MORE THAN ONE WAY TO RECLAIM THE POWER TO CREATE MONEY, August 28, 2009
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.
WEB OF DEBT BLOG 
Please tell me who “George” is, and what are Georgist institutions?
David, A Google of “Georgist institutions” brings up over 21,000 results, and would have instantly answered your question. 😉
Henry George, the author of “Progress and Poverty”, (1879) may have been the most profound self-taught economist-philosopher of all time, or at least among the top tier. He was mainly interested in social and economic justice, and sought the reasons why so much poverty seemed the most rampant in the midst of the greatest material progress, i.e., the largest urban centers, where industry and trade flourished.
He criticized and corrected errors and omissions by Adam Smith, David Ricardo, and John Stewart Mill, among many others. He advanced the Land Value Tax as the single best solution, even today, of the nightmare tax code that today burdens an oppressed and shrinking middle class.
The Land Value Tax, or LVT, would do much in the way of peacefully and gradually redistributing some, if not much, of the wealth that our current system of monopoly capitalism has unfairly taken from laborers. Laborers (workers and entrepreneurs) ) are the real producers of all real wealth. Our current system is geared to divert the rewards of real wealth production that should go to the workers into the hands of those who monopolize land. They do this by virtue of the “community enhanced value” of the land’s location.
Like money, the mechanisms behind this exploitation are hard to see until after the veil is lifted. George’s books and the institutions that have arisen, like Schalkenbach, explain this mechanism, and why taxing the UNIMPROVED value of land would solve many of our economic problems. Reforming money would solve many others. Reforming them both would allow solutions for most of the world’s other serious problems, such as hunger, disease, environmental pollution, climate change, and so on.
You might still want to try that Google search, even after a windy reply like this! 😉
UMKC of all places! I live in Omaha, NE, only 3 hours away. I will definitely check them out.
Anybody heard anything about the University of Massachusetts – Amherst? I’ve been pointed to them by those who believe it is a “liberal” institution (not that monetary reform is either liberal or conservative; that was my code word for being out of the mainstream).
Radcliff is also supposed to be pretty liberal. California Berkeley? (sp?)
I think we should return to this very serious subject matter. For those of us who have invested their time, money and effort into money reforms this is as serious as war and peace, or life and death. Future generations, including our children and grandchildren are depending on us to do the right thing on economic reforms.
I’d just like to remind those following this discussion that Ellen Brown’s book, Web of Debt, has nothing in it about state banking. It was essentially about federal banking reforms (the FRS and FRA). The state banking articles were developed out to the necessity of the money crisis in California, Ellen’s home state.
These articles, whether the AMI likes them or not, were very creative and workable (IMO) solutions that could have and should have been adopted. Had they been used they would have saved the taxpayers in California untold billions. And another 47 states are in similar dire straits while our federal gov’t sits on its hands and does nothing.
If even one or two progressive states were to adopt something similar to Ellen’s state banking proposals the federal reform efforts and the AMA would be far more likely to happen.
Would it be more likely for the people of this nation to get behind the public banking reform effort in ONE STATE, so that it might pass, or overcome the enormous death grip the “Money Powers” have over our federal system?
Think about it. Moving one state Vs the entire nation. Which is more likely?
Thanks Jere. Actually I did discuss the Bank of North Dakota and the option for states to own their own banks in the postscript to the 3rd edition to Web of Debt. You need my free ebook! I’ll send it.
Thanks Ellen! I have an earlier ebook update to the 2008 edition, but I guess I missed this latest one. I’ll download it now. You are appreciated for all you do.
Then maybe we should make an assessment of which state is both most needful and most open to the idea of (state level) reforms and concentrate our efforts there. Off the top of my head I would suggest Ohio because of its economic difficulties and having Dennis Kucinich as a well known representative. I don’t know how bad off Vermont is, but Bernie Sanders may well be amenable to our monetary reforms. Vermont also is good because it is relatively small geopgraphically and population wise. Doesn’t Iowa have a rather large progressive constituency? Maybe Massachusetts
Yes, people in Vermont have expressed interest, and in Michigan, Florida, Washington State, Georgia, and New Mexico. Would you like to join our public-banking google group?
Sure Ellen. Did I see that in the forum here, or what specific google group is it?
It’s actually small and invitation-only, but anyone who gets this far down this blog and interested is a candidate! I’ll send you an invitation.
Which state has the most open to reform governor?
Maybe Washington State, although someone called me today from Florida with promising developments.
Ellen, here is a copy of what I posted to the AMI blog. I just want you to understand I see your position and I get it. You have a valid argument.
Jamie,
Great article! You never let me down. Gordon has kept me up to date on the debate between the AMI Federal solution and Brown’s State-by-state solution. Of course I know them both well. My name is credited on the AMI act!!! And you know full well my stance. I do believe that the federal solution is the BEST solution.
But here is my only critique. As we all know the fractional reserve process is an immoral yoke around all our necks. Taking on debt to have a money supply…whether it be to private or public institutions is to me a repugnant idea. But what Brown has suggested fits a hole that AMI has yet to tender a viable solution. The State bank idea eliminates the GAIN from fractional banking to private institutions and returns it to the people. Even though AMI proposes to create money debt free –and so it does—the act does nothing to stop debt free money from being fractionally expanded by the commercial banks thus generating great GAIN to the banks. This is a cold hard fact.
Your case point number 3….argues that it is not about the interest but it is about the debt is only true to a point. Whether the money starts out as debt or ends up as debt that is fractionally expanded you ALWAYS end up at some amount of interest extraction spread over time that mathematically outstrips the money supply itself. AMI’s contestation with Brown is thus MOOT!
Brown’s position of various state run banks does in fact cure this phenomenon of extraction where AMI has yet to address. I have read Fisher’s book on the 100% solution have found it silent on a solution for fractional expansion which is why Henry Simons backed away from it. Fisher like AMI proffered that only loans could be made from savings accounts as a half-hearted strike against the money power. But this does absolutely nothing to stop fractional banking. That is a cold hard fact. Still, I am a proud backer of Fisher and AMI.
I think personally, in the end AMI is going to lose the argument with Brown and her supporters for the hearts and minds of any who would be influenced by the monetary reform community based on this structural gap as I have outlined. AMI should work on a solution that is defendable rather than defending its status as the moral and constitutionally legal foundation to reform. Times change. Laws change. And it is quite apparent that the constitution has been greatly weakened. If we took a stark examination in just exactly how many ways the constitution has been usurped I think we could hardly imagine the government once framed by it. The constitution sadly, is somewhat of a relic. Not progressive but ‘aggressive’ politics across the spectrum has seen to this.
The future doesn’t rest on the past. It is to be framed by the rational or undone by the worst of human avarice. It is our choice.
AMI, I support you, but I wait for you. I have been waiting for close to 5 years now. My critique today is the same as it was when I was working to find the language to put in the AMI Act that cured just exactly what I have addressed here. I failed to find it then and clearly outlined my concern then. I reiterate it today. I am proud to be named on the act. I am proud to have played a part in the most important question of our time outside perhaps the environment. I am proud to tell everyone I know about AMI. But I ask……
When is AMI going to provide a full solution that is defensible beyond rhetoric?
Thanks Gregory, you said that so well! I don’t see it on the AMI blog though. Would they be filtering the posts?
Oh yes. They are heavily filtering posts. See my next comment.
I reposted it to AMI. We will see if they leave it up this time!
They haven’t posted it yet, nor have they posted my comments on Ellen’s posts there. Nor has AMI responded to my email inquiry asking why I was turned away from the 2009 conference.
BTW Gregory, I thought your response to my money reform blog was outstanding. Thank you. People can read it here:
It has been over 4 days since I posted two comments on the AMI blog in response to Ellen’s posts there. Neither of them has been allowed. They were “held for moderation” for a few days and now they are simply gone. Apparently the comments there are being heavily screened and only those that are favorable to the AMI position will be posted.
Since AMI will not post my comments I will re-post them here, exactly as they were:
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In re Ellen’s 1st post:
Jere Hough Says: Your comment is awaiting moderation.
August 31, 2009 at 8:52 pm | Reply
I concur in all that Ellen says here, and on her blog site. I would only add that some of the disparaging comments made against the state banking concept have been unfair, unkind and demonstrate a lack of understanding on Dr. Brown’s actual positions. There is no reason to portray this as an either/or dichotomy. It is not a zero sum game wherein if I win you lose. This is largely an issue of public education and awareness, and the more fronts we use and the more people we recruit the faster this will happen. If it does not happen fast, I fear it will not happen at all. It may be beyond the point where it can happen now. Community and local action may soon be all that is left to us.
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In response to EHB 2nd post (that should have been 1st):
Jere Hough Says: Your comment is awaiting moderation.
August 31, 2009 at 9:03 pm | Reply
I agree with Ellen. Stephen Zarlenga and his book “The Lost Science of Money” brought an epiphany to my lifelong search to get to the source of our economic and political problems. I regard him as one of the most influential people in my 70-year life. I’ve read and reread every word of “Lost Science” and spent most of my waking energies on educating people about this urgent need for reform, largely in helping Ellen maintain her blog and forum, as well as my own. We really need to keep open minds and discuss the best ways to achieve our mutual objectives. Division and discord are the tools of our enemy. We should think long and hard before imitating them.
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Neither of these comments were posted by the AMI blog.
Pretty terrible comments, huh? Anyone should be able to plainly see why they would be rejected by AMI, right?
Wrong. One of these posts extols high praise to Zarlenga and AMI. I’ve never had anything BUT praise for their positions and work, until now. Both comments disagree with the AMI position, but do so respectfully, IMO.
Am I wrong? Would an objective person or observer see cause to reject these comments? What am I missing here. Please help me out on this issue, because I am stumped.
Ellen – with respect, there are a few technical details of the AMA that you’ve misread here. I know exactly which line of the AMA has led to the confusion, and I’ve highlighted this to Jamie and Stephen, so that it can be clarified in due course.
In contrast to what is said above, the AMA specifies that the government creates money, and distributes it to the people. It does not funnel the money to the people via private banks – there is no ‘middleman’. Rather than the banks borrowing the money from the government, they will need to borrow money from the public (who in turn received it DEBT-FREE from the government via the salaries of public sector workers).
The differences between the AMA and the state-banking options are huge. The state-banking option still requires people to pay interest merely to borrow the means of exchange. In contrast, the AMA puts money into the economy without simultaneously creating debt.
The real difference is this: under the existing system, bankers own the world and the people own nothing. Under state banking, the state-governments will own the world, while the people still own nothing. In contrast, the AMA gives (note, GIVES, not lends) money to the people so that they can actually accumulate wealth.
Regarding which is more democratic, I would argue that – despite first impressions – the AMA is actually far more democratic. Under the state-banking option, a network of government bureaucrats get to decide what gets funded and what doesn’t – in order words, who is allowed to buy what. While the AMA gives the decision on monthly money creation to a panel of ‘experts’, once that money is granted to the government, it is then distributed by millions of public sector workers (both at Federal and state level), as they spend their salaries into the real economy. Note that this is real debt-free money, not money that has to be repaid.
Once that money is in the economy, it belongs to the people – not to the government, not to the bankers, and not to the state banks either. Under the state-banking proposal, money will never belong to the people – it will always belong to either private banks or state banks. Which is really most democratic? Which really puts most power in the hands of the public?
The truth is that there are fundamental differences between the two proposals, and each proposal would have a very different effect on the economy. If either proposal was passed it would have huge implications, so debating which one is the most beneficial for society is no small matter, and it’s important to be accurate when we’re comparing the two proposals.
I will be at the AMI conference as well so I hope we get time to discuss further.
Ben,
In response to your explanation as to the general position of AMI with respect to the government creating money debt-free by spending it into existence, I believe Ellen as well as everybody else has sufficiently paid due homage to declaration as set forth by AMI and the act. Do we really have to prove that we are all believers of this any further? We certainly don’t need it explained to us anymore. You wrote 6 paragraphs outlining what we already know.
The ONLY difference with respect to debt-free money that AMI and Ellen has is that she sees that debt-free money must be spent into existence to cover the interest deficit in the money supply that a public bank would cause by lending money into the money supply as a form of debt. Now, in reality, spending this money into the money supply is a superfluous step. Perhaps she is tipping her hat to AMI or doesn’t understand why spending money into existence loses all meaning when you can lend it in to existence at the government level. The peoples’ need for money is met either way. If you think about that you will understand that. All that interest extraction by the government does is lower taxes for every non-borrower!!! As interest takes the place of money extraction from taxation. Am I the only person that sees this? So I am not sure why Ellen has bothered to concede this point as it isn’t needed in a state model of banking. However, I would assume that in times of slow borrowing it would be useful stimulus tool to be able to spend money into existence. In this vein I would certainly aspire to keep it in the back pocket of the monetary control board tool belt.
What we need form AMI is not more rhetoric but an unassailable operational model to the END of commercial expansion of the money supply. As I have outlined in my critique. AMI has failed this mission. Even in your letter, again you offer nothing to the system by which M2 expansion is controlled. Savings accounts and tagging will not work or will cause more problems.
Also I would warn you about getting mired into the debate about whether AMI’s Act is more democratic than the state banking model. The Peoples’ various definitions of “democratic” have not only been warped they have been almost seemingly sidetracked into free market propaganda. I don’t think Ellen has proposed that we shut down the government and let the banks run wild even though it might appear that way considering that I have not read any comments by what authority these institutions would be regulated or by what measure they would be allowed to expand the money supply. Perhaps I missed it. I know she mentioned a Tobin tax and I would assume that she would promote some kind of central authority. But I will wait for clarification.
If you really think about it, it is more of a question of central planning versus decentralized planning anyway. AMI (besides failing to end commercial expansion of the money supply) has failed to express the decentralized aspect of the economy and Ellen has failed to describe the democratically appointed control measures by which the banks must surrender their sovereign control of the money supply. Bankers certainly have proven they can’t control themselves and can’t be trusted. I don’t care if that gets in the way of somebody needing to borrow some money. Maybe that money shouldn’t be available in unlimited quantities. But who decides that…..is a serious question. Perhaps we should let the PEOPLE decide if they have money to lend out!!!!!! That would be the most democratic decentralized principle of all time!!!! Then we would see the true cost of money!!!
Gregory – You state that “The State bank idea eliminates the GAIN from fractional banking to private institutions and returns it to the people.“.
The AMI proposal eliminates fractional reserve banking altogether. No fractional reserve banking, no gain.
Then: “Even though AMI proposes to create money debt free –and so it does—the act does nothing to stop debt free money from being fractionally expanded by the commercial banks thus generating great GAIN to the banks. This is a cold hard fact.”
Actually, that’s not a fact. I know what you’re thinking – I’ve been there before and spent days pondering on it. But the ‘0% reserve’ doesn’t allow money creation. In fact the ‘reserve’ concept isn’t even applicable to savings accounts – under the AMA proposals, the money is either in the account, or it isn’t (and has been lent out to somebody else). It is technically impossible for money to be created via this system.
I know (from your post on Jere’s blog) that you’ve done a lot of work on this and are pretty confident in your argument. If you get chance, let me know your reasoning on the ‘fractional expansion’, and I’ll explain in more depth why there is no fractional expansion under the AMA proposal.
Hi, thanks for writing. Here’s the point about interest: whether the banks are public (as in my proposal) or private (as in the AMA proposal), people will be borrowing from them at interest. So the bank lends $100 and takes back $105. More is owed back than was put out there, whether owed to the public or to a private entity. I totally agree with the AMA proposal to have this shortfall made up by allowing the government issue money greenback-style for its own expenses, particularly infrastructure and other productive endeavors. That will be sufficient to put extra money in the system to cover the interest.
Here’s one of several problems with the AMA system as you describe it: the banks will be limited in their lending to what they can find to borrow from the public. What if the public isn’t in a mood to lend? What if they want to save their money, or invest it in stocks or bonds rather than lending it for a small interest to banks? You’ve just shut off the credit spigots. That’s exactly the situation we’re in now — there is insufficient credit available at reasonable rates for the needs of trade. I’m saying the ability to get credit should not be dependent on there being a fund of money available somewhere to borrow. People create their own credit, by “monetizing” their own promise to repay. Under the current system, people turn some asset into credit-money: a house, a car, a factory, future productivity, etc. That is a good thing — it’s the “real bills” doctrine. It is what has made our country very productive. It’s the underlying premise of community currencies: there is no arbitrary limit to how much credit can be created; it’s created when someone wants to trade with someone else. If people are borrowing credit created on the books of the government, there is no parasitic middleman drawing money out of the system, so there is no harm done. My point is that instead of having to wait for some legislative body or independent Federal Reserve-like agency to agree to issue more dollars, the government will create credit automatically, abundantly, as needed, for all willing borrowers able to show that they are creditworthy and able to pay the money back. I’ve discussed in my book the possibility of even making those loans interest free. If there were only private banks, there would be no possibility of interest- free loans to the public.
In the AMA proposal as you present it, there would be no “banks” as we know them. There would only be non-bank lenders: middlemen who borrow low and lend high. Nobody would be creating credit in response to the needs of the community, not the banks or the government. It might take a computer model to prove it, but my contention is that you will choke off the productivity of the economy doing it like that. There is no harm in allowing a public bank to create credit on its books, since the profits would return to the public purse. In fact I would go for a 0% reserve requirement for public banks. (They actually have that in Canada and some places in Europe.)
Here’s another problem: if you prohibit credit creation anywhere on the books of any bank in the U.S., companies that need credit will go abroad to get it. You will just feed the City of London, Wall Street’s rival. And if you think you can get the whole world to agree to outlaw credit creation on the books of banks, dream on; that would be sometime into the next century at least, and I would argue it will be never, because the premise on which the notion is based is wrong. Also, it would mean giving up national sovereignty to some global legislative body, and there are many many problems with that. I’d be very leery of it.
Ellen,
And to anybody else who has read my posts. Please forgive my awful grammar!!! I can’t believe how many mistakes I have made. I will work harder at cleaning up my act! I am not used to writing like this. I usually take a lot of time to write and I have to proofread pretty to catch my mistakes. So please bear with me.
Ellen I want to address some of your points if I may:
I have commented on your first paragraph elsewhere. If your detractors can’t understand this very salient point about the necessity to in some way cover the interest deficit then they never will. I pointed out elsewhere that really in fact the government does NOT have to spend money into existence to cover that interest deficit. It goes like this. The public bank lends $100 dollars into existence and $105 must be paid back. So what? Just because one person went into debt and the money is debt-based, does in NO WAY indebt the rest of society. The ONLY reason a debt-base currency indebts an entire society in our present circumstance is that our government has to go into debt to the banks to create money to cover that $5 dollars of interest. But where does the government get the money to cover the interest charge on the $5 dollars it borrowed so that the citizen borrower could have the currency available to pay his debt to the bank? Well the government has to borrow to infinity at every smaller increments. Multiply this phenomenon by the number of loans in society and you get a grim picture of enslavement for debtors and non-debtors alike.
In a state model of banking you would NOT have to spend money into existence. The government could lend all of it into existence. In the prior model the more money borrowed by people creates the need for more taxation as the credit worthiness of the state worsens. In the state model of banking the exact OPPOSITE occurs. The more people borrow the LESS taxes non-borrowers have to pay!!! To non-borrowers it makes no never mind if their money is debt-based or spent into circulation. The state of the money as a variable is not an influencing condition on their lives. The only concern is if money were to evaporate for lack of demand for money. If this were the case then by all means spend it into circulation. But clearly in the state model the question must be postulated: Is there really a deficit of currency in the money supply due to interest extraction? I propose that this scenario is purely conditional and NOT absolute.
“Here’s one of several problems with the AMA system as you describe it: the banks will be limited in their lending to what they can find to borrow from the public. What if the public isn’t in a mood to lend?” So what? More precisely which public are you refering too. The 15 year old kid who works for minimum wage who just started working and spends his money on pizza and video games or the multil-trillion dollar insurance, pension and 401k system that puts the bulk of its funds into interest bearing accounts? If we just started today, the capital that has been extracted from production to specualtion would be more capital than the system needs for a generation. Right now we are in a Liquidity Trap. We have more money to lend that can be borrowed at any interest rate and that is going to last for a long long long time.
Bur for arguments sake lets say that nobody has money to lend. Okay. So what. That just means that the rich have spent every dollar they own and created so much demand that the middle class would be stuffed with cash. Okay lets say they spend it all. Now the poor are stuffed with cash. Sounds like heaven on earth. Money has been completely distributed and all it would take would be in fact nominal capital injections of money to keep the ship sailing smoothly along. AMI’s solution by your intrepretation works just fine.
However you might try to slip one by me and say that all this capital is going to spin in some vortex inside the speculative channel in the stockmarket or something like that. Just how long do you think that could last if the people have no money? A day’s worth of trading? I doubt an hour. That money would split faster than an atom in a nuke bomb. Where would it go? I isn’t going to just float in the air? It would be lent.
Don’t take this the wrong way. But whether you want to believe it or not…..the supply-siders are in your head. They have spun your paranoia right up. I mean they practically lather at the mouth at the mere mention of rational monetary thought. For them it threatens their sacred mandate to be the glorious defenders of capital’s damn right to exist….oh dear me. If capital isn’t let loose from its confining foundation the world will crack in half and all your babys’ brains will melt!!!! Give me a fricken break. Just because they have unstable minds doesn’t mean that you in anyway have to accomidate them. We as reformers don’t have to put The Peoples’ access to capital ahead of the actual PEOPLE! This is supply-sider mythology and a tool used to spread fear and suppress real thinking.
Demand-side logic dictates that there can be NO production without demand. But there can be production without money. Last I checked I only got paid every two weeks. I worked for free for two weeks. Then I received my ability to demand goods and services. I got paid. In a flat monetary regime where money is supposedly going to be really hard to borrow I can’t see any reason why demand would fall off? The idea that a business can’t pay its employees in a world where money is hard to borrow (why? Because it is spending too much time being spent?!!!!) is patently absurd!
I stipulate only one concession –well at this point because it is the only one I see at the moment – which is, that yes it might take more time to acquire bigger ticket items in a hard-to-borrow system. So that means I guess that it would takes savings to get what we want……hmmm but that would mean that if we wanted houses or cars or boats or anything valued over a thousand dollars…..then I guess that means by default…..that there would absolutely be…..money…..to…..LEND. That is unless we don’t value those things. The very same logic goes for businesses who want to invest in new capital equipment. I guess they will just have to reduces those bonuses to the the top executives and save a little cash too. Boo-hoo.
“My point is that instead of having to wait for some legislative body or independent Federal Reserve-like agency to agree to issue more dollars, the government will create credit automatically, abundantly, as needed, for all willing borrowers able to show that they are creditworthy and able to pay the money back.” Ellen, what I am about to say may seem out of the box a little so bear with me. In a world of unlimeted credit, there is NO such thing as a credit worthy borrowers. I say this with a split mind on the matter because I agree that credit should be available to for all that they would want. That sure would be the easy street.
But if we examine the housing market as a case we can easily understand that as the price of the asset goes up so does the the risk of that asset not drawing in a new buyer. The systemic risk increases as more money is borrowed to buy an appreciating asset. It is at the heart of every bubble. The reason nobody sees it coming is that they falsly believe price translates to wealth and never bother to check to see if there are any greater fools left to buy the house. They are too busy counting their imaginary piles of cash in their head to bother.
In the end you have more debt than value for the entire system (liquidity trap) and not a viable creditworthy borrower. Not because they are individually a bad bet (those left standing) but because all bets are losers. So if you simply reverse enginere the process, you will see that credit extension begins to be underpriced after the very first loan is made. You propose to unleash chaos because the supply-siders got the boogy man in your head? Maybe it isn’t so bad to have a monetary control board set the amount to be injected into society and let society determine if it wants to lend it. I am not so sure that the outcome will be so frantic. Afterall it wasn’t the lack of lendable funds that got us into this mess it was the overabundance of funds that created the mess.
My feeling is that your general critique of the AMI Act is baseless and grounded in supply-side fear mongering. You are attempting to apply their irrantional group mentation to a newly designed rational invention, moderated by rational people, not subject to the supply-side wrathful bull-god that eats wimps too weak to buy low and sell high crushing the little worthless peeons along the way to personal glory and gold plated umbrella stands. There will be plenty of money even if the AMI Act actually worked and shut down fractional expansion of the money supply (which it doesn’t) for all the reasons I outlined above.
So don’t waste your time trying to defend your state banking model as a defence of capital. You would only be serving the Masters we are trying to get off our backs. You assertions are powerful enough about interest flow. That is all that matters. That is the core strenght of your argument.
Your final point is that people would go elsewhere for credit. So what! Let them. That will only destroy their currency or blow up in the borrers’ face. Just exactly how are they going to convert it into dollars anyway? If there are no dollars to lend there are no dollars in the F/X markets. Work any scenario you want. You will end up driving dollars into the F/X markets thus creating dollars to lend. Here is an example: I borrow pounds to buy Chineses products. I sell those products in the US. I get dollars. I buy back pounds with dollars. Dollars are now available to lend by the seller of pounds. If dollars are banned from the F/X markets then what you propose would be impossible, unless you had goods to then sell in pounds. Now just for giggles lets say we move ALL of America’s business into pounds for Chinese goods. Just how long you think before the British government collapses under the Chinese demand for debt Soveriegn Debt instruments? It is not like China is going to be buying a whole lot of Jaguars and pints of ale. They aren’t going to buy anything but Briten’s debt which will force Briten to go into debt in order to reabsord all that credit. There isn’t a single country in the world that could handle our business. They would buckle in very short order.
I could go on, but I am beat. I hope I didn’t make too many grammar mistakes!
Darnit. Right in the first paragraph!!!!!!!
Hi Gregory, thanks for trying to explain your position, but I’m totally swamped with work and a bit panicked right now, as I have to speak next week in NYC and don’t want to go too far out on a limb in what I’m going to say. I’m not a great speaker; I rely on content, and I have to really work it to get it right. Plus I’m taking my 90 year old mother along and delivering her to her sister’s in Pennsylvania, adding much commotion. I normally ask people to keep their comments to a page or less, to keep the responses manageable and the entries readable and not off-putting to other readers. In any case I’ll have to deal with this later, e.g. after Sept 14 when I return.
Ellen,
Good luck with your speech and I hope your travels are smooth. I will work harder at keeping it shorter.
Gregory – feel free to email me. I don’t want to clutter Ellen’s blog with overly-technical discussion. You can find my email address on my site. (click my name just above this comment to get to the site).
Ben,
I don’t mind having a public discussion on the topic of monetary reform and I certainly would not deprive the public of a technical analysis of the of the situation.
They deserve a shot at getting it. If we hold that information back….then we aren’t any better than the present controllers of the system. This is also something AMI and its inner circle should work on.
I remember years ago begging Stephen to either create flow charts or models or something that us followers of AMI could use to spread the word. It was ignored at the 05 conference. And I wasn’t the only person who asked.
Then I created several for him of various versions breaking down fractional reserve banking, the 100% reserve model, two tagging models, my solution model, a balance sheet model etc. NONE have ever been posted on the site and they were ignored again at the 06 conference even though I brought prepared material to share.
You would think that at the very least there would be a model that outlined in a physical sense how fractional banking worked on the AMI website (Ellen are you taking notes?).
People aren’t following this because you guys are teaching them. We have to get more technical not less.
I promise to change that if I can.
Ben,
Thanks for taking a moment to speak on the topic. Like I said, I have read Fisher’s 100% reserve book. He too also posited that loans should only come from savings accounts and went further in stating some expanded model on the idea where savings accounts should be specific to a separate institution from banking. But alas, it makes no difference how you slice it. Money can travel from one savings account to another through the process of lending. TRUE the AMA does eliminate the fractional reserve system…..however, it replaces it with a system of M2 money supply expansion to an UNBOUND infinite quantity.
It is illogical to presume that by merely stating that loans can only come from savings account is sufficient to stop the money supply expanding. You have to prove it. I can prove that it doesn’t. It is a simple task of charting the flow of money from bank to bank to bank to bank to bank. Money is ubiquitous and therefore is indistinguishable from one unit of currency to the next. Nobody can say that such and such money is credit and such and such money is money. It is not possible. Your argument is fallacious even under the most liberal of interpretations, which to my understanding is –and I am paraphrasing Stephen Zarlenga—“well it will at least slow down the banks”. He’s even admitted it. I know, because I have had frank discussions with him in my investigation of the matter several years ago, and he has openly said it in public.
Thus is his attempt to rationalize the 100% solution (more accurately named the 0% solution) Stephen postulates that it would be possible to “tag” money, thus forging a breach between credit and money. This is true, it would. However, a new problem arises as the market will of course naturally discount credit, as it cannot be deposited into a savings account. Result….we would have a dual currency system with two separate payment tracks. One for credit and one for money. I clearly understand this and have modeled out several control flow charts to handle this system eliminating the dual currency nature of the model, through a dual payment track flow. More I explained this in-depth to Stephen years ago along with my critique of the Fisher 100% solution.
I have created visual flowcharts for both systems over several iterations and it is clear. The fist does nothing to cease the problem with M2 money supply expansion and the other creates a new set of unacceptable conditions.
You claim that money can’t be created via the AMI Act. I challenge the assertion. I have seen no evidence to the contrary. I have seen no AMI sponsored charts or graphs or gamed out models. Only unsubstantiated statements. In fact I will challenge one-on-one anybody from AMI to a public debate at a conference to prove me wrong. Part of my job was to find the language for the AMI Act that was to complete the section with regard to the operational component of the ACT. It was section 3-1 or 2 or something. I haven’t bothered to read it in a long while, so please forgive me if I got the sections wrong. This is the ONLY section of the act that has teeth and unfortunately it is SILENT on just how the AMA is to fulfill its promise to provide a stable currency through a stable banking model. It is empty. When I realized it was going to stay that way and I wasn’t going to be allowed to speak about it or my solution for it….I pretty much walked away. More like pushed away by Stephen.
Ben, I appreciate your attempt to explain the AMA to me….but if you could explain how M2 money supply expansion is stopped by the act, you would have in your last letter. The fact is you can’t because it doesn’t. It is a cold hard fact. Fisher new it. Simons new it. All the economists of the 30s new it. The only people who can’t see it are those stuck in the dogma of AMI.
Believe me Ben. I want it to work. That is why I read Fisher’s work. Have you? Has Stephen made a copy available on his website? No he hasn’t. Ever wonder why? I do. Since I sent him a PDF version of the 100% solution that I made myself from a copy that I found at a University Library. They barely let me out the door with it, because it was worth like $800 they told me. Now can you tell me why he doesn’t want anybody to read the book? I can. Because the book is a failure. There is no magical outline to end fractional banking. Fisher is totally silent and if you read online about Simon’s support of the work you will find that he grew cold to the effort. That is the real facts and the real history. They didn’t solve it then and AMI hasn’t solved it now. But I have and Stephen refuses to let me explain it.
Now back the question of GAIN. GAIN is a concept relating to interest extraction…usury. Ending fractional banking does not eliminate gain by interest extraction. “The AMI proposal eliminates fractional reserve banking altogether. No fractional reserve banking, no gain.” Is this really an argument you are going with???? Because it defies logic to the extreme. You either made a mistake in the statement or you don’t understand this topic at the root level. I hope it is the first, because if it is the second then don’t both replying. LOL. Starting off with a statement like this is not going to get you very far with me. You are going to have to up your game a lot because, like with the belief that the act solves fractional banking you are making another huge unsubstantiated claim by saying that ending fractional banking ends gain. Only ending interest extraction ends gain and Ellen Brown has the solution with the state model. Accept it! Technically she is absolutely correct. The state model bends interest flow back to the people resulting in a net zero gain for the banks. I knew this years ago and told Stephen the same thing. She nor I are the first persons to say it either. Keynes, Friedman, and Fisher all understood that a nominal interest rate destabilizes the monetary system. In other words you can’t charge interest at all.
The Brown position (and I state it firmly as she has been the loudest and most proficient declarer of it) is as they say in the programming community “the killer app”. She has earned it. But all the AMI arguments as set forth by Jamie resolutely contest with claim that this model can be put into action. I too have my doubts. But times change and laws change.
Ben, ultimately….now that I am an outsider to AMI I don’t have to prove anything. I did that bit. You guys have to prove your claims. Until you do, you have nothing and sadly even though I totally respect everyone there, even Stephen, you are nothing. You guys are going up against: the most devious, most powerful, most dishonest, most corrupt, most predatory, most dangerous, most villainous characters and their long history of victory after victory after victory with popguns. They will tear you up!!!
If the AMI Act is passed in its present form it will do immeasurable harm to world. It would be playing right into the hands of the banking establishment. If by the wildest stretch of the imagination that the banking establishment had to yield to some kind of pressure for reform, they would in short order break the back of the act and drive right though the hole that is already waiting for them. The will see that the act allows them to loan as much money as they want. It will eliminate all limiting control parameters with respect to a held back reserve, that is unless the act stipulates such a reserve, which if it did, why bother with the act in the first place. The banks will create monster bubbles and artificially low interest rates because the government will be forced in time to lend (all part of the AMI platform as stated by Stephen) money to the banks to once again bring them up to the 100% reserve threshold – i.e. making accounts flush. This is the paradox of the outcomes. Stephen presumes to punish the banks for past misdeeds by forcing them to borrow from the government to bring empty accounts up to 100% reserve at the start of the new monetary regime, only to open the floodgates which will in time FORCE the government to make loans to the banks at artificially low rates in perpetuity always ever bringing empty accounts up to 100% reserve. It is a laughable nightmare!!! I tried desperately to get Stephen to see this years ago.
True, some interest flow goes back to the government and this is good. But it is the exact idea that Brown proposes. So we go a very long, misunderstood, irresponsibly defined, misguided, convoluted way at finding ourselves right at Ellen’s doorstep. Except we do a lot of damage along the way with the AMI Act in its present form. If you think for a second that congress will have ANY control over the expansion of the money supply you will be in for a shock. The banks will be in control and they will lobby for fixed or subsidized rates from the government. They will rape the land. If you think the mortgage bubble and meltdown was bad, just wait until the AMI Act passes!
What we saw in the 08/09 meltdown is EXACTLY and I mean EXACTLY what I just described in the paragraph above. Well not exactly. At the end of the day, the banks are receiving a “clipped” rate of return on all their loans as the loans they made in mortgages are netted out against the interest on the U.S. Treasuries that replaced (SWAPPED with the Federal Reserve) them on the banks’ books plus the interest (a new law passed in all the smoke that allows interest to be paid on reserves) that will be paid to the banks’ nearly (what is it) some new trillion in reserve balances held at the Fed (i.e modeling the 100% reserve mandate).
The banks made out like bandits. They GOT PAID to dump bad debt which then got dumped on whatever Federal Agencies that bought them from the Fed, wrapped them in new Federal Mortgage Backed Securities and resold those new securities back to the Fed. If you don’t believe me, just look at the consolidated financial statement of the Fed. It is all there.
At the end of the day, banks will have an unlimited power to expand the money supply if the AMI Act passes as is. I am sorry if you can’t see that. But it is a fact. And I have gone a great deal further at pressing my argument than anybody, including Stephen has. I will take all comers. Frankly I can’t see how it is not simply apparent to everyone that moving money into savings accounts does next to nothing.
Gregory – thanks for your comprehensive reply. The text of the AMA isn’t specific enough to explain why money creation will be impossible. I have been working with Jamie (and a few others) to develop that accounting language that you referred to. I have the UK version of the accounting language available here:
http://www.bendyson.com/the-reform-in-detail/
You can get the idea by replacing ‘Bank of England’ with the Federal Reserve, and so on. There would naturally be a few other small changes to fit the American system.
When reading, note the following key details (which may help clear up the confusion):
1. Every credit to an account must be matched by an equal debit to another account. (Item 1.1 in the act)
2. The ‘savings accounts’ (referred to as Investment Accounts) don’t actually hold any money – they simply represent the money that will be repaid to the customer when the savings account matures (when it reaches the agreed maturity date). (Item 3.2)
The second point is significant to the issue of money creation. If you understand the ‘balance’ of a savings account to be real money, then it would appear that money creation takes place. However, under the rules that I’ve specified, the money is actually transferred from the customer’s checking account, to the bank’s ‘Investment Pool’, and then into the checking account of the loan recipient.
The money is moved – not duplicated.
If, after reading the technical language above, it isn’t clear how money creation wouldn’t be prevented, let me know. What would constitute proof for you? Do you want to see worked transactions? Flowcharts? Excel models?
I would be keen to see your visual flowcharts as well. I think I know exactly where the confusion is coming from – I have gone through the same confusion myself.
Glad to see you men are working it out. The Internet is an amazing tool! The finest minds from around the planet working out the details of the New Millennium, sight unseen.
Ben,
Please allow me to stress to you, that I am not confused on the subject of money creation in anyway. I may not have all the secret knowledge of the central banks, due to the veil of secrecy they have. But I can assure you I understand well how money is created.
What is described in the Huber/Robertson paper “Creating New Money” does NOT work. I know this, because I worked on my own solution before I read theirs. Now I concede that they did produce their work before I did mine. However, I was relatively new to money reform when I met Stephen and I basically never heard of anyone except for Ed Griffin and all the other books about money like Two Income Trap, Dollar Crisis, No Logo etc. It was books like these that inspired me. And of course Lost Science. I even read Secrets of the Temple which was a totally useless bore.
When I worked out my solution I had never read Creating New Money and I shared my solution with Stephen a long time before I read their paper. I didn’t read it until Stephen asked me to critique it more than a year later. What was weird was that they not only developed similar structure to my solution they even used similar phrases like “pooled” accounts. If I remember correctly. It has been a couple of years since I read it last. I don’t think they used “transaction” channel though. I seemed to remember sending that note to Stephen in my flow charts prior. Maybe it has gotten around. But don’t quote me here. I would have to go back and do a comparison of their language and my language. But putting that aside as it is not my point to beat them or anything but only to impress on you that I did indeed read their work and I do have a past effort outside and before I met their work.
When I broke down their solution for Stephen I clearly determined that it wouldn’t work. What I had at the time was a more complete form of their idea. It was about 95% of the solution I have now. My OLD solution worked but you had a money flow drift problem. A critical point in the Huber/Robertson paper that they don’t see. In fact Creating New Money is missing at least two key elements of concept before it can even hope to come close to working. I am not going to go into the other idea and I am not really going to try to explain drift in writing. Anyway, I compensated for the drift part of the problem by adding a very clever idea that I actually picked up from Stephen from his “tagging” concept of money.
I figured out my OLD solution only after I worked out a flow chart on Stephen’s tagging idea and found tagging created a dual currency system where credit would most obviously be discounted at some point in the game, thus creating two prices for everything and two payment channels for everything. But that work was very useful as it led me to create the correction I needed. Once I inserted this concept I solved for drift.
I guess tagging would be another element of concept missing from their work. So that makes at least three things missing. When you add all three of these concepts together you have your fix for Huber/Robertson. But only if you add the fixes. They also had another error on some minor point but it was related to my fixes anyway. But it proved to me they don’t see it.
My present solution transcends my old solution by leaps and bounds. The fix I created isn’t needed anymore. In fact I garbaged the entire model. So I guess I actually have two working solutions!!!
At this point I am electing NOT to tell you what it is as I have plans on releasing my solution in a book or something. I tried to give it to Stephen for free back in 08 but AMI wasn’t having it!! So what can I say? All I can say is Creating New Money doesn’t work and neither does Fisher’s 100% solution. At this point all we can do is agree to disagree on this issue. And unless this issue is rectified the acts have nothing.
Ben,
I read a little more of the British version and I do see a fix for an issue in there that was not (to my best memory) included in the Creating New Money paper. Can you tell me which points Jamie added to section A? I am just curious.
Gregory,
There was a lot of discussion between myself, Jamie and Mike Black of the UK regarding various issues and problems that came up, so I can’t really attribute different points to different people. We kept finding problems and finding fixes for them until we reached the end (for now).
As you haven’t specified what the problems are yet, I am taking a guess that you refer to the act of money being deposited into a savings account, then lent out, then redeposited back into a savings account, then relent again.
Under the rules that we’ve specified this process doesn’t create money, providing that any amount credited to one account is debited from another. If this is the case, we are simply moving money around – no different to me lending you a $10 note, and you lending it to Ellen.
If you want to release your solution as a book, best do it soon – there’s too much at stake! For the time being, I stand by my statement that there is no money creation under my extension of the Robertson/Huber proposal.
Ellen – thanks for your reply. I can see you’re busy so don’t feel like you need to reply.
This is a problem is interest is charged on 100% of the money supply – as it is under the current system. However, with a real (debt-free) medium of exchange, interest will be charged on a much smaller proportion of the money supply. The mathematical impossibility of the current system no longer applies. The problem of interest become much less of a problem.
The public’s need to borrow is a result of the existing system. Their need to borrow will be much lower if there was a real (debt-free) medium of exchange. The need – and dependence – on access to credit will fall massively when there is a real money supply injected by the government.
(Incidentally, money can not be ‘invested in stocks’ – you can use money to buy stocks, but the money is then in the bank account of the person/company who sold stocks. No money is ever really ‘in’ the stock market. This is an important point to remember – stocks are not money, nor a form of money, nor a place to store your money. They are just an asset that you can buy.)
It seems like there is a solution that means we can have the best of both proposals:
From the American Monetary Act:The money supply should be created and spent into existence by the government, and private banks should be prevented from creating money.
From your public-banking proposal: There should be public entities (at state level) that have the power to create money in response to good projects that increase the productivity of society.
My major objection to your state banking proposal is that it still requires the people to borrow the medium of exchange that they need to trade and therefore perpetuates our current debt dependency. Whether the interest is recirculated or not, everything under this system will be more expensive than it would under the AMA system.
It seems that your major objection to the AMA is that the money supply would not be responsive enough to the needs of the economy. This is a valid concern. Although I am confident that the AMA proposal would massively reduce the need for credit, I can see that it would be beneficial for good projects to be able to get funding even if the public are feeling risk-adverse and choosing to keep their money safe in checking accounts rather than taking a risk and putting it in savings accounts (where it will be lent out).
Considering that we are all working towards the same eventual end goal, it seems the solution might be to take the best of both worlds.
Finally, regarding the international feasibility of getting other countries to outlaw credit creation – you only need two countries to ‘take the leap’: the USA, and the UK. Once other governments see the stability of the currency, the health of the economy, and the debt-reduction that would result, they will all follow. It might seem a long way off now, but it is possible. After all, there is very little life left in the current financial system anyway, and we are probably only looking at another 10 years or so before it really does hit the fan – if not sooner.
Ben,
I like a lot of what you said in this message. I agree, under the AMA there “probably” will be less interest charged on the whole money supply. It’s a theory. At least this is far more honest than telling people that the act ENDS fractional banking when it clearly and most demonstrably doesn’t. So, as you say the problem of interest does become much less of a problem. So, points for AMI on this front.
Further, I concur that how we perceive credit today should in no way be extrapolated to a POST debt-based model. Non of use have experienced a debt-free model. We all are speculating on the outcome. But isn’t worth the risk to explore a new way being human? What an adventure. It is like finding a new land on some distant shore. There are no guarantees of anything. However, I think things will be much better. Logic is at play here and we can draw inference pretty easily. Moving away from a debt-based model will take us from the supply-side fear mythology to a logical demand-side reality. The NEED for credit will probably be less and if it isn’t the state banking model can always be instituted AFTER the AMI Act. The act establishes a foothold by the declaration of the true nature of money. This is a critical feature of the Act that is overlooked.
I also don’t understand any of the rhetoric about money being “invested” in anything. Money can spend time circulating in the investment channel. Trillions are traded every single day. But that money lands somewhere. Usually to my knowledge it will land in some interest bearing account if even the lowest paying overnight rate swaps. When you really look at it, money only is free when it is in your pocket. And I mean free in the context that it is NOT collecting interest for somebody or some institution. It used to be true that money was also out of play when it was stored electronically or in material form at central banks. However, that rule of procedure seems to be disappearing. I believe the term used to be “sterilizing” when a central bank pulled money out of play. Of course this is always only a temporary phenomenon.
“and private banks should be prevented from creating money” This should be true. But the AMA doesn’t do it. Also I don’t agree with the notion of “productivity”, rather increasing productivity as a priority of a society. Why is productivity so darn important? Productivity is a metric of supply-sider irrational thinking. Productivity is a driver of banker security. What is productivity to a manager, owner, or a banker? It usually means lower cost inputs. That means cheaper labor. Or more outputs created by the same amount of labor. The same net outcome is achieved….more profit. Why would “society” care about driving profits for employers? Labor’s profit is in DIRECT competition with the notions of productivity. Unless we do a better job defining this subject we will still be ruled by supply-sider non-sense. Demand-side logic dictates that a society can be as productive as it should be. The idea of “becoming” more productive suits no purpose unless it is needed. Right now would you say that General Motors should become MORE productive? I don’t think so and they prove me right. Stability is the cause and mission of monetary reform not productivity. Stability is the keyword in my view.
With respect to monetary reform. You only need one of the top ten economies to adopt a debt free currency and the others would buckle. Monetary reform will reward the first mover and destroy late comers. Whoever moves first will dominate the world markets, hopefully they will not dominate the world but lead us to a more progressed state of existence.
That’s what I think about a state-owned bank — just one model would do it, then everyone would follow. There’s the model of the Bank of North Dakota, but it’s been around so long that people can dream up other reasons why North Dakota is doing so well; and they don’t talk about the virtues of their system much, I suspect because they want to stay under the radar. Bill Still went to Guernsey and tried to get information about whether the government was still printing its own money, and the natives were tight-lipped. But Ken Palmerton, who is from Jersey, assures us they’re still doing it; they just don’t want to get shot down like the New Zealanders etc. did. Jamie Walton said last year at the AMI conference that the New Zealand central bank had to quit printing its own money because they were threatened with being banned from trading with the British Commonwealth if they didn’t. That’s how I had it in my notes at least. That’s why I think this new Financial Stability Board based in the Bank for International Settlements agreed to by the G20 is so dangerous. They’re liable to come up with a global regulation that governments can’t print their own money because it would be “inflationary.” There is no democratic structure set up for the Financial Stability Board; it’s evidently all done by committee, and who chooses the committees isn’t specified. I think that’s EXACTLY what they’re up to — what Carroll Quigley said they were up to in the 1960s — owning the world by controlling the means of exchange privately, through the Bank for International Settlements as global head of a private global banking system. I’m worried that we’re in our ivory towers bantering back and forth about systems that will take decades to get through Congress, while the rug is quietly and quickly being pulled out from under us from abroad. That’s why I think it would behoove us to show a united front and get out there and do something doable in a matter of months instead of decades. To my mind, our best shot would be to set up a modern publicly-owned bank as a model for the world. When it’s obvious that popular governments can create credit better than private bankers, we can work on a popular government issuing its own money outright.
Ellen,
This is some scary stuff. I hadn’t heard about New Zealand. I expect we will be seeing a lot of this type of intimidation by the money power in the future. They know they must force compliance or their debt ponzi-scheme collapses. Frankly I am surprised that we who aren’t in debt aren’t punished for NOT being in debt!!! But actually I am in debt to the tune of my so-called share of the public debt. So I guess I am being punished. A sad LOL :~(
Do you by any chance have a pdf copy of Quigley or Soddy? I think they are public domain by now aren’t they?
Gregory, Quigley and Soddy are both available online. So is Henry George. Google them, and if you can find them I’ll post them later. I’m having several families over for barbecue today, and have little time now. Also I’ll get to you post on my blog ASAP, maybe tomorrow.
Online version of Carroll Quiqley’s “Tragedy and Hope”:
http://alexanderhamiltoninstitute.org/lp/Hancock/CD-ROMS/GlobalFederation/World%20Trade%20Federation%20-%2098%20-%20Tragedy%20and%20Hope.html
or
http://tinyurl.com/lzl4at
This is one of the most suppressed major histories ever written by a scholar of Quiqley’s stature. Every time I have found online texts they have quickly disappeared. So if you want it, I would download it and save it locally. I have the hardcover version, but the online version is easier to cut and past from.
Sorry that I haven’t had much time to post the last couple of days.
Hi Ben, you write, “My major objection to your state banking proposal is that it still requires the people to borrow the medium of exchange that they need to trade and therefore perpetuates our current debt dependency. Whether the interest is recirculated or not, everything under this system will be more expensive than it would under the AMA system.” I don’t understand what you mean. Both systems have banks that lend money at interest, right? In mine, the banks are publicly-owned, in the AMA’s they’re privately owned. Are there fewer banks in the AMA system? I don’t think so. I’m agreeing with the AMA that it would be a good thing to let the government issue the money it needs. I’d go with Richard Cook’s estimate: with a $13 trillion GDP, the government could “print” about $4 trillion, since that’s how much the earning power of the people falls short of the cost of the GDP now. (That’s my recollection of what he said without looking it up.) So how is there less interest in the AMA system than mine? I think there is less interest in mine, because there are no middleman private bankers who need to take a cut. Anyway thanks for considering my proposal politely and not calling it an insult to humanity. Don’t you think I showed admirable restraint in not responding in kind? Men go to war, women go to lunch. That’s the title of one of many books I never got around to writing. I guess Obama goes out for a beer, another good approach.
Ben,
Technically Ellen wins this argument hands down.
I agreed with you in my prior post….not I must disagree. You state “everything under this system will be more expensive than it would under the AMA system”. Referring to the state banking model. This is a pretty generalized statement. By everything are you including public works? If so, I think Ellen was very clear in earlier posts that her state bank would make interest free loans to government projects. I am not sure why she didn’t say it in her last post. Maybe I am wrong. Please clarify if so.
If that is the case then……All public works are now organized to effect the EXACT same outcome as the AMI model. Public works are at COST not Cost plus Interest. Now it might be argued that the principal of an interest free loan would have to be paid back. Or just rolled over forever. My point is, in a state model of banking the cost of public works is NOT greater than if the money was just spent into circulation.
In private concerns how does the state spending money into circulation make my buying a house any cheaper? I still have to borrow the money. So, really my personal reality is unchanged. My cost didn’t go up or down. I don’t see how a blanket statement like the one you made is applicable. Again, a debt-base currency as a question of ethics and power distribution is only relevant if there is a national debt or not.
Just a quick one. You say:“I think there is less interest in mine, because there are no middleman private bankers who need to take a cut.”
Just to clarify, under the AMA and Robertson/Huber proposals, money would not be distributed via the banks. It would be spent into the economy via government spending. The bankers only get to play ‘middlemen’ between savers and borrowers. Unlike the current situation, they don’t get to charge interest on nearly 100% of the money supply.
Gregory,
You say: “My point is, in a state model of banking the cost of public works is NOT greater than if the money was just spent into circulation.”
What is the relative difference in cost to you between a) borrowing $1000, interest free, to buy a car, and b) a family member giving you $1000 to buy the car? One costs you absolutely nothing, while the other costs you $1000.
So the comment you made above isn’t accurate at all. If the state government has to borrow money, even if it is interest free, then the cost is passed entirely onto the taxpayers. It is their income which will go to pay for the works (unless the state banks plan to indefinitely roll-over their loans). In contrast, if the government creates money and spends it into the economy, the actual cost is zero. There’s a massive difference between the two.
In private concerns – especially when buying a house – the current debt-based monetary system has inflated the price of houses 6 times over. My own grandparent’s house was the (modern-day) equivalent of £60,000 when they bought it. It would now fetch £750,000. In the UK, bank lending for mortgages has tripled the cost of housing in the last 10 years alone. So, the current system has a massive impact on the cost of your housing.
Fine, but I think we’re talking about apples and oranges. I totally agree with the notion of having the government print money — lots of it. If you can get Congress to agree to that, wonderful. But there will always be a need to borrow. The young man starting out with no rich relatives and no job has to borrow; the person buying a $500,000 house has to borrow, even if he does have a job; businesses have to borrow in order to get the money to pay for workers and materials in order to produce something that they can sell and recoup their costs. No matter how much money you let the government print and spend on its own needs, including hiring people, these needs for credit will still be there. So that’s all I’m talking about: what kind of banks will we have from which people can borrow? I say public banks are mathematically sound, not parasitic, and generally a much better deal for the public than private banks. Even if the private banks can’t create credit on their books but can only get it by borrowing money themselves, they will be draining interest out of the system. With public banks, the interest will return to the public purse.
Ben,
Your illustration is fallacious because the government is NOT in general (I guess) going to be gifting me a $1,000 bucks just because I want a car!
It may pay me a thousand dollars. So I am not sure what you are saying. So if I borrow a thousand and spend it on a car and work to pay it back at ZERO interest it would be EXACTLY the same as if I worked for the thousand and then spent it to pay for a car….well not exactly. In the first instance I get the car way earlier.
Again, interest is the key point. Not whether the money was created debt-free or as debt-based. If the government lends itself money at ZERO interest who cares if it pays itself back. It might reduce the money supply temporarily, but that could be good thing. So what. People will have to pay taxes to moderate the money supply no matter if it is spent in existence or lent into existence. In fact it is likely that political interests will pursue a progressive tax no matter how we reform the monetary system.
Maybe lending money into existence is as good a reason we will have to tax it back out. If say Florida wants to develop a port and compete with California’s port….then maybe the state should have to tax its people as part of its PETITION to the federal government for a cut of the newly injected money supply for that year. They are after all reaping the benefit where the people in all other states are not.
This would be a far closer taxation system that the founders laid out in the Constitution than we have right now. It fits with both apportionment and uniformity.
Sorry Gregory – maybe I wasn’t clear there. From the point of view of a state government, there is a massive diffrence between borrowing an amount (which has to be repaid) and being given a once-off, free grant from the government (that doesn’t have to be repaid). One is debt, that has to be repaid by taxing the local citizens, and one is a free grant, that never needs to be repaid. The point is, there is a difference in cost between the two proposals.
Fairness of taxation is another big topic but probably a bit too off-topic for the discussion at the moment.
Hi Ellen,
Let me clarify. If I have misunderstood any part of your proposals, please correct me.
If we keep the current system and simply add in state-owned banks, we still have the situation whereby all money is created as debt.
Say that somebody wants to buy a car for $1000. If they have to borrow the money/credit to buy the car, they will likely have to pay back $2000. Something that should cost, say, 2 weeks labour will now cost 4. If all money is created as credit/loans, then this is the average result over the economy – the interest cost will mean that the real cost of buying anything is higher than the price that you actually see in the shops. In contrast, if there is a real debt-free money supply in the economy, it is possible for things to be bought without any interest needing to be paid on there.
The big issue is really how money is injected into the economy. If the only way that we can put money into the economy is through getting people to borrow (either from private banks or public banks), then we still have the same problem as we do now.
I think the issue that we need to get clear is, should the bulk of money be lent into the economy, or spent into the economy?
If the proposal is that the bulk of money should be lent into the economy, then it seems like a lot of our current problems will continue.
———-
On the subject of how much interest would be charged under each system: if all money is lent into existence, plus interest, then overall there is an interest charge on 100% of the money supply.
However, if the economy was starting with a debt-free money supply, the lending would be from those people who have more money than they need, to those who have less than they need. A certain percentage of the money supply would be on loan from those with spare money to those without. The exact percentage – whether it’s 20%, 40% or 60%, would depend on the distribution of income in the economy. However, it should be clear that the interest would apply to a lower percentage of the money supply, which is why I say there would be less interest charged under the AMA proposal.
If the love of money is the root of all evil, what is the worship of money?
Capitalism.
Yup. America, like Argentina (one of the richest countries in South America) is being plundered by the international banking cartels, who also invented Capitalism and started the Capitalist ‘Boom – Bust’ upward-wealth-shift cycle with the South Sea Bubble in 1715 – 1724.
Today’s reckoning, “Grand Theft, Planet” is the sixth in the deliberate and orchestrated boom-bust series.
The best solution is debt-free or ‘sovereign’ currencies.
This is crazy talk.
If you want to be effective in America, the anti-capitalism rhetoric will not cut it. It scares people.
If you want to be effective, differentiate between monopoly capitalism — which is today in power — and laissez faire capitalism — which is NOT in power.
Marx and modern-day Marxists effectively blur the line between these two totally opposing methodologies. In fact, to me, there is little difference between Marxism and monopoly capitalism, which I prefer to call “plutocracy” because all communist revolutions are immediately overtaken by a ruling elite anyway.
The concept of a democratic republic where laissez faire capitalism is fostered and protected by a debt-free monetary system is the most fair system of governance and finance ever devised by humanity.
Bill,
I thought I read that you created Money Masters. If so I wanted to say thanks! That’s all. Just thanks.
Marks posited that capitalism would evolve into socialism. But I think fascism is more correct. I think it boiled down like this. Essentially due to the predatory nature of capitalism, after it got done feeding on labor and extracting all but the basic means of survival from labor it would then turn in on itself and feed until only one corporation existed. We can see this in so many ways.
Now it might be argued that capital formation allows for new businesses to be invented but it is just as easy if not easier to say that capital formation organized for the acquisition of new businesses is not only easy to obtain it is also cheaper to obtain as the risks are lower. The yield curve is an impressive force on the processes of humanity. Unfortunately the only direction it takes us in infinite trials is mega-consolidation.
After labor has been suppressed as a competing organization (union busting, off-shoring. In-sourcing, tariff breakdowns, supply-side media controlled brainwashing) for distribution of resources and as less fit corporate competitors are eaten up…we are left with government by corporation based on the feudal system which is basically fascism. And when I say less fit I don’t mean less inventive, or less viable. I mean less predatory. They fail to measure up to the sociopath extraction model. They fail to either crush labor or crush competitors. Eventually all “nice” companies will roll over if the price is right. And under an infinite supply of debt-based capital…..any price is non-too high.
Well, Marx may have posited that, but that doesn’t make it true.
The problem is that true incentives have been removed by plutocracy. No amount of government can replace it.
British historian Nesta Webster, author of “World Revolution” (1921), observed that Rousseau’s writings embodied all of the principles which would later be known as Communism. In what is perhaps the most brilliant refutation ever devised of the Communist error in logic, Webster wrote:
“…ownership of property … is not peculiar to the human race. The bird has its nest, the dog has its bone that it will savagely defend… if everything were divided up today all would be unequal again tomorrow. One man would fritter away his share, another would double it by turning it to good account, the practical and energetic would soon be more prosperous than the idler or the wastral. The parable of the ten talents perfectly illustrates the differing capacity of men to deal with money.”
Yes, MM was my baby — with the help of my co-author.
Bill,
To the issue of whether or not supply-side capitalism fueled by debt-based currency will parasitically fold in on itself…..I suggest that the facts are self-evident.
However, this is not a criticism of the core values of private ownership or individual enterprise.
Capitalism and Private Enterprise are two different concepts and should not be confused. The first is the means of formation of capital the second is the means of distribution of said capital. Two completely different worlds!!!!
Capitalism will eventually destroy Private Enterprise, and I think that is exactly what Marx was postulating.
Also I feel that Webster fails to critique Capitalism appropriately if he doesn’t differentiate ownership from the intentions by which we accrue gain. Crosspollination of the topics only muddles our thinking on both. Which is exactly what Webster does. He confuses the having with the getting, granting equal moral status to each. Which is clearly not rational or even possible.
Just exactly what are the definitions of “practical” and “energetic” anyway? Are we to fill in the blanks? Practical and energetic certainly does not equal moral. Just because Webster off handedly refers to the bible are we to assume there is a moral direction or lesson to his argument?
When one reduces the Parable of the Ten Talents (Matthew 25:14) to an accounting or money management lesson as Webster dismissively does. He not only seems to fall terribly flat, but it comes off as patently self-serving rhetoric to some “natural state” theory of socio-economic outcomes.
To my understanding the parable has nothing to do with the social theory of personal prosperity as Webster has co-opted it into, but rather one’s relationship to their Master (God) and doing His Will with the “talents” bestowed upon them. The end goal being to “Enter into the joy of your master” and the punishment being “And throw that worthless slave into the outer darkness, where there will be weeping and gnashing of teeth”. I think that goes WELL BEYOND something that “perfecty illustrates the differing capacity of men to deal with money”!!!!
Webster like so many others either seem to be reading an entirely different bible than me or I am crazy.
Even if we are to stick with Webster’s “view” of talents being actual money and thus property he totally fails to see that the property belongs to the Master (God) not the slave (Faithful Man). So even if we grant him this liberal interpretive ground, it is clear he reverses the actual scriptural paradigm and makes complete error through the construction of heretical allegory!
Do I need to go any further?
Nesta Webster was a British woman who lived in the turn of previous century (early 1900’s). It is she, not he.
And I made a complete error calling Webster he. I was told by a friend that Webster is a she. In any case I stand by my views regarding what I read in the prior post.
Is anybody else having serious problems with this website crashing their browser windows? I get a crash basically every single time. It is only a matter of seconds to a few minutes before I crash out. It is really affecting my ability to post here. Just wondering if anybody else is having this trouble too.
Having dealt in the theories of monetary reform for many years, although I am weak on technical theory, I think I have something to contribute in the area of practical politics. The likelihood of meaningful monetary reform coming to fruition at the federal level as a first step are remote-to-impossible without working at the state level as a first step. Test your theories out there first. That’s the way things get done.
For goodness sake, we have a working model to point to — the State Bank of North Dakota — to lessen the not-so-unreasonable fears of wary legislators.
Furthermore, I propose in my new film, “The Secret of Oz”, working at an even smaller level — the University Bank. Every university is crushed by bonded indebtedness. If a state university approached a state legislature seeking a state bank charter, the lawmakers would be hard pressed not to grant such a charter to bring financial relief, especially if minimal harm could be demonstrated to local banking entities. Bonded indebtedness is typically arranged by the big money center banks in New York.
The University Bank can be sold politically by alumni to their respective legislatures on the basis of intra-state patriotism. Alums are a powerful force in EVERY state in the union. If you really want effective political action, break it down. This is the way to go. This is the way to get a wealthy cadre of intra-state political activists behind monetary reform at the bite-sized level. State legislators will soon get the idea and it can flow up from there. Remember, “all politics is local” means something.
Universities have massive assets and a guaranteed income stream. A University Bank, as I envision it, would set up shop in a brick-and-mortar bank building, issue credit cards, take alumni deposits and provide checking accounts. It would look no differently from a regular bank, because it would be a regular bank!
In Virginia we working with the idea of wrapping the bank inside a 501 c(3) merely for political purposes to try to ensure wary legislators that we are not trying to take business away from local banks.
It’s been estimated that a University Bank thusly constituted could provide not only debt free and interest free capital improvement loans to it’s university, but low-to-no interest loans to EVERY SINGLE student.
No legislator is going to get behind sweeping monetary reform at the federal level just because you tell them the experiment would be worth the ride.
I agree.
Experiment!
For the last fifteen years the wealth gap in South Africa has widened, only the faces at the top have changed.
S.A. runs a First World, Capitalist, Debt-based economy, a First World Transportation system, a FW communication system, a FW manufacturing sector that can deliver on time, every time, in the correct quantities, correctly priced and invoiced anywhere in the world.
So this farwawy country is an extension of the First World, but which straddles a huge Third World population that is getting fed up with Capitalistic ‘Debt is Money’ philosophy, which has the whole continent on a bonded rope of debt.
In retrospect, I believe the American predatory sub-prime lending practices were first tried out (experimented) in most of the Third World.
Mugabe’s hyperinflation is the result of currency speculation and this government is well aware of that.
In charge of the SA Third World people in KwaZulu Natal province is a group of ‘Chiefs’ called the ‘Amakhosi’.
I am involved in an experiment involving Industrial Hemp and Sovereign currency – AND BOTH THE CROP AND THE CONCEPT CAME INDEPENDENTLY FROM THE AMAKHOSI.
So outside thinking like that in this discussion is completely welcomed by the authorities in the local population of the AmaZulu.
We will know shortly whether we can conduct the experiment, which just must be under the eyes and approval of the national government, which has called for ways to ‘kick-start the rural economy’ – or watch it just come into being by the Amahkosi!
President Zuma (against whom I believe ‘plots’ were used to remove him from politics, like that against Elliot spitzer) is proving himself to be a man of the people and understands their poverty in the midst of plenty:
He promoted the amazing Finance Minister, Trevor Manuel up to a new Cabinet post, a planning office, and replaced him the Pravin Gordhan, the former head of the South African Revenue Service (SARS), the best-run government department in the land.
Both Manuel and Gordhan’ experiences are extremely well-suited not only in financial and economic terms but also in being open to monetary reform thinking coming into the current political and economic mix.
In the meantime,watch the other experiment, Arnie’s IOUs!
Tom,
You should keep us all updated on you progress. Do you have a website? Or a blog? Are you doing a local currency system? If so, what is the structure? Do these chiefs have any money to start with that can be used to buy infrastructure? Just wondering.
How much leeway is the government giving these chiefs to develop their own currency?
This is in response to Doug Wolfe on the AMI website, in case they don’t post my response there. I’m all for the U.S. government issuing the money it needs. The AMA is right on that and I support it. More power to it! But there will always be a need for banks to lend money at interest. I’m just saying that publicly-owned banks are a more efficient way to get there. This is not a stopgap measure; it’s a solution. It would make it obvious to Congress that we don’t need to be bailing out these big Wall Street behemoths in order to have a credit system. We can set up our own credit system and let them fail in the ordinary way. I believe the nation is under covert attack by foreign powers, which are inches away from solidifying a global one-world private money system headed by the Bank for International Settlements as global regulator. The G20 just agreed to that, with the Financial Stability Board approved in April in London. If we don’t do something fast, they will pass a regulation forbidding all nations from issuing their own money or their own credit. Carroll Quigley said that was what they were up to 50 years ago, and they’re doing it and they’ve almost succeeded. The odds of Congress passing the 100% reserve solution in the next year or two before that happens are zero. They don’t understand it and won’t see why it would solve anything. But they WOULD understand a publicly-owned bank option. It’s already being done in North Dakota, brilliantly well. It’s been done in other countries brilliantly well. State politicians understand it; I’ve talked to them. It’s something we could do NOW to save our nation from the grip of a global cartel that has been attempting to shut down this nation for 300 years and is about to succeed. Read my latest article on Huffington Post or on my website, http://www.webofdebt.com/articles.
Ellen Brown, on September 7th, 2009 at 8:36 pm Said:
“I believe the nation is under covert attack by foreign powers, which are inches away from solidifying a global one-world private money system headed by the Bank for International Settlements as global regulator. The G20 just agreed to that, with the Financial Stability Board approved in April in London. If we don’t do something fast, they will pass a regulation forbidding all nations from issuing their own money or their own credit. Carroll Quigley said that was what they were up to 50 years ago, and they’re doing it and they’ve almost succeeded. The odds of Congress passing the 100% reserve solution in the next year or two before that happens are zero.”
I could not possibly agree more. I’ve seen this probability escalating over the past 30 years, and more especially the last 8. I am fully convinced by all available evidence that the state and local currency options are soon going to be the only viable ones left to most of the USA, at least until after many catastrophic financial events leave the door open again for renewed federal action.
I would have posted this and many additional comments on the AMI blog, but they are not posting my comments. I suspect they are not posting all or most of the comments that are supportive of your positions or critical of theirs. Nor will they take my registration money, my sustaining membership money, or sell me another book. And I fully support all major AMI reform goals. Go figure.
Funny that an organization that claims that reform efforts cannot afford the distractions from other reform efforts is managing to blow itself up over this insane attack on another additional mode of reform. Or is is just another reformer? Makes me think of suicide bombers.
I am just popping-in from another site that linked to this… Excellent discussion!
Sorry there isn’t more than that, but I really appreciate this level of debate and I think it speaks volumes about the quality of a particular site… I could get hooked and I just wanted to say thanks.
Thanks for sharing you perspectives and explaining your arguments in language that I can understand. If humans spent a bit more time and effort we could be living in paradise rather than fighting over scraps in a dump.
Keep up the good work and i’ll try to share this with my friends.
“Plus, if AMI doesn’t get it, the tax man will. I need some deductions!”
Ellen Brown, you understand the banking scam. Bravo. Now take some time to read the dense but brief 200 page book “Cracking the Code”. The federal income tax and banking scam are inter-related. It looks like you are still a victim.
I agree with Ellen. Do the bank first, then do the AMI Monetary Reform…….it is crucial that we ACT NOW.
But again, it’s not an either/or proposition, no matter how much AMI wants to convince people that it is. Neither Zarlenga nor Walton, or any of the the posters supporting their position on their blog make substantive or persuasive arguments that state or local efforts at reform are harmful to the national effort.
The reality I see is that the further up the chain of power we look, the more enmeshed in the Debt-Spider’s web are the actors on this stage. The Money-Masters have a death grip on our national government, and they will kill or emasculate any money-reform bill the same way they are doing with healthcare reforms, or any other meaningful reforms.
That does not mean that the money-power doesn’t extend to the state congresses. Certainly it does. But it is not as rigid and monolithic at that level, and there is still some room for popular pressure to be brought to bear.
This entire divisive issue is frivolous and needless. It was a non-issue until it was forced on us by personalities who apparently need to control the money-reform efforts, or dominate the reform spotlight.
Meanwhile, as “real money reformers” fight over state or federal reform “exclusivity”, the Austrians and “Gold-bugs” are in the best position to hijack any reform efforts, and return us to an illusory gold standard. That IS what they have planned all along, and any informed reformer SHOULD know that.
Of course minor details like that should not concern “real money reformers” when we have “real issues” like whether to attampt federal or state reforms to tackle. Right? 😉
Jere,
I could not have said it better. For sure you hit the nail on the head with the gold-bugs being in the best position. However, Ron Paul has fallen into the Austrian trap. He definitely needs a lesson on the Gold Smith’s Tale!!!
A metal-based currency that allows lending will either cause mass deflation as interest is extracted. Thus making gold lending impossible at any rate of interest that extracts faster than gold mining would permit. Or it is inflationary (asset bubbles) the second you permit lending on a fractional basis, which would be very susceptible to massive crashes for lack of backing after the bubble pops. Think 1929 crash when we were still on a gold backed system.
The Libertarian view sadly is sort of a backward looking system. Think of all the advancements in the world that would be stalled by limiting them to the speed in which we pull metal out of the ground.
Greg said: “For sure you hit the nail on the head with the gold-bugs being in the best position.”
Well I think that is really the 800 lb gorilla in the room, and the AMI money reformers don’t seem to have a clue about how to deal with that fact. So they simply ignore it.
What is obvious to me from long study and observation is that the “gold-bug” or Austrian gold standard position is the “fall-back position” the banksters have had in place all along.
The international finaciers and central banksters are diabolically clever, and far seeing beyond normal comprehension. They have always known the “system” of exponential growing debt money would implode, and so they have always backed the Austrians and the “gold-standard” as the plan they would have ready to put into place in a crisis. It would probably come in conjunction with a global banking movement.
Since the central and global bankers (IMF, World Bank, BIS etc) already have most of the world’s gold bullion this fall-back would just profit the banksters 100-fold more than have the previous centuries’ criminal enterprise Ponzi schemes.
And the people once thought “taxation without representation” was intolerable!
So this is my problem with relying solely on a national or federal legislative solution. It would get hijacked by those it intends to reform, and turned into an instrument to further enrich them at the people’s expense. Debt-slavery and serfdom is the inevitable end result.
National reforms can’t even achieve a no-brainer like TRANSPARENCY for heaven’s sake. And this is in the wake of a multi-trillion dollar extortion without any accountability whatsoever of where the taxpayer’s money went. Akk we will get is more lipstick on the pig, and more shifting of the deck chairs on the USS Titanic as it sinks.
Ellen,
Hi from Direland aka the Emerald Isle.
Your analysis and advocacy for a State Bank is refreshing.
I came across your excellent blog from a link.
The timing of that discovery is prescient.
Here in Ireland our Banking Crisis is reaching a defining cusp,in terms of fundamentally divergent disagreement over ways to resuscitate a shattered economy underpinned by broken banks.
The government propose to establish a National Asset Management Agency.This will take €90 billion of toxic loans off the covered banks for a yet to be announced ‘haircut’ .
A controversial valuation method is proposed which is causing much public and political consternation.
A Long Term Economic Value will determine the price at which the taxpayer stumps up .
I am not a financial or economic expert,but the fact that there is not one independent economic commentator who supports the proposed NAMA arouses deep suspicion.
Vested commentators are trotting out blurring yet weakening rebuttal to two proposals that have been put forward by the main opposition parties Fine Gael and Labour.Both alternates propose degrees of Nationalisation,
There are mass protests planned for the 12th and 19th.
On Wednesday the Daíl will return from their summer vacation as we face into a winter of discontent.
The leading independent Irish economists are blogging on the Irish Banking Crisis below.
http://www.irisheconomy.ie/
Sir,
Excuse me for butting in here, but this I’m the Director of the new documentary on precisely this problem, “The Secret of Oz”. http://www.secretofOz.com
This film was scheduled to play yesterday — Tuesday, Sept. 8 — at the Film Festival of Ireland in Tipperary. Fed-Ex messed up and didn’t deliver it on time, so I’m hoping it will be rescheduled today — or sometime.
In any case, I’ll go on this blog and weigh in.
Bill Still
Excuse me for being boastful, but I’m just so happy to have won something for a monetary reform film. This helps us all out.
The Secret of Oz has just won the Silver Sierra Award for Filmmaking from the 2009 Yosemite Film Festival in Yosemite, California. I will be there to accept it at their Award Ceremony on Oct. 24th.
Bill,
Well done and congratulations!!! I look forward to seeing it soon.
Bill
Thanks for that.
Congratulations on winning the Silver Sierra Award.I am looking forward to viewing your fascinating and from the clip watched on youtube,instructive film.
Your gifted presentation maps out in clear and illuminating expression,a subject matter that is so important yet is so prone to obfuscation and complex interrupt by heavily vested interests.
In my opinion,as the public debate is intensifying in Ireland and a critical mass of thought is querying the self-same experts whose expertise was prevalent in our artificially created ‘boom'(aka the Celtic Tiger).Such questioning and criticism is now being dismissed as populist nonsense,by the shameless vested.
Maith thú a chara.
IDS.
Hi,
I’m a passionate believer in Ellen’s system of financial reform. No other reform will work. Plenty of systems *could* work but centralised reform allows for centralised opposition. This is the centralised opposition that has controlled the supply of ‘debt-money’ since the Goldsmiths stumbled onto the fractional reserve system.
How would their opposition work? Well, in terms of media argument they would surely go with the “government is incompetent” and “government is wasteful”. The irony is that the government is largely incompetent due to the fact that the money and thus the power is in private hands. The scarcity of money is a large cause of the greed we see in modern humanity. Though I will say I think there is a certain amount of greed in our nature.
But by far and away the most destructive argument would be the one of inflation. The fact is that no matter how you present it, the MSM will argue that government creation of money will be wasteful and lead to hyper-inflation. It doesn’t matter if this is in fact true because inflation is an *expectation* that prices will rise. Thus is the MSM creates enough of an expectation that inflation will occur then it will!
The elegance of Ellen’s solution is that by creating state-controlled banks one at a time you largely sidestep this problem and the centralized opposition.
Still, one thing people need to remember is that what those in the know *love* about the current financial system (just reference Carroll Quigley’s “Tragedy & Hope”) is its nature of all-encompassing, pervasive control. In the same way that the British and it’s money-men would never allow the ‘American System’ to take hold in the United States the private banking elite do not want any nation to operate outside of this system as it removes them from their control. In fact, the private financial system has brilliantly achieved what religion and warfare never could; (almost) total global control. People choose their nation and choose their religion but no-one can choose their money.
I do find a certain irony in the fact in that we would not be able to have this discussion if the fractional reserve banking system had never come into being. There is no way we would have the technology we have. It is the fractional reserve banking system and its corresponding constant requirement of growth that has driven the world technologically forward in such a small space of time. In fact you could say that Moore’s Law is a direct result of this requirement for constant growth. It has put humanity on a treadmill that requires us all to run. And it has driven the planet to the point of no return. We will either solve the problems we are constantly creating or they will destroy us. There is no longer a ‘middle ground’.
I live in London, England, and I’m wondering Ellen if there is a similar way something to your state owned banks could be achieved here? We have the state and then a large number of councils. Councils have large revenues from council tax, parking fines, government funding, etc… would it not be possible for the creation of council-owned banks to operate in a similar manner to your state-owned banks?
I am glad that at the very least we are all talking about these issues!
All the best,
Alex
Alex,
Your have some fantastic points. I have thought the same. We are very much aligned in our thinking. The language has certainly been controlled by the financial elite. They have us repeating like a chant everything they want us to believe about money. But unless we start acknowledging the facts: like it may be true that the bankers stuffing us with credit may have in fact helped us advance. We may not be able to actually make accurate judgments as to the value of credit. Ellen suggests that we have as much credit as we want. AMI suggests that we take a gamble and potentially reduce credit by a lot. So which system is right? That is a good question for sure.
I really liked your comment about how the money system has done what religion and war have not been able to do. I would agree in total except that the debt-based currency model as executed inside the supply-side dogma is a tool of a religion. Mathematically the system falls apart. It has happened many places around the world including the United States within not even 40 years. The system is a proven failure. But we are told to have confidence and faith and trust our leading minds. Confidence…faith….trust…..That’s religion.
What about the facts?
In addition, has anyone considered that the reason those in power (Obama, Brown, Sarkozy, Merkel) do not discuss this issue is that without the ‘web of debt’ the power of our industrialized countries over the rest of the world would vanish? As in, the system handicaps *every* country but because ‘we’ (the industrialised countries and their puppet politicians) are in control it handicaps us less and thus puts us at great advantage?
Bill, I look forward greatly to “The Secret of Oz”… “The Money Masters” was very important in shaping my education on the money question. I guess the most important thing we can do is educate those in positions of power like you suggest. Hopefully your film will reach university deans, council administrators (here in the UK), congressmen, etc.
Congrats on your award!
Alex
One other thing… all money may be created as debt money but all money is *not* debt money. For example, banks make many bad loans (even in good times) and this money circulates around the economy, often being stored or deposited by people as savings. This money never has to be repaid because the bank has written it off. In fact, most bank money is re-circulated into the economy:
From http://wfhummel.cnchost.com/timebomb.html
“Some writers claim that interest on bank loans is a time bomb. They argue that money created through bank lending is only sufficient to repay the principal, which means additional borrowing is required just to pay the interest on the loans. That implies the public’s debt to banks must grow at the compound interest rate, even if the money supply never increased. Thus the interest payments to banks must consume an ever larger fraction of the public’s income, which will eventually drive the economy into the ditch. A popular name for this thesis is the debt virus.
What are the Facts?
In 1980, commercial banks had loans and leases outstanding of about 1,000 billion dollars. Over the next 21 years, the average interest rate on those assets was 9.8%. According to the debt virus thesis, by 2001 the public would have owed 7,200 billion dollars to commercial banks from just the 1980 loans and leases, which assumes no growth in the money supply thereafter. If we accounted for the growth in the money supply to support the growing economy, that figure would be many times larger.
In reality, the total of bank loans and leases in 2001 was only 3815 billion dollars. Obviously there is a major disconnect between the debt virus thesis and the facts. During that 21 year period, the average return on bank assets was about 0.7%, far less than the 9.8% average interest rate that banks charged on loans. Why such a dramatic difference?
Why the Debt Virus Thesis Fails
The debt virus thesis is based on a very incomplete model of money flows. Banks recycle most of their income back to the non-bank public. They borrow from the public and pay interest on those deposits. They pay expenses such as employee wages, overhead costs, expand capital investment, and write off bad loans. They buy financial assets for investment and as secondary reserves. Out of net earnings, banks pay taxes and shareholder dividends. All of these return money to the non-bank public.
In truth banks do well when their customers do well, and lose when their customers lose. Well-run banks do better than the nominal growth rate of the economy while others fail. However the aggregate net worth of banks can only grow apace with the general economy, as the record shows.”
Alex,
Nice attempt at a refutation of the Debt Virus Theory. I would only ask next time that if possible when you lay out numbers like you did please leave us a link to your source so that we can learn more. I have heard your argument before. This concept of recycling is an incomplete idea since you did not take into account the growth trends of the financial sector versus the productive and even service economy. I don’t have stats off the top of my head but I am sure they are readily available on the net. It is clear that the financial sector has become the dominant part of the economy. That means it has successfully stripped capital from the productive part of the economy.
It may be true that the banks buy assets. But those assets will in the end direct capital back to the banks. Thus only delaying not stopping compound extraction. They may pay taxes, dividends and salaries and interest to depositors but surely you don’t think that the banks are not for profit institutions at the corporate level? As you stated they will buy up producing assets but these are typically other debt bearing assets. So how would that be very different than making loans? These assets are nothing more than a degree of separation from standard bank business. Your points seem moot in this respect and do little at revealing new pertinent facts. All you have done is restate what everybody already knows.
Further, the argument that “some banks fail and some succeed” as another leg of your stable systems theory is shaky at best. Some car makers go under and some don’t. Does that mean the market share of auto penetration just shrank or will NEVER grow? I think not. Growth is the norm not the outlier. Supply-side economics is entirely based on growth. Certainly banks that fail are consumed by banks that are GROWING. Failure and success of entities at the microeconomic level have no connection to growth at the macro level except their impact on the MIX at the macro level. Success/failure arguments basically do nothing but distract from the real topic which is, is the financial sector growing relative the other sectors of the economy or not.
You also state “If we accounted for the growth in the money supply to support the growing economy, that figure would be many times larger.” To my knowledege the public owes something to the tune of 40 to 50 Trillion in various forms of debt. This number is probably very conservative. On top of that you would have to add another 15 to 20 Trillion in Federal, State, County, City DEBT that is acruing. Most if not all this debt both private and public is underwritten by the banking system at some point in the chain.
Besides what I just stated here, if I use your numbers and start with ONE Trillion in loans at 9.8% interest and assume that this interest is re-lent over the course of 21 years we do indead get 7.1 Trillion. You say that number is more like 3.8 Trillion. Almost half as much!!! But did you take into consideration that of the 3.8 Trillion only ONE Trillion of it exists and you are talking about an imaginary number? In other words, by your own admission the economy is SHORT 2.8 Trillion in year 21. Please correct me if I am wrong….but it would seem that your fictional economy failed well before it hit these numbers. And by the way, the calculations work out at 9.8% interest but don’t work out at .7% interest. You either changed the premise of your logic or you made a serious miscalculation coming to 3.8 Trillion at .7% over 21 years. I only get 1,158 thousand billion being due. In this example using your interest rate of .7% the economy would still be SHORT 158 billion in year 21. So even in the most conservative example we are over 15.8% short.
Expanding on this thought, it seems that the largest fracture in you refutation – and I don’t know if you omitted this on purpose or simply missed it – is that you glossed over or totally omited the fact that banks propably do relend their profits? Just taking your very conservative profit of .7% (correct me if I got these calculations wrong) a Trillion Dollar Money Supply would have to set aside in 5 years 3.5% of all captial just to pay interest in that year. In ten years 7.2% of all capital to just pay interest in that year. In twenty years 15% of all capital to just pay interest for that year. In fifty years 42% of all capital to just pay interest in that year. In 100 years 100% of all capital to just pay the interest in that year. So under you very light assumption it would only take 100 years to totally shut down a Trillion Dollar Money Supply.
So tell me….where in that 100 years does the economy actually break down? At what percent do the people simply fail at having enough money to pay the banks a compound .7% annual extraction from THEIR money supply? Now if you refute by saying the money supply will grow. I will reply in two ways.
First, what is the fundamental mathmatical difference between a ONE Trillion Money Supply and a 10 Trillion Money Supply? Nothing. The same result would happen. The economy no matter if it started as a ONE or TEN Trillion Dollar Money Supply would have to set aside in 100 years 100% of all capital to just pay the interest in that year. So size doesn’t change a thing but make the total nominal value of extraction larger. The percentages thus, are indifferent to the size of the economy. So no refuge there for you.
Second I would also add, assuming that we did not start with TEN Trillion but added the extra NINE Trillion over time….I would ask, just where does that extra 9 Trillion in new capital come from? Why it is DEBT of course. Where –forgive my logic if I am wrong here – each new line of ONE Trillion will march the very same path of the first Trillion in my 100 years doomsday example just as if we had started will all TEN Trillion from the start. Only the second instance it might take say 30 years to inject another 9 Trillion into the economy. The result being, at best the slower injection model might extend our 100 years doomsday date by another 30 years. Again, these are projections when 100% of all the capital must be set aside to pay interest in that year. The economy will collapse far sooner than that.
So, using your percentages under a very simple interest rate calculation we can easily see the power of interest extraction on a DEBT-BASED currency system. The one thing we absolutely can derive from this, is it is IMPOSSIBLE for a DEBT-BASED currency system to keep itself at a steady state (unless all interest is given back to the state as in the state model of banking) and it is not only IMPOSSIBLE for a DEBT-BASED currency system to grow itself out of an inbalanced and ever compounding extraction, the ultimate collapse of ever growing economy –of which we are to suppose solves this problem of extraction– would be even more devistating and does little to delay doomsday. If you don’t see this, then I might ask…have you been watching the financial news in the last year? Tim Geithner just said in a CNBC Town Hall that the economy was at the edge of collapse. That is your Treasury Secretary speaking not me.
If anybody wants to challenge what I have stated….I welcome it. I would love to be shown that I am wrong. It would give me hope.
I agree. The choices are state-owned banks or do away with interest.
Hi Greg,
I did in fact post a link to the source:
http://wfhummel.cnchost.com/timebomb.html
It is not my argument but I read the argument posted there and believe it has merit. If you look at most measurements of government debt as a ratio of GDP you can see that it does not head in only one direction.
Furthermore, the system can sustain itself because those in control have the necessary tools to do so. In Britain we are on course to borrow £150bn this year, but we have created £150bn of new money through “Quantitative Easing” to primarily buy government bonds. In essence the British government has printed its debt shortfall.
The reason it is not portrayed like this is simple. The powers that be do not want the idea that money can be created by the government to be established. In fact, I would bet that the average person believes that government creation of money is a one-way ticket to hyper-inflation. Expectation of inflation creates inflation.
The current system is maintained because it offers the “web of debt” that Ellen so brilliantly describes, a “web of debt” that yes, enslaves us all, but also enables a system of control and power far more sophisticated than any army or religion ever could be.
I would love to live under a fair monetary system and not “monopoly capitalism” as Bill has described it but I believe the chance of this happening in my lifetime is virtually nil. I believe that the international power structures are maintained via this system. If you do not believe this then witness how when the US or Britain has a financial crisis we break ALL the rules (e.g. Quantitative Easing or mass increase in borrowing instead of slashing of services) that the IMF and World Bank impose on other countries.
I can’t state this enough… private control of finance is about maintaining an international system of control. If could be argued that without it Britain would be a relatively insignificant country on the world stage. We have no longer have any real resources to speak of. No doubt the politicians recognize this and that the international financial system *is* where we get our power. Read “Confessions of an Economic Hit Man”.
All the best,
Alex
Alex,
Thank you for the cordial reply. I apologies for not being clear on my request for a source. I did look at that site (figured it was yours) and did not see a PRIMARY source of data that this conclusion was linked to. If it is there I would like to see it.
Anyhow, I don’t believe it is impossible to achieve monetary reform. If you do, why are you bothering to make comments that would bring the rest of us down? This site is about possibilities, not “the way it is thinking”.
On another point. Quantitative easing is neither a new concept or an unordinary concept. Quantitative easing is a STANDARD FUNCTION of money supply creation.
“The reason it is not portrayed like this is simple. The powers that be do not want the idea that money can be created by the government to be established.”
You stated this is reference to the point that the money power does not want the people to understand how simple it is for government to create money. Nothing could be more true. Yet on the other hand they LOVE to claim that governments create money and subsequently cause inflation. I think in psychoanalysis they call this “blaming the victim”, something most sociopaths are prone to do. And it is those sociopaths who run the show. They really know how to create a cloud of cognitive dissonance in group mentation!!!
Finally your statement “Furthermore, the system can sustain itself because those in control have the necessary tools to do so.” proposes an ENTIRELY different reason why the debt-virus thesis is incorrect than what was posited in your earlier article of which I refuted. You have completely done a 180 on your prior argument. One might suspect you of a rather obvious tactic of subterfuge at this point as it is plain to see the guile in your approach or you are prone to bi-polar thinking. In the first instance you defend Friedman monetarism free-market Reganomics and in the second you validate Keynesian fiscal stimulus under a New World Order. Either way it damages your credibility.
What I have gathered so far from reading you is that the monetary system is STABLE because banks spend all the interest back and well if that is proven wrong then it is STABLE because governments create more money through machinations only the “controllers” really understand and we should just realize that change is relatively IMPOSSIBLE. All three of your positions are in DIRECT OPPOSITION to the mission of monetary reform. Which brings me to question, why are you here?
I clearly argued that the system can’t be kept stable. It makes no difference who grows the debt-based currency system. Eventually the extraction velocity will win and the system will come crashing down and the government will not be able to STOP it the next time or whenever doomsday comes. Stability is NEVER possible under this model and it is quite possible to understand this and it is even more possible to change the system.
I am not coming down you to make an enemy. I just want to snap you out of this pessimistic mindset. Remember, people are reading what you say. If you truly believe in monetary reform you, I, we have a responsibility to inspire not deflate. We should be looking for ways to win the day not for ways to accept and suffer an impossible peace.
Yes, the system is inherently unstable. Michael Hudson refers to the ancient concept of Jubilee which most here probably know is a cancellation of debt. He mentions that ancient economists (or whatever they were referred to then) had a better understanding of the problems of compounding interest than those of today. Poor bought or mis-educated little things.
Here is a video link to the interview:
http://www.youtube.com/watch?v=3pwAFohWBL4&feature=channel_page
This is a great clip I’ve seen several times before. Much valuable info. The shortcoming is that I didn’t see any call for monetary reform, and that is at the bottom of all our economic and other woes.
The other links along the bottom are also excellent.
Good post!
Great video! Very useful. This man is closely associated with the American Monetary Institute. I believe I met him there but I know I have emailed with him a bit.
Yes, Greg. And He also has an excellent website where he publishes many of his articles, all of which are very informative. He is a regular annual speaker at the AMI annual conference in Chicago.
This discussion goes on & on, but we are running out of time. The UN world powers behind the Oz Curtain are about to clamp down & not allow any govt. to print its own money. Then where will we & our discussions be?
My proffered solution is that millions make citizen arrests on all govt. employees, ocean to ocean, same day & time, & offer 2 alternatives:
1. Help us restore our Republic; or
2. To prison for trial & execution for treason (no excuse for ignorance is there?)
This seems the only solution short of a bloody revolution.
Thanks.
Dr Bob, With all due respect for your doubtless pristine motives, your “preferred solution” – to make millions of citizens arrests of all govt employees – is not only unconstitutional, illegal, impractical and totally unworkable on many levels. It is also really nuts.
Who would be the all-powerful leader to organize and trigger such a fanciful idea? Obama? Geithner & Sommers? The DNC or RNC? Stephen Zarlenga and the AMI? You?
OK, the return of Jesus might just work, but short of that, what?
We ARE running out of time. I’ve been writing that for many years now, but truth-tellers are called doomsayers nowadays. No one is listening.
Here’s a news flash: ONLY CATASTROPHIC EVENTS ARE GOING TO WAKE THE PEOPLE.
And even then all fingers will point the wrong way and innocent heads will roll to satisfy the misdirected lust for revenge.
So, what’s your next solution, other than violent revolution? (We know that won’t work.)
Do you really think (along with Walton, Zarlenga, and the AMI) that congress is going to refuse acting on federal money reforms just because of a few discussions like this one?
I completely agree with Jere.
Dr. Bob, you not only dishonor yourself by calling for violence, you provide the enemies of monetary reform to take your comments out of context to bring dishonor on all of the rest of us. We TOTALLY disavow any violence to bring about monetary reform whatsoever!
I agree with Jere and Bill. Violence is a waste of time and resources as well if you ask me. If you want to wage a revolt against the money system just convince everyone to stop borrowing money. I think you would be just as likely to affect the second as the first. And if so, nobody would have to die. Consider it a non-violent resistance movement.
Get people to hate the idea of borrowing money and you will castrate the bankers. Just read about Argentina. They hate credit now, after the oh what was it….the 98 and 01 monetary meltdowns.
Dr. Bob may be very well intentioned, but to espouse violence AUTOMATICALLY throws him into “agent provocateur” status. Monetary Reform cannot in any way be associated with violence prone folks and those who do espouse violence MUST be banned — for life. We are attacking the citidel of the largest money-making machine in human history — nothing less than the creators and perpetuators of serfdom. Their EASIEST and most sure way to discredit us is to be able to take Dr. Bob’s comments out of context and attribute them to the rest of us as a whole, lest we all be branded as “domestic ter* or is ts”. Can’t stress this enough. It’s a very serious issue.
Again, writers, how much time remains to put your reform ideas into actual reality? Ellen has written of how the international Banksters are about to clamp down so that no govt., State or Federal, can print its own $$.
When we are all locked into the UN dictatorship with their own $$ system, your ideas will have no effect.
Guilt by association affects us all, since just being “citizens” of CORPUSA puts us all in the barrel with the worst criminals of modern time.
Sorry you feel so bad that an opinion diverse from yours has no place on your blog. Censorship for sure.
I think it is too bad that everybody here is overreacting to Dr. Bob. I mean come on…
Like anybody of real power is even remotely worried about us — a couple of gnats we are nothing more. They don’t have to bother “discrediting” us, we are not even on the radar screen of the public consciousness.
As to the question of WHAT CAN BE DONE?
Well, let’s start with the bad news. There is absolutely nothing that can be done. Why? Because we the people are powerless.
We have allowed a handful of Robber Barons to set up a wage slave state, where the average citizen is less than a gnat.
The “democratic” system? What a joke. Let’s just try and see what happens if a real reformer tries to get elected. Not a snowball’s chance.
Why? The system is completely rigged. Getting elected to any office means you have to have media time. Lots of it. Guess what? The media are gatekeepers that do not allow anyone past who does not have the “official” seal of approval (ie an ideology that is in line with the oligarchy system that is in place now).
I heard someone else mention that a grassroots communication movement — I tell two people, and each of them does likewise…
This may spread awareness, but then what? The reality is that the masses prefer to live in complete apathy and ignorance. And you know why that is? It’s not because they are not as bright as us “with it” “Informed” guys, but because they are smart enough to know that absolutely nothing can be done to topple the mighty ruling elites.
So they don’t even bother. They prefer not to think about the raw deal that life in a 21’st century “democracy” is — and watch Survivor, football and ultimate fighting instead.
So you tell me, Jere, Gregory, and the other very sharp folks here. Let’s hear your idea. How ARE we going to topple the mighty elite?
Because that is what monetary reform means. It means the people running the show are suddenly stripped of their power. Their power to control the lives of hundreds of millions of people like little ants.
Do you think they are going to just bow their heads meekly and sigh, “Oh well, it was a swell ride while it lasted. But now the good little folks have the have asked us to depart. So depart we must”
If that is how you think these things happen then you are dreaming. This has never happened in history and it never will. The toppling of one power structure by another is always a bloody event. Very bloody.
And that is what it will take this time.
Dr. Bob’s idea is right on the money. It could be the beginning of the revolt that will get things rolling. If you don’t have the stomach for that then you will not be part of any change, I can promise you.
I think Dr. Bob’s idea is terrific. In fact I would take it much further. I actually do believe we can stir the masses from their slumber (and stupor). But it takes some dramatic throw-down, veins-in-your-neck-bulging street action. Not some pussyfooting around in a chat room.
Just think what would happen if some madman started yelling for the heads of all the usurers who have enslaved the people — and the bought and paid for politicians that they own. When people get hopping mad, the media have to pay attention.
I went to a demonstration and a lynch mob broke out? So much the better. You can bet all the lunchbox Joes will be there tomorrow night after they see the throwdown on tonight’s TV news.
You want to get the people fired up? Then start screaming for bloody justice and see what happens. Milquetoast only begets milquetoast.
I’m working off the management board and don’t see Dr. Bob’s addition, but I agree on one thing — nobody of any real power is worried about us yet. That’s one reason I haven’t prepared a report on the AMI conference. I would, but there is so much to be done, and it really doesn’t matter who is right on that issue; the big boys aren’t paying any attention. There are other articles more in need of being written. But here’s my plan, and how I think we can get their attention: note that Michael Moore and a candidate for governor in Florida have picked up the state-owned bank idea. It’s getting out there. If just one state, county or other public entity tried it and turned the local economy around, it would catch on like wildfire I think. Then we don’t even need a movement. It just becomes obvious. So I’m just trying to fan the flames, getting information out there. We can argue about it when it’s a real possibility on the table. At first they ignore you, then they laugh, then they fight you, then you win. Ellen
Ellen, your scenario sounds good except for one thing. The powers that be will never let it succeed.
Oh sure, one or two state-owned banks might actually spring up at some point and they will do some good no doubt. But those ripples will NOT be allowed to spread. It will be a minor oddity nothing more.
We have to remember that the real power behind our society are a handful of oligarchs and they control ALL of the levers of power — politics, media, academia for the most part except for a few brave exceptions here and there like Hudson, Chomsky, Jensen, etc…
if it was just fighting the politicians, the people could win. If it was just fighting the media, the people could also win. But this is a monolithic power structure that we are talking about. They have ALL the power and all the mechanisms that exert that power in a real way.
I wish your idea could work. I would love that. But I don’t see it happening.
Dr. Bob’s idea was basically a citizen’s revolt. Where each citizen rises up and places a citizens arrest on anybody in government that they can get their hands on. The charge would be treason and the punishment appropriate.
This is brilliant. It is also constitutional. The Robber Barons are the ones who have usurped the power of the constitution, which rests with the people. The elected politicians who serve in this criminal enterprise are guilty of treason.
The constitution expressly gives the people the right to rise up — with force of arms — if necessary, and smack down any usurper of the constitution.
It is time the people did just that. Three hundred years of usury is enough.
It is simply a matter of getting the opiated masses fired up. That’s where pitchfork power comes in. Do not underestimate the power of the street mob. The Romans knew this very well and it even happens today in various countries — like the “color” revolutions in the former Eastern Bloc.
The fact that these revolutions were largely orchestrated by US agent provocateurs is in fact encouraging. If the CIA can do it in Serbia. Georgia and Ukraine, why can’t we the people do it here?
The powers of whom you speak are ready for riots in the streets; that’s what they want to happen. They’ve got the tasers, the tanks, the army, the FEMA camps all set up. We can’t beat them in the streets. We have to be sly like a fox, gentle as a lamb, using Aikido to turn their own force back on them. I think we have to beat them at their own banking game, by setting up banks that work for the common good. It’s all legal, and they established the rules themselves. How can they stop us? It’s just a matter of educating enough people to see how things are and how it can be done.
Ellen, Dr. Bob’s 1st post recommending citizen’s arrest of millions of government officials on the same day, at the same time, appeared on Sept 10, 2009. I Voiced my objections to such a plan, for numerous reasons, as did Bill Still, Greg Mihalich, and perhaps others.
My primary objection is that is would lead to blood and violence on a massive scale, and the government is ready for that, even eager. It would break the back of reform and resistance to the money and bankster powers.
Then Gordon Arnaut returns over a month later renewing Dr. Bob’s theme of violent revolt and revolution.
Since October 25 Arnaut has posted volumes on this and similar themes that are simply really bad ideas, and ideas I don’t think you or your book support.
One of these is the idea that “interest” – all interest – is bad, or usurious, and should be outlawed. I forget at the moment what the other major plank in his thesis is, but I remember it was faulty. I will look up his post of October 25 and 26th and address these major points in a new thread below.
Gordon Arnaut is well-informed about the issues, but in my opinion, misdirected as to root causes and the means to achieve the best solutions.
Cheers, Jere
Dr. Bob (ret.), on September 12th, 2009 at 3:29 pm Said:
Sorry you feel so bad that an opinion diverse from yours has no place on your blog. Censorship for sure.
_______________
Censorship? Your posts words and thoughts have been posted. What is censorship is what is going on at the American Monetary Institute blog, from Stephen Zarlenga and Jamie Walton! That is censorship! That is where respectful disagreement can rarely take place. That is where my attempts to support the state public banking solution have NOT been allowed. There is where my application for conference registration was denied, for no other apparent reason than I assist Ellen with her websites, and support her ideas and work.
You apparently have no idea of what the word “censorship” means. Every single post submitted in support of the AMI position has been posted here. Every one! Not one has been censored.
On the other hand, YOUR “diverse opinion” HAS been posted. It contained some really lame ideas, to put it mildly, and because it was criticized on both moral and practical grounds, you think that is censorship?
If you really are a doctor I pray that your diagnoses of patients are not as fatally flawed as your reasoning.
I may have seemed a bit harsh in my reply above, but the point I attempted to make was valid. My respectful posts to the AMI blog have been censored, meaning they were withheld, not posted at all. Others who have attempted to post there have also had their posts withheld. What AMI is doing on their blog, withholding posts showing disagreement with their position, is real “censorship”. AMI is engaging in not only “censorship” of posts, but of ideas that are not in “lock step” with their own. That is censorship.
I am one who after years of supporting AMI, TLSOM and the nationalization of the federal reserve system, and all of the main tenets of the AMI, have been denied registration at this years conference without the decency of an explanation or reason. That is “censorship” in its ugliest and most extreme form.
Therefore when someone frivolously claims “censorship” about us here, when there is only disagreement, I hope I can be forgiven if I get a bit touchy about it.
The rejection of suggestion you made to make millions of “citizen’s arrests” of government officials across the nation, as appealing as that might be on some fantasy level, is not a rational idea. Nor is “bloody revolution” something we should even be jesting about. It is not censorship to call nonsense what it is.
There are peaceful, respectful, dignified solutions we can agree on and work toward within the framework of civilized behavior. And those who are not against us should be counted as friends, even if we fail to agree on all issues. That is the central point here: unnecessary divisiveness, admixed with exalted ego and pride.
How come Ellen Brown’s registration was accepted at this years conference but yours wasn’t?
Brian, Thanks for asking.
I really do not know, except for the sequence of events. After some discussion with Ellen, I called AMI to inquire about registration for my wife and I, IF Ellen Brown was going to be welcomed at the conference. I spoke directly to Stephen Zarlenga. He was evasive, claimed not to remember me from previous conferences, put me on hold only to be disconnected. When I called back, I got the answering machine, left a message, and got no return call. Called back again and he answered, mumbled something that sounded negative about a Jere Hough and “Internet posts”, claimed to know nothing about my past support of AMI, said that since I’d already been to two conferences it would be “better to make room for someone else” this time. (This despite still offering $100 discount on registration prices! Still even today!) Finally, after his telling me he was busy and had to go, I said, “Please, Stephen, just tell me if Dr. Brown will be welcome there.” and he hung up without answering.
My sense is that something I wrote on money reform, AMI or the like did not sit well with him, or gave him some offense somehow. Since I have always had the highest praise of AMI, SZ and money reforms, nothing negative was ever written intentionally. Indeed only the opposite. But back to your question.
Now this all took place after Ellen and I had exchanged emails and talked via telephone about the conference, and she had said she probably would NOT go because she doubted she would be welcomed after seeing his anti-state bank paper online. I was trying to decide whether to plan for the wife and I to attend, and had decided it would depend on Zarlenga’s position on welcoming Ellen Brown. That was when I told Ellen I would call him to find out what his position was.
The last thing I expected to have happen is to get curtly dismissed without the courtesy of a reason or reply. He hung up the phone on me, not once, but twice.
Needless to say, my once great respect for this man has plummeted to zero. I sent him an email asking for clarification or explanation of this rude behavior and after over two weeks now have received no response.
After I reported all this to Ellen, she decided to try registering on the website using a credit card, and it went through, so she decided to she what happens when she shows up there. Of course she suggested I do likewise, but after informing my wife of what had already happened, she said, “no way!” And I tend to agree. Why should I spend about $2000 for us to make a trip after being treated so rudely, and without provocation or cause? Indeed, after I have worked so tirelessly for the cause of money reform and supportive of Zarlenga’s book and the AMI/AMA reforms?
So after I was rejected by telephone, ostensibly for my support and advocacy of Ellen’s work, which is also Z’s work, and the larger cause of honest money everywhere, Ellen took a different tactic, and it apparently worked. Now unless her registration fees are refunded it will be almost impossible for SZ to refuse her admission without making more of a fool of himself than he already has. If I could afford it, it would almost be worth the $2000 to register as she did and go just to watch the fireworks… and I think there will be fireworks – unless there are apologies and reconciliation.
In summary, after Ellen and I conversed about whether we would be welcome in Chicago, or even admitted, I called and spoke personally to SZ and was rudely rebuffed. Armed with this information, Ellen registered electronically, and was apparently accepted. I could have done likewise, but until an apology is offered directly to me by Zarlenga, I will not attend another conference. I am finished with him and the AMI for good.
I hope that answers your question. It still leaves me without answers, but unless Z is willing to explain, and so far has not, I can only suppose he took offense at something I wrote.
Jere,
Wow. That is some story. I got the brush off from Stephen too. And I worked CLOSELY with him to develop ides for a solution that ended fractional banking!!!!! When I gave them to him…..and they didn’t reconcile with his thinking…..I was summarily dismissed. So don’t feel too bad. I wasted a lot of my time and energy let alone money going to two AMI conferences.
Hey, listen if you guys on the State-Banking camp want to put a conference together I will be more than happy to show how AMI’s solution will NEVER work. I know Fisher’s 100% solution and Huber/Robertson very well and can show their critical errors.
Publicly-owned, debt and interest free Permanent money and no fractional lending.
Pennsylvania, here we come!
Take a look at Guernsey money.
Tom Dennen (author of Grand Theft, Planet)
Ha! I can think of a couple of possibilities. First, I didn’t call; I just paid by paypal. It might have been automatic. Second, the main reason I’m going is that Michael Hudson said I should go and debate the issue with Stephen. He said he would moderate. I’m not going to agitate for a debate–I’m happy to sit in the back and do email when the lectures get slow–but I do think it’s a good way to hone my argument, so I accepted the challenge. Ellen
Cross posted. Hi Ellen! Glad to see you back. Hope your trip went well.
If I knew thee was going to be a debate on the issue, and it would be given fair hearing, I would attend at almost any cost. Of course Bill Still (The Money Masters) and Paul Grignon (Money as Debt) would also have to be invited, as they favor state as well as federal money solutions. I would say David C Korten also falls into this “community money” camp, at least as a fallback position.
My own position has been solidifying since Obama took over as President. That is that the money powers-elite are too thoroughly entrenched for any person or administration to effectively oppose their plans for a new world economic order.
Geithner, Sommers, Bernake, the Fed, Goldman Sachs, JP Morgan, Rockefeller, the Bilderbergers, CFR, et. al. are just way too powerful to go against without massive public support. And I do mean overwhelmingly massive.
Any and all attempts at reform will only be hijacked by the money-powers, and even turned to their advantage.
Want to convince me that the AMI has a snowball-in hell’s chance of doing something constructive? Pass the Federal Reserve Transparency Act! Since the “crash”, there is massive public and congressional support for that – over 200 congressional sponsors! Pass it and give it teeth, and then just maybe I’ll regain some hope for getting something positive achieved on the federal level.
Instead, what I see is the teeth getting pulled from all the financial and banking reforms that were bandied about before the election, and since. They are all being watered down by the money lobbies. By the time they are passed, we will have only somehow given them more power to extort money from the bleeding public.
I am more and more being convinced that our federal government may not be salvable in any way that represents gov’t of, by and for the people.
Paul Grignon and Bill Still seem to be coming to the same conclusions, and I’ve seen some good things from both of these cutting-edge thinkers lately.
Sorry for the length, but you got me started….
Talk about Bleeding the Public , when you take their good paying jobs away , Like the I believe the Change of Tariff Law back in 1994-95 was the beginning of this demise we see today , and the Giant Sucking Sound Ross Perot talked about in the 1992 Presidential Campaign , http://www.thenation.com/doc/20011231/greider
, and let the money flows just go one way , out through the international Big Banks , and back to Asian suppliers , with no way to re balance the trade deficits , you set up the eventual capitulation . we were warned , but the Free Importers were buying off policy makers , and together with the Currency manipulators in the east , did what Ross Perot said , I mean if you look at Clinton’s donor list you see the payback is from these beneficiaries of the Free Trade agreement that he penned , all in the name of what Greshams Law teaches as the abyss of currency valuation when 2 different valued currencies trade in the same market place , the lower valued drives the higher out of circulation ; Gresham’s Law of the 14 th Century , http://www.statemaster.com/encyclopedia/Gresham%27s-law .
And check this warning out ; The High Cost of the China-WTO Deal
Administration’s own analysis suggests spiraling deficits, job losses
by Robert E. Scott http://www.epi.org/publications/entry/issuebriefs_ib137/
It might be that the time has come to re negotiate a new Bretton Woods would be a direction all International trade partners could debate as a direction of Re structure , http://www.statemaster.com/encyclopedia/Bretton-Woods-Conference .
Ross Perot…..I have such fond memories of him. Man he was entertaining. Why is it the kooks seem to come out right? Perot, Kucinich, Ron Paul, Einstein, Edison, Newton, Galileo, the founding fathers of America, , etc etc etc. Anybody seeing a pattern?
How could anybody seriously believe Tim Geithner, Bernanke and the rest of the Banana Splits gang (look it up) ever again?
Hey, speaking of kooks, has anybody noticed that Kudlow on CNBC has stopped parading his “follow the bouncing ball” supply-side mantra on his show? “Supply-side economics is the best path to prosperity” blah blah blah. He seems to have backed away. Or have I just missed it? I wonder how long he will wait until he starts with the bouncing ball routine again.
Kudlow can’t sell the Free market concept now because if it were not for GOV stimulus and FED Monetization , the Free Market would still be in Free Fall , because really we have not seen a Bottom , because Consumption is still Half of what it was , with only Stimulus Programs driving what little bit of growth we have .
I still think that with the one way flow of money thats been in place since the beginning of the Free Trade agreements that put the Big Box Retailers /Multi-Nationals in control of the retail markets , and with Asian nations manipulations of their currency values , not letting them rise the world consumption rate was exploding over the years of Free Trade , has ended in total consolidation of world capital flows of the capital generated out of the trade of durables through the equity markets , in effect western nations over the years lost their own wealth creation / new money created from producing new products that a expanding a expanding population demand , and turned into consumer only nations , that credit feed until the willingness to continue to extend credit became fundamentally flawed to the point that the cover up in accounting and rating agency could not keep the cover over the financial markets positions any longer , once the short seller start shedding light on the problem with the positions they kept increasing . That was really the only Free market operating that brought the financial problem that was way over done , into focus , and I think we should never allow a Federal Instrument to replace the Free Will of markets to short a company stock if there is a possible manipulation in progress , with the way they were rat holing the debt that was building up , not letting the investor have a clear sight , and GOV regulators looking the other way for political reasons , even when they had a duty to defend the investor . No political party is resistant of GREED of Power and Money , only the Independent body thats getting the shot end of the stick can be the neutral in a skewed operation , no matter if its Capitalism , Socialism , Communism , whatever the society function , it all is subject to Greed over Power and the Resource control it has over the people , and that is where in my mind , a society never wants to loose its ability to be free to express themselves over the issues , like here on this forum , because Communications are vital to sustain a consensus that keeps people peaceful with solutions .
hungy4food,
Kudlow is a MORON and nobody should ever listen to a single word this man says! I only watch the show to see the spin for the day, but I don’t bend over backwards to tune in. Notice they stopped chanting their supply-side moron chant. Well I haven’t caught it anyway.
I get most of what you are trying to say. You have some good points and I get what you are driving at. However what you said in the following quote made no sense at all: “has ended in total consolidation of world capital flows of the capital generated out of the trade of durables through the equity markets , in effect western nations over the years lost their own wealth creation / new money created from producing new products that a expanding a expanding population demand and turned into consumer only nations , “.
I think what you are saying is that credit expansion in America shifted from production to consumption. We borrowed less to make things and borrow more to buy things.
“I think we should never allow a Federal Instrument to replace the Free Will of markets to short a company stock “. Not sure what you are saying here either. What federal instruments are you talking about? If you are talking about the bailout to save the financial system then you are nuts if you DON’T bail them out and just let the short sellers crush their equity value.
Who do you think is destroyed when these huge bank and insurance companies go down? Millionaires, billionaires? NO NO NO, they made their loot. It is the small savers and investors in numbers to the millions of individuals who get devastated. The rich will survive.
Even though I HATE the idea of saving these Supply-Side Jackasses, the responsible thing to do is act with integrity to the mission of this great nation… which is to preserve the union.
Thanks Jere. Trip went well–got a standing ovation, which was cool. It’s all in the preparation; I’m sure it’s not the speaking voice!
Is is taped somewhere? I’d love to see it if so.
I’m sure preparation is part of it. But so is dedication, enthusiasm, integrity, and selflessness.
All worthy of standing applause. 🙂
Thanks! Honestly though, it’s the preparation. Since public speaking isn’t my strong suit, I go to extraordinary lengths to be clear and have a dynamite power point. It was videotaped but I don’t know where it’s obtainable. Thanks for the support though!
Ellen,
I am glad it went well.
The Fed got the authority to start paying interest on reserves held at the Fed in October 2011 under the Financial Services Regulatory Relief Act of 2006, signed into law on Oct. 13, 2006. The Fed was gearing up to pay interest on commercial banks deposits at the Fed. Reserves were 800 billion at the time.
Then the financial 08/09 crisis hits. The Fed pressed congress for early adoption of the law resulting in:
Release Date: October 6, 2008
For release at 8:15 a.m. EDT
The Federal Reserve Board on Monday announced that it will begin to pay interest on depository institutions’ required and excess reserve balances.
http://www.federalreserve.gov/monetarypolicy/20081006a.htm
The Fed then grows reserves from about 900 billion Sept 08 to 1.7 Trillion April 09. That is nearly 100% in 6 months and is over a 100% increase from the date the law was passed.
Prior to this boondoggle for the banks, it took 12 years to double it before that from about Dec 1996. 10 years before that to double. About 9 years before that. About 12 years before that.
http://www.federalreserve.gov/releases/h3/hist/h3hist1.txt
So, not only do the banks get to escape their corrupt near destruction of America, they get paid for by the taxpayers for their trouble. NICE WORK IF YOU CAN GET IT!!!!!
So if you want to talk about finance “reform” legislation going against America’s interest, you don’t have to look into the future, just look into the past my friends.
Jamie Walton of AMI wrote:
“3. The problem is being misidentified as interest, when the problem is debt.”
“Proponents of the scheme are alleging that interest collected by “private” banks is kept out of circulation and is therefore not available to repay loans the bank have made. But this is not true.”
Response:
But it is true! Interest and who gets it (if anyone) IS the problem.. The above may be one of the worst instances of sloppy thinking I’ve ever seen come from reformers. It is so wrong on so many levels that it boggles the mind. Not only are “proponents of the scheme” (of public banking on state levels) believing and claiming that interest to private issuers of money is the problem, but AMI itself claims this. It is a major leg of the cause of money reform!
To say it’s not true is to refute AMI’s reason for being! How utterly absurd.
Jamie Walton continues with his nonsense: “Most, if not all, interest re-enters the system in some way at some time (e.g. as expenses, dividends, investments, etc.). This is not the problem.”
Response:
Again, this argument is the one the banker’s themselves use to justify their continued usurious charging of interest on our money. If this is true then money reform is totally unnecessary, and AMI might as well close up shop. Fortunately, it is untrue. Any serious money reformer or organization should know these basics well enough to avoid arguing against their own causes.
Walton goes on: “The problem is almost all of our money is created with a debt attached; it is ‘borrowed into existence’ from banks, who create it when we have to borrow it.”
Response:
OK, I get it. According to Walton, writing for AMI, Interest “isn’t the problem”. Debt is the problem. Is that clear?
But then Jamie Walton continues to dazzle us:
“As our economy grows, we need new money, but almost all of the new money is presently created with interest-bearing debt, so almost every new dollar has more than a dollar owing on it – so it has to ‘earn’ more than a dollar and pay it all back to banks (who never had it in the first place).”
Response:
Is this clear yet? AMI claims interest isn’t the problem; debt is the problem. But not just any debt, “interest-bearing debt” is the problem. Yet he is still claiming interest isn’t the problem, but interest-bearing debt is. This is like saying someone didn’t die from suffocation; he died from a lack of air. It’s playing with semantics that are devoid of any real meaning.
So now he’s changing what he originally claimed, that interest wasn’t the problem, but debt was, into “it’s interest-bearing debt” that is the problem. Are we straight on that yet? Do you think Walton is straight on it yet? Not likely.
He continues:
“Who owns and runs any particular bank makes little or no difference because the debt-based money-creating banking system will still own and run us, on a treadmill.”
Response:
I have to ask here how this clarifies whether debt or interest is the problem. If the debt didn’t bear any interest would we still be on a treadmill? Would there be any problem without the interest-bearing money-creation? Did Walton explain why who owns the bank makes no difference? If so, would someone explain it to me?
Walton continues:
“Money doesn’t have to be created like this; coins aren’t, they’re just created as money, with no debt attached; when they’re issued, it’s revenue for the U.S. government, saving taxpayers $$$. All money can be created this way. And; if we don’t start with any debt, then we don’t start with any interest either.”
Response:
As little sense as the above makes, it does make it clear that it is the interest that is the undesirable element. Without interest to be paid to a 3rd party there is no problem, as Walton’s last sentence makes clear.
In summary, the entire essay by Walton and AMI is circuitous, tail-chasing nonsense. It is a terrible piece of writing, unworthy of publication anywhere, much less on a money reform website that desires and expects to be taken seriously.
The main issue in money reform is for the public to regain their sovereign control over money. Then money would work for the people, as it should, instead of enriching private Wall Street speculators.
If the public banks issued the money, then it would matter little whether or not in some instances it bore a reasonable rate of interest, because that interest would be returned to the public treasury. It could be used in place of taxes for all kinds of public works and benefits. This could be done at all levels, from community to town, county, state, regional or national.
All this having been said, I have always been an advocate for national monetary reform, nationalizing the Federal Reserve System, returning money creation to the people’s government, and elimination or greatly reducing fractional reserve banking.
We think this entire issue is frivolous and divisive. It was foolish to raise it at a time when united efforts at money reforms are so essential to our survival.
Paul Grignon’s latest film, Money as Debt II, details all these issues, including the recycling of interest, LETS, and many other types of money reform issues. I urge those who are really interested in money reform to watch it, absorb it, and benefit from what it teaches us:
http://www.youtube.com/watch?v=cUou51iI4vw
http://www.moneyasdebt.net/
http://paulgrignon.netfirms.com/MoneyasDebt/disputed_information.html
Then take appropriate actions!
Jere,
On point 3, I must concur 100% with you. Please see my reply to Alex, on September 9th, 2009 at 12:21 pm. I think I did this topic some justice. I wrote more on it elsewhere.
You stated “Is this clear yet? Interest isn’t the problem; debt is the problem. But not just any debt, “interest-bearing debt” is the problem. Yet he is still claiming interest isn’t the problem, but interest-bearing debt is. This is like saying someone didn’t die from suffocation; he died from a lack of air. It’s playing with semantics that are devoid of any real meaning.” I think the language you are looking for Jere, is tha Jamie and AMI are making a DISTINCTION about a debt-based currency without a DIFFERENCE.
Jere you are hard core man…. This comment you made: “In summary, the entire essay by Walton and AMI is circuitous, tail-chasing nonsense. It is a terrible piece of writing, unworthy of publication anywhere, much less on a money reform website that desires and expects to be taken seriously.” is very tough on Jamie. I know him personally and I like the guy. He is true blue when it comes to money reform. I have no doubt about his sincerity. All we have here is a crisis of perception. I have been fighting with Stephen since 05 on this basic point that you so eloquently expressed. Ellen has talked about it as well.
AMI is stuck in Fisher thinking and has thus failed to grasp the deeper aspects of monetary thought. Now I have total respect for Fisher. He stuck his neck out in the 30s and went against the Fed back then when nobody really new what was going on. Today we common folk are working at a perception model that is surpassing Fisher and catching up to the Fed really fast. They haven’t evolved their technology or paper magic beyond our comprehension in relative terms. The FED and the Central Banking Fraternity are losing intellectual ground fast.
Which is why they are on a PR campaign to repair all the damage they did. They are even reinvigorating their go to keywords like “trust, confidence and faith” (See Tim Geithner on his Sept 09 CNBC Town Hall . Their religiously toned archetypical dogma is being retrenched. Talk about going to the old playbook!!!! I have no doubt they will freshen it up with some youth targeted expressions like “teamwork, volunteerism, contribution” etc. Something to bring some energy to their tired clichés when they realize only the bobble-heads are still nodding. I like that….somebody write that down. Supply-siders are all bobble-heads. Can I trademark that? LOL!!!
One way or another the reality of the monetary system will be revealed to the mass consciousness. The powers that be cannot stop it. So, lets give old AMI a break. They are coming along…..kicking and screaming….but they like the Banking Fraternity are going to have to concede to reality. Once a truth takes hold in a science and escapes political-economy….you can’t stop it. Take the environment for example. The battle is over on this subject. Anybody that wants to fight it now is just going to waste his or her breath on the backside of a losing argument.
Anit-environmentalists are fossils now. And that took under 5 years or so after Inconvenient Truth. There will be a popping moment for the monetary system as well. It’s coming one way or another.
The problem with AMI is not necessarily that they disagree with the premise that interest extraction is a detrimental influence on the national prosperity. A primary plank of Zarlenga’s agenda is the punishment of the banks for their past abuses of the monetary system by FORCING them to borrow real money from the Government at some interest rate determined by some schedule, up to the to total figure of the current M2 possibly some of the M3 money supply. We are talking about like 8 to 15 Trillion that the banks will have to borrow in real money from the federal government to meet the Fisher 100% Reserve Requirement.
This AMI policy serves three functions. First it establishes that the Government Creates Money by Law. Second it corrects the error of the Fractional Reserve Thesis. And finally it redirects the interest flow back to the Federal Government. It is Assertion, Correction and Sanction. AMI clearly sees interest flow back to the state from day one of their Act’s passage into law. The error they make is that they believe they will never have to force the banks to borrow real money from the government again because the supposed Huber/Robertson solution kicks in after day one.
It is not that AMI disagrees with the state model of banking. They just believe that the interest flow back to the state takes place in a terminus iteration (i.e. the entire M2/m3 money supply). Regardless of how that iteration may be tranched out or broken into parts over time. They don’t see it as a repetitive cycle that will go beyond the current M2/m3 money supply. Which it will be because they have not solved for commercial monetary expansion.
Like I stated before. Huber/Robertson fails and thus as some point banks being Forced to borrow money will transition to banks DEMANDING to borrow capital from the Government at some real cheap interest rate of which the Government will of course have to accommodate. So in effect the state model of banking will actually manifest itself in due course. Except in the AMI paradigm the banks get to keep profits by passing along their cost of money to the public.
Do you think by any stretch of the imagination, that if we leave a technical loophole open for the banks to commercially expand the money supply that we won’t get another bucket of supply-side slop dumped over our head while the malefactors of this propaganda bang the side of the bucket with mallets until our ears are ringing and we are seeing stars!!! Their rhetoric will be fiercer, more frantic and more illogical than it ever was. They will fight hard to keep us convinced that the Government is stupid and evil while the angels that run banks and corporations are the only people who can save us from certain economic death. They really like to dangle death in front of us all the time don’t they. Well it is only going to get worse in the future no matter the outcome. If we reform or don’t reform they will be going down and they will make it hard on everyone.
Anyway, I won’t go into the technicalities…..but right now the commercial banks get paid by the Treasury and now also by the Fed (reserves now earn interest) a very small amount of interest profit to create new money which slightly lowers the cost of money for the public (when borrowing). Never mind the dividends paid to the stockholders of the various Federal Reserve Banks. Under the AMI Act all that will effectively change is that the commercial banks will PAY a very small interest payment to the Treasury or maybe also to the Fed to create new money of which will only slightly raise the cost of money for the public (when borrowing).
All that I can see that happens after the AMI act passes is that the public will (possibly) pay more to borrow money. However they may find tax relief and other socio-economic relief from government programs like free healthcare and education. No more student loans yeah!!!!! But as you can see that will step on banker profits and I am sure they will manage in some way to take that business back from the government before dime one goes out to the people. Really, does the Federal Government need banks to write student loans right now anyway? If the Treasury can underwrite billions in loans to washed up Wall Street banks then why can’t it fund its own student loan program lowering the rates to near ZERO? Can somebody explain that to me?
I agree; it’s that Gandhi line, “First they ignore you, then they laugh at you, then they fight you, then you win.” I just did a radio interview with Stan Monteith, who said that at first he disagreed with the state-owned bank idea for California, but then he thought about it and now he thinks it’s a great idea. He’s interviewed me quite a few times.
Ellen, I think you’re right about Gandhi. I’ve been using that quote for 30 years or more. The problem I see is in defining what we are trying to win. Gandhi had a simple message: independence from Great Britain through non-violent resistance. General strikes, protests, work stoppages, peaceful protests and marches.
Gandhi an his movement accomplished great changes in India, but they did not overcome the subtle entrenchment of the money- power elites. Great Britain retained control over the Indian banking system, and the creation of their money.
Lord Acton called the war between teh bankers and the people the last great struggle of mankind, or something to that effect. I’m quoting from memory so that may not be exact. He was talking about the banker’s power to create money… the absolute power that “corrupts absolutely”.
You did indeed win your battle with that audience, and received your well-deserved standing ovation, but this struggle is just beginning to become visible to a few. It is still invisible to most.
I know in my heart that you will win. We will all win, eventually. But, as with Dr. Martin Luther King, it may not be in our lifetimes.
If we had 1000 more Ellen Brown’s we could win it in a year. 🙂
Gregory Mihalich, on September 16th, 2009 at 4:55 am Said:
Jere, On point 3, I must concur 100% with you. Please see my reply to Alex, on September 9th, 2009 at 12:21 pm. I think I did this topic some justice. I wrote more on it elsewhere.
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Thanks Greg. I think you do any topic you write on justice, and then some. The only problem is you include too much food for thought. I could write a book on your posts, and perhaps more.
I only have time to address a couple quick points.
Zero interest student loans. Paul Grignon (Money as Debt II) has taken the position that State Universities are the perfect public entities other than states themselves, to establish public banking operations. He explains it better than I could, so I won’t dwell on it here, but I loved the idea! I’ll see if I can find his comments again. I posted them here on on my blog site, I’m sure.
I also appreciate your comments on AMI, Zarlenga and Walton. I largely agree, with some minor reservations. I’ve only met Jamie once, last year, and talked to him a few times via telephone. I’ve been overjoyed that Stephen has someone to help him with the workload. I toyed with the idea of volunteering to help him myself, if I could do so from home, but then I discovered Ellen and her book and articles, and found myself far more in concert with her views than Stephen’s. I’ve never had a major confrontation with Ellen, while I have trouble discussing any idea with Stephen except those of his own origin.
I could handle working with him for a New York minute. Yet I still admire the book, and the work AMI is doing.
As for being hard on Jamie? Wasn’t it Jamie who accused Ellen of lacking humanity? Or or having no common sense?
The insults to Ellen and those supporting the state solution didn’t stop there, and the distortions and misrepresentations of her positions are most egregious. Jamie might indeed be a nice guy, and likable, but he wrote that offensive piece and Stephen recommended it, so my position is that those who can dish out insults should be able to handle harsh or inconvenient truths.
It is one thing to disagree respectfully with another’s differing positions, but “that article” was not respectful disagreement. It was an attack, and a series of insulting misrepresentations that does great harm to the entire money reform effort.
It is difficult for me to forgive that without serious attempts at reconciliation, and I’ve not seen one shred of evidence that is forthcoming.
I essentially agree with all your other points. The violence and heated rhetoric are escalating, and will continue to do so. It seems that the nihilists and anarchists are gaining ascendancy. They really are stirring the pot for revolution, and their methods are anything but civil and peaceful. Chaos is their goal, and the reasons should be obvious as to why.
We only need to look at history for ample precedent.
Thanks for your always valuable comments.
Jere,
You do make a valid argument. A line was definitely crossed. I would have to go back and read what he wrote again. I usually skip vitriolic speech as it just gets in my way. That is why I am so hard to trip up and take off target, which is what everybody should be doing. We need to work the problem and stay on target. If I learned anything from the movies Apollo 13 and Star Wars it is those two lessons. LOL!!! To me the floor should be open to debate and let the best ideas survive.
I am hoping that Jamie did not write those things but he certainly did put his name to them and for that, I think he should take a step back and reconsider who the enemies really are. Ellen posses no real threat to AMI if AMI has the better idea. AMI should be directing its attention at public relations and getting monetary reform in the mainstream media. If they were smart, they would team up will Ellen, as she seems to be much better at gaining ground for the cause. Ellen is on the Huffington Post. Where is AMI? Nowhere. Ellen actually asked people who read her articles to do something. What has AMI asked people to do?
I wanted AMI to contact all the NGOs out there who have massive mailing lists and can rally people to a cause. AMI should be speaking to these groups and tailoring a message to each. Why aren’t they doing that?
Anyway that is what I would be doing.
And I agree with all of that, Greg. Your questions and mine are the same. The problem is that every time someone comes along that SZ/AMI should welcome and join forces with, all I see happening is fear and resentment that SZ might lose a little of his prestige as “lead reformer”. This is crazy, and it is self-destructive of the entire money reform effort. What is needed is a broad and inclusive tent that end up in a landslide of public clamor for monetary change from the private to public control AT ALL LEVELS OF GOV’T.
There must be a rebalancing of power between the states, regions, and national levels of governemnt. Government must be brought closer to the people, and removed from the hands of the transnational corporations. But instead of doing this, it’s moving toward MORE centralization on a GLOBAL scale,
I actually think a global federal government would be a great idea at some point, but not until we achieve more safeguards and checks & balances so that the PEOPLE are actually in control. Economic policies should be created to SERVE the people, not exploit them.
As always, thanks for your thoughts. They are good ones.
Thank you Ellen, also Jere and Gregory for such deep thinking on the subject of monetary reform. Considering this topic is rather complex which is why we American’s tolerate our current system, I have a suggestion :
– Promote the federal gov’t passing a law offering one free or near-free mortgage to all American citizens?
We own Freddie/Fannie anyway, and we should own the banks. The gov’t could offer everyone the opportunity to refinance into a free or near free loan directly from the federal gov’t. One each and you have to live in it. Of course, everyone would do it and I think most would vote for it. Advantages:
1) Would reduce everyone’s mortgage dramatically
2) Would stimulate housing dramatically
3) Would save Americans a ton of money in interest
4) Would never need to be refinanced (can’t get better than free)
5) Easy for the average Joe to understand
6) Could serve as a simple political platform
7) Is the American Dream written into law
10% down for qualifying good credit folks, more down for less-than-good credit folks. Of course the bond markets would hate it along with private bankers and other make-money-with-money stakeholders but as I see it, the banks blew it.
The other political platform I propose is simple as well:
– No more political advertising on TV
This is were most political contributions are spent and is a simple concept that the average Joe can understand. Ads are often untrue and inflammatory, etc. thus are bad for us. We eliminated cigarette advertising for this reason with great success.
Real change done simple.
Thoughts?
Is this proposal similar to Professor Bob Blain’s solution (visit http://hourmoney.org/ , click on “Mortgages, Government, and Money Facts” on the left column, and then click on “Change the Mortgage Math”.) ?
And while you are at this site, you can read “Private versus Public Finance”. It is mentioned after “Change the Mortgage Math”. Both articles are just one page of reading.
Doug, on September 16th, 2009 at 1:10 pm Said:
Thank you Ellen, also Jere and Gregory for such deep thinking on the subject of monetary reform. Considering this topic is rather complex which is why we American’s tolerate our current system, I have a suggestion :
– Promote the federal gov’t passing a law offering one free or near-free mortgage to all American citizens?
(etc.)
– No more political advertising on TV
_____________
Thanks for the compliments Doug, and your suggestions. They are good ones. However, for the most part, they are already included in the larger concepts of money reforms, at least those I’m working towards.
Changing from a private to a public (socially controlled) form of money creation would accomplish a large part of the lower interest (more affordable) home mortgage. I can very easily foresee situations where it could be socially desirable for some mortgages to be available at zero interest, or close to it. This assumes state-created, no-interest money, of course.
Much social magic could be accomplished by eliminating a parasitic, profiteering, non-productive middleman – the private bankers.
However valuable your other idea about political advertising on TV, this would require another entire round of social and political reforms governing the conduct of our electoral processes, including campaign finance reforms, and probably even sweeping corporate entity (personhood) reforms. They have been tried but have failed because the corporate lobbies are too rich and too powerful – the same reasons we haven’t been able to achieve money reforms.
Such changes might be simple to talk about, but they are extremely difficult to enact because they affect entrenched corporate greed, and their motto, “Greed is good” prevails today in America.
It will not always be so. The system appears to most to be “recovering”, but the recovery is an illusion, bought and paid for with taxpayer bailout money, and Fed givaways to their bankster buddies. The “bailout bubble” will also soon burst, and another round of bailouts will be needed. If not granted, then the system will collapse, again, and the rescue will be worse than the original problem. The “rescue” will be a new world economic order – the one Ellen has written about that will revolve around the BIS, IMF, World Bank and G20 (mostly privately controlled) Central Banks.
The world will thus become indentured servants to the Money Masters, who will decide which of their hand-picked two or three candidates we get to vote for. Pretty much the way it is now in the USA, and most other western representative “democracies”.
Every where I look in “high places” to find “solutions” to the wealth-power elite dilemma I am confounded. All the options seem to be controlled by the money-power elites, or will be as soon as they see us taking any particular route.
National and international money reforms would be the ideal, but I just don’t see that happening anymore. I think that window has closed to us. I am more and more thinking that we are going to have to think and act locally, in our respective communities.
I wish I were wrong. I’d love to be convinced I’m wrong. I wish someone could show me some real evidence that I am. But I have looked, and I just don’t see it.
Whoops. Didn’t mean to turn into a ramble, but that’s where your thoughts led me.
I think you are completely correct in your assesment of where this could be going. Public debt creation is being used to make up for the lack of private debt creation to fund the grand debt pyramid with Intl banksters pulling the strings all leading to a one-world gov’t run by private banksters forced upon us in a time of crisis.
However, the end game could also be to ultimately burn holders of gov’t debt (Fed reserve treasuries/bonds). Perhaps just foreigners like China, the Saudi’s etc. will get burned if they decide to stop funding us? We could even implement the monatary reforms explained so well by Ellen but prioritizing US citizens only. What could foreigners do about it? We have Iraq for oil, we will have bought a ton of solar panels/stuff from China and oil from the ME most of which has been recycled into our debt instruments, and we spend more on the military than the rest of the world combined without a comparable external military threat.
Maybe this is the real reason we do all this? Would explain quite a bit of our strange behavior and why Obama seems much like Bush in terms of debt, military and Wall Street. Could serve as the pretext for the next war thus new debt? Hate to be so cynical but like you, I’m dumbfounded at our current course.
BTW, I have posed this idea of cutting bankers out of the middle of mortgages to a VP at a local credit union. To my surprise, even this executive could not make a cogent argument why bankers are needed!!
When you ask someone “why” they must pay 2 to 3 times the value of their house in interest over 30 years, a common answer is because bankers accept the “risk” of carrying the mortgage. It’s only been a year that this has been “proven” untrue – we taxpayers in the end are the risk takers (e.g. bailouts). So perhaps there is still hope people will wake up to this.
Of course this is only true if we plan to actually pay back our public debt. So perhaps it doesn’t matter, at least for us. Remember Cheney saying “deficits don’t matter”? I know, this is very cynical.
I would of course prefer a rich celebrity turned politician to propose a simple platform such as:
– One free “American Dream” mortgage to each US citizen
– Eliminate political advertising on TV
Interesting times we live in.
Doug, Personally, I think its difficult to view things today from the POV of too much cynicism, or more properly a healthy dose of skepticism. The layers of deception are just too deep. I think you are at least partially correct in the reasons why someone like Cheney could say “deficits don’t matter”. They certainly don’t if you have no intention of ever repaying your debts.
However, as Ellen has pointed out, even our current massive debts could be unwound in ways that would not totally abrogate them, if the money and banking systems were nationalized. Yes, the bankers might not get all they would want, but then, do they deserve to? I think not.
However, your hope that the people might wake up to this is becoming less realistic every day. More properly, the issue is “So what if they do wake up? What are they going to do about it?”
Enough of the real wealth and power in the world has already been transferred to the money-power elites so that there is little “the people” can do about it now.
It’s not so much that I’m dumbfounded about what to do as it is that all the avenues I once thought we could take to remedy the situation have already been more or less blocked, and are becoming more so each day. Meanwhile the people are only waking up very slowly, and most of them are angry at all the wrong “enemies” and their actions will only work against them, and for our real adversaries.
That is the problem, as I see it. Still, I see no alternative to keep attempting to awaken the people via every avenue possible. Ultimately the people will win this struggle once enough people realize what it really is. In the meantime I see much suffering that could be or have been avoided, even now with concerted action. But we are not yet ready to act wisely or effectively, and so we will lose the opportunity to seize the moment.
I like your “rich celeb” idea. Dreams are good. Hold on to that. 😉
Interesting times indeed.
In Terms of Herding Sheep , consider this quote by a Famous person ;
“By a continuous process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method, they not only confiscate, but they confiscate arbitrarily; and while the process impoverishes many, it actually enriches some. The process engages all of the hidden forces of economic law on the side of destruction, and does it in a manner that not one man in a million can diagnose.”
— John Maynard Keynes, 1920
Pay special attention to Keynes’ statement: Not only is he 100 percent right, but most politicians today subscribe to Keynesian economics, making this perhaps one of the most dangerous times for your money, ever.
Since the depths of the Great Depression in 1932 (when Keynesian economics really took hold in Washington) …
The dollar has lost 98 percent of its purchasing power …
But gold has soared in value by more than 4,300 percent.
Put simply, $100,000 of cash in 1932 is now worth merely $2,000 in purchasing power …
… while $100,000 worth of gold bought in 1932 is now worth $4,449,313!
I have a couple of questions. First I am a believer in inflation. But I think as usual the Gold Bugs have not gotten it right.
Using your numbers I would take $100,000/35 = 2,857 oz of gold in 1932. $35 Was the official FIXED exchange price at the Fed.
Today’s Spot Gold Price was $1,005 X 2,857 = $2,871,285. This is what a $100,000 dollars of gold in 1932 would be worth today. You claim nearly $4.5 million. I think you missed it on the over/under on the high side! Tell me if I got the math wrong.
Saying what a dollar is worth is much more difficult because you have to take into account how much money a person earned back then and now versus how much EVERYTHING cost back then and now.
I did some of my own calculations going back to about 1968 and found that the average man’s salary in purchasing power was about the same except that many more men go to college today. So that is a decline in the standard of living since it cost more to stay equal. On the other hand I found that the minimum wage is about 70% of the minimum wage in 1969.
So the poor got poorer the middle class has to pay more to stay even and of course the rich got richer.
These are very conservative figures as well.
I would say the dollar is worth less because people have allowed themselves to be paid less and have allowed other people to pay themselves more. In other words the wealth pie is distorted.
Now if you want to be serious about gold you would have to understand that to have a working economy based on gold coins that you would have to give up most of your gold to the rest of the people so they could have money. The gold would have to be distributed. So there is VERY little chance that you would own $4.5 million in gold today.
You would be trading in thousands of a percent of oz of gold to equal 1 dollar.
This is the prime fallacy for all gold bugs. They never understand that they would not get to own all that gold from the past. If they did….they would have most of the money supply and everybody else would be in soup lines. Gold would be so rare in trade that it would not even be consequential to everyday life for the world. It would not FUNCTION as money and thus the whole point of the gold bug argument collapses.
Gold may hold its value as gold bugs claim but it can’t act as money unless it is well distributed and if not well distributed then the world spirals into a never ending deflation resulting in less and less products and services and less and less development. Gold would reverse progress. Try making a profit under a gold standard. You would destroy the economy. But you might say “we can mine more gold”. Well, then progress could only go as fast as the miners can dig. And if anybody got too rich from their particular business –whatever that might be– they could expect more control from the government to strip them of their wealth or anarchy in the streets from civil unrest.
Do gold bugs think about how the world might actually be if they got their way? We in monetary reform are trying to beat poverty and injustice not pave the way for it. A dynamic, progressive, civilization does not need shiny metal that doesn’t rust as a means of exchange. It needs a currency that is technically dynamic and progressive as it is. Keep your gold. Anyone with common sense sees that gold HAS no value whatsoever outside of its utility. It is just another element on the periodic table; an element that could be just as easily replaced by any other element on the table purposely corralled as money, rightly distributed, and forced upon a populace to use as money.
It is not only gold that HAS no value. Nothing HAS value in and of itself. It may have colour, weight, odour, but NOT value.
“Value” – like beauty, is IN the eye (or mind?) of the beholder (not that which they behold).
hungry4food,
Did you ever borrow money from a bank in your life? Maybe you know somebody who did. Now think about all the people, corporations, small businesses, charities, etc etc etc who have borrowed money. Do you seriously think “government” did it all??? Do you seriously think government is totally responsible for causing inflation?
WE confiscate secretly and unobserved, an important part of the wealth of US. By this method, WE not only confiscate, but WE confiscate arbitrarily; and while the process impoverishes many, it actually enriches some.
Also I might point out that the government is “US” also not some dictator behind a wall of tanks inside his disco palace.
All human activity under a debt-based currency will cause inflation. And while yes this does cause some to be impoverished and some to be enriched……the charter of this nation was not designed to specifically protect the masses from this predation but only to be there for the masses in support of them. And our government has done a pretty good job of that. It could do much more, but it has brought honor to its creators. Government bashing is typical of gold bugs. But it doesn’t play well in the monetary reform community.
By the way, Greenspan said the same thing and look what he did to this country….him and his Supply-Side Whack Pack. It is people like them that have FORCED fiscal stimulus keynesian style. If you want to blame anybody for pushing bad religion it is those morons. They and all the other Friedman inspired Chicago Boys since the 50s have destroyed one nation after the other and they have done it under REPUBLICAN as well as democrat leadership. In fact they have conned republican chumps far more than the dems. Well that might not be so true since Clinton’s presidency. To be fair really, the Chicago Boys dance both these parties around like puppets on strings.
Now I am no huge fan of Keynes, but if it weren’t for fiscal stimulus under this debt-based currency model……you might as well have called it a wrap for the old red, white, and blue. Government debt SAVED this nation. We should be grateful that this nation’s bonds can still sell.
But the FED is buying the Majority of those Bonds with Printed Money .
And as far as the bailouts helping this small investor , heck its the small investor thats bailout themselves with their own Tax money , that now is going to cause higher taxes to be forced upon them . the rich won’t pay more because in the end they will only run a break even operation , while the political appeasers try and sell the middle class on the idea that they can get the money from the rich to take care of the deficits , but in the end it all will fall back on the majority of society to foot the bills , it always has …….
You may be right that the Fed has “printed money” only in the sense that reserves were grown –which is all electronic funds– but they had no hand –other than setting interest rates– in the expansion of the M2 money supply. Bernanke himself said growth in reserves won’t cause inflation. It is growth in the M2 money supply that is the real driver of inflation.
And guess what. Growth in the M2 money supply…..that was ALL US AND THE COMMERCIAL BANKING SYSTEM. The fed did not force us to buy homes or cars or boats or computers or build more useless strip malls or giant movie theaters, or purchase worthless internet stock, etc etc etc. That was all us following the moron religion of the Supply-Sider’s freemarket god. 50 cent said it best “get rich or die trying”. However, it is the people trying to get rich who rarely die. It is their victims along the way who suffer and die….the poor, the military, husbands working too many hours, shoddy health-care, near slave labor markets in Asia, South America, India etc etc….need I say more?
Our taking on of more debt is the cause of monetary expansion. Those who profited the most from this debt expansion are the REASON that the government has to go into debt in order that it may replace all the money the predators took from their prey. That is how the real business cycle works.
Lets get something right though…the rich do pay most of the taxes because the rich take most the money. And it is the rich who have all of you government haters completely snowed and doing their dirty work of government bashing for them. They are the predators.
And it leaves me wondering why Republican Tea Baggers are sooooooo stupid!!!!! Generation after generation from ancient times past these types have been baffled and cajoled by the rich to do their bidding all the while convinced that they actually understand their own beliefs which they have been spoon-fed from their MASTERS. When will these “patriots” wake up from history and get a CLUE?!
Idiot Tea Baggers should be grateful the government does what it can, to make sure the predators don’t run out of prey. Thus, what was said about the small business person was that without government spending there would be no money for small business to have in order that it even MAY think about paying off its debt.
Finally, here is a cold hard fact, you, I, nor anybody in this whole entire world has had to yet work a single day to pay a single dollar of the “deficit” — you mean national debt really. NOT A SINGLE PENNY HAS BEEN TAKEN FROM ANY OF US IN THIS MATTER. It never has and it never will.
The reason: the debt is simply rolled over forever. You say well “we pay the interest”. In some measure this does move money from society the wealthy. However that money is injected right back into society by the government who simply borrows that interest expense right back from the rich. The debt grows….but it is never really paid. The day of reckoning will happen when the federal government won’t be allowed to roll its debt over. Then the whole system will come crashing down like the mortgage market. Then all American money will probably collapse and the rich will lose everything. This is precisely why China, Japan, Canada, Britain, the European Union and everybody else won’t be selling their several trillion worth of our national debt anytime soon. Never-the-less, some country at some point will break for some reason we can’t see yet and when they do…..our sovereign treasuries will collapse and our money with them.
Will we pay the actual debt? No. But we will pay in many other ways. Monetary reform isn’t about worrying about debt, it is about protecting the future of our species.
if I may interject a couple of points:
1. debt-based money did not save this nation. It has merely desperately re-inflated the bubble which will appear to remedy the situation only for a short time. It’s like kicking the can up the hill to the next-higher cliff. The only remedy is the govt issuing debt-free US Notes, pay off the debt with them. Simultaneously as the US Notes stream into the system, proportionally raise bank reserve requirements to full-reserve banking. Lastly, future government borrowing should be forebidden by Constitutional Amendment.
2. Gold has never worked well as money. Gold can be money, but money cannot be gold. History shows that gold-only money systems always concentrate money, not democratize it. It has always been the prime tool of plutocracy and serfdom.
I love to quote William Jennings Bryan’s famous Cross of Gold speech here, because so few people have actually read it:
“…they will search the pages of history in vain to find a single instance where the common people of any land have ever declared themselves in favor of the gold standard. They can find where the holders of fixed investments have declared for a gold standard, but not for the masses have.”
“What we need is an Andrew Jackson to stand as Jackson stood, against the encroachments of aggregated wealth.
“We say in our platform that we believe that the right to coin money and issue money is a function of government. We believe it. We believe it is a part of sovereignty and can no more with safety be delegated to private individuals than can the power to make penal statutes or levy laws for taxation.
“Those who are opposed to this proposition tell us that the issue of paper money is a function of the bank and that the government ought to go out of the banking business. I stand with Jefferson rather than with them, and tell them, as he did, that the issue of money is a function of the government and that the banks should go out of the governing business.“
I agree , gold cannot be a replacement to paper currencies , but it can be an alternative store of value while the Politics of monetary policy work to find stable ground when it becomes over ran with policies that have saturated supply-side markets with over production and left the economies bankrupt by a lack of value appreciation that creates a solvent paper currency .
the alternative markets for such a work off period , to return to a stable supply demand economic function will be met with a era today of such a fast paced manufacturing capacity in the world that unstable supply-side markets will be the nrm if this is the only method to economic function , and is why a alternative investment platform like hard currencies can provide a means to alleviate a sole supply-side function as the only means to trying to achieve market stability . We need Both types of markets to see stability in the overall world economies , with the way different valued currencies and manufacturing capacities are conflicting with each others society needs of stability
Superb, Bill. The constitutional amendment prohibiting the national government from borrowing money was Jefferson’s primary lament on the defects of the US Constitution as adopted. A sovereign government that has the right and responsibility to create and manage money has NO LEGITIMATE NEED to borrow it.
In a representative government, sovereignty originates with the PEOPLE, and is delegated upward to their governments at respective levels. It is the people who have the ultimate right to determine what money is, and how it will be created, mananged and distributed. Yet this crucial truth is hidden from the people for the purposes of exploitation by the private bankers, who want to profit from the money-creation process themselves, and deprive the people of their natural rights.
Jackson had it right on banking. So did Jefferson, Lincoln, Edison, and all the others who warned us about the evils of private money creation by the money-monopolists.
Your film, The Money Masters is to be especially commended,. In my opinion it ranks as one of the two best films ever made about money, and how it can be either the source of our worst problems or the most creative solutions. The other film is Money as Debt, by Paul Grignon.
If these two films were used as the basis of economics classes around the nation, or even the world, miracles could be achieve within a decade or two. Of course Ellen’s Web of Debt would be just about the best money textbook I can imagine.
Thanks for commenting, Bill.
I’m have a Social Credit monetary reform understanding, as written about in modern times by Richard C Cook, who describes how the SC hypothesis and framework of the problem accommodates the various structurally inevitable inflections and stages of the current debt-based credit system.
So what i’m wondering about is that is the bank reserve issue a root cause or merely another symptom – If the right debt-free credit ratio is calibrated year after year, where will the demand for the banks to inflate the money supply come from?
Obviously the banking network would try and sabotage a good credit system, but if excessive debt is being designated to those interests in such attempts, then surely they would only succeed in driving themselves insolvent as the natural outcome. So i wonder if the reserve ratio issue is an un-neccesary ‘artificial’ limitation, not required with a accurately measured Credit function?
The Money Masters film has great historical presentation and over view in it’s own right. Monetary refrom history courses as an option would be really popular with students at educational insitutions.
Some interesting points and questions, Nik. Of course I’m sure you know Richard Cook is a regular speaker at the AMI conference, and is scheduled to speak this year as well. I’m sorry I won’t get to hear him this year.
Monetary history and reform efforts would be about as welcome in most US educational circles as exploding Easter Bunnies in toy stores. No doubt students would welcome them. Carl Herman is ample testimony to that. However it is the funding that is the big stumbling block, as it is with all reform educations. Forget education, we can’t even get reform INFORMATION released in mainstream media channels.
Thanks for your comments.
Bill,
Thanks for the comment…..but I believe I was perfectly clear on the point you made about “kicking the can” up a hill. I am not exactly sure why you felt it was necessary to clarify on this point unless you find error in my premise. The fact is….this nation WAS saved by the government going into debt. That is the fact. And that fact is entirely a different idea than if the government can save us forever.
The reason I made this statement was not that I agree with it in principle, rather I am not saying that this (more government debt thus kicking the can up a hill) is how things SHOULD be. Rather I was defending the government from a government hater who can’t or refuses to understand that the government is part of the SOLUTION. It is not the ENEMY. And that we should be grateful that it is still standing. Government haters are very confused people who need to be corrected in their thinking. Alluding disorder in my thinking when it doesn’t appear to be merited, I believe won’t help.
Now I am working under the assumption that you are not a government hater. I derived that by the statements you made with respect to the government’s role in the solution. So I believe we certainly are on the same page. But what I would suggest for all of us, is that when a government hater comes along, we correct him by reminding him that we need our government and it is doing what it can within the context of its allotted mandate granted to it BY US. If our government fails us, it is because we failed it as a People. Nit picking on perspective, while completely ignoring the CONTEXT for which it was originally designed does nothing but attempt to discredit your ally.
Good Lord, I have no idea how you could have taken that as some sort of personal criticism. This is a forum, mate. Forums are for debate. In fact, I agree with about 95% of your last. Thicken up that skin for best results, eh?
Government is of God. It is the ONLY thing that restrains evil in this world. This constitutional republic the Founders blessed us with is the greatest vehicle for humankind to permanently escape the bonds of serfdom ever created. Unfortunately there a lot of government haters about and we all should unite to gently reassure them that a government of the people is the most effective opposition to “Big Brother” or the “New World Order”, etc.
Hear, hear!
I think the manipulation of our capital system began when the lobbyists came to Washington DC in droves over the past 10-15 years .
I read where in the 1990s there were only 6-8000 and today 50-60 thousand are located in the DC metro area
Doug,
I read your post and you have a good grasp of the situation. If I may, allow me to suggest a book for your reading list. When you feel like it, check out “The Dollar Crisis” by Richard Duncan.
http://www.amazon.com/s/ref=nb_ss?url=search-alias%3Daps&field-keywords=dollar+crisis
It is one of a small handful of books that I recommend. This one is really very good at explaining how international monetary flows actually work. I think you will appreciate it.
Hey Jere,
It is my email address linked not my website… for some reason my browser was autofilling it into the website field! Deleting of my posts is fine.
I just watched Money as Debt II. Wow. Such a depressing situation. I still think that the one thing monetary analysis documentaries like this are missing is exploring more in depth the reason there is no political will at a high level to make a change. I believe that the international power structures are maintained and managed via it.
Obama is not an idiot. Gordon Brown is not (as much as I want to say he is). Brown was Chancellor for a decade. He *must* understand how money works. But I believe there is a high-level belief that it is the financial system that gives Britain its power in the world. The dollar as the reserve currency is no doubt a large reason for global US dominance. I believe they think the option is what we have or anarchy.
I stated earlier:
In Britain we are on course to borrow £150bn this year, but we have created £150bn of new money through “Quantitative Easing” to primarily buy government bonds. In essence the British government has printed its debt shortfall. Where are the austerity measures the IMF normally impose in such situations?
I can’t state this enough… private control of finance is about maintaining an international system of control. Read “Confessions of an Economic Hit Man”. It portrays brilliantly how the developed world uses the financial system to maintain its power over the less developed world.
Hi Alex, I didn’t know what you meant about deleting your email. Now I see, and I did manage to edit one, but there are 205 responses to this post! I don’t even know where your posts are. So much to do, so little time . . .
Ellen, Don’t bother with it. I’ll take care of it without any need to delete anything. I know you are busy getting ready for the fireworks display in Chicago.
Wish I could be there.
Alex. It should be fixed now.
I doubt there will be fireworks, because (shhh) I think Stephen is a coward, and I’m too laid back to care! We’ll just snicker at each other and that will be it. Cheers, E
That may actually be the case. Whatever the motive, he has not answered my emails requesting an explanation for refusing my registration at the 2009 conference, or for hanging up on my phone calls, or for refusing to post my replies to his and Jamie’s very insulting article on the state banking options you have proposed. All of that would seem to support your feelings above.
It appears my praise of Stephen all over the internet may have been somewhat overrated. Maybe you could give him a snicker or two for me? I’d like to be doing that myself. 😉
Alex, on September 20th, 2009 at 5:44 pm Said:
“Hey Jere, I just watched Money as Debt II. Wow. Such a depressing situation. I still think that the one thing monetary analysis documentaries like this are missing is exploring more in depth the reason there is no political will at a high level to make a change. I believe that the international power structures are maintained and managed via it.”
_______________
Comment: Of course they are, and I would think the reasons for a lack of political will in high places to change the status quo would be obvious: they benefit from it! It shouldn’t be necessary to dwell on the obvious.
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“I believe they think the option is what we have or anarchy.”
Comment: That is the dichotomy they would have us believe exists, which is not true, of course. Just like the only alternative economic systems are not “capitalism” or “communism”. These false dichotomies are promulgated to confuse and polarize the people.
________________
“I can’t state this enough… private control of finance is about maintaining an international system of control. Read “Confessions of an Economic Hit Man”. It portrays brilliantly how the developed world uses the financial system to maintain its power over the less developed world.”
Well, we would certainly agree, since exposing that national and international system of money/power control is what Ellen’s book, this website, my website, AMI’s site, and hundreds more like it, are all about. As for Perkins’ “Confessions”, that ha been among the books, videos and other sources I’ve been recommending for years, since it first came out.
If you haven’t already, the book you should probably read is “Tragedy and Hope”, by Carroll Quigley. It’s the most comprehensive and authoritative history of this money-power elite I’ve yet read. Others have added to and updated it, but it remains the “source”.
I reviewed the book on my website, here:
Thanks for your comments.
I think it’s very important to discuss the very different properties between permanent money and credit. That being said doesn’t mean that it’s an impossible task to create a fair debt based monetary system but you have to consider these very different properties if you want to avoid the bad things with debt money.
I made a video showing these different properties. Hope it will lead to some fruit discussions.
http://tinyurl.com/na558c
Michael, You are correct about the importance between permanent circulating money and credit. However, the goals we are working toward in our attempts to reform our current money system would be impossible to achieve without a complete understanding of those differences.
They are fundamental to any hope of meaningful money reform.
Money is a present claim on real wealth: commodities, goods or services.
Credit is a promise of, or a future claim on, real wealth: commodities, goods or service.
Anyone can issue or extend credit, but only sovereign entities can issue credible permanent legal money.
Do you have a problem with any of these basic definitions or concepts?
IMO. Paul Grignon’s videos clearly illustrate the above essential concepts about as well as it is possible to do. If you disagree, please state why.