” plan, as Bush is soon to be the Lame Duck and the object of all America is leaving behind. In other words, is this just slick marketing controlled from Wall Street?
Thanks Again!
Eric
Good rhetorical questions, but I’m afraid I don’t know. I’m studying up now to try to figure out what just happened today with the 900 point rise in the Dow. It looks seriously suspicious, but I haven’t nailed it down yet. Ellen
Thanks so much for your site here, Ellen. I am learning so much from it, and it so refreshing to get straight facts presented in an easy to understand manner.
I agree with you that we need a grassroots movement. I hope it gets underway soon.
Back again Ellen!
After reading your latest article (and various supporting articles) on the PPT’s role in directly manipulating the markets, my guess would be that all this talk about an IMMEDIATE economic stimulus is either supplementary or misleading. What would be the role of a direct liquid infusion into the markets if the problem is still derivative-based? Could this just be another way to finance the credit bubble overtly, seeing as how many families aren’t paying their credit bills because they haven’t enough money?
I guess the real question is, why ARE practically all the economic czars supporting this stimulus?
Thanks again!
Speaking grassroots movementwise, have you ever been on the Alex Jones radio show? http://www.infowars.com I listen to him every day,- he is very cutting edge, revolutionwise. If you’d like, I’ll call him until he invites you on as a guest. My biggest fear is that the revolution will start before you are in the forefront and that whatever changes are made will be ineffective , or else co-opted by the banksters.
Thanks Warren! I haven’t been on Alex Jones, but I’m game!
Hi Ellen!
I just discovered your site and learned about your book. I look forward to reading it!
I found your site by following a link posted at Chris Martenson’s site, http://www.chrismartesnson.com . Have you heard of Chris and his “Crash Course” befire? From reading your blog comments, and those of your readers, I think you might find it very interesting.
The goal of the Crash Course is to educate people on the convergence of 3 major issues now impacting us, including our unsustainable debt based economy (“the end of money”), peak oil, and the environment (finite esources). Chris’s theme is “the next 20 years are going to be very different from the last 20 years”.
Anyhow, if you get a chance, check it out! The Crash Course is only ~3 hours long in total (free online), consisting of 20 short (digestable) video chapters. You can probably get through the first 3 in less than 10 minutes!
Again, I look forward to reading your book!
Ellen, my apologies; I had a typo in the link to Chris Martenson’s website in my post above. It should be: http://www.chrismartenson.com/
Thanks!