Reply to AMI


Sirs: This is in response to the entry posted on your American Monetary Institute blog on August 16, 2009, which references my articles on a state-owned bank solution to the credit crisis. I was disappointed to read that you thought my proposal was “an insult to humanity,” as the idea was actually drawn from the AMI’s book The Lost Science of Money. I do quite a bit of writing and speaking, and I always follow your lead in saying the ideal monetary model is that established in Benjamin Franklin’s colony of Pennsylvania, which not only spent but lent money into the economy, through its own publicly-owned bank. The Lost Science of Money calls it “Pennsylvania’s Superior Money System.” On pages 370-71, your book quotes Pennsylvania Governor William Keith, who wrote of the province’s founding of a publicly-owned bank:

“It is inconceivable to think what a prodigious good effect immediately ensued on all the affairs of that province . . . . The poor middling people who had any lands or houses to pledge, borrowed from the loan office, and paid off their usurious creditors. The few rich men who had before this [quit] the trade – except that of usury – were obliged to build ships, and launch out again into trade.”

It is submitted that our proposals aim for the same thing – reclaiming the money power for the people themselves. We would just get there by different routes. My public bank would create credit on its books, lend it, and charge interest on it. You would have a public entity create money and lend it to private banks at interest, which would then lend it to consumers and businesses at interest. The private banks in your scheme would no doubt tack their interest costs onto the interest charged to the end borrowers, since banks are in the business of making a profit, and that is the only way they could make a profit in your system. My proposal would just eliminate the profits to the private banker middlemen. Banking would become a non-profit public service, with the interest returned to the public purse.

You maintain that publicly-owned banks are “mainly a distraction from genuine reform of the system, as encapsulated in the proposed American Monetary Act.” Indeed, much in that Act is excellent; but it would leave the determination of how much credit is available in the economy to a central planning board, when the money supply needs to be flexible, expanding and contracting organically in response to the needs of trade. The American Monetary Act gives the final word on the money supply to the Secretary of the Treasury, under the guidance of an independent monetary board. Today, that would be Timothy Geithner. Trusting Timothy Geithner to determine the day to day credit needs of the country would be the equivalent of trusting the Russian Soviet to accurately determine how many size 9 shoes its population needed. When the pot of available funds decreed by the Treasurer ran out, creditworthy borrowers would be turned away, and the economy would falter.

Ready credit is what makes an economy run smoothly, and its availability should not be subject to the whims of a political body. Credit-money is created when creditworthy borrowers take out loans. Banks merely “monetize” the borrowers’ promise to repay. As The Lost Science of Money makes clear, “money” is not a commodity but is created by legal agreement. Credit-money is created when the “full faith and credit” of the community is advanced to the borrower. The function of the banker is just to oversee the agreement, acting as the middleman who advances the funds and collects them back. Publicly-owned banks are the most efficient and cost-effective way to get ready credit into the economy. They are not a temporary stopgap measure, any more than the land bank of the colony of Pennsylvania was.

You have divided your objections to state-owned banks into two groups, “moral” and “technical,” with separate numbering for each. I will follow your numbering in addressing these points.

Moral Objections

1. You state that for a public bank to engage in “fractional reserve” lending – that is, to create credit on its books – is immoral. That appears to me to be a mischaracterization of the problem. What is immoral is the private creation of money. Both our proposals are attempting to overcome that flaw. I am just suggesting that publicly-owned banks are the most direct and practical means to that end. Congress is now owned by Wall Street, as Congressmen themselves are complaining. States, on the other hand, still have some autonomy.

2. You state that banks cannot create credit on their books but can make loans only against 90-95% of their deposits. This is no longer true. Federal Reserve data establishes that the reserve requirement is now essentially obsolete. For a detailed discussion, see Jake Towne, “Yes, Virginia, There Are No Reserve Requirements (Part 2),” August 12, 2009, establishing that “reserve requirements are effectively not in existence and easily avoided by accounting tricks in the U.S. banking system.” See also Eric deCarbonnel, “US Banks Operating Without Reserve Requirements” (March 29, 2009), stating, “Although, under current regulations, all depository institutions are required to maintain reserves against transaction (checking) deposits, the reality is they don’t.” Both articles are supported with Federal Reserve data.

What limits bank lending today is chiefly the capital requirement, and states are in a far better position to meet that requirement than private banks are. Banks must have Tier 1 capital equal to 4% of loans and other risk-weighted assets, and they must have combined Tier 1 plus Tier 2 capital of 8% of risk-weighted assets. Tier 2 capital includes several things, but the most interesting here is the appreciated value of unencumbered real assets. For a private bank, that typically means only the building that houses it; but a state has buildings, prisons, parks, etc. peppered all over the state. It has a HUGE asset base, so it basically does not have to worry about Tier 2 capital at all.

That just leaves Tier 1 capital, which is essentially the bank’s own money. For a private bank, that generally means the capital contributed by shareholders and the interest earned on loans. Again, a state has a huge amount of money of its own. A friendly regulator could count the state’s whole revenue base as Tier 1 capital. But let’s say that the state wants to dot all the i’s and cross all the t’s by actually setting aside enough Tier 1 capital to please the regulators. At 4%, $1 billion would be enough to create $25 billion in credit – virtually enough to meet California’s $26 billion budget deficit in one fell swoop. You say that this would just be a loan, which has to be paid back; but that is not necessarily the case. The state owns the bank, so it can roll the loan over as long as needed; and the interest returns to its own coffers, so the loan is essentially interest-free. The federal government has been rolling over its debt since the days of Andrew Jackson. For a state to create interest-free money on its books and roll the loans over indefinitely produces the same result you wish to achieve – an interest-free government-issued money supply. In both our schemes, the government gets the money interest-free, while private borrowers get it with an interest charge attached.

You say that only the federal government, not the states, can create money under the Constitution; but this is not true. The Constitution forbids states only to issue “bills of credit,” which has been interpreted to mean paper money. U.S. Supreme Court case law holds that a state can own a bank, and that the banknotes issued by the bank are not the sorts of “bills of credit” forbidden to the states by the Constitution. Banks no longer issue banknotes, but the principle still holds: bank-created money is not forbidden to governments any more than to private banks. We know that private banks create money. In fact, they create virtually all of our money. The ownership of the bank will not affect the bank’s ability to create credit on its books. Rather, it will just achieve our mutually desired end of transferring the power to create money from private to public control.

3. “The problem is being misidentified as interest,” you maintain, “when the problem is debt.” You argue that all money could be created interest-free by the government, just as coins are today; and that this would save the taxpayers money. I totally agree with that: Congress should issue money outright. That was the model followed in the colony of Pennsylvania, which we agree was the ideal model. Congress should create not just coins but paper dollar bills and accounting entry money. But that is a completely different issue from consumer credit or debt. You are not proposing to eliminate banks that charge interest to borrowers; you would just tack an extra interest charge on by making banks borrow from the government as the ultimate creator of credit. Under my proposed system, as in yours, the government would be the ultimate issuer of credit; but with a bank that was state-owned, the extra interest drawn off by private banker middlemen would be eliminated.

Technical Objections

1. You state that “no bank’s an island . . . If the other banks aren’t lending, a State-run bank wouldn’t be able to lend either.” Today, the other banks are not lending because they are not able to meet the capital requirement for additional loans; and this is because the “shadow lenders” have disappeared – the investors who were taking loans off their books, making room for more loans. A state-owned bank would have huge capital and deposit bases and a clean set of books, and therefore would have a huge capacity for lending as and where needed. It would not be dependent on other banks to meet its reserve requirement, which as noted above is now essentially obsolete.

2. You caution about following the model of the Bank of North Dakota, which you warn is playing with fire because it is not FDIC insured and could be subject to a bank run. In fact, the FDIC is now broke – literally. Its own funds offer little if any protection. In a few months it will have to start borrowing from the government. If the banks were owned by the government in the first place, this problem would have been obviated.

3. You say that a state bank would take deposits away from other banks, reducing the lending ability of those banks. However, the overall credit capacity of the system would not be reduced; the business would just move to the state-owned bank, as well it should if the latter can provide superior service at cheaper rates. The State of California has $17.6 billion in demand deposits and NOW deposits, which could be moved at will; and most of the banks it has them at actually turned down California’s request to honor its IOUs. Some of those banks got taxpayer bailout money specifically to keep credit flowing to the states and consumers, an obligation they have clearly failed to fulfill. California owes them nothing and has every right to remove its deposits from those banks into its own. That is free-market capitalism. More than that, it is a matter of survival. Why should we be feeding parasitic out-of-state banks that aren’t helping us in return? The Bank of North Dakota was set up in exactly those circumstances: the farmers were losing their farms to the Wall Street bankers, so they set up their own credit system to escape the Wall Street maelstrom — and it worked, brilliantly well.

4. You state that the meager benefits of forming a state-owned bank would not be worth the costs. However, you are looking at a very limited range of benefits. Let’s consider again California. With its enormous capital base, California could generate enormous amounts of credit, which could be used to refinance its existing debt; and since the state would own the bank, it would pocket the interest. California pays $5 billion yearly in interest alone — as much as some states’ whole budgets. Just that savings would make a state-owned bank worth the trouble; but a state-owned bank could serve more purposes than that. It could eliminate the cost of borrowing for income-generating projects such as infrastructure, low-cost housing, and alternative energy development. On average, interest has been calculated to compose 50% of the cost of every project. Moreover, the state wouldn’t have to scramble around looking for a loan when it needed one, knuckling under to inflated interest rates. On the question of costs, today a bank can be set up on the Internet, without even the cost of a physical building.

5. You suggest that negotiating better terms with existing banks would be more cost-effective than setting up a new bank. Again, you are overestimating the costs and underestimating the potential benefits of a state-owned bank.

6. You write, “We citizens have only so much energy and time to devote to changing our world for the better. Diverting good people into nonsense condemns us to continue suffering unnecessarily. This time of crisis must be used for real reform, not diversions.” I agree with that. The economy is in an emergency state. We cannot afford to wait for a Congress that has been captured by the same private money-creating monopoly from which we are trying to free ourselves.

Your plan represents a far more radical diversion from the status quo than mine and is therefore a harder sell to make to basically clueless politicians. A state-owned bank has already been operating very successfully for 90 years in one pioneer state, and following that model would require doing nothing different from what banks do now. How can regulators object, when we’ll be satisfying all their requirements? In fact, the shift will seem so minor that its significance is liable to be missed. Even committed monetary reformers like yourselves have apparently missed its implications and potential. Through state-owned banks that create money on their books, we can achieve what Benjamin Franklin, Thomas Jefferson, Abraham Lincoln and William Jennings Bryan all aimed to achieve: a publicly-created money supply issued by the people for the people.

365 Responses

  1. The real problem, Rick, (and others following along) is that 300 years of brainwashing and mind control by the “banksters” (City of London and Wall Street Financiers) have left most of us incapable of thinking correctly about “money” – what it is, how it functions, and who creates or controls it.

    George Orwell said something to the effect that … in a world of universal deceit, the first duty of truth-tellers is to return to basic definitions and meanings. Our would be controllers play mind games through subtle shifts in word meanings.

    No mind game is as serious as that of money, because the money-monopolists know that everything else is controlled through the gate-keepers of money. These “gate-keepers” mostly remain behind the “curtain” as in the Wizard of Oz. The curtain is the same as the “Matrix”, or the mirror in Alcie in Wonderland (Through the Looking Glass). They stay out of sight, and operate from behind the scenes. They have no need to run for high offices when their money can control those who do. And make no mistake… it does!

    So… what is this mysterious thing we call “money”?

    It is nothing more than a form of accounting – debits and credits on a ledger, or a computer. Money is nothing more than the “tokens” or “proxies” for those accounting debits and credits.

    Understand it, believe it, repeat it over and over. Get all the illusions of the “intrinsic value” of money out of your heads. It’s an illusion, created by illusionists whose purpose is to control you and your world.

    Money is a token of bookkeeping! It doesn’t matter if it is a coin, or paper dollar, or gold, or silver, or an iou. What matters is its legality and acceptance. It’s acceptance depends on its recognition as payment of government taxes and fees. When the government decrees something is money, it becomes money! It is done by “fiat”, or “decree”.

    Once we firmly establish this concept in our minds we can see the foolishness of allowing private banks to generate these “bookkeeping entries” and charging interest, or compound interest – often several times the original principal – on this newly created “bookkeeping money”. It is magic – an illusion. But it is a very profitable one for the banksters, and a very expensive one for taxpaying citizens.

    More later. Jere

  2. Rick said: “My guess is that we would see barter economies spring up long before that point. Whether that’s 20 or 100 years from now, I don’t know.”

    What we are going to see is a return to local economies and local sustainability. Just how local is open to question. Barter economies will only last until those communities figure out that “money is bookkeeping” and someone starts keeping books – debits and credits – on earnings (the value of labor) and exchanges, or trades of that stored labor for goods and services.

    Bookkeeping works far better than direct barter, and allows for a far greater division of labor and sophistication of industry. Very little industry is possible in any system of direct barter.

    More later. Jere

  3. great debate you all !!!!!
    here is more signs of dissent from the dollar as reserve currency …….

    India is buying 200 of the 403 tonnes of gold the IMF is selling.

    Click to access India%20Buys%20HALF%20IMF%20403%20Tonnes%20pdf.pdf

  4. Jere:

    “Understand it, believe it, repeat it over and over. Get all the illusions of the “intrinsic value” of money out of your heads. It’s an illusion, created by illusionists whose purpose is to control you and your world.”

    That’s exactly what I’ve done. However, I’m taking it one step further by suggesting that labor is also a form of currency (with similar relative value). Ideally, labor translates into dollars which tranlsates to goods and services.

    Labor = Money = Goods and Services

    If any part of that equation approaches zero, the rest of it follows suit. I am calling into question the viability of translating labor into money, because money is the choke point and the enabler of control. Because of that, we have an economy that is more fairly represented by the following:

    Labor=1/money=1/Goods and Serivces

    As labor grows, the rest of the equation approaches zero.

    Additionally, if we see labor as a form of currency and labor is also being rendered irrelevant through automation, it goes without saying that fixing the official currency will not fix access to labor. Populations keep rising while the actual number of jobs is decreasing and both are happening exponentially. Even with a sound state currency we are left with a “water water everywhere and not a drop to drink” conundrum. Labor is becoming no less a game of musical chairs than the monetary system.

  5. Rick, I like your thinking, but it needs a bit of sharpening. Labor in an essential ingredient in the production of all wealth. In fact, it is only one of two essential ingredients. The other is land, in the sense that Henry George used the term “land”, including the earth and all that is naturally in or a part of it.

    So all “wealth” arises from one or another, or some combination of these two basic ingredients. There are no exceptions.

    Now “labor” only “translates” into dollars (or any other form of money) if that labor results in salable (or tradeable) production of some good or service, OR someone is willing to pay for that labor.

    All labor translates into wealth if it is directed to this end. Other forms of labor end in recreation, entertainment, play, or socializing, rather than in the creation of a marketable product or service.

    I’m not at all sure of the value of your equation, but I am of this one: Wealth = Land + Labor.

    Money is a proxy or substitute for wealth in the process of exchange.

    Capital is stored wealth, or wealth that is set aside for the production of more wealth. Capital may be money or it may be other forms of stored wealth (assets) in excess of those needed or desired for consumption.

    The “rewards of labor” are only shrinking because they are being diverted to those who claim that “land” or “capital” deserve a greater share of the return on productive industry – i.e., the production of new wealth from land and labor.

    These are fairly simple concepts that have been outrageously complicated by those who do not want us the understand these basic concepts – most professional economists, accountants, bankers, and those they work for, the top tier (wealthiest) of financiers (or CAPITALISTS).

    Does any of this help? I’ll be back with more later.

    Cheers, Jere

  6. Actually, that clears up quite bit for me. Very enlightening. Thanks Jere.

    Do you not think that automation changes your equation, though? (Wealth = Land + Labor)

    Does land then become the only way for us to obtain wealth?

    I feel like we’re being thrust back to the middle ages here…

    • Indeed, we may end up being thrust back to the middle ages, or even further, depending on how stupidly we act. We must change our system in the correct ways or suffer the unpleasant consequences.

      But automation does not change the equation. It only changes the degree of human or animal labor into mechanical-kinetic labor. It’s shifts the sources of energy, and amplifies the need for machines, fuels, and other human, wind or horse-power alternatives.

      I’m trying to show you that it is those in power, or in control of the “land” and its resources that decide that workers will receive a smaller and smaller share of the “profits” from our modern industrial production. The profits have always been divided up only two ways, to the so-called “owners” of land and resources, and those who labor on the land or with the resources in order to produce something of value… wealth.

      All Capital is rightly the joint produce of land and labor. Yet the “landowners” claim it all to themselves, and labor gets an ever decreasing share. Why? Because labor has less power than capitalists (landowners).

      But how did these “landowners” come to own their land? Where did the titles to it come from? Did it come from its maker?

      Those who make property (wealth) properly claim title to it. But who made the land and all that is in or on it?

      When the first European explorers stepped on American shores and “claimed” all the lands from the Atlantic to the Pacific theirs, in the name of their sovereign (king or queen) did that rightfully make it so?

      What of the American Indians who were already here? What of those to come later? Couldn’t these usurpers just as logically claimed the entire planet for their nations?

      I hope I don’t appear to be getting off the point, because I am not. The point is “who owns the land”? Who created it? And if those who didn’t create it claim it as theirs, is that right, or just?

      Land and resource ownership is an even deeper root problem in our economy than money creation, but they are both at the very heart and soul of economics. Yet you never even hear them discussed in any economics course. Isn’t that curious?

      Yes, “curiouser and curiouser” as Alice would have said.

      Mushrooms, anyone?

    • Forgot to address this:

      “Does land then become the only way for us to obtain wealth?”

      No, you can buy wealth with money, or earn it with labor. Or you can steal it. The latter has become the predominant method. The means by which the thefts are accomplished are getting more and more difficult to detect. The confidence games and methods of fraud and deception are becoming more ingenious with each passing decade. Mortgage-backed securities, credit default swaps, derivatives of all sorts, pyramid and Ponzi schemes, and even good old commercial banking are all vehicles of very creative theft. These are all vehicles to transfer wealth from its rightful owners to thieves.

      But land is a key ingredient in the production of all wealth, and its distribution and use must be re-examined before we can get to the bottom of our most serious economic problems. The biggest of these is the vast inequality in the distribution of wealth… meaning the use of land and the fair return on labor. I do not, or ever will, advocate “equality” of wealth. That is unnatural and unachievable. There must always be material incentives for industry and ingenuity – at least until man has evolved into a higher order of being – some thousands of years from now.

      The reason I earlier recommended reading Henry George is that he explains all this far better than I can. Few people in all of history can stand shoulder to shoulder with him.

      More later, Cheers, Jere

      • Progress and Poverty?

        • Progress and Poverty is probably the greatest economic publication of all time. It surpasses and corrects Adam Smith, David Ricardo, John Stuart Mill, and even Karl Marx and Das Capital (even though George was unaware of Marx’s works when he wrote, except perhaps by word of mouth).

          Marx was correct about many things though, including the collapse of monopoly capitalism (predatory financial capitalism).

          No economics education can be considered well-rounded without reading Marx, and even to a greater extent H. George.

  7. So Marx was right then. We will be forced into communal ownership / no ownership.

    • No, no no…. He was only partly right, and like most great thinkers, partly wrong.

      Communal ownership is a terrible idea. It has always failed wherever it has been tried, and whenever. Property ownership is hard-wired into human nature.

      But “LAND” is a separate matter from all other forms of property, and even our backward laws recognize that fact. All property except land is “made” or “created” by combining labor with land (resources). It is only land, and its resources, that should be treated differently.

      The “maker” or “producer” of any property should rightfully claim title to it, whether finished goods or unfinished parts. These rightful producer/owners have rightful title (claim) to these “fruits of their labors”, and the right to sell or transfer them to subsequent owners or producers. This holds true for everything produced or made by man or mankind, whether farm produce or items made by his labors – tools, furniture, wagons, automobiles, etc.

      Land, though, is different. It is a special case, and requires special thought and consideration.

      More later. Cheers, Jere

  8. What about assets such as “air rights” (as the rights to build an elevated train or bridge over a particular building in the city) or “intellectual property”, or “royalties”? Do these contribute to true wealth?

  9. I think you missed the earlier clarifications of what is meant by “LAND” the way Henry George defines the term. “Land” includes ALL of the earth’s natural resources, including those under the land and over it, as in the air, sky, clouds or even lightning.

    “Intellectual property” is a form of labor. Royalties are simply payments for the use of copyrighted or patented intellectual property rights.

    And yes, all these are examples of some combination of “land and labor” in the Georgist sense of these terms. Again, ALL wealth is some combination of land and labor, and the proceeds or profits from wealth are distributed to those who control one or both of these elements of wealth.

    The reason labor is being shortchanged in this mix is because the power elites have monopolies over both. Both of which are unjust and immoral.

    Every man should own his own labor, and the fruits thereof. Anything else is slavery or indentured servitude. A man is not free unless he can sell his labor to the highest bidder, or direct it to best increase his own wealth.

    Land and the natural resources thereof should be apportioned according to some scheme of “fair use”. Some fair portion of the natural resources (mineral, oil, gas, gold, silver, etc) from the land should go to the commonweal from which it is taken.

    (In my utopian world convicted criminals would not be warehoused at taxpayer expense, but would work to at least earn their keep, if not produce a surplus. Farms and mines could be suitable occupations for at least a portion of the time criminals had to spend in lockup. We are a long way from having such a self-sustaining prison system, IMO, but we could begin planning for it. Imagine Bernie Madoff digging gold out of a mine to repay his victims some small bit of what he stole, or sending hand-picked farm veggies to people he made homeless 🙂

    But I digress…

    Certain of what you call “assets” or “rights” (such as building elevated trains over city buildings) I would call into question. Again, the question mark is raised by the division between produced or manufactured, man-made property (or “assets”) and natural resources like oil, water, air (or rivers and oceans as particular instances of these).

    I don’t think men (or any particular individual men) have any right to claim permanent ownership over God-created land, sky, air or water, or any other natural resource. Would it have been equitable and just for Adam and Eve to claim ownership of the entire Earth just because they were “the first ones here”? Should everyone subsequently born on earth have to pay rent to Adam & Eve (or their heirs or assigns)?

    What right beside raw power gave title to the land in North America to the European settlers? Your answer is that there was none. They took title to the land and divided it up among those new settlers as they saw fit, or found profitable.

    But I could go on indefinitely. The point is that wealth is inexorably tied to land and labor, and money is just a temporary token for the exchange of wealth – a bookkeeping entry of some sort. The ruling super-rich elites have used a false concept of money to transfer (steal) the commonweal(h) of this (and all other) nations to the point that they can buy and sell congressmen, senators, judges, and even presidents.

    The window of opportunity to fix this money problem is closing. It may have already closed. It may have to collapse before it can be rebuilt.

    That’s it for tonight. Cheers, Jere

  10. “The richest 5% in every nation, rich and poor, North and South, East and West, now own between 70% and 95% of their own countries.”

    Land monopoly (plus private inheritance) is the very back bone of rule by the rich.

    Winston Churchill: “Land Monopoly is not the only monopoly, but it is by far the greatest of monopolies – it is perpetual monopoly, and it is the mother of all other forms of monopoly.”

    Here is (part of) “Archimedes” by Mark Twain:

    “It is evident that he was an over-rated man. He was in the habit of making a lot of fuss about his screws and levers, but his knowledge of mechanics was in reality of a very limited character. I have never set up for a genius myself, but I know of a mechanical force more powerful than anything the vaunting engineer of Syracuse ever dreamed of. It is the force of land monopoly; it is a screw and lever all in one; it will screw the last penny out of a man’s pocket, and bend everything on earth to its own despotic will.

    Give me the private ownership of all the land, and will I move the earth? No; but I will do more. I will undertake to make slaves of all the human beings on the face of it. Not chattel slaves exactly, but slaves nevertheless. What an idiot I would be to make chattel slaves of them. I would have to find them salts and senna when they were sick, and whip them to work when they were lazy.

    No, it is not good enough. Under the system I propose the fools would imagine they were all free. I would get a maximum of results, and have no responsibility whatever. They would cultivate the soil; they would dive into the bowels of the earth for its hidden treasures; they would build cities and construct railways and telegraphs; their ships would navigate the ocean; they would work and work, and invent and contrive; their warehouses would be full, their markets glutted, and:

    The beauty of the whole concern would be
    That everything they made would belong to me.

    It would be this way, you see: As I owned all the land, they would of course, have to pay me rent. They could not reasonably expect me to allow them the use of the land for nothing. I am not a hard man, and in fixing the rent I would be very liberal with them. I would allow them, in fact, to fix it themselves. What could be fairer? Here is a piece of land, let us say, it might be a farm, it might be a building site, or it might be something else – if there was only one man who wanted it, of course he would not offer me much, but if the land be really worth anything such a circumstance is not likely to happen.

    On the contrary, there would be a number who would want it, and they would go on bidding and bidding one against the other, in order to get it. I should accept the highest offer – what could be fairer? Every increase of population, extension of trade, every advance in the arts and sciences would, as we all know, increase the value of land, and the competition that would naturally arise would continue to force rents upward, so much so, that in many cases the tenants would have little or nothing left for themselves.

    In this case a number of those who were hard pushed would seek to borrow, and as for those who were not so hard pushed, they would, as a matter of course, get the idea into their heads that if they only had more capital they could extend their operations, and thereby make their business more profitable. Here I am again. The very man they stand in need of; a regular benefactor of my species, and always ready to oblige them. With such an enormous rent-roll I could furnish them with funds up to the full extent of the available security; they would not expect me to do more, and in the matter of interest I would be equally generous.

    I would allow them to fix the rate of it themselves in precisely the same manner as they had fixed the rent. I should then have them by the wool, and if they failed in their payments it would be the easiest thing in the world to sell them out. They might bewail their lot, but business is business. They should have worked harder and been more provident. Whatever inconvenience they might suffer, it would be their concern, and not mine.

    What a glorious time I would have of it! Rent and interest, interest and rent, and no limit to either, excepting the ability of the workers to pay. Rents would go up and up, and they would continue to pledge and mortgage, and as they went bung, bung, one after another, it would be the finest sport ever seen. thus, from the simple leverage of land monopoly, not only the great globe itself, but everything on the face of it would eventually belong to me. I would be king and lord of all, and the rest of mankind would be my most willing slaves…

    read the rest of Mark Twain’s “Archimedes” here – at a site that is one of the world’s greatest hidden treasures:

  11. How to steal everybody’s everything and get away with it:

    First thing you hijack is the language the people use.

    You re-name what is actually the commons, the common heritage, the earthly gifts given to all equally by whatever it is you think created us, the work done for everybody in common by mother nature – the commons – you rename this “natural resources” and get everybody to use that terminology.

    you do this because the commons obviously cannot be owned

    but resources can.

    bingo. now you can own the earth and all the works of man upon it.


    • Excellently put — language shapes reality! We just need to rewrite the whole thing.

      • Linked you to a great NY TImes article from 6 Dec 1921, in which Thomas Edison makes beautifully succinct and clear argument for what we’re trying to do. He and Henry Ford were arguing that the government should issue its own currency for public works projects. Edison destroys the gold-standard and the concept of Federal Reserve notes with ease and grace. I certainly admire how he’s able to simplify the message.

        Perhaps we should all take note of Edison’s approach when explaining to our friends and neighbors.

        • Edison and Ford were both fans and advocates of Henry George’s economic philosophy, as was Samuel Clemmons, (Mark Twain) and hundreds of other 19th and early 20th century notables.

      • James Joyce wrote something like… ‘the war is in words and the wood is in the world’. I think that’s a warning (disguised as only JJ could and did) that language can get us far from our reality, from what’s really real, from what really matters. (I have the idea that we humans started letting error in when we first learned to prefer (this was our (inevitable) fall from grace, this was our leaving Eden), when we departed universality and began to think in particulars, divisions – and began naming things.) Anyways, I’m working up some hopefully helpful stuff to put in the forum, about unhelpful versus better words and memes for reformers to think about and use if they see fit – plus some handy specifics on engineered manipulations that have been perpetrated against the people. (Anybody else here read the Frank Luntz propaganda playbook that got leaked a while back?)

        Meantime… I’m daring to post a delicious language treat below – because we reformers do hard work for humanity’s good and carry the burden of knowing what all should know, and our lives deserve to be brightened by great delights (especially ones that inspire us to persevere) – or we have missed the whole point of living.

        Please don’t try to understand this excerpt – much better to just let it wash over you. Read it slowly, out loud to yourself is good if you like. (there are no typos. This is from James Joyce’s immensely important masterpiece Finnegans Wake – and JJ will forgive me the license I have taken in editing it… because me n JJ are having a language and lifelove affair)

        Awareness is on the rise, Friends. Truth is getting her boots on, climbing out of her dungeon. The human tribe…the Finnegans…are waking…so, enjoy, Monetary Reformers:

        “You mean to see we have been hadding a sound night’s sleep? You may so. It is just, it is just about to, it is just about to rolywholyover. Of all the stranger things that ever not even in the hundrund and badst pageans of unthowsent and wonst nice…to be have happened! The untireties of livesliving being the one substrance of a streamsbecoming. Totalled in toldteld and telltold in tittletell tattle. Why? Because, graced be Gad and all giddy gadgets, in whose words were the beginnings, there are two signs to turn to, the yest and the ist, the wright side and the wronged side, feeling aslip and wauking up, so an, so farth. Why? It is a sot of a swigswag, systomy dystomy, which everabody you ever anywhere at all doze. Why? Such me. Where did thots come from? It is infinitesimally fevers, resty fever, risy fever, a coranto of aria, sleeper awakening, in the smalls of one’s back presentiment …a flash from a future of maybe mahamayability through the windr of a wondr in a wildr is a weltr as a wirbl of a warbl is a world.

        It is perfect degrees excelsius.
        Anemone activescent the torporature is returning to mornal. Humid nature is feeling itself freely at ease with the all fresco.”

        Lots of fun at Finnegans wake!
        Love soft fun at Finnegans Wake?

      • As good as your solution is, Yours and AMI’s proposals seem to keep the concept of making money with money using “compound interest” which grows exponentially while economies do not. Interest as a substitute for taxation may help govt’s fiscally but does less for average Americans still stuck working years paying amortized interest.

        In additional to municipalities, would not the easiest idea for reform be to simply cut banks out of the middle of mortgages for credit worthy Americans? Repeal the Fed Act and refinance everyone using the 0.5% discount rate banks get but for 30 years. One each and you have to live in it.

        Most direct interest expense is mortgage. We already own everyone’s mortgage already anyway (Freddie/Fannie, and the toxic waste that Obama/Congress allowed onto the Feds books, marked to fantasy).

        Imagine the purchasing power from drastically reduced cost of interest. Wealth distribution would be more even. If we incentivize US and service sector spending, we would have full employment and a much higher standard of living for most. . We Americans like to spend so with expenses reduced drastically, money would go to purchases and better yet, personal services. Wages would rise and the real economy would do very well.

  12. Look at the land dispute in Israel. When certain land is regarded as “sacred” such as the Temple Mount / Western Wall, it should be internationally owned, or better yet, mutually agreed not to be owned by anyone on this earth, ever.

    Having said that, we seem to do better as territorial peoples, as compared to nomadic tribes. Territories need to be guarded, governed and defended, lest the young and weak are not provided for.

    In Illinois, as well as many other places, much of the farmland is owned by the insurance companies. Right now we are loosing control of our food supply, and could be headed for disaster on that front.

  13. Land and Money are the two ultimate monopolies that plague humanity. They feed off each other, and both must be ultimately remedied in order for any reform in the other to stick.

    I’m now concentrating on money only because I think the people will wake up to that monopoly first, because of the economic crisis and collapsing dollar.

    But money cannot be lastingly repaired if the monopoly in land and resources (the Earth;s natural wealth) is not also repaired. Henry George explains this best in “Progress and Poverty”. It is quite simply the best economics book there is, and one of the easiest to understand.

    The ownership and control of land, like money, has been rapidly concentrating in the top 1 % of the wealthiest people on the planet. That single fact is going to make serfs of nearly everyone in the world within a few decades, at the most… unless we reverse the trend.

  14. As you know, 1% own most land and money for the same reasons – the money system and the historically corrupt concept of compound interest.

    If you haven’t already, I recommend reading

    • Michael Hudson is one of the rare economists who write to earnestly educate and inform, rather than use econospeak to cloud and confuse the issues, and make them more unintelligible.

      Kudos to Professor Hudson! A refreshing voice of sanity in a nutty world.

  15. Here is an example of Compound Interest growing at unsustainable rates as the jesters show in Chinese actions during President Obama’s visit …..

    How can the American People pay for 2.5 trillion Health care Reform , as Judd Greg said on CNBC , and this massive China Debt thats growing ever so rapidly ?????

    China owned $799 billion of our Treasury debt as of September. That’s up from $618 billion a year earlier and $468 billion the year before that. About 61 percent of the Treasuries traded in the marketplace, as of mid-2008, were in foreign hands. And now, China has surpassed Japan as the largest foreign owner. That means they control the purse strings.

    Heck, China is such an 800-pound gorilla in our debt market, they don’t even have to dump their existing bond horde to send prices plunging and interest rates surging. They can just step back and buy fewer bonds at auction!

    China knows this. What’s more, the country’s leaders are so confident in their position of strength that The New York Times reported the following about the China-U.S. trip …

    “In six hours of meetings, at two dinners and during a stilted 30-minute news conference in which President Hu Jintao did not allow questions, President Obama was confronted, on his first visit, with a fast-rising China more willing to say no to the United States.

    “On topics like Iran (Mr. Hu did not publicly discuss the possibility of sanctions), China’s currency (he made no nod toward changing its value) and human rights (a joint statement bluntly acknowledged that the two countries “have differences”), China held firm against most American demands.

    “With China’s micro-management of Mr. Obama’s appearances in the country, the trip did more to showcase China’s ability to push back against outside pressure than it did to advance the main issues on Mr. Obama’s agenda, analysts said.”

    • This all depends on us paying China back. We print money, run up the debt, hide our defaults (toxic waste), while China and others must continue to buy our treasuries to maintain their currency peg to support their export sector, propping up the dollar. We get to keep interest rates near zero which helps Wall Street borrow artificially cheap dollars to invest in Chinese assets (carry trade) and they have no choice but to weaken their currency to maintain their peg. They give us money, Walmart, wind turbines, solar panels etc. We give them dubious promises that we will pay them back.

      To reduce the amount of US treasuries they must buy, China prints RMB as well and spends it as fast as it can subsidizing industry, increased export capacity, access to resources and many mal-investments. If they stop, it will result in our inflating our way out of our debt to them and we might very well not pay them back at all. They won’t be able to do much seeing we spend so much of the money they give us on our military.

      So we do finance and military things, promote asset inflation bubbles. They produce, we extract. It’s why we keep inventing new ways to carry more debt and sell it to them (hello derivatives and fiscal deficits). No wonder Cheney said “deficits don’t matter”.

      Explains why Obama is so much like Bush on military spending and Wall Street.

      This logic suggests we should spend as much as possible on everything we can think of so long as China is our banker. Crazy? Yes but this seems to be our course.

  16. Wall Street has been transferring money, wealth, productive assets, and investments to China and India for Decades. That process is mostly complete now. All presidents, including Obama, are pretty much hostage to the events the Wall Street and City of London Banksters have created. It is Wall Street, Bernake, Sommers, Geithner, et al, who are actually running things – or are at least the visible faces among those who are running the world… and that includes China, Russia, etc.

    Whatever appears “logical” to us is at least 5 moves behind their global strategy. It’s almost senseless to try to make sense out of it all.

    The important thing to remember is that “they” (Wall Street, etc) have control of the giant vacuum that is sucking all the wealth out of the people in every country, and funneling it up to their coffers and vaults. The wealthiest 0.01% have title or control of almost ALL of the wealth of all kinds anywhere.

    And it is because THEY run the “magic money-machines” and collect the compound interest from them.

    It’s past time for the people to take back their money and their governments.



  18. Jere’s comments above are among the more constructive ones I have come across on the Web of Debt site.

    A year or so ago, I searched the AMI site for arguments which represented the ideas then prevailing as to how and why it was necessary that the creation of fiat currency must occur at the federal rather than state level. Frankly, I was a bit confused as there seemed to be bias in favor of a model somewhat similar to a modification of the current system in the USA with control of the central bank within (?) the federal system rather than by the ‘reserve’ banks.

    Ellen Brown’s current response Jamie Walton’s blog is as far as I have been able to follow the apparent controversy. In a searching for responses to this blog, I would appreciate a little help. Can someone direct me to follow-up blogs by Jamie Walton, Stephen Zarlenga, or others which present counter arguments or has Ellen Brown’s current blog sort of settled the issue among blogers for the time being?.

  19. It’s been quite some time since I posted here, and we’re no closer to stopping the hijackers in their destruction of the US.

    I had contacted the American Monetary Institute to see how their progress is. Today Stephen Zarlenga called me at my home. Seeing I am a Dr. (ret.), perhaps he smelled some money he could possible get from me.

    We talked a few seconds when I realized that he was not my cup of tea. He believes my negative views of the Kenyan prez were not to his liking. Also he badmouthed the Tea Party demonstrations. So I told him there was no point to our going on, and we hung up. He believes he can get monetary reform before Congress, that I should read his info and buy his book, but I told him that is what has been going on all my 72 years in the US. Buying books and talking is not what is needed right now. We need some proaction, not the usual reaction when it is too late to do anything.

    With the catastrophic Gulf oil gusher and the forebodings about 2012 happenings, perhaps we don’t have much longer to be debating anyway. I hope we’re wrong about the Marxizing of Amerika. Perhaps things are rosey and we have nothing to fear. That would be nice, if real, huh?

  20. Dr. Brooks,

    While I share in your concern about the current economic system and a potential collapse of some form, I have to part ways with your analysis of the current direction of the country, particularly with respect to the Tea Party movement. Though I hesitate to declare that all tea parties are equal, there are common ideological denominators to be found.

    At its heart, the tea party movement is a laissez faire movement that ignores the reasons for challenging that system throughout the last 150 years of our history. The tea party considers any and all government interaction or regulation within the economy to be radical, tyrannical Marxism. Quite the contrary. The only radical redistribution of wealth has been upward, with the major banks at the reins committing the largest theft of wealth in human history.

    If anything, we have entered an era of state capitalism where the lines between government and business continue blur. The government is choosing to distribute goods and services primarily through a private sector, for-profit proxy. In fact, a strong argument can be made that state capitalism is a better description for what the 20th century called communism and that the world has yet to see true communism on a large, national scale, simply because the working class has never been rendered irrelevant.

    Just as Marx predicted, though, capitalism is rapidly negating the working class via technology. Technology has enabled both the outsourcing of industry and an accelerated pace of automation while real wages fail to match the rise in productivity. The financial mechanisms of our economy have become ends unto themselves and the only wealth-creating tool we have left is casino capitalism. What is not yet clear is whether Marx was correct about a proletariat uprising and a subsequent communist utopia. I tend to believe that we are more likely to see a return to sustainable, self-contained, locally-based economies–perhaps with some form of communal ownership such as a system of coops.

    As for the tea party, I have only my experience with local movements and individuals. Though their anger and frustration are are justified, their diagnosis is 180 degrees off the mark. More than anything, they are a cultural movement that represents a backlash against inevitable cultural change brought on by a metamorphosis of the economy and the American demographic. My experience with the tea party has been that they tend to believe any whisper campaign that lands in their inbox and that it is driven by a subtle, and at times overt, form of racism–lest we forget that the tea party’s roots can be found in claims of fascism and tyranny born of residual gutter politics and rumor from the 2008 campaign, long before the current administration took office. The fact that a major political movement and party has embraced the nativist legislation in Arizona, which was written by a member of FAIR (Federation for American Immigration Reform) should speak volumes. FAIR is listed by the SPLC as a nativist hate group with fundraising ties to the Pioneer Fund, a white supremacist organization. Such a popular reaction is not unheard of, nor should it be unexpected. History has shown us repeatedly that times of struggle often make it en vogue to target lesser groups within a society, be it by ethnicity, religion, political affiliation, or some other minority status. One of the most recent examples is the chain of events that led to the conflict in the Balkans, which was preceded by high levels of debt, the dissolution of industry, a collapse of confidence in governmental institutions, and several years worth of dehumanizing rhetoric in media outlets. In short, the Tea Party is a predictable, albeit misguided and disturbing, political reaction to the American debt trap, of which Helen has written so extensively. And should their economic and cultural ideologies be realized, I believe it will ultimately end American capitalism.

    That is not to say that the current administration does not represent a fundamental change in American democracy. The fact that there is so little daylight between the current and former administrations in terms of policy, if not justification, is the most telling sign. The incestuous relationship between government and big business forbodes a withering of repsonsive, representative democracy. As Hedges describes in his latest book, “Empire of Illusion: The End of Literacy and the Triumph of Spectacle,” the era we have entered is more akin to what he calls “inverted totalitarianism,” where totalitarianism is not personified by one person at the top of a political hierarchy, but in the anonymity of the corporate state. In short, corporations, specifically the banks, have grown more powerful than the government, which is why neither party will enact substantive, systemic change and why you have been waiting 72 years for something more than a book or a debate.

    Kind Regards,


  21. This is the best most thought provoking website to date,I’m thrilled to death I unearthed

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  22. Come on Money Reformers,

    Debating how to reform is a great thing and a conversation that should be on TV more, but questioning each others intentions and calling each other a names is unproductive.

    As you may know I am more on the side of separating the activities of profit making loans and money creation and leaving banking to the private sector, but I admire the work on this blog and the other great work of Web Of Debt.

    Working together is so important rather than discrediting each other.

    I call for more synergy and co-operation between different reforms.

    As our reforms go more mainstream by the day, it is important to have a portfolio of reforms to debate and model, and public banking as well as AMI have to be up there.

    I have just created a YouTube channel to leverage my influence with bankers on banking reform.


    If anybody wants help with spreading the message contact me on my blog

    Simon Dixon

    PS Keep up the great work


    Ellen Brown: “My proposal would just eliminate the profits to the private banker middlemen. Banking would become a non-profit public service, with the interest returned to the public purse.”

    1- The AMI solution does not eliminate private banks. In this aspect, it is less radical than Ms. Brown’s solution.

    2- North Dakota has private banks. Their solution works for them.

    3- Ms. Brown’s discussion of capital requirements are very convincing, meaning that other states already have the required capital to create banks.

    4- I prefer that the private banks be eliminated, for the reasons given by Ms. Brown. Also, and more importantly from a long term view, the private bankers will ALWAYS try to control the money because it is so profitable. They are like a recurring infection in the nation and world.

    5- The danger of state banks is politicization, i.e. friends of the politicians get money, typically as loans, enemies do not. Once the private banks are eliminated, the private bankers will turn to the politicization of the state banks as an excuse to return to the private banking money-as-debt system.

    6- The question is how do we prevent the politicization of the state banks?

  24. Answer: In the case of the United States, at both the federal & state level, that the state banking function become a fourth and separate leg of government. It should be independent as is the judiciary.

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