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.
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:
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
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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.
_______________
“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:
http://wealthmoney.wordpress.com/2009/05/28/188/
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.
Back to the subject: AMI, Stephen Zarlenga, and the money reform conference for which I was denied registration…
I’m still scratching my head over being unwelcome at the AMI conference this year.
Here is just one among hundreds of favorable plugs I’ve given SZ and his book over the years. This was a review I wrote on Amazon.
(Quote)
________________________
8 of 8 people found the following review helpful:
A “Must-Read” for All Citizens
By Jere L. Hough “Truthseeker” (Kansas City, MO, USA) –
Why does this priceless masterpiece remain “unavailable”? I happen to personally know the author and publishers and they assure me that it IS available to Amazon, or any other bookseller.
It appears to me that this book is simply being “blacklisted” because the truths it contains are simply “too inconvenient” for certain powerful financial interests.
I agree with the 5 most favorable reviews already here, and only disagree partially with Mr. Greco’s, the critical portions. He is simply wrong about the book not offering solutions. The solution is to take back our monetary system from the usurped control of the private international central bankers and return it to a government of, by and for the people. The other big step in the solution is that all money, whether paper or commodity metals like gold, silver, copper or bronze are given legitimacy by “fiat”, or the force of law, i.e., the currency must be accepted as payment, especially of taxes. He also gives the all-important recipe for correcting the fractional reserve problem in a non-disruptive and peaceful manner.
The true importance of Mr. Zarlenga’s unparalleled work on this subject is his noble effort to make this subject plain enough for the masses to understand. He demystifies the subject that has been so deliberately obfuscated for so long by those who wish to entrench their power by the very lucrative, and exploitative, control of a nation’s money supplies.
Corrective change will be impossible until a “critical mass” of citizens realize exactly how and why they have been exploited, and act to free their economic chains. The resulting benefits to society will be immense, and immediately felt by a middle class that will expand and prosper, rather than shrink and diminish as its now doing.
Indeed, this book will be in the realm of money what Henry George (“Progress and Poverty) will someday be in the realm of land and raw materials, or Carrol Quiqley (Tragedy and Hope) is in the uncloaking of the Anglo-American power elites (some would call them “Illuminati”). In other words, it will be a classic in our hope of understanding the present and of correcting the mistakes that have kept us from achieving our destiny, as a nation and a world.
Read this book, even if you have always been intimidated by the deliberate mumbo-jumbo of technical micro-economics, and the likes of Alan “What did he just say?” Greenspan.
You will be amazed at what you learn.
Jere L Hough
_______________________
That was my review – one of eleven the book has received. It can be seen here:
http://tinyurl.com/lg79bv
I guess that is what Zarlenga thinks is hypercritical, or unsupportive of his positions.
If Stephen Zarlenga wants to consider me an “undesirable” at his money conferences, then I’d hate to see what he considers “desirable”. I am certain that if Ellen Brown had called him about registering, as I did, she would have received the same cold and rude response that I did.
The only thing I can think of that might actually be going on is that I later gave Dr. Brown’s book, Web of Debt, an even better review on Amazon. How dastardly. Shame on me!
Jere,
I think you should have just registered with PayPal (no phone call) and come to the AMI conference!
Thanks Ann, With hindsight, that might have been the best thing for ME to do. However, the circumstances leading up to my first calling AMI and speaking to Stephen Zarlenga by telephone were fully discussed above, on Sept 16th, and in other places.
It was about a month prior to the conference when AMI, Zarlenga and Walton published their critical and insulting paper on the harmful and distracting effects of Ellen’s “State Bank Solution”. Ironically this was about the same time that I had decided I needed to make up my mind about attending, in order to line up airline and hotel reservations at favorable rates.
My wife, a former director of critical care nursing who is nearing retirement, and who has taken an interest in money reform over the years I’ve been involved, had expressed an interest in attending the conference along with me this year. Yet this would double our financial outlay, and… well, nowadays money is tight.
So before making a decision, I decided to write Ellen to see if she was going. or might even be speaking. (I had been disappointed that Steve did not ask her to speak last year, and even more disappointed at his negative reaction toward her when I brought the subject up to him.) The emails turned into phone call, as I had nailed some favorable airline rates and wanted to pull the trigger on them.
Ellen’s initial reaction was that she would probably not go, since after AMI’s publication of that scolding article about her and the state banking option, she would probably not be welcome. If that were the case, I would not want to go either. So I told Ellen I would give him a call to find out. My relations with SZ had always been friendly and cordial, so I hardly expected the cool and rude rebuff and brush-off I got when I called, or the hang-up when I asked him about Ellen.
I relayed this sad turn of events to Ellen by email. Meanwhile Ellen had been asked by Dr. Michael Hudson, (a speaker) and others, if she were going to attend. She told Hudson what had happened and he asked her to go anyway and support her position on public state banking. Hudson also wrote Zarlenga expressing his negative opinion on SZ’s position.
So Ellen decided to try the credit card registration route without talking to SZ or AMI, and it went through, so …..
She is going and I am not.
Certainly, as is pointed out above, we did discuss my registering in the same manner, but my wife had already hit the roof, and made her position clear; she wasn’t going. (I wonder why she lost her interest?) The low fare was now lost on the airline tickets. But most importantly, I had been personally insulted by Steve Zarlenga, someone I had praised and supported all over the internet, along with the cause of money reform.
After the rude treatment, refusal to answer a simple question, and abrupt hang-up by Stephen Zarlenga, the idea of registering or continuing to support HIS causes with MY money is laughable. It will remain laughable until I receive some sort of reasonable apology. I’m more than will to entertain one. I’ve sent AMI an email asking for an explanation. No answer. I’ve tried posting a response (two, actually) to the “comments” section of his blog. They were not posted. No reason, no explanation, they were just not posted.
It appears that Stephen Zarlenga thinks that he owns the money reform cause in the USA. Not true. Money reform is MY cause. It is OUR cause. It is the cause of all who seek justice and understand how our monetary system is perhaps the greatest source of misery and injustice on this planet. AMI and SZ do not own the causes and great movements for social and economic justice.
SZ’s book greatly advanced my understanding of monetary issues. Ellen Brown’s book further advanced it, but more importantly, gave the cause a far superior teaching tool: a book with an entertaining story line that could educate the masses about money and economics.
Ellen’s book can reach masses, while Stephen’s rambling tome is of limited appeal and value. After the first time I read TLSOM I was equally elated to find such a treasure of information about money and dismayed at the shabby manner that information was presented. My main thought was that it had the makings of a masterpiece if only it was edited and properly repackaged, even entirely rewritten and/or rearranged to make it more readable.
Even the title is awful. The Lost Science of Money? Money has almost nothing to do with “science”, and almost everything to do with philosophy, law, culture, and civilization. Money is a philosophical “abstraction” of “law”. It is an official substitute for real wealth. Science has nothing to do with such concepts, until we get into the micromanagement, or microeconomics of money supply, flow, velocity, and demand.
So, I actually started to write a book I thought would fill that gaping need for a book on money that would appeal to the masses, and then Ellen’s book came to my attention and stopped that project in it’s tracks. I couldn’t hope to top Web of Debt any time soon. And even if I could, it would not be a productive use of my time, in terms of achieving money reforms. Instead I use my time here, and on my website, writing articles on money reform.
So, thanks for the sentiment Ann, but “no thanks” to conferences where my support is neither wanted or accepted. If Zarlenga wants to elevate his own ego over the far larger cause of achieving money reforms, I’d rather go another route. Steve did not stutter when he told me that since I’d already been to two Chicago conferences that it would be better to allow “new faces to attend”. Would YOU show up after such a direct insult? Would anyone?
[...] MORE THAN ONE WAY TO RECLAIM THE POWER TO CREATE MONEY, August 28, 2009 by Ellen Brown, Web of Debt [...]
Ok I got a message from Ellen saying that my post was of topic. I’ll take my part of the blame if my presentation was hard to follow but my post was very on topic. I’ll try to explain my point and it’s a pure mathematical approach – so there’s no need for emotional outbursts. Just show mathematically and logically that my objections are flawed and I will accept it.
When new credit is created in a debt based money system an asset and a debt on the same amount are created. Someone is holding an asset on X dollar and the counterpart is holding a debt on the same amount (X dollar) – together they cancel each other (=0).
Let’s divide the population into two parts:
1) One part holding the debts
2) The other part holding the corresponding dollar assets
These two parts are, in mathematical and monetary aspect, equal in size since all created credit equals the total amount of debt. If all debt are paid all the created dollar will cease to exist (=0).
Now lets say an additional amount of dollars (Δx) are going to be created. This can only be done by putting someone in debt in a debt based system (obviously). But those already holding enough dollar assets don’t need to borrow any money so the only option is to indebt those with small dollar assets or those already in debt. If those already holding debts take loans they will get deeper into debt. If those with small dollar assets take a loan they will move from the asset part of the population to the indebted part of the population. Hence: fewer people will be left on the asset side and more people will be on the debt side even more indebted.
If additional debt money is created the scenario above repeat itself creating a situation where more debt leads to greater an greater inequalities (which is also empirically easy to show).
Further more:
Lets say a politician wants to redistribute (by taxation, “trickle down” or what ever) so that the indebted part of the population can pay their debts by taking Δx dollars from rich people. But this means that an equal amount (Δx) of the money supply will be destroyed (since killing the debt equals killing the same amount of money). Hence: any attempt to redistribute in the debt based money from those who have to those in debt would destroy part of the money supply. So politics is trapped in an undemocratic situation where it can’t do anything about the inequalities without destroying the money supply.
All this is avoided by the permanent money AMI suggest. Permanent money (as Lincolns Greenbacks) don’t need anyone going into debt – it should avoid dividing the populations into debts slaves and those holding corresponding assets (where the debt slaves are desperately trying to get hold on the fewer and fewer rich peoples money in order to pay their debts). Permanent money can also be redistributed without destroying the money supply.
As I said. I only want a strict mathematical formal argumentation showing where my logic slips (or how this can be avoided in a well planed debt system) and no emotional outburst.
Thanks for trying Michael, but your basic assumptions used in your formulations are wrong. By that I specifically mean your division of the money supply (population) into 2 parts, one holding assets and the other borrowing them.
Modern bank created money simply doesn’t work that way. Anyone who read Ellen’s book, Web of Debt, or Stephen Zarlenga’s The Lost Science of Money would understand that.
The confusing part (to me) is that you do appear to understand that Lincoln’s Greenback dollar (or something similar) issued by the government is the correct solution. You also make a number of accurate statements.
What is missing, from my point of view, is the purpose of your mathematics. What are you trying to show? What are you attempting to prove? What points were incorrect in Paul Grignon’s Money as Debt I or II? Where are you going with all this?
Jere,
I couldn’t watch 10 seconds of Michael’s videos. I could not make sense of the first one so I did not bother with the second. I agree with you.
Well I wasted 15 or 20 minutes watching parts of 4 or 5 of his videos. All I got was a headache for my efforts. He’s obviously invested HIS time and effort in putting all that together, but the question remains, for what? To what purpose? One clear sentence should answer that question.
Does the ‘In Duplum Rule’ apply in the United States?
Not as far as I can tell.
Gregory, sorry if I’m bad at describing my point in a clear way.
It’s seems like nobody understood my previous post either (sorry again, and sorry that I happened to use my second name, Nils, instead of Michael).
Let’s see if a can make my point clear by stating it as a questions instead.
Ellen’s suggestion is that a state own bank should create credit instead of private banks and that would solve the problem (or at least make it better). People would get work and they would be able to pay of parts of their debts.
Good so far. But what happens to the other side of the equation? A debt at an equal amount is created at the same time as the credit is created. Who is going to hold it? The rich guys don’t need to take any loans. Isn’t the only way to indebt someone who is already indebted ? (Or someone with small dollar assets but the pool of potential debt slave have reach it’s mathematical limits -as Ellen elegantly use to point out – almost everyone is indebt). Wouldn’t the credit (no matter who is creating it) just be a way to move around the debt within the system? Isn’t a debt write off the only solution and start a system that don’t indebt people (Greenback style)?
So, I guess my question is who’s going to take the corresponding debt on an equal amount as the created credit?
Michael,
The AMI platform is that the BANKS themselves will have to “take on the debt” that they helped create by making loans under the ‘Fractional Banking System’. How this will occur is that the BANKS will have to borrow REAL money from the federal government who will in turn create that money either by accounting book entry (electronic) and or simply by printing/coining it. The entire banking system (BANKS) will have to borrow enough money to cover 100% of their customer’s deposits. This is the Irving Fisher concept of 100% reserves, developed by him and Henry Simons and others back in the 30s called the “Chicago Plan”.
The purpose of forcing the banking system to borrow real money from the government is to first correct their mismanagement of society’s money supply by stripping them of their profits from said misuse and abuse. The second and perhaps the most important purpose, is to entrench the idea that the government is the ultimate creator of money not the banks. Forcing banks to borrow money from the government, instead of the other way around, flips the paradigm and positions banks in their rightful place; entities subservient to the legal sovereign power of the state. Right now, in spite of so called regulations, the banking system is running the show.
So you ask, “who’s going to take the corresponding debt on an equal amount as the created credit?” The people who borrowed the money from the banks will still of course have to pay it back, but the banks will have to pay all that interest back to the government.
It is assumed that as the people pay their loans that the principle will be withdrawn from the money supply and thus the money supply is reduced. This is the standard belief with respect to the fractional banking system. However, I have not seen a working model depicting this outcome from AMI under a 100% model. I don’t think they have one yet.
I have worked on this myself and I have my own views that I won’t elaborate on here.
The final outcome is basically the same as the State-Model of Banking that Ellen is backing. As the people pay their loans back the interest flow will pass right through the banking system back to the federal government. AMI requires the banks to borrow from the government, the State-Model simply nationalizes the banks. The endgame is basically the same except in the first instance the banks graft ’some’ profits from the system in which they have for so long exploited to the extreme. I am assuming that the banks will borrow at a lower rate from the government than they loaned at, thus yielding a profit on the spread in rates. Well, a profit if they can cover their costs and interest payables on their customer’s deposits.
Is it all clear?
“So, I guess my question is who’s going to take the corresponding debt on an equal amount as the created credit?”
Answer: The borrower. That should be obvious to anyone.
Once again you appear to be laboring under the misconception that when banks loan money they are doing so with an existing stock of money that already exists. Everything written about money reform by anyone I respect or trust understands that bank loans are different from all other forms of private loans, in that they do not have to have money on hand in order to lend it. It is created by making the loan. All our current money is now created as a loan. There does not have to be “a lender” with actual capital or wealth, or money involved.
Now Michael, Nils, or whomever, I am weary of repeating the obvious. Your points are no more clear as “questions” than they are as statements.
Apparently I am not alone when I say I simply don’t understand the point(s) of your posts. I appreciate your good intentions, but I just do not have time to continue trying to figure out what you are getting at.
The only way Debt can be payed off and cancelled from the system over all is for money to be injected with no Debt obligation.
That is real Credit, nothing else.
The annual earnt Price – Wage price gap in an industrial economy (no matter how ludricously askwed or un-naturally coercive the wage allocation setting may be is irrelevant for this point) is the origin for real Credit injection, anti-inflationary. Price rebates and Citizen dividends being the distribution means ‘Social Credit’ literature promotes in regard to this annually Earnt Credit cycle in an industrial economy.
This approach will eventually wittle down over all Debt back to equilibrium with the dynamic of legitimately incurred Debt used in the process of wealth production and distribution, while also reducing price levels.
Economists would also be out of jobs to a great degree and have to hobnob in philosophy or learn the arts or something…last bit was a joke, kind of.
A recent post by Gregory recommended a book called “The Dollar Crisis.” I went to Amazon to order. Fortunately, I read the negative comments as well. The lesson here is we need to be very careful to identify just who is offering opinions here and what their motivations are. Just because they can get on Ellen’s page, doesn’t mean they are in our camp.
Here is the review that I think is especially telling:
“This book was a big disappointment. It is very poorly written and the “solutions” the author proposes for fixing what’s broken with the USD & international trade border on economic lunacy. You think I’m exagerating? You decide:
“In the last chapter of this unfortunate book, the author proposes two “solutions” for the weak dollar and international trade imbalances. Here they are:
1. Global Minimum Wage
2. Global Money Supply Control
“I’m not sure these two ideas would fix USD & international trade woes, but they would undoubtedly result in massive global unemployment & inflation, and they would serve as a very solid foundation on which to establish global tyranny on a scale that is hard to imagine today. The foolishness and potential destructiveness of these ideas raises grave questions, in my mind, about Mr. Duncan’s competence in the economic sphere.
“On every page you will find international trade and monetary policy jargon and vague chains of reasoning that are never adequately explained. This sort of writing may be fine for an experienced international trade professional, but it doesn’t help lay readers seeking to learn more about the serious issues involved. I think many readers will find this book produces CONFUSION rather than clarity.
“One of the main theses in the book is that rising central bank assets cause inflation. While an argument can be supported that there is a “connection” between the two, one would be hard pressed to show that the connection is directly causal. Rather than clearly establishing a rational foundation for this claim, the author succeeds only in doing a lot of handwaving on the point. Inexplicably, the book focuses on reserve asset levels as the cause and ignores the inherently inflationary effect of fractional reserve banking systems & paper reserve assets. Hmmmm, I wonder why?
“Concerning the same thesis, the book offers up many, many charts and graphs displaying all sorts of statistics tangential to the point, but somehow, the author never quite gets around to displaying any stats that explicitly show the US rate of inflation increasing in step with the Fed’s total reserve asset level. Hmmm? What a puzzler, Mr. Duncan. Seems like you’d want to back up the major contention of your book (which you repeat mantra-like ad nauseum) with just such statistics, yet none is presented. Curious indeed.
“Also, several graphs of central bank reserve assets are displayed, “…without gold”, with no explanation as to why gold central bank assets are not included. Again, I wonder why?
“Every chapter is awash with unstated assumptions and vague chains of reasoning. Also, a large proportion of the statisics and studies on which the author bases his assertions & conclusions are from the IMF, for which Mr Duncan worked for years. In summary, the book appears to be nothing more that a global central banker proposing global central government “solutions” “
I agree , more about social justice than free enterprise solutions in that book .
Balance in terms of tapping into the creativity of labor by rewarding labor for advancements in all needs categories as a way to appropriate the means to supply the needs of a society should be debated more . This would bring about more advancements and efficiencies in supplying the means for the needs , because who better to tap into for on the job training of how to make a system better than the people doing the jobs , in a majority sense , then you have satisfied labor and neutralized the need for social justice , and stabilized the redistribution of wealth , thus balancing the need for cash and credit .
Sounds pretty simple right up to when Politics get involved , huh ?????
Did you even read the book? Am I the only one that read this book? I don’t know about the “free enterprise” solutions you speak of, but the Dollar Crisis is about an imminent system failure. It is immaterial what the author may suggest we do to fix the system. Whatever Duncan may prescribe as a solution does in no way discredit his incontrovertible analysis of the problem.
But on a light note, I think you make some really good points. I absolutely agree we need to “reward labor”. How about a global minimum wage for starters? That would start to meet needs. And yes this would help reduce the need for credit and redistribute wealth. Sounds good to me. How about it? Does anybody else agree that we need to end slave and child labor around the world?
Thanks Bill, I had not looked at the book, or the reviews until now. I find myself in harmony with your assessment. I think your pointing out that Duncan has long worked for the IMF raised red flags for me. Also that fact that he was an “Austrian” in his philosophic orientation sounded the alarm bells.
In the end, although I haven’t read the book, I think your assessment is probably accurate. Any book on money that lacks the essentials of shifting money issuance from private to public authority is simply more “smoke and mirrors”, IMO.
I never buy a book without reading all the top rated reviews on both sides. That’s the only way to get to the heart of what a book is really about.
Thanks for some good detective work, Bill.
Jere,
Duncan takes a neutral position in his analysis of the Dollar Reserve System. I don’t know how you guys inferred that Duncan has “Austrian” philosophic bias? Correct me if I am wrong….but isn’t that more or less the gold bug camp? You might say it the camp of very low growth in the money supply. I know they speak to that point.
In my reply I speak to that point too. But ONLY in the context of out of control expansion of the money supply. This expansion is a direct effect of trade imbalance. If we made goods to sell back to the Chinese then our dollars would reflux (come back). But instead our government has to go into debt in order to absorb that flow of cash back from China and then has to find ways to spend that credit somewhere overseas. Try two wars and tons of wasteful spending outside our own country.
Finally, I wrote the original post in the context of trade flows not shifting the money power. It is true that Duncan doesn’t mention this. However, it may be a subject he hasn’t considered. In any case, the book is great at what it discusses.
I would read the book before I dismissed it.
I haven’t read it either, but I’ve read Richard Duncan’s articles; I think he’s pretty insightful. I quoted him in Web of Debt. There will always be negative reviews around. I think Gregory was citing this for Duncan’s understanding of capital flows, a tricky subject.
Bill,
First, you can be assured that I am a true monetary reformer. I was involved with the AMI Act from its early days!!! You can trust me when I say Richard Duncan’s book is spot on accurate. All I can suggest is, what can it hurt to risk the $15 bucks to find out for yourself. Make up your own mind.
More, I don’t put much stock in people’s reviews considering how many armchair economists we have running around with some axe to grind. I must say, your reviewer went off the edge. The review was more filled with bile than insight on Duncan’s work. More the review is full of technical mistakes. I seriously doubt that the person who wrote this review…..knows what they are talking about.
Right off the start your reviewer proves they know nothing of economics let alone monetary reform. See point two. Control of the money supply is paramount to monetary reform. Is it not our position as reformers that money creation has gone out of control? Ben Dyson shows on his page, growth in money supply statistics, Ellen has made plenty of comments on money supply growth. You yourself have lamented about inflation from MONEY SUPPLY GROWTH. So it is quite clear that controlling the money supply is of tremendous importance not “lunacy” as your reviewer put it.
Next, a global minimum wage is KEY to the notion of a balance of trade. The main reason China owns so much of our debt is because we allow them to use near slave labor. Because they have such a cheap labor force they really don’t need to buy much from us. They can make what they need as it is much cheaper for them. Thus they don’t buy from us.
So what do they do with all that cold hard American cash? They buy the most liquid U.S. Securities….U.S. Bonds. That is our national debt. Who buys this debt? China’s central bank. How does China’s central bank get the American cash? It is obtained when the Chinese central bank swaps newly created Yuan for American dollars from its own Chinese merchants who sell to the U.S. This is how China stabilizes its own currency expansion policies. This is called a “Currency Board System”. This technique has been used around the world. http://en.wikipedia.org/wiki/Currency_board
A global minimum wage would balance labor inequities and re-establish the notion of specialization on a balanced playing field. In other words trade would be based on nations trading the goods they are best at producing with other nations who are the best at what they do. Right now we buy inferior goods that have been proven dangerous and maliciously dangerous only because they are cheap. We mistakenly call this “efficiency”.
The result of a global minimum wage would be that instead of China buying our debt they would buy our products. This would help solve our massive financial surplus (China buying our debt) and trade deficit (America buying Chinese goods). Your reviewer is ridiculously ignorant of basic economic theory if they can’t grasp this simple model of trade flows. One might ask if this reviewer was born in the 90s or simply slept through the 80s when Japan was buying up every piece of land and commercial building they could get their hands on. Just wait until we allow Chinese direct investment (the buying up of domestic infrastructure both commercial and public). They will grow tired of our low yielding bonds and are already threatening to dump the dollar as their reserve currency. A global minimum wage is a great defense against wholesaling what is left of our nation to a communist state.
The following statement by your reviewer is astonishingly absurd. “I’m not sure these two ideas would fix USD & international trade woes, but they would undoubtedly result in massive global unemployment & inflation, and they would serve as a very solid foundation on which to establish global tyranny on a scale that is hard to imagine today.”
Wow! Sounds a little paranoid to me. First, the main thesis of “Dollar Crisis” is that our system of credit expansion (i.e. fractional lending) has been used to expand credit which has then been exported overseas through our trade policies. In other words we create credit to buy foreign goods. We export our INFLATION. The Crisis part is that in time this inflation will not be tolerated by our trading partners and they will dump the U.S. dollar and U.S. dollar denominated assets. This would END the U.S. as a global financial power!!!
Your reviewer has NO grasp on the idea of inflation. Maybe he or she should do some reading about the stagflation of the 70s. Remember how Nixon closed the gold window on Aug 15 1971? Why did that occur? Our trading partners were getting stuck with more and more and more dollars which were devaluing. We were exporting our INFLATION! Just like we are doing now. Except the Chinese can’t exchange dollars for gold. They are left to buy mainly U.S. debt. http://en.wikipedia.org/wiki/Nixon_Shock
“The foolishness and potential destructiveness of these ideas raises grave questions, in my mind, about Mr. Duncan’s competence in the economic sphere.” I have grave concerns about this reviewer’s ability to understand Duncan’s excellent book.
“On every page you will find international trade and monetary policy jargon and vague chains of reasoning that are never adequately explained.” This statement is PATENTLY FALSE!!! Duncan’s book is probably the best book I have ever read with respect to walking a reader through the process of international trade and consequences thereof from untended imbalances. Duncan is the only author that I have ever come across who explains what a liquidity trap is. Our media whitewashes this reality by calling it a “Japan style recession”. Japan is in a liquidity trap and they have been there going on 20 years almost. Duncan as well clarifies the other legs in the liquidity trap: overcapacity, synthetically low interest rates, lack of profits, lack of investment, and accruing national debt to GDP. All this is made crystal clear for the reader. The value of understanding these concepts alone is worth ten times the cost of the book!
This statement from your reviewer speaks volumes. “This sort of writing may be fine for an experienced international trade professional, but it doesn’t help lay readers seeking to learn more about the serious issues involved. I think many readers will find this book produces CONFUSION rather than clarity.” Seems to me your reviewer simply can’t understand the book. For me, the last thing I would do if I didn’t understand the book I just read……is PAN the book I just read. It smacks of petulance derived from feelings of inadequacy.
Your reviewer wonders sarcastically why Duncan doesn’t explain how fractional banking causes inflation but rather focuses on asset accumulation by central banks as the cause of inflation. Again this is patently false!!! The fact is, Duncan is quite clear that the growth of CREDIT which is used to buy foreign goods, which is thus then COVERTED to foreign central bank assets as CASH or U.S. Treasuries is the cause of inflation. Your reviewer not only missed the self-evident causal relationship between credit expansion (i.e. fractional reserve lending) and the subsequent growth in assets (cash and bonds) in foreign central banks, your reviewer’s claim as to Duncan’s position on the matter is totally backwards!!!! Your reviewer is either purposely misleading review readers or is totally unqualified to be speaking on this subject.
Again this statement from your reviewer totally misses the mark on the main thesis of the book. “Concerning the same thesis, the book offers up many, many charts and graphs displaying all sorts of statistics tangential to the point, but somehow, the author never quite gets around to displaying any stats that explicitly show the US rate of inflation increasing in step with the Fed’s total reserve asset level.” As I stated prior, the book teaches us how America is EXPORTING our inflation by expanding the credit of this nation through our purchases of foreign goods. The book speaks plainly about how foreign central banks hold our cash and bonds. The fact that the FED has such items on its balance sheet play a less important role in the string of logic that the book is presenting. Federal Reserve assets are an entirely different ballgame and if one was inclined, one could do more research on the subject. I would suggest learning about what the Fed did in the 08/09 crisis.
“Also, several graphs of central bank reserve assets are displayed, “…without gold”, with no explanation as to why gold central bank assets are not included. Again, I wonder why?” For me, I think it has been like 5 years since I read Dollar Crisis so don’t quote me here. But I do believe that when Duncan outlines central bank assets he does have an “other” line item. Central banks hold a myriad of assets beyond gold, cash and bonds. They hold foreign currencies for one, SDRs, loan receivables etc . All total, central banks hold trillions of dollars worth of assets. Gold is a small pittance hardly worth mentioning anymore. Why gold is such a concern for this reviewer speaks volumes about which camp this reviewer comes from. This reviewer is obviously a gold bug. Decide for yourself what that implies.
The only thing this reviewer got right is that the author does believe that the various federal not “central” as the reviewer snidely puts it, that federal governments act to assuage the trade imbalances before the whole system crashes. Hence the title of the book “Dollar Crisis”. How this is off the mark for the monetary reform community is unknown to me.
This book is a crisp, rational, step-by-step explanation of the global ramifications of a U.S. Dollar global reserve system and what could bring it down. It talks about credit expansion, currency boards, foreign expansion of their own currencies on the back of the U.S. dollar, liquidity traps, devaluing U.S. Treasuries (low yields high credit expansion) which some bond traders are now calling junk, and wraps it up by saying that the sum effect of said trade imbalance is that we SWAP DEBT FOR GOODS, and it can only last as long as our trading partners are willing to hold falling assets in trade for real goods.
If you want a real education on how money moves around the world, read this book. It puts all the major pieces into place and will make any information you hear about trade after reading the book more sensible to your reasoning. In fact I would go so far as to say, that without reading this book or one that is just like it, one would not be equipped to have a rational conversation about trade, trade policies or the economic ramifications of prolonged trade imbalances.
Hmmmm, I’m afraid I don’t read well enough to read such a long post. You do have a way of talking down to folks that makes me not want to read this anyway. Everybody knows something and no one knows it all.
Maybe the USA and the Swiss could work together to solve their currency problems and develop a model …..
http://www.forexblog.org/2009/09/snb-could-intervene-again.html
Jere,
I can’t seem to find my post on my review of Jamie’s criticisms of Ellen’s State-Model of banking. I am sure I put it up here.
Did you guys decide to take it down for some reason? Just curious. I have a copy that I can repost. I think it does a good job at explaining errors of AMI’s solutions.
Or maybe I am just remembering this wrong. I know there was some discussion about your posts not being put up on AMI’s board and you and Ellen were curious as to whether or not my post was allowed on their site.
Has a treaty been signed at the Chicago Accords of 09 or something? LOL If so, let me know and I won’t repost.
Click on “older comments” below. Yours was dated 4 Sept 09.
Here’s the link:
http://webofdebt.wordpress.com/more-than-one-way-to-reclaim-the-power-to-create-money-an-open-letter-to-the-american-monetary-institute-august-28-2009/comment-page-1/#comment-4489
Brian and Jere,
Thank you.
Greg. It was on an earlier page, as Brian said. I changed the numer of posts per page so that it might be displayed now.
I can’t do anything about the censorship on AMI’s site though. I can’t even get anything posted there, and I’ve given up trying.
Only half kidding.
I think bad karma cost Chicago the 2016 Olympics.
Admittedly, I’m not an expert in monetary policy and I’m only now learning about all of this. I understand the basics though. Call me the scarecrow, I suppose. I’ve been reading through Ellen’s Book, Modern Money Mechanics, and on the history of central banking.
I am a convert.
I’ve found that when I try to explain this people, I get both a light bulb and a blank look all in one. Been thinking about facilitating discussion forums in my garage to teach/learn the basic to friends, family, neighbors, etc.
Before I start sharing this with people, I need a question answered.
All money, it seems, requires the same ingredient: belief in its power and value. Change the perception and you change the value, do you not? So, perhaps monetary reform through official channels is the wrong approach to attaining the end state we want, which is equitable and fair distribution and access to goods and services. Any good strategist will tell you that you to fight on your enemy’s terms is perhaps the least preferred position to fight from. So, perhaps we should take a lesson from the politics of recent years: discredit the messenger and the message won’t matter.
I realize money fuels all economic activity, but perhaps its time to start thinking of an alternative energy source? Is there a way to conduct transactions without the need for money as a medium or the scarcity it produces? When it comes down to it, its all about resources, production, and distribution isn’t it? Those are mechanical problems that we can solve.
Based on the banking history Ellen describes, it seems money was created for the express purpose of being easily controlled, as a choke point of sorts, where economic acitivity that MUST filter through the “goldsmiths.” I can’t help but think of the office techno-geek who refuses to teach anyone how to power-on their computers for fear of losing his power and clout. Free up the rest of the employees to learn for themselves, and the sycophant becomes irrelevant, does he not?
Just wanted some professional opinions on that as I continue to learn.
Money becomes money when the reigning government declares it “good for the payment of taxes”.
To me, the “end state” is not the equitable and fair distribution of stuff. The end state is to have a medium of exchange where the value thereof is regulated, and that serves all citizens equally. Forget about this store of value stuff. Not necessary for money. As I say, gold can be money, but money cannot be exclusively gold.
As far as scarcity goes; doesn’t scarcity make people be productive? If everyone had all the money they needed, why would they get up and go to work? Nothing would get done. That’s another reason why it would be a good thing to let this system crash. America would be returned to a work ethic.
As far as the choke point goes, I think you are exactly right. Why put a golden ring around the neck of your money system so the plutocrats can pull the chain whenever they want?
Very good points, Bill. Allow me to play devil’s advocate for a spell if you will.
I would have to ask if we are not interested in the fair and equitable distribution of goods and services, but a medium of exchange that “serves all citizens equally,” are they not one and the same? Money=Goods Services, does it not? And if we’re not talking about a more equitable distribution, what’s wrong with the system now (other than me not being on top)?
If we’re using money to spur producivity, are we to presume that our motives are any more altruistic than the present masters of it? One man’s productivity is another man’s shackle. If it weren’t, we wouldn’t be here. I would argue that productivity is a) too often defined in terms of cooptation or coercion, and b) often undermined by the realities of scarcity. Should we continue to beat the horse because we refuse to ponder a better way to train it?
Before I charge down this path, I’d like to know where it leads. If we’re talking about building a real economy where technology and productivity actually improve the quality of our lives, as opposed to the gadgetry of a standard of living, count me in. However, if I can expect another 1000-fold increase in “productivity,” and the continuance of a 40hr+ workweek, as we saw from the IT boom, why bother? Seems an Animal Farm scenario if we don’t first stop and ask ourselves what we want out of this deal.
Hi Rick. Welcome, and do continue your study. Overcoming a lifetime of “the Goldsmith’s story” takes considerable time and effort. Your questions require a better understand of what money IS and IS NOT. Bill Still started a pretty good answer. We have devoted much discussion of this topic on Ellen’s Web of Debt Forum, linked at the top of this blog page.
Anything can be used as “money”, i.e., in place of direct barter, but that does NOT make it “money”. “Money” is “official” within a given political and economic boundary, and MUST be accepted as taxes, fees, and settlement of debts, public and private. It is “official” by decree of the issuing sovereign government. That “decree” is called a “fiat” in Latin. Fiat does not mean paper money, as most people are wrongly taught; it means that the money, whether coin, paper, or bookkeeping entry, is legal tender in that jurisdiction, state, or nation.
Modern Fiat Money is a man-made creation, and an abstraction. It is a social invention that facilitates the exchanges of goods and services (real wealth). It is a “PROXY” for that real wealth, not the wealth itself.
It is an artificial and unneeded level of complexity and obfuscation to say money must be a “store of wealth”. That is rubbish put out by those (bankers, accountants and economists and others) whose aim is to confuse the subject, and they are in the vast majority. Stable money in a stable economy will always serve well as a “store of wealth”, but that is not the main function of money.
However money is and must be some kind of measure or standard of value, or price, in the marketplace. This does not mean that a potato will not rise or fall in price from one year to the next. That would be based on scarcity or availability of potatoes that season.
Most “money”, by far, is neither coin nor paper, but simply ledger entries of debits and credits, whether on a ledger page or a computer.
When I use my debit card to buy groceries no coin or paper money is actually changing hands. It’s all done though an electronic clearing house. My checking account is debited the amount of the groceries and the grocer’s account is credited. No interest is charged, although there may be a small fee to the merchant or myself for that transaction. That is really how most money should work within a given economic (money) system.
Difficulties only arise when transactions are made outside of the economy, where our local money has no standing, or value. Then money exchanges come into play. Gold, silver, and other precious commodities may be useful or desirable for trading outside of one’s own economy with that that use other money units. But gold, silver, and other precious metals are not money – they are forms of commodity wealth that are themselves bought and sold on the commodity markets just like peas or corn, and whose prices fluctuate with supply and demand.
My own view is that the basic value of money should be tied to work or productivity – labor. I refer the reader to Henry George, Progress and Poverty, and secondary works about his ideas. Land (resources) and labor are the two essential ingredients of all economics. I use “land” here in the sense that George did, meaning “the earth, and all that is on or in it”. All wealth is produced from some combination of these two essentials. What about “Capital” you ask? Capital is nothing more than stored wealth that is set aside to produce more wealth – i.e., not intended for consumption.
Enough for now. Sorry for the length.
Hi Jere and don’t worry about length. I enjoy reading everyone’s comments.
Between you and Bill, I’ve yet to receive a better explanation of economics.
My first question/concern (directed toward both of you) is primarily based on the labor side. It seems labor is being negated at rates faster than we can retrain the workforce. While outsourcing removes entire markets, automation removes multiples of workers. We do not replace each cashier with a technician. While I do not know the exact ratio, let’s assume that one technician can repair up to 100 automated checkout systems. 99 people, now need a new position and must go through some level of retraining. To thrive, however, most will need significant retraining. Yet, with each new profitable market, we are seeing the same phenomenon. Hi level, highly educated jobs, once thought secure, are no longer so. Even stock trading is being automated. I realize that outsourcing is often thought of as cyclical redistribution in the new global economy and that eventually our labor prices will drop to a level that will be attractive for business again. However, I can also see automation overtaking outsourcing as the primary loss of employment by the time that happens or soon after.
I see the trend only continuing and accelerating. Sooner or later, do we not reach a point of impenetrabilty to basic goods and services? With money representing both value and scarcity, if our access to money itself is cut off, so is our access to goods and services.
I see two options here: 1. abandon money so that access cannot be controlled through labor alone, or 2. submit to a single currency and regulating authority throughout the world, which may or may not include democracy.
Second question: how does monetary reform alleviate that in an open system and an open economy? Granted, we will alleviate untennable pockets of debt that are being deposited throughout our economy when we borrow, but we must still be able to repay it. If we are being made, “redundant” (as the Australians put it) faster than we can earn, then we are still left with borrowed access to goods/services and an unrealistic assumption of return, aren’t we?
My third and final question revolves around the market manipulation that comes with money. To borrow your potato example, I can grow a bushel of potatoes, but may choose to destroy some of them in order to articifically inflate the value. Subsidies that favor one crop over another are yet another form of this. All we sacrifice with that is our self-sufficiency and reliance. The moral and social implications of this are profound. To me, its akin to a parent purposefully withholding food from one of his or her children merely to maintain a value for the food among the siblings. Money streamlines that process, ability, and practice 1000 times over by people 10 degrees removed from the direct market.
How do we justify such a waste of resources when those resources can be used to garner additional assets or alleviate very real problems?
I would hope that the recent economic meltdown has taught us that our fates are all bound, even when we think they are not.
I agree , Gold is only a alternative to the Political manipulation of currency use for political favors , that lead to events like economic volatility causing inflation , and interruptions in economic stability using fiat based financial instruments to advance society needs .
No, we are not redistributing the spoils. We equalizing the means of getting them — one notch earlier. We are using the system to remove the impediment to incentive driven competition — namely monopoly.
Redistribution schemes — the “isms” don’t work — have never worked. As the great British historian, Nesta Webster said:
“…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.”
Perhaps more importantly, the main difference is that you removing the ability of government to borrow. In the current fiscal year the US gov. will spend north of $700 billion — on interest payments — mostly to bankers. Yet we argue whether or not to fund NASA to the tune of $14 billion. Total receipts from federal income taxes is only $1,100 billion. In a $3,000 billion federal budget, only $500 billion is discretionary spending.
Now that’s just the spending by the feds. Then there are the states….
Now in Ellen’s world — and I’ll refrain from speaking for her in other than generalities lest I misrepresent her view — but she would reduce a substantial portion of consumer interest payments as well by federalizing some portion of the current consumer debt market as well.
Either way you do it, you are removing crushing debt loads from the system.
Please don’t take my skeptism as disagreement. As I posted earlier, I am a convert. From an incrementalist perspective, I consider it a healthy reform. Though to view scarcity through a purely machiavellian systems approach I think is to miss the point of the market as liberator. What is debt if not an extreme expression of scarcity? Under that theory, we should presently be more productive and prosperous, not less.
That said, I do feel that we are in uncharted waters and sailing as if the old rules still apply. If anything, the tech bubble proved that technology was not our primary export, but markets themselves were. Two trends are accelerating at previously unseen levels: automation and market outsourcing. Humanity has never seen this before, at least not at present levels and pace.
Nor are we in a production-based economy any longer. Our labor no longer produces hard assets that we can turn to. Without those assets, credit will continue to be the driving impetus that only encourages larger trade deficits.
Finally, while environmental concerns may temporarily provide a boost in domestic job opportunites, the science suggests that the only real solution is to produce and consume less while populations continue to grow. As environmental concerns and threats increase, production and consumption will need to follow suit in reciprocal fashion. Some would argue that a time when constraints are needed most is also the worst time to abandon the constraining power of money. I would argue though that money and markets from an environmental perspective are counter intutive, and instead drive baseless production and consumption that is often very wasteful from a resource prespective. We need look no further than the mountains of un-recycled electronic debris growing abroad whose market usefulness and personal utility had a lifespan of only year or two before it was discarded.
Even in uncharted water, we can reasonably surmise that if the channel is narrowing and the current accelerating that a waterfall lies ahead. GDP growth in no longer tied exclusively to job growth. In fact, we may be seeing a dramtic shift in the polarity of that relationship. Economic downturn always drives innovations in automation and efficiency. Traditional thinking suggets that automation will drive down prices, reinvigorate buying power and open up new markets. However, we are now seeing the workforce displaced by automation or outsourcing at rates faster than it can be retrained. In the mean time, the Dow is still able to grow.
There is a theoretical absolute zero when it comes to automation. A company could be imagined to employ only one person, its owner. If that company represents the whole of the economy, it goes without saying that things collapse long before then. Simply changing the creator of money is like jumping inside a falling elevator believing that we can negate the force of the impact.
In times like these, I find its good to have a healthy sci-fi imagination. Let’s conduct a thought experiment.
Imagine I am a freshman in college 30 years from now. My federally subisdized student loans have been approved and I sit down at my computer to begin my first lesson in a self-paced college algebra course. I log-in to my class and download the video of an algebra lecture recorded 30 years earlier. I am quickly overwhelmed by a concept and turn to my classmates for help. The class consists of 5000 fellow on-line students. I blast my question out to the forum and get my question answered within a matter of time.
This process continues for nearly every course throughout my scholastic career–the exception being those “cutting edge” courses that require up to date thought and analysis. Those lectures were recorded only 2 years ago.
I graduate after x-number of years and charge out into the workforce with my student loan debt only to find that the field I trained for has a greatly decreased job abundance or has been rendered obsolete altogether.
What are my options?
1) Compete for what jobs exist with the 5000+ other students from my class, and possibly every other graduate in the world.
2) Go back to school and incur more debt.
3) Take out another loan and try to start my own business, provided the market can sustain the additional business.
4) Borrow enough money to relocate to the country my market went to, most likely at a wage that is insufficient for my debt load, where I work until my job moves to another cheaper market yet again. Once more, I am forced to move and I quickly find myself in a system of self-defeating nomadism.
5) Go on the dole, assuming there is still sufficient tax revenue to provide one.
6) Engage in criminal activity to achieve sustenance or prosperity.
7) Seek out an alternative market of those similarly affected, such as a barter community.
Some jobs of course will not be outsourced, but is mere speculation to assume that well-rooted jobs will be sufficient to prevent a tipping point. It is also very difficult to forsee which jobs will automatable in the future. Theoretically, the only limit is the number of jobs itself.
What I am suggesting is that we are fast approaching a point where the concept of money could prove the ultimate albatross. I certainly cannot forsee a timeline, but I can sense the acceleration. The nightmare scenario is that we either abandon money and consumerism on our terms or let the jungle do it for us.
On Squawk Box this morning I listened to Steve Liesman talk about Inventory numbers being down year over year for an over extended period , and ……the One thing that is being lost in this translation is the Fact that ” Just-in-Time ” Manufacturing capability with today’s manufacturing worldwide has never before been this HUGE !!!!!! Plus all the Specialized Tooling in the Field , that construction workers have to create structural components is astronomical in that say for instance the time it takes to build a house relative to work force available as Primary Jobs being a sustainable unit of the economic growth indicator , the market has no growth sustainability when you factor in the Speed in which the number of workers armed with today’s tooling can flood a inventory so fast that in retrospect it shows on the Inventory charts as a Decline because growth in terms of value has never a chance to register before the market becomes saturated , this is true in all inventory sectors !!!!!!!!!!!!!!!!!!!!!
The ability to produce products in Mach 10 lighting speed with High Tech innovative processes has rendered the industry overall with no need of Inventory build ups , it just ends in surplus and saturation of markets before any fundamental growth can be established .
The New era of Growth is going to come from the Raw materials resource supply inventories and how they are valued into the future on the Future demand that anticipates population growth , at a pace of a Billion people per 10 years , the Inventory on raw materials and Commodities in general are the inventories we need to be focusing our understanding of supply-demand fundamentals on !!!!!!!!!!!!!!!!!!!
The world is growing the population the size of the USA every 3 years ……so go figure out what that demand on Natural Resources will be in the very near future .
Its all about the Population growth and future supply of raw materials , thats why we see this action going on ……
China muscles deeper into global commodity markets
China’s building muscle in the commodities markets, active in countries from Canada and Australia to…
http://www.marketwatch.com/story/china-muscles-deeper-into-global-commodity-markets-2009-10-30
Normally I try to discourage long posts that aren’t about monetary reform, but in this case — since I was just puzzling over my stock list myself — I’m making an exception! So what would you recommend? Dump everything but commodities?
Personally, I have completely withdrawn from the stock market, even commodities. I expect gold and silver to continue to appreciate in the short term, but not enough to get in beyond what I am physically holding. The Money Powers control it all, lock stock and barrel, and they shake out the little guys with short-selling even when they know that particular commodity is going up.
What I want to know is the 12 or 13 richest families in the world are investing in, and to a lesser degree the 300 or so families that are all interconnected with that top 12 or 13 giga-google-richest bunch. Those guys and the biggest central banksters are going to profit, whether the markets rise of crash.
I see local investments as the best, or safest. Investing in a crop of potatoes or corn many not be a big payoff, but at least you can watch it, up close and personal.
Michael Moore thinks local Credit Unions or non-profit Banks (in you can find one) are the way to go. I’ve believed that for many years, only they really have to be built from the ground up in most places.
Actually, our entire economy is going to have to be rebuilt from the ground up on the basis of “sustainability”. Counting on perpetual growth is beyond insane. Counting on perpetual exponential growth is like jumping from a plane in flight without a parachute…. an exhilarating ride before oblivion!
What is your vision of sustainability?
You’d have to narrow down your question a bit before I’d tackle that one. The dictionary definition of “sustainable” would do for starters.
I guess to me sustainable would mean living within our means without exhausting our resources, human or natural.
Truth be told, I’m tired of competition. And I think a lot of people are. I’m tired of being pitted against my neighbor for sustenance or security. I’m tired of the selfish and self-absrobed culture it produces, the political problems it causes, and the montary and human costs we must endure for competition’s sake alone. I’m tired of waking up everyday where I have to go into an environment that expects me to perform as such. Competition drives an over consumption of resources and does so quite disproportionately.
The problem I have is that I see a lack of any thought being put into new systems that actually improve the human condition and quality of life. The country’s founders were obsessed with that type of philosophical ponderance and put it into application. I see very little of that today. For example, what good is a rise in productivity when we see neither a rise in compensation nor an alleviation of our burden to labor. So if we’re going to overhaul how we attain sustenance in this life, I would prefer to develop a new way so that we may have time to enjoy an experience as opposed a never-ending quest for one. Markets and automation, in my opinion, should work to free the human condition of forced or coerced labor, but to date they have primarily served as merely another force to compete with. Anything short of that is not sustainable in my opinion and only further rot us from within.
Rick, I think it is good to think about the big picture, such as the environment and sustainability.
However I think there are a lot of big-picture items that have not been mentioned, and should be.
One way of looking at things is haves and have nots. What would an economic map of the world look like? The few rich countries Europe, Japan and the US, versus most of the rest of the world. The economic disparity is staggering.
Even here at home the disparity is mind-boggling. The 400 richest people in the US own as much wealth as the bottom 150 million combined. If we do the math, it means that one of these top 400 is, on average 375,000 times as rich as a person belonging to the bottom half of the population.
That is a staggering number. If we are seeking answers we have to start with the facts that slap us in the face.
Another slap in the face is that the rich countries (Western World) have been dominating and exploiting most of the rest of the world for 500 years. This is going stronger today than at any time in the colonialist past.
Yet another slap in the face is that we the people in the so-called democracies are actually so powerless that we are basically serfs. Ninety percent of the population is in the debtor class, while 10 percent is the creditor class. If you want to exist in this society you have to sign on to a lifetime of debt-bondage.
You have to accept unconditionally the diktat of corporate giants on which your existence depends — the bank, the insurance company, the phone company, the oil company, the car company, etc.
At some point in your dealings you realize that you are just a heifer that has no choice but to walk down that narrow chute that is fenced in for you. There is no other way to go. One foot forward…on to the abattoir.
When you have taken these slaps to the face and the blood starts circulating, you ask yourself, “How exactly have the great mass of humanity been so thoroughly enslaved?”
Well the answer is quite simple. Money is a choke point, although that is not its natural function. It is simply a medium of exchange. Just like the airwaves are a medium for the transmission of radio signals. The power-hungry long ago realized that if they seized control of money, they would have all the power.
Now all of that is very well known to us. But there is one exceedingly simple device that is the cause of all of our economic misery — and at the same time, all of the economic inequity. This is also the single device by which the plutocracy accumulates and holds on to power.
That one little thing is called INTEREST. It is not debt itself, nor the creation of new money by debt. Both of those are perfectly natural means for the economy to introduce new “tokens” of exchange, as required (when more goods and services are created by our labor).
The only unnatural thing about debt is interest, as Aristotle so wisely pointed out more than 2000 years ago. Btw, the ancient Hebrews, and before them the Mesopotamians also knew this and forbade interest. So did our own rulers in centuries past: “If a man is found taking usury, his lands will be confiscated. It is like taking a man’s life and it must not be tolerated.” — King James c. 1566.
The appearance of banking and interest lending is a very recent phenomenon. It is also responsible for most of humanity’s ills, because it allows a small group of individuals to systematically seize control of the lifeblood of human existence, the medium of exchange called money.
It is pointless to talk about things like productivity, automation, scarcity and other variables as if they actually have any bearing in the mathematics of the economy. They don’t — because the economy is controlled by plutocrats pulling strings.
I’m an engineer by profession. I know very well the mathematics of Newtonian mechanics. But if some godly figure were to take control of all the “strings” of the physical world, what use would my formulas be. When this deity can make gravity go backwards, what good is my math?
This is the case with economics today. There is no sense trying to think about theory and abstract. There is only one reality that is created by those whose power shapes events — political, military, cultural, etc.
As for the current economic crisis, it is the result of only one thing, interest. The reason is that interest means the economy MUST get bigger each year, in perpetuity — in order to pay last year’s interest. The problem is that economic activity is a physical thing, with physical limits. The economy, like anything else in the physical world, starts off growing, but then reaches its limits and stops. Is there such a thing as a 10 foot tall human, or a 500 lb mosquito?
Creating money with interest tacked on means the economy MUST continue to grow ad infinitum. In fact it’s growth rate must ACCELERATE year over year. That is a physical impossibility. That is why we are in a bind.
Please think this through. Let’s say you borrow one million dollars to buy a house. By the time you pay that mortgage off you will have paid back three times that amount. Once for the principal and double that for the interest. (Typically).
Everyone else in the economy is also borrowing to buy houses, cars, etc. The companies making those products are borrowing too. So is the government (In fact now we have the situation of the government borrowing from the same banks to which it is giving that cash as a bailout). We also have poor countries borrowing money from the rich banks.
All of those loans come with interest. Where will that money come from? It will have to be created through economic growth. But all that new money that is created through economic growth comes with interest added too — because that is how new money is created as loans (with interest). So now, you need even more growth, in order to create more new money, which means even more new debt (with interest), and on and on…
Eventually, a point comes where no more growth is possible. We reached that point during the last decade when, against all odds, traditionally poor countries like Brazil, India, China and Russia all stopped borrowing money from the banks of the West.
That was the growth that kept the West going. Call it colonialism which is what it is, but for five centuries it provided for the absolutely necessary growth that interest lending demands.
With that source of growth drying up, what would happen? What happens to a Ponzi scheme when new money — growth — stops coming in? It collapses. And the people running it go broke.
That’s what our economy really is, Bernie Madoff writ large. A giant Ponzi scheme, because it MUST have growth. If the economy was not a pyramid scheme it would not need to grow. Nothing bad would happen if it did not grow.
But in a Ponzi scheme, as soon as the growth stops, it collapses — it defaults on payments to investors and that causes a domino reaction. That is what awaits our economy. (not to mention that continued, accelerating growth is not sustainable ecologically).
Seeing that this was about to happen sometime in the previous decade, the bankers, led by Greenspan, opened up the floodgates of cheap money in order to create a debt bubble on purpose. Yes it worked, temporarily. All that new money provided the growth fix for a few more years.
But all of that new debt comes with its own interest, which requires even more growth — which in turn requires even more new money-debt (with interest, etc..
At some point the chickens come home to roost.
That is where we are. Where we need to be is one simple solution that only requires a pen. Written into law: Interest is from now on prohibited.
That’s it. the abolition of interest means the power of the money men is vaporized. The economy is unchained from the Ponzi-scheme need to grow. The hoarding of money as a choke point by which the plutocracy exercises control is removed, and every man woman and child on this planet sees their economic condition improve and tastes economic freedom for the very first time.
Even more important is that there is now fairness and economic justice. Let’s listen to ancient wisdom. Interest is the only problem. This is the very fortunate part. It is one single thing and it is a single target to attack. It can easily be excised from the body politic just as a pimple is squeezed.
It does not require social upheaval or any ideological conversion or “isms.” It does not even require any overhaul of the existing system. Banks would continue to give loans, principal only, as required by law.
Lenders who have cash could charge interest, but that could not apply to new money created as debt. As a result, this interest lending would be just a tiny fringe for bad credit cases and the like. Even then the interest rates would have to be very low due to low demand for this product.
People who save and invest, which is only one out of ten anyway, can invest in shares as before and earn dividends. Those who put their money in the bank would provide the cash for the small amount of cash lending, where interest is allowed, and would thus earn some on their savings.
Let’s keep in mind a final slap in the face. The contribution of the financial sector to GDP today stands at 43 percent. How is this even possible? Money giving birth to money?
What this really means is that the financial parasites are siphoning off nearly half of the productive worth of the real economy. That is doing huge damage.
And that’s on top of the damage that they do by hoarding money as if it has some intrinsic value of its own. It doesn’t of course, and their hoarding of money only means that real production and earning by the people is kept down.
Bill mentioned the interest burden of the US government. Yes we could be on Mars by now if it wasn’t for the government paying hundreds of billions a year to bankers as interest. And now we have the ultimate idiocy with the government borrowing trillions from the same banks, only so they can gift them this cash.
It is time to adopt a simple message. Abolish Interest Now.
Gordon:
Thank you for your thoughtful reply. I”m all for it. Interest sounds like the best place to start…
Gordon, please keep your posts confined to 500 or so words, and two or three main ideas. Long rambling posts do not get read, and are an impediment to conversation.
As for abolishing interest, we agree with you that it is absurd for our governments to pay trillions in interest charges to central banksters in order to “borrow” money that have a constitutional, legal and moral right to create without interest.
However our solution to that is to have our governments reclaim (take back) the money-creation powers they gave away to private banksters in 1913. It is NOT to abolish interest per se.
Please read Ellen’s book and/or related money reform works from similar sources such as the American Monetary Institute (AMI) at http://www.monetary,org .
Eliminating the interest on new money creation is as simple as having our government rescind the Federal Reserve Act of 1913, and bring the Federal Reserve Banking system under REAL federal control and supervision.
Btw, don’t take my word for it that interest needs to be abolished.
Take it from none other than Ben Bernanke. What is the interest rate he is charging on the several trillion he is printing under the “quantitative easing” program designed to refloat the banks and stock market?
That’s right, ZERO percent. Bernanke has already abolished interest — at least temporarily. As soon as they can get the Ponzi scheme economy back on its feet, it will be back to interest as usual.
Also note that if we take into account the inflation rate of a couple of percent, the zero-interest debt-money actually has a negative interest rate. The The lender is PAYING the borrower to borrow.
This points up the connection between interest and inflation. An interest-based economy MUST have inflation. That is because the economy must not only grow year over year, but the growth rate must actually accelerate year over year.
It is difficult enough to have perpetual growth. But perpetual, accelerating growth is simply impossible for even short periods of time. The result is that inflation takes up the slack.
In an economy without interest — at least on new debt-money creation — inflation would not be necessary. We could have full employment without inflation.
The reason full employment causes inflation in an interest-based economy is because more people working means more people borrowing. Each of those new loans comes with built-in interest, which means the money supply must expand in order to pay that interest. For the money supply to expand, there must be new money-creation. The only way to create new money is through additional debt, which adds even more interest that needs to be payed with even more interest bearing debt-money creation. etc…
Also to tie up one other loose end. If we have a small amount of cash lending where interest is allowed, we still have the problem of having to create new money to pay for that interest next year. A simple way to fix that is for the government to inject that amount of new money directly into the economy by way of credits and subsidies.
This would perfectly balance the books and take care of the new money needed to pay the interest on the cash lending. It would also be of great social value because those money injections could help the most vulnerable in society.
The bottom line is that the extractive (parasitic) effect of the financial sector would be completely eliminated. The situation we have today is that the financial sector absorbs a hugely disproportionate amount of society’s wealth.
What is that money used for? The 43 percent of GDP that is siphoned off by the financial sector? That money is used mostly for large-scale gambling. The financial sector is simply stealing huge chunks of the productive output of the real economy and using that money to gamble on derivatives and other games.
A significant amount of the money is also splurged on extravagant living — the entire luxury goods sector, private jets, high-priced prostitutes, servants, chauffeurs, etc.
Without interest, all of this wasteful activity — the casino gambling and a lot of the high living — would simply stop. Interest is the single mechanism by which the financial parasite extracts the lifeblood of the host economy.
Don’t believe me? What is securitization? It is the bundling and reselling of mortgage and other debt, all of it interest bearing. It is directly skimming off the money created as interest. Nothing more.
Until securitization came along quite recently, the skimming off of interest took a more circuitous route, but it still ended up in the same place — in the hands of the parasites.
Bottom line is that a simple law prohibiting interest on new money created as debt, would eliminate completely the parasitic extraction of the financial sector. We are at 43 percent people. I don’t even know of any parasite in nature that sucks off nearly half of the hosts blood. It is impossible in nature, but not in our society.
Gordon, These long, rambling posts are a detriment to conversation. Please limit them to 500 or so words and a couple of ideas.
The way to eliminate interest on new money is by having our congress reclaim their constitutional authority to create it, rather than to borrow it from the banksters.
You cannot outlaw interest on privately created money without multiple layers of chaos and pandemonium, not the least of which would be government intrusion into private business and property.
The proper solution is to rethink and redraw the lines between public and private enterprise, and thereby return money-creation to the sovereign authority it has always held up until the Bank of England and the US banking syndicates usurped it. Money creation should be a sovereign right and function.
I think most us are in agreement here and to continue further disucussion centered on defining the problem is wasted energy. Ellen has already done that. My intent over the next couple months is to hone a presentation and to begin holding local meetings on the matter.
I think this forum would very useful for honing that message and for coaching each other in same. I also think that his forum has yet to tap its true potential. It could be used to disseminate such things as presentations that we all can use and updates on our progress. It can become a central organizing mechanism for similar efforts from around the country.
As for me, I am tired of talking about it. Its time to start doing something and I think top-down politics alone is a dead end. We can have these things, but they will have to be built organically.
If there is anyone out there who can build an easy to follow, persuasive media presentation, such as a short film, I believe your country is calling.
In the mean time, I’ve got some friends to contact who might be useful.
“It takes a network to defeat a network.”
–Gen Stanley McChrystal
I agree because this is a problem with no solution …
The Fed just passed $2TRILLION in their printing business (monetary base), up from $850Billion last year.
http://alfred.stlouisfed.org/series?seid=WSBASE&cid=124
Still not feeding though to Money supply (MZM), but the spring is being wound ever more tightly
“If there is anyone out there who can build an easy to follow, persuasive media presentation, such as a short film, I believe your country is calling.”
See my reply to Gordon below. Bill Still and Paul Grignon have put out two of the finist video teaching tools on our money problems imaginable. Ellen Brown has video presentation on You Tube. Google them.
My website and Ellens, Grignons, The Money Masters, and http://www.monetary.org (AMI) have tons of info and links.
The problem is, of course, that we have the entire mainstream media system, educational system, and most elected government representatives, all under the control and direction (carrot or stick) of the Money Elites. Only the most independent of thinkers are going to pay any attention — at least until more calamities come down the pike. Then they will all be grasping at the wrong solutions – because they won’t understand the problem.
Good luck with your garage workshop.
Yeah, and I see McChrystal is “winning” the war in Afghanistan.
I think local presentations are a good idea. people need to know some basic facts, which they don’t right now.
I suggested earlier that getting organized religion behind monetary reform and economic justice would be helpful too.
My own idea is to simplify the message to something EVERYONE can understand and get behind:
ABOLISH INTEREST NOW
we have got to deal with the corruption too , or it won’t matter like this stuff ;
http://www.businessinsider.com/nj-taxpayers-paying-goldman-sachs-nearly-1-million-a-month-2009-10
New Jersey Taxpayer Paying Goldman Sachs $1 Million Month For Bonds That Don’t Exist (GS)
http://www.goldmansachs666.com/search/label/GoldmanSachs%20and%20Corzine
1. All of the mainstream planetary religions are already serving their chosen masters. Sure, it would be great to recruit spiritually minded people into economic and monetary truth, but that process will probably take a long time…. at least to approach the power of the existing entrenched religious authorities who are now serving Mammon.
2. It is totally meaningless, and even counterproductive, to say “ABOLISH INTEREST NOW”.
First, it’s an impossible task. Second, it’s not even desirable. Third, it doesn’t address the central problem with money: who issues or control it!
Other than that, doing away with interest might be something to dicuss someday.
Gordon Arnault wrote: “My own idea is to simplify the message to something EVERYONE can understand and get behind:
“ABOLISH INTEREST NOW”
__________
Einstein said that it was important to reduce complex ideas to their simplest terms, but NO SIMPLER.
That is what you are doing here, and in so doing distort not only the diagnosis, but any chance of applying the correct treatment.
Jere, I respectfully disagree about abolishing interest.
First of all, it is entirely possible. Necessary in fact. Witness Bernanke’s temporary suspension of interest.
In fact the entire decade of the debt bubble the interest rate was very low. It was an attempt to forestall the inevitable Ponzi collapse of an interest-based economy.
Abolishing interest would in fact be the easiest reform to implement. All it takes is a law that say no more debt-money with interest. Nothing more. No new government bank, no complex regulations, nothng.
So where is the impossible part?
And abolishing interest is in fact the ONLY way to unchain the economy from an unsustainable pyramid scheme. It is simple mathematics. I will post shortly a table that proves this.
Anyway, I am absolutely open to someone poking holes in my argument. So by all means, please expand on your argument.
Gordon, Interest is NOT the problem with our monetary system. The problem is WHO receives the interest, which is the same as who “issues” or controls the money.
Have you even read Ellen’s book yet? It’s clearly explains the point you seem to be stuck on.
Now “excessive” interest is a problem in many areas of the economy. Inappropriate interest is a problem, and needs to be dealt with though legislation.
But there is no need for me to “re-invent the wheel”, or re-debate this entire question of what is at the root causes of our monetary malaise. That has been done scores or more times here on this one website, and in “Web of Debt” and in Zarlenga’s “The Lost Science of Money” , or in Soddy’s “The Role of Money”, in “The Money Masters”, a video by Steven Still, or “Money as Debt” a video by Paul Grignon. Google any or all of these sources for more info.
The root cause of our money-malaise is indeed interest, but it is who gets the interest, NOT that there is some interest attached. Fair and justifiable interest is just the fair return on the “rent” or use of something of value. You can call it interest or a “fee” or a “use charge” or whatever. The label doesn’t change what it is.
Our money problem is privately created money that is generated by loans (i.e., money created out of nothing but a promissory note), and the compounded return on that interest that is being sucked out of the nations blood (money) supply like vampires are supposed to do.
I repeat, it is that all this “compounded interest” goes into the vaults of private banksters that is the problem. If the return on the creation of new money went to the taxpaying public, i.e., the government, there would not be a problem, and never would have been one.
Just calling “interest” per se the culprit is not only an oversimplification, but outright disinformation, and only compounds the already comples problem.
Misdiagnosis always prevents or delays proper treatment of true causes.
Always!
“Interest is NOT the problem with our monetary system. The problem is WHO receives the interest, which is the same as who “issues” or controls the money.”
So if the government creates the credit that I need to buy a house, and I pay them 3 times the principal instead of the banks, then somehow I’m better off? The debt problem is solved?
“But there is no need for me to “re-invent the wheel”, or re-debate this entire question of what is at the root causes of our monetary malaise.”
Wow! Isn’t that what this blog is supposed to be about?
“Fair and justifiable interest is just the fair return on the “rent” or use of something of value.”
The “fair” return (or rent) would be nothing more than the real depreciation cost that resulted from a person borrowing or using the asset.
utopian, on November 1st, 2009 at 5:42 am Said:
(quoting Jere)
“Interest is NOT the problem with our monetary system. The problem is WHO receives the interest, which is the same as who “issues” or controls the money.”
________________
I’m sorry to see you take the bad side of this critical issue on money reform, Utopian.
That is what I said. That is what I meant to say, and it is the essential truth that those who hope to understand this unfolding train wreck had better understand, and right NOW! It is time to Xavier Onassis! … Or not.
____________
“So if the government creates the credit that I need to buy a house, and I pay them 3 times the principal instead of the banks, then somehow I’m better off? The debt problem is solved?”
_______________
It is beneath you to put false words in my mouth, or argue straw men. Everything I have every written, or Ellen has written, would shout out the injustice of such a monstrous accusation. NO! I have never said or meant anything close to that – precisely the opposite! And the government is not now creating any credit at all that is going to finance houses for consumers. That is ALL privateering at work by the money marauders.
_______________
“But there is no need for me to “re-invent the wheel”, or re-debate this entire question of what is at the root causes of our monetary malaise.”
Wow! Isn’t that what this blog is supposed to be about?
____________________
No. Not in my opinion. Not when it has already been done from Franklin, Pain, Jefferson, Madison, Jackson, Garfield, Bryan, Henry George, Lincoln, FDR. Frederick Soddy, Alexendar Del Mar, Zarlenga, Helen Brown and even myself, along with untold others who correctly perceive and comprehend the problem.
At some point we have to say “this is the ROOT of the problem, and THIS is what me must fix.” Unless we can reach that point we are dead, as a culture or a civilization. And that point is now.
I said: “Fair and justifiable interest is just the fair return on the “rent” or use of something of value.”
Utopian replied: The “fair” return (or rent) would be nothing more than the real depreciation cost that resulted from a person borrowing or using the asset.
Me: I can’t believe you said that. That’s the hogwash. If you haven’t thought things through any further than that then you need to be reading and learning, not issuing prescriptions for money and economic reform. The fair return or rent from the use of any real productive asset must certainly take into account “depreciation” but soooo much more than that. Among other thinks it must take into account the loss of revenue the asset provides the owner or his family by his using it himself.
Or perhaps you would do away with private ownership of property all together, and revert to communism or socialism? If so, that is ultimate folly.
The bottom line here utopian, and Gordon, is that society can NOT abolish interest without destroying the basic incentives that drive industry and hard work, and productivity. INTEREST must be regulated and controlled by society, but to abolish it would be to abolish most of industry itself, and the growth of REAL (not illusory) prosperity and wealth.
But then perhaps you think the destruction of all real wealth would be a good thing? That would not be a debate in which I would participate.
I really thought from all your posts here and you website that you were further along in your thinking than this.
One more time:
“Interest is NOT the problem with our monetary system. The problem is WHO receives the interest, which is the same as who “issues” or controls the money.”
Cheers,
Jere:
At the risk sounding marxist, what do we do when automation and outsourcing reach such levels that access to the money itself begins getting cuttof for a majority of the population? Its happening now, and quickly. Every person cannot be an entrepreneur. Money lent or spent today, even interest free, does not necessarily create the same number of jobs it used to. The internet is a perfect example of this. What good is sound currency and lending if the stimulative effect is decreasing faster than access to it?
This a real question I have and I don’t know the answer. Does money not become more of a barrier than a vehicle for healthy transaction?
Rick, “Sounding Marxist” should not be a concern of anyone on this forum. Only sounding foolish, contradictory or irrational should be a concern. Marxism, socialism, communism… these are all terms that inhibit the free discussion of ideas, and almost always distort meanings rather than clarify them.
I have posted long articles on my website discussing how these terms are used to mislead and confuse vital issues. Even “capitalism” is almost universally grossly misunderstood, and a word that obfuscates, rather than illuminates.
I believe firmly in most kinds of private property, if it is honestly obtained. I don’t think you can do better than a “free market system”. Too bad we don’t have one. I think we need to rethink the centuries of propaganda that tell us private monopolies and cartels are good for us, and can manage public utilities and infrastructure better than communities, states or governments.
Automation is one problem. Outsourcing of productive industries are another. Money creation is another. Your question(s) indicates a conflagration of these disparate ideas and concepts.
We do not have a “sound currency” so your question about what good it would be is hard to read. Money creation as it is practiced in most of the world today is the biggest criminal enterprise the planet has ever known, or ever will know.
We are moving into and (hopefully) through the most dangerous era our planet and its inhabitants will ever face. I’m talking SERIOUS here folks.
And its all tied to the Money Vampires having tea and crumpets at G-20 conferences and secret Bilderberger meetings.
Oh, and my best answer to your question is that we have already reached that point… and many decades ago.
Cheers,
Hi, Jere asked me to jump in here, but I haven’t had time to read the whole thread. I’ll just give my view on interest: I can see the merit of the Biblical and Sharia refrain against it as “usury,” and I think it might be possible to create a system that was interest-free. However, interest serves some useful purposes. Besides covering the costs of the bank and potential defaults, it slows people down from borrowing too freely and prevents carry trades. If people were able to borrow from the government interest free, they would get heavily into speculation — borrow at zero percent and invest at a higher percentage and keep the spread. So you’d have to put limits on what you’re going to allow the money to be borrowed for. But then, even assuming government-owned banks, you’d have to leave it up to government bureaucrats to decide what projects were worthy and what weren’t. And how would you stop people from pretending to borrow to create a business and in fact using the money to speculate? The oversight and record-keeping could be worse than taxes!
In terms of mathematical sustainability, you can overcome the pyramid scheme problem (always having to pay back more than is created in the first place) by making the banking system publicly-owned, and allowing the government to issue some interest-free money for its own expenses to cover the excess. You would only have to do this once: issue $105, spend $5, and lend $100 at 5% interest. Then collect it all back in as principal and interest, and lend the same $100 and spend the same $5 all over again. That’s assuming one year loans, no defaults, and no growth of GDP. To allow for those things, you would want to keep the parameters flexible.
I’m glad to see everyone taking an interest in these things, and I think discussion is important. On the issue of these discussions coming to blows and personal vendettas, I would plead for everyone to discuss only issues and not use any loaded name-calling sorts of words. If I had time, I would edit those out, but I don’t. Best, Ellen
Thanks Ellen, Good answer, as far as it goes, especially your first paragraph. The problem here was that “abolishing interest” was being discussed far beyond the banking system, and extended to the economy as a whole. In addition, interest itself, and its abolition is being argued as THE solution to our monetary problem… a la Mike Montagne and his crowd.
They were also talking about eliminating interest on ALL lending, public or private. Which is, of course, suicidal to a productive and health economy.
Cheers, but I fear little is going to be settled by your comments.
Jere/Ellen,
Ceratinly didn’t mean to sound as if I was backing one side or another. I thought the argument was about interest on money creation all along. If we’re talking about abolishing interest on all lending, I agree that is not only harmful but deeply unfair to the lender. The lender is voluntarily relinquishing a portion of his or her wealth to help the borrower and in doing so incurs both cost and hardship. To do away with all interest is not sound. Plus, we will all end up paying for a bank’s sevices rather than receiving any kind of interest on our deposits. We will end up with cash in mattresses again and crime run amok.
My sticking point is with the long term viability of money as a vehicle itself. As I asked above, is money not losing its stimulative capability over the long haul? (ie 100 cashiers replaced by 1 technician.)
Rick, No apology needed. Most reasonable people will eventually agree that a modern complex economy cannot be sustained or maintained without some form of interest, or return on capital investment. The interest or “use charge” on the origination of “money” is altogether another matter. The two should not be conflated.
As for ending up with cash in the mattress, what else will happen if all the banks collapse or go bankrupt? Of course the FDIC will pick up the tab for all losses under $250K, but who is the FDIC? US – the taxpaying public! As usual it is the taxpayer that is on the hook for all the crimes of the banksters.
What good is worrying about the “stimulative capacity” of money, when the total value (buying power) of money goes to almost nothing? That is what is happening, and it is happening by design. It is being carefully and deliberately planned by those whose intent is to rule over our planet.
Difficult to believe? Perhaps, to those who have not studied these matters for decades. Yet it is the plain truth, and a truth that will be laid bare soon enough.
You should probably read Henry George. It sounds to me like you may be ready for what he has to say to our world. This even though he said it over 130 years ago. His message is timeless.
Advancing technology is only a problem in systems that are run by predators who swallow up the gains that should flow to society for the resulting increased productive capacity. That means the kind of system we have now. It needs to change.
(quoting Jere)
“Interest is NOT the problem with our monetary system. The problem is WHO receives the interest, which is the same as who “issues” or controls the money.”
Here is a classic example of what you said …….
http://www.businessinsider.com/nj-taxpayers-paying-goldman-sachs-nearly-1-million-a-month-2009-10
New Jersey Taxpayer Paying Goldman Sachs $1 Million Month For Bonds That Don’t Exist (GS)
That article is only one of hundreds of the scams on credit and interest being conducted by Goldman-Sachs – one of the largest criminal enterprises ever conceived by the mind of man.
Here is a summary from the article itself:
“This is just one of several stories of interest-rate swaps gone bad. But bear in mind a few things. Everyone seems to have been caught off guard by the decline in interest rates over the past few years. This isn’t just a matter of banks foisting bad deals on state and municipal governments — Larry Summers (no fool) got burned when serving as the President of Harvard. … the fact that the bonds don’t exist anymore is a red herring. The state chose to replace the bonds, voluntarily, from floating to fixed. There’s no reason that should get them off the hook from a side bet.
These are derivatives games (high stakes gambling) with improperly originated interest on imaginary money. In other words – monopoly money – money that only has value in a make=believe game of Monopoly.
Except that the “monopolies” are real, and all the profits are going to the banksters.
Also, abolishing interest does in fact completely take away control of money from the financial overlords.
Interest is their goose that lays the golden egg. Without interest they have nothing. No power, no money, nothing. They become simply bookkeepers — harmless eunuchs who earn a fair wage for their business of conducting fair transactions.
I will say the opposite in fact, that abolishing interest is the ONLY way to reign in the money masters.
As for not being beneficial, how so? The money that the financial sector currently siphons off and diverts to casino gambling among themselves, would stay in the real economy. How much would everyone benefit if that 43 percent of GDP that they extract is distributed throughout the productive sector of the economy?
Jere,
I wish you would explain to me why interest is not the problem. I have read through the first few chapters of Ellen’s book and it does not deal with the problem of interest chaining the economy to the requirement of accelerating growth.
I just posted on the think take page a column from my spreadsheet on the Ponzi scheme. Unfortunately the page formatting took out all of the spaces and jammed all the columns of numbers together so it is hard to read.
The upshot is that an economy that creates money by way of new debt with interest attached is a recipe for disaster.
Please think this through Jere. If you loan out a trillion dollars over the course of 10 years at even a low interest rate, you will have created the necessity to increase the money supply over and above the money already created by those loans — in order for money to exist to pay back the interest.
Let’s make a reasonable assumption that each of those loans was for something productive and added real goods and services to the economy. In other words, all of the new money created as loans is linked to an increase in economic output.
That is perfectly natural. A business asks for a loan if it needs to expand production. A family asks for a loan if it needs to buy something, which “something” also needs to be produced.
But now at the end of this 10 year cycle, you need expand the money supply by another $500 billion, just so that there is enough money so that the debtors you loaned to can pay the interest.
What happens then? This benevolent government bank has to print up some money and give it away. There is no other choice.
But this money is not linked to any new goods or services, like the loaned money was. therefore it simply dilutes the value of the money — inflation.
That is why our economy has had inflation for the last 100 years.
But inflation is not even the real worry. The real worry is what happens when growth inevitably slows down. It doesn’t even have to stop completely, it just needs to slow down.
The whole thing inevitably collapses like a Ponzi scheme. Which is what an interest-lending bank is, a Ponzi scheme in reverse. Instead of taking in investment and paying out interest, it lends out money and expects interest back.
It is the exact same thing. A vacuum cleaner can either suck or blow, depending on how you arrange it.
Also I do not agree that there can be such a thing as “rent” on money. Money is only a medium of exchange. It has no intrinsic value.
You see, there is the trap and you just walked into it. As soon as money is allowed to be a commodity in and of itself, instead of simpoly an abstract symbol of an underlying commodity, then the game is finished.
Then anyone can profit from hoarding it, manipulating it, breeding it, etc.
You have just defeated the whole idea of monetary reform when you assign intrinsic value to money. It a token only. It can have no value in and of itself.
That is why if you allow it to collect “rent,” you have made it a thing of value. Why because simply having it means it will beget more. With nothing else than the act of possessing it, you are assured that it will multiply.
Ahh there is the fatal flaw.
Conversely, if you take away the possibility of money to be able to beget more money in and of itself, with no other activity whatsoever. Then money can only be the neutral medium of exchange it is meant to be.
And then it does not matter who or what creates it or handles it or does whatever they want with it. It has become worthless in and of itself because it cannot give birth to new money, in and of itself.
That is the beauty of it. It can be so easily policed. No interest. Period. That’s the law. You don’t need to put in an elaborate system where only a government priesthood could be allowed to handle money.
No money hoarding, no usury, no inflation, no incentive to siphon it off. What would be the point of hoarding it? It can’t get you any more.
Gordon, Most of your argument has absolutely NOTHING at all to do with my positions on money, and falsely attributing positions to me that are not mine, and which I vigorously oppose, does me (and you) a great disservice. You speak of me “walking into a trap” of thinking money is a commodity, when that is entirely false. I have taught for years that money is nothing but a token, or proxy, for real wealth. I fully know, understand and teach that money has no “intrinsic value”. Not even gold has “intrinsic value”. You speak simplistically as if those of us here had no clue about what a “Ponzi scheme” is, or how it works, when exactly the opposite is true. We have understood your “Ponzi scheme” mathematics for longer than you could imagine, and have been trying to educate people about the dangers of them. I’ve been blogging about this stuff since the mid 90’s, and predicting this crash since before the tech-wreck of 2000-2001 and the housing bubble that followed that.
It is YOU who need to think this through, not those of us who have been studying and writing on this problem for years. When YOU have read or seen all the references I’ve given you, or read the rest of Ellen’s book, and if you STILL don’t comprehend the real nature of the interest problem, perhaps I will devote more time to it. For now it is a dead issue, and a waste of everyone’s time.
You simply cannot outlaw interest without destroying the economy, and that is NOT the objective. What is needed is to shift money creation to the sovereign governments that represent the people that elected them. That is THE ONLY solution. It is not to abolish interest, but to RE-DIRECT and properly regulate it. It must become a part of a sustainable economic system.
We all understand your mathematics, and the impossibility of continuing (sustaining) an infinite interest growth model in a finite system.
What you are proposing is akin to saying the way to stop theft is to outlaw property. No property = no theft. Simple huh? Or so you would have us think.
No. It isn’t that simple, but close. The first thing that needs to be done is to mentally separate the charge for creating private money (interest on something that did not previously exist) from that charged on the loan of existing wealth. Charging a fee or return on the use of existing wealth is not only sound, ethical, moral and sensible, but indispensable to a prosperous society or culture. What is suicidal is the charging of compound interest on money created by the stroke of a pen, or a keystroke – money that never existed before it was borrowed.
Can’t you grasp this vital distinction? It is crucial to any understanding or comprehension of our impending money collapse, and the resulting takeover by the new world financial order – i.e., the Fed, IMF, BIS, Bilderbergers, etc.
The problem is an economy that allows privateers, pirates and thieves to usurp (steal) it’s money-creation authority and thereby redirect the seniorage and benefits (profits) from the money-creation process is the real problem. THAT is the real culprit. SOMEBODY has to create (originate) money, and SOMEONE has to bnefit (profit) from that money-creation process. The only remaining question is:
WHETHER THAT SOMEONE WILL BE AN ELITE OVERCLASS OF MONEYMASTERS – AN ARISTOCRATIC MONEY ELITE – OR IT WILL BE THE TAXPAYING PUBLIC – THE GREAT MIDDLE CLASSES, VIA THEIR ELECTED GOVERNMENTS?
Someone is going to profit from the money-creation (origination) process, be it financiers of the people.
Take your pick.
“You simply cannot outlaw interest without destroying the economy…
Charging a fee or return on the use of existing wealth is not only sound, ethical, moral and sensible, but indispensable to a prosperous society or culture.
SOMEBODY has to create (originate) money, and SOMEONE has to benefit (profit) from that money-creation process.”
__________
All of the above is simply hogwash. I can’t believe that you said it Jere. Credit is as essential to a modern trading society as the air we breathe, so ALL credit must remain in the public domain and be interest free.
If credit is only issued for productive purposes, then the total amount of credit in existence will match value of the asset wealth that it creates exactly. As the assets are used and wear out, the outstanding credit that was issued initially to make their production possible, should be reduced (paid back) at the actual rate of the asset’s depreciation.
In such a case, the only fair fee or return on the use of existing wealth would be the amount that the borrower’s use depreciates the value of the asset. There should be no additional profit earned by the lender because he has not contributed anything productive to the process. He may have given up the right to depreciate the asset himself, but he has done nothing productive to increase the value of it either, so he has no legitimate claim to a reward. Demanding one, however, throws the delicate balance of credit (money) supply and demand out of the window.
As Gordon has properly sensed, the rest is just the same old smoke and mirrors of circular thinking.
utopian, on November 1st, 2009 at 6:52 am Said:
Jere: “You simply cannot outlaw interest without destroying the economy… Charging a fee or return on the use of existing wealth is not only sound, ethical, moral and sensible, but indispensable to a prosperous society or culture. SOMEBODY has to create (originate) money, and SOMEONE has to benefit (profit) from that money-creation process.”
__________
utopian wrote: “All of the above is simply hogwash. I can’t believe that you said it Jere. Credit is as essential to a modern trading society as the air we breathe, so ALL credit must remain in the public domain and be interest free.”
____________
And I can’t believe YOU, untopian, are not only missing the point, but are twisting my words and positions here, as above. OF COURSE CREDIT IS ESSENTIAL TO A MODERN COMMERCIAL ECONOMY!!! THAT IS MY POINT. That is the reason interest cannot be abolished. No interest, no lending, no lending, no economy.
HOWEVER, IT IS NONSENSE TO SAY ALL CREDIT MUST REMAIN IN THE PUBLIC DOMAIN, AND BE FREE OF INTEREST!!! That statement is simply wrong, and not only wrong, but really dangerous and destructive of things you and Gordon want to keep and cherish in our world – good things – productive things. Most credit comes from “Capital”, private capital. Or at least it should in a properly run economy. If you eliminate private capital investment and the right to change a fair rate of interest on that investment, you wipe out the majority of our productive economy. Again you continue to advocate shooting the host to kill off the parasites. Overkill is not the solution, and never will be the solution.
_________________
“If credit is only issued for productive purposes, then the total amount of credit in existence will match value of the asset wealth that it creates exactly. As the assets are used and wear out, the outstanding credit that was issued initially to make their production possible, should be reduced (paid back) at the actual rate of the asset’s depreciation.”
The above is nonsense. Who is going to determine what is or is not a “productive purpose”? Think how many of our modern conveniences would not exist today is “credit” was only issued for someone’s idea of a “productive purpose”? No transistors, microchips, internet, personal computers, cell phones … the list is endless. Risk is essential to invention and innovation – progress.
utopoan continues:
“In such a case, the only fair fee or return on the use of existing wealth would be the amount that the borrower’s use depreciates the value of the asset. There should be no additional profit earned by the lender because he has not contributed anything productive to the process. He may have given up the right to depreciate the asset himself, but he has done nothing productive to increase the value of it either, so he has no legitimate claim to a reward. Demanding one, however, throws the delicate balance of credit (money) supply and demand out of the window. As Gordon has properly sensed, the rest is just the same old smoke and mirrors of circular thinking.”
_______________
What Gordon has properly sensed is that confusion about the issues will indefinitely delay vital solutions. Those that foisted this pernicious system upon us are clever beyond the imaginations of most humans. Only those who have long been “disconnected from the Matrix can see the clear reality. Talking about doing away with all interest in order to take down the banksters is an RX for destroying the entire world economy. That is exactly what the NWO-moguls want! Then “they” get it all on a platter, lock, stock and barrel, without a peep of protest.
Is that what you want? Do away with all interest and that is what you will get.
utopian, The circular reasoning here is yours and Gordon’s , not mine. Under your scenario, most private lending would simply cease, eventually bringing down the economy. But your big mistake is in not separating out (in you mind) that interest which is charged of the phony private creation of imaginary money – money that is backed somehow by the full faith and credit of the US citizen/taxpayer (Ponzi-scheme INTEREST) – from other forms of interest on loaned REAL wealth. Please read some stuff by David C Korten, especially the Great Turning, or even more to the point, “Agenda for a NEW Economy.”
300 years of false programming about money, interest and economics have poisoned our minds to the truth – they have filled our minds with so much “sludge” that it appears we can’t think clearly or logically.
ABOLISHING ALL INTEREST WOULD DESTROY OUR CIVILIZATION! THE ONLY REAL SOLUTION IS TO RECLAIM THE MONEY AUTHORITY FOR THE PEOPLE.
I’m sorry Jere, it appears that I mistook you for being someone else. No hard feelings I hope.
The issues that I have tried to raise here are far too complex to be explained in tiny blog bites. I assumed that you had read and understood the bigger picture that I present here: http://www.monetaryreform.com/MR/betterWay.htm but obviously I was wrong.
I love you brother, and I’m sure the world will be a better place if you and Ellen are successful at implementing the monetary reforms that you recommend. At least, our taxes should go down.
best of luck,
utopian
utopian, your apology is accepted and appreciated.
However, you were not wrong. I have looked over your material on your website extensively, although I do not profess to recall every detail. That you favor abolishing all interest was something I apparently missed.
This debate over interest, and the “gold standard” are the two issues I’ve spend most of my time debating with people over the years, and even decades. Once “money”, “currency”, “legal tender”, “fiat” notes, drafts, bills, coin, credit, debit and so on, are properly defined and comprehended in their ideal forms, these semantic debates will no longer be a problem, except for those whose intent is to deceive, or mislead, For now we will have to agree to disagree on the issue of interest, and its proper (or improper) place in our economy, and/or monetary system.
Cheers… and the love and respect is mutual.
I have thought, and believe I have stated, that I think your website is among the premier ones on money reform that I’ve seen, laying aside this one issue of apparent contention.
I agree that these complex issues cannot be addressed properly in small sound bytes. That is why we have asked those who post at length here be familiar with the basics of money reforms as outlined by Ellen H Brown, Stephen Zarlenga of the American Monetary Reform Institute, and other leading edge thinkers and authors on these issues.
Otherwise we are just burying essential truths under tons of words, and confusing people rather then educating them.
Jere, tell me one thing. Why is usury “indispensable to a prosperous society or culture?”
If you cannot explain that in a sentence or a paragraph then there is no point reading a book. It does not take a book to give a simple answer to a simple question.
You say you understand that money is just a token. Yet you do not understand that if you allow interest-taking or “rent” on money, then it is no longer a token. It becomes a commodity in itself.
Jere that is a huge disconnect. If you cannot see that simple fact, then I must assume that the rest of your theory is fatally flawed.
What you and Ellen seem to be advocating, replacing the entire lending system now in place with a government-controlled entity that is going to do the exact same thing — only they are going to be more ethical.
Really? You are replacing one caretaker of a commodity of supreme value, with another.
This is the same idea the communists had when they decided to take the means of production away from the elites and replace it with a government elite that would be more benevolent.
True, the system did end up hugely more fair to the average person. I traveled and worked in the Soviet bloc during the 1980s and stayed with people and saw how they lived. In a lot of ways they had advantages that we don’t, namely being free of the stress that comes with being a debt-slave.
So I am sympathetic to the idea of socialism, actually. But 99 percent of the people in the US are not. All anyone has to do to stop this entire project, if it ever even picks up steam is to shout, “Socialists.”
Look at the health care debate and the tea partiers. Do you think these people are going to stand by and let you evict the bankers and Wall Street. They won’t even let you take on the health insurance companies.
But the simple fact is that a socialization of the banking system is not necessary. And it is not the solution, IF you insist on carrying on with usury. It will just be the same thing run by an entirely new elite. That’s why your system needs the punishment of death hanging over anyone who cheats inside the system.
None of this is necessary if interest is abolished. It is a perfectly self-regulating system. No one CAN cheat. It is impossible precisely because money cannot breed more money.
If you can put in a socialized banking system WITHOUT usury then sure, no problem. More power to you. Good luck with getting it past the tea partiers and the bought and paid for Congress.
It is your idea that misses the real diagnosis and the real cure. I’m sorry to resort to your aggressive tone, but I am growing tired of your ungracious manner.
Gordon Arnaut, on November 1st, 2009 at 12:28 pm Said:
Jere, tell me one thing. Why is usury “indispensable to a prosperous society or culture?”
_____________
Gordon, Why would I try convincing you of something I think is absurd?!? But what is more absurd is that you could imagine I could think such a preposterous thing! I have been writing and teaching against “usury” all of my 71 year life! What sewer are you dredging this stuff up from?
You lurch from one misrepresentation of my positions to another, and I will not tolerate it much longer. You may find value in wasting your time. I do not.
INTEREST is indispensable to a prosperous economy (society) NOT usury! Stop twisting words and their meanings.
You accuse ME of “huge disconnect”, yet apparently can’t see the “huge disconnect” in your reasoning above:
“You say you understand that money is just a token. Yet you do not understand that if you allow interest-taking or “rent” on money, then it is no longer a token. It becomes a commodity in itself. Jere that is a huge disconnect. If you cannot see that simple fact, then I must assume that the rest of your theory is fatally flawed. What you and Ellen seem to be advocating, replacing the entire lending system now in place with a government-controlled entity that is going to do the exact same thing — only they are going to be more ethical. Really? You are replacing one caretaker of a commodity of supreme value, with another.”
___________
First you say money is not a commodity,(which is partly true in some cases, and not in others) and then you say “we” would replace one commodity of supreme value (money) with another. This is extreme gibberish, nonsense. You can’t have it both ways. I do not believe in commodity or commodity-backed public money.
In the first place “we” (money reformers) are talking about transferring to public authority and control ONLY those banking functions that involve the creation/origination of money. That is a sovereign right, or authority, delegated to governments by the people, or citizen-taxpayers that governments are supposed to represent, and our government representatives had no right or authority to give that sovereign authority to banksters, as they did in 1913 with the Federal Reserve Act.
Let’s get this straight: We propose to take back the money-creation functions of banking, and restore it to the people, where it rightly belongs. Any interest derived from the issue of money should be returned to the people in lieu of taxes – taxes which mostly are the result of interest paid to the private bankster bloodsuckers that now suck our lifeblood (using interest) with every dollar circulated or created bearing compound interest.
I am also going to address another point Ellen brought up, about the possibility of carry-trade springing up.
That is the situation where someone borrows money at a low interest and lends it somewhere else where the prevailing interest rate is higher.
This situation has been been going on for quite some time with Japan. Moneylenders borrow money in Japan because their interest rates are low, convert the money into US dollars and lend it out at higher interest.
I will just note that the Japanese obviously realize that pushing interest rates down is the right way to go. I suspect they would prefer to have a zero interest rate, if they weren’t already getting beaten up with this carry trade.
So yes, the carry trade question is a genuine concern. If the US did abolish new money interest-lending, it would be a boon for the global carry trade.
Or would it? Financial companies that borrow money at low interest rates, in order to speculate have one fatal flaw. If they make the wrong bet, they go kerplunk.
The formula for carry trade involves not just relative interest rates, but also currency values. Let’s say they borrow interest free in the US and lend it in Japan. They have to trade US dollars for yen. The more they do this, the higher the yen rises. pretty soon, the interest that they get back in Japan is not enough to buy back the dollars they need to even pay back the principal.
Yes, there will be a few billions to be made at first. But it will not last long and it will not have a big impact. Again we have to get our minds around the idea that 5 or 10 percent is not a huge deal. It is not enough to sink the ship.
What about illegal carry trade in the domestic market? Let’s say a chiseler borrows money interest free from the bank and then, after some clever paper shuffling, offers that same money for lend at interest.
Well, who is going to take him up on it when you can go down to your bank and get an interest free loan? But let’s say you are maxed out on lending. the bank won’t lend you more. Or you have bad credit. Either way you now need to go the secondary lending market, where cash can be lent at interest.
Again, the bad credit pool is only a small percentage, so only 5 or 10 percent at most will take advantage of this market. Not a big deal.
But here again, natural market forces come into play. There are still people saving. Now this illegal carry-trader has to fight for a limited market with legitimate folks who are saving. The interest rate they can charge goes down. Plus there is the risk of defaults; we are talking about bad credit risks here. Get enough defaults and how are you going to pay back the principal that you borrowed for this criminal scheme in the first place?
Plus there is always the chance you will be caught and go to jail.
Bottom line is that illegal carry trade will be practically negligible.
So all told, we sum everything up. ON the plus column we have every single consumer diving a pie that amounts to over 40 percent of GDP. That is the amount extracted by the financial sector.
On the negative side we have a few folks who choose not to save money, but invest in stocks. There is also a troublesome international carry-trade that will siphon off some money. But it too is a drop in the bucket. Illegal carry trade at home. Maybe a few small time fringe players here and there. After all there are still mafia loan sharks operating.
Thank you Gordon, for completely making my case about the impossibility of “abolishing all interest”. Ellen was raising her example as only one of a literally endless number os similar cases where attempting to abolish interest simply will not work. I myself was going to bring up the black market, and loan-sharking as other examples, but you have kindly done that for me.
All of which brings me to the point, which is, what is your point? You’ve just negated your previous point that all interest should be done away with in order to fix our money problems. So what is the point of all the above?
I am also going to talk about the benefits of abolishing interest on new money lending. (Again, because I have covered the possible downsides already, but not the benefits.
What would happen if interest (on new money lending) was abolished tomorrow?
Everyone would be at their bank the day after tomorrow and refinancing their mortgage. My mortgage payment would be cut by more than half. (Others might be more than half, or less, depending on how close they are to paying off their mortgage).
Overnight, the discretionary income of practically all consumers would increase significantly. What would they do with the extra money? Some of it might be put aside, but a lot of it would be spent.
I don’t think I need to connect the dots and point out what a huge jump in consumer spending would do for this economy.
What about businesses, which also borrow money? Every business would likewise see an infusion of cash flow, just like consumers — by way of the interest saved.
In order to compete, each would have an incentive to lower prices. The net result: consumers with more money in their pockets; a marketplace of goods and services that now cost less.
Put those two together and we have REAL PROSPERITY.
We add to this the fact that inflationary pressure caused by the need for the money supply to expand more and more every year, in order to pay the interest on previous years, is gone.
The money supply need only expand by the amount that new production is introduced. No new production? No problem. No new money needed. No need to create more debt-money simply to pay the last year’s interest (and the accumulated interest on the previous 10 or 20 years that is still demanding payment).
So what is the problem?
When we add everything up, we see that the only real downside to abolishing interest on new money creation is the possibility of a cross-border carry trade opening up.
The effect of this is not that big in the overall picture. In engineering we often ignore variables that have an impact of less than 10 percent, in order to simplify our model. We distinguish between things that have a major effect and those that don’t.
I would also bet that if the US did away with interest on new money, the major economies would quickly follow suit. The US is the center of the world financial empire and basically dictates the rules of the game.
What I see with Japan’s low interest rates is that they are sick of this game (and have been for the last 15 years), but they have no choice but to go along. If the US abolished interest on new money, they would jump right in too.
In that case, there is no chance for a carry trade.
In fact, I think the move to zero-interest new money will be inevitable. Even the bankers realize they must do this now, which is why they are doing it. At least among themselves.
They still want to hold on to the old flawed interest-lending paradigm, but the forces of nature are against them. Inevitably, interest-lending MUST collapse (for new money creation). Time will tell that this is so.
Gordon Arnaut, on November 2nd, 2009 at 11:24 am Said:
I am also going to talk about the benefits of abolishing interest on new money lending. (Again, because I have covered the possible downsides already, but not the benefits.
What would happen if interest (on new money lending) was abolished tomorrow?
Everyone would be at their bank the day after tomorrow and refinancing their mortgage. My mortgage payment would be cut by more than half. (Others might be more than half, or less, depending on how close they are to paying off their mortgage).
________
With all due respect, Gordon, you are dreaming here. You haven’t begun to cover all the possible downsides or the upsides of abolishing interest on privately created new money.
You ask, “What would happen if interest (on new money lending) was abolished tomorrow?”
The 800 lb gorilla, in-your-face answer is that there would be no new money lending. What private banker is going to loan out money, even to the most credit-worthy borrowers, at 0 percent interest?
None! Nada, zip, zilch, zero… how many ways can you say “nobody”?
Your answer to your question is, “Everyone would be at their bank the day after tomorrow and refinancing their mortgage. My mortgage payment would be cut by more than half. (Others might be more than half, or less, depending on how close they are to paying off their mortgage).”
Where is all this new money at zero percent interest going to come from, Gordon? What private banker or financier is going to refinance trillions of home loans (mortgages) at zero percent when they are already getting 6 or 7 or 8 percent?
Do you really think legislation can force private bankers or lenders to loan money to all takers at zero percent interest?
What planet did you say you were from?
Only sovereign (government) entities could properly loan money at zero interest, and then only to certain other sound state, county or municipal entities who are “too big to fail” in the only real sense of the word that makes any sense. And then it would be in the public interest, or common good, (commonweal) to do so. Roads, bridges, water and sewer facilities, communications, airports, shipping ports, public parks… all these would be proper candidates of zero interest financing IF, repeat, IF the money was created by the public government authority without interest attached to it.
There are some other municipal, state or national projects that might qualify for zero financing, such as student loans (most could actually be grants) or schools, playgrounds, libraries, media centers, performing arts theaters, arenas, and town halls. But only if the money were created without interest by a sovereign public authority under the transparent watch-care of the public and their elected representatives.
Enough of this foolish talk of legislating interest out of existence. There may be a day in the distant future where such an idea might be possible, but it will be far, far away, and the profit motive will have been replaced by the “service motive” by a large portion of humanity.
We are not close to that yet.
Jere:
(Starting a new thread. Last one was getting a little too squashed.)
To pick up where we left off, you said:
“What good is worrying about the ’stimulative capacity’ of money, when the total value (buying power) of money goes to almost nothing? That is what is happening, and it is happening by design. It is being carefully and deliberately planned by those whose intent is to rule over our planet.”
Allow me to summarize the problem as I understand it.
1) Money is a symbol, or as you put it, a “token” of the exchange of goods and services. It is merely a vehicle for conducting transactions. In short, it has value because it has been assigned value by either a state or financial mechansim and is accepted by the market as the common medium of exchange.
2) Reward or compensation for labor has been defined in monetary terms. Our labor translates into money which becomes the ticket granting access to goods and services.
3) Money is being used as a control mechanism by financial elites through manipulation of currency.
As debt bubbles are deposited at the lowest possbile levels of the economy and grow to consume entire nations, that control grows along with it. We soon reach a point, and perhaps already have, where it becomes a numerical impossiblity to get out of hock.
4) As the debt bubbles grow, we as individuals and as a nation are forced to borrow larger amounts of money and to dedicate larger portions of wealth to social spending to maintain social order and stability. As this happens, the ability of the currency to represent fair and just reward for labor diminishes in reciprocal fashion through currency devalutaion.
In the mean time…
5) Automation is accelerating beyond our capacity to retrain the workforce for new postions. Automation differs from economic downturn because jobs that go away do not return.
6) As automation matures, the ability and impetus to outsource labor grows. Markets themselves become exports.
So where does this leave us? It means that the population is being squeezed on multiple fronts with one common result: access to goods and services is being snuffed out by not only currency but the translation of labor into goods and services. Both labor and currency are being rendered irrelevant.
It seems to me that the shortest distance between two points is a straight line. What is hurting us is nothing more than our original belief in currency by equating it to goods and services. Fixing currency, therefore, is ultimately a stopgap measure at best. It is temporary. Whether we use Reserve Notes or baseball cards matters little. It is easy to manipulate via political machinations, bank scares, etc. And, short of a constitutional amendment, we will likely see the policy usurped again as it has been throughout our history. Even then, I’m not sure it will prove impenetrable.
Let’s assume for a moment that the masters of money are able to realize their vision tomorrow. There is a single world currency, they have complete control of it, and are able to puppet populations at their whim.
At the same time, let’s assume that tomorrow also sees automation grow to levels that negate the worforce beyond the levels needed to sustain access to goods and services for a majority. In that brave new world, money becomes the sole lock on the door to goods and services for which we no longer have a key.
My guess is that we would see barter economies spring up long before that point. Whether that’s 20 or 100 years from now, I don’t know.
(Note: I’m already seeing a resurgence of second-hand stores and bartering in and around my community. Stores with a “Buy, Sell, Trade,” theme are having no problem staying in business.)
What would we do then? We cannot challenge the world. Our only option, it seems to me, is to forego the dogma of money. If money no longer represents access to goods and services, doing away with it is the quickest, and perhaps only way, to free ourselves. Any new currency would likely be met with an insurmountable resistance.
Recalling that the central message of Oz was that each had the power to overcome their deficits all along. Dorothy needn’t have defeated the witch. She merely needed to will herself home.
I’m not suggesting that a barter system is the ideal solution, but I am suggesting that all slavery is rooted in one dogma or another and that same dogma is used to enable the servitude. Remove the dogma and the slavery dissolves.
Perhaps the problem is that we are limiting ourselves to a singular solution which only lends itself to control. The only constant requirement is access to goods and services. If we diversify the way we exchange goods and services now, neither the pain nor the learning curve will be very severe. What about hybrid economies with strong communal, barter, resource-based, and/or multiple currency sectors? Just brain-storming here.
Well you have a good brain for “storming” Rick. Problem is, your post covers too much ground for detailed reasoned responses.
IMO, you start off great for the first quarter, start tacking off course a bit with the automation stuff, and then lose your way before regaining your compass at or near the end.
Your piece would make for a great dialogue between us, if I only had the time.
Just remember that although Dorothy could have just “willed herself home” at any time, (had she known that) it would not have done anything to help the citizens of Oz, who were freed from their oppressors by destroying the wicked witches.
Helping oneself is good, but helping ones community, state, nation, or even one’s world is far greater and more noble.
I’ll try to return to specific parts of your post as time permits.
Cheers, Jere
The real problem, Rick, (and others following along) is that 300 years of brainwashing and mind control by the “banksters” (City of London and Wall Street Financiers) have left most of us incapable of thinking correctly about “money” – what it is, how it functions, and who creates or controls it.
George Orwell said something to the effect that … in a world of universal deceit, the first duty of truth-tellers is to return to basic definitions and meanings. Our would be controllers play mind games through subtle shifts in word meanings.
No mind game is as serious as that of money, because the money-monopolists know that everything else is controlled through the gate-keepers of money. These “gate-keepers” mostly remain behind the “curtain” as in the Wizard of Oz. The curtain is the same as the “Matrix”, or the mirror in Alcie in Wonderland (Through the Looking Glass). They stay out of sight, and operate from behind the scenes. They have no need to run for high offices when their money can control those who do. And make no mistake… it does!
So… what is this mysterious thing we call “money”?
It is nothing more than a form of accounting – debits and credits on a ledger, or a computer. Money is nothing more than the “tokens” or “proxies” for those accounting debits and credits.
Understand it, believe it, repeat it over and over. Get all the illusions of the “intrinsic value” of money out of your heads. It’s an illusion, created by illusionists whose purpose is to control you and your world.
Money is a token of bookkeeping! It doesn’t matter if it is a coin, or paper dollar, or gold, or silver, or an iou. What matters is its legality and acceptance. It’s acceptance depends on its recognition as payment of government taxes and fees. When the government decrees something is money, it becomes money! It is done by “fiat”, or “decree”.
Once we firmly establish this concept in our minds we can see the foolishness of allowing private banks to generate these “bookkeeping entries” and charging interest, or compound interest – often several times the original principal – on this newly created “bookkeeping money”. It is magic – an illusion. But it is a very profitable one for the banksters, and a very expensive one for taxpaying citizens.
More later. Jere
Rick said: “My guess is that we would see barter economies spring up long before that point. Whether that’s 20 or 100 years from now, I don’t know.”
What we are going to see is a return to local economies and local sustainability. Just how local is open to question. Barter economies will only last until those communities figure out that “money is bookkeeping” and someone starts keeping books – debits and credits – on earnings (the value of labor) and exchanges, or trades of that stored labor for goods and services.
Bookkeeping works far better than direct barter, and allows for a far greater division of labor and sophistication of industry. Very little industry is possible in any system of direct barter.
More later. Jere
great debate you all !!!!!
here is more signs of dissent from the dollar as reserve currency …….
India is buying 200 of the 403 tonnes of gold the IMF is selling.
http://www.preciousmetalstockreview.com/downloads/India%20Buys%20HALF%20IMF%20403%20Tonnes%20pdf.pdf
Jere:
“Understand it, believe it, repeat it over and over. Get all the illusions of the “intrinsic value” of money out of your heads. It’s an illusion, created by illusionists whose purpose is to control you and your world.”
That’s exactly what I’ve done. However, I’m taking it one step further by suggesting that labor is also a form of currency (with similar relative value). Ideally, labor translates into dollars which tranlsates to goods and services.
Labor = Money = Goods and Services
If any part of that equation approaches zero, the rest of it follows suit. I am calling into question the viability of translating labor into money, because money is the choke point and the enabler of control. Because of that, we have an economy that is more fairly represented by the following:
Labor=1/money=1/Goods and Serivces
As labor grows, the rest of the equation approaches zero.
Additionally, if we see labor as a form of currency and labor is also being rendered irrelevant through automation, it goes without saying that fixing the official currency will not fix access to labor. Populations keep rising while the actual number of jobs is decreasing and both are happening exponentially. Even with a sound state currency we are left with a “water water everywhere and not a drop to drink” conundrum. Labor is becoming no less a game of musical chairs than the monetary system.
Rick, I like your thinking, but it needs a bit of sharpening. Labor in an essential ingredient in the production of all wealth. In fact, it is only one of two essential ingredients. The other is land, in the sense that Henry George used the term “land”, including the earth and all that is naturally in or a part of it.
So all “wealth” arises from one or another, or some combination of these two basic ingredients. There are no exceptions.
Now “labor” only “translates” into dollars (or any other form of money) if that labor results in salable (or tradeable) production of some good or service, OR someone is willing to pay for that labor.
All labor translates into wealth if it is directed to this end. Other forms of labor end in recreation, entertainment, play, or socializing, rather than in the creation of a marketable product or service.
I’m not at all sure of the value of your equation, but I am of this one: Wealth = Land + Labor.
Money is a proxy or substitute for wealth in the process of exchange.
Capital is stored wealth, or wealth that is set aside for the production of more wealth. Capital may be money or it may be other forms of stored wealth (assets) in excess of those needed or desired for consumption.
The “rewards of labor” are only shrinking because they are being diverted to those who claim that “land” or “capital” deserve a greater share of the return on productive industry – i.e., the production of new wealth from land and labor.
These are fairly simple concepts that have been outrageously complicated by those who do not want us the understand these basic concepts – most professional economists, accountants, bankers, and those they work for, the top tier (wealthiest) of financiers (or CAPITALISTS).
Does any of this help? I’ll be back with more later.
Cheers, Jere
Actually, that clears up quite bit for me. Very enlightening. Thanks Jere.
Do you not think that automation changes your equation, though? (Wealth = Land + Labor)
Does land then become the only way for us to obtain wealth?
I feel like we’re being thrust back to the middle ages here…
Indeed, we may end up being thrust back to the middle ages, or even further, depending on how stupidly we act. We must change our system in the correct ways or suffer the unpleasant consequences.
But automation does not change the equation. It only changes the degree of human or animal labor into mechanical-kinetic labor. It’s shifts the sources of energy, and amplifies the need for machines, fuels, and other human, wind or horse-power alternatives.
I’m trying to show you that it is those in power, or in control of the “land” and its resources that decide that workers will receive a smaller and smaller share of the “profits” from our modern industrial production. The profits have always been divided up only two ways, to the so-called “owners” of land and resources, and those who labor on the land or with the resources in order to produce something of value… wealth.
All Capital is rightly the joint produce of land and labor. Yet the “landowners” claim it all to themselves, and labor gets an ever decreasing share. Why? Because labor has less power than capitalists (landowners).
But how did these “landowners” come to own their land? Where did the titles to it come from? Did it come from its maker?
Those who make property (wealth) properly claim title to it. But who made the land and all that is in or on it?
When the first European explorers stepped on American shores and “claimed” all the lands from the Atlantic to the Pacific theirs, in the name of their sovereign (king or queen) did that rightfully make it so?
What of the American Indians who were already here? What of those to come later? Couldn’t these usurpers just as logically claimed the entire planet for their nations?
I hope I don’t appear to be getting off the point, because I am not. The point is “who owns the land”? Who created it? And if those who didn’t create it claim it as theirs, is that right, or just?
Land and resource ownership is an even deeper root problem in our economy than money creation, but they are both at the very heart and soul of economics. Yet you never even hear them discussed in any economics course. Isn’t that curious?
Yes, “curiouser and curiouser” as Alice would have said.
Mushrooms, anyone?
Forgot to address this:
“Does land then become the only way for us to obtain wealth?”
No, you can buy wealth with money, or earn it with labor. Or you can steal it. The latter has become the predominant method. The means by which the thefts are accomplished are getting more and more difficult to detect. The confidence games and methods of fraud and deception are becoming more ingenious with each passing decade. Mortgage-backed securities, credit default swaps, derivatives of all sorts, pyramid and Ponzi schemes, and even good old commercial banking are all vehicles of very creative theft. These are all vehicles to transfer wealth from its rightful owners to thieves.
But land is a key ingredient in the production of all wealth, and its distribution and use must be re-examined before we can get to the bottom of our most serious economic problems. The biggest of these is the vast inequality in the distribution of wealth… meaning the use of land and the fair return on labor. I do not, or ever will, advocate “equality” of wealth. That is unnatural and unachievable. There must always be material incentives for industry and ingenuity – at least until man has evolved into a higher order of being – some thousands of years from now.
The reason I earlier recommended reading Henry George is that he explains all this far better than I can. Few people in all of history can stand shoulder to shoulder with him.
More later, Cheers, Jere
Progress and Poverty?
Yup.
Progress and Poverty is probably the greatest economic publication of all time. It surpasses and corrects Adam Smith, David Ricardo, John Stuart Mill, and even Karl Marx and Das Capital (even though George was unaware of Marx’s works when he wrote, except perhaps by word of mouth).
Marx was correct about many things though, including the collapse of monopoly capitalism (predatory financial capitalism).
No economics education can be considered well-rounded without reading Marx, and even to a greater extent H. George.
So Marx was right then. We will be forced into communal ownership / no ownership.
No, no no…. He was only partly right, and like most great thinkers, partly wrong.
Communal ownership is a terrible idea. It has always failed wherever it has been tried, and whenever. Property ownership is hard-wired into human nature.
But “LAND” is a separate matter from all other forms of property, and even our backward laws recognize that fact. All property except land is “made” or “created” by combining labor with land (resources). It is only land, and its resources, that should be treated differently.
The “maker” or “producer” of any property should rightfully claim title to it, whether finished goods or unfinished parts. These rightful producer/owners have rightful title (claim) to these “fruits of their labors”, and the right to sell or transfer them to subsequent owners or producers. This holds true for everything produced or made by man or mankind, whether farm produce or items made by his labors – tools, furniture, wagons, automobiles, etc.
Land, though, is different. It is a special case, and requires special thought and consideration.
More later. Cheers, Jere
What about assets such as “air rights” (as the rights to build an elevated train or bridge over a particular building in the city) or “intellectual property”, or “royalties”? Do these contribute to true wealth?
I think you missed the earlier clarifications of what is meant by “LAND” the way Henry George defines the term. “Land” includes ALL of the earth’s natural resources, including those under the land and over it, as in the air, sky, clouds or even lightning.
“Intellectual property” is a form of labor. Royalties are simply payments for the use of copyrighted or patented intellectual property rights.
And yes, all these are examples of some combination of “land and labor” in the Georgist sense of these terms. Again, ALL wealth is some combination of land and labor, and the proceeds or profits from wealth are distributed to those who control one or both of these elements of wealth.
The reason labor is being shortchanged in this mix is because the power elites have monopolies over both. Both of which are unjust and immoral.
Every man should own his own labor, and the fruits thereof. Anything else is slavery or indentured servitude. A man is not free unless he can sell his labor to the highest bidder, or direct it to best increase his own wealth.
Land and the natural resources thereof should be apportioned according to some scheme of “fair use”. Some fair portion of the natural resources (mineral, oil, gas, gold, silver, etc) from the land should go to the commonweal from which it is taken.
(In my utopian world convicted criminals would not be warehoused at taxpayer expense, but would work to at least earn their keep, if not produce a surplus. Farms and mines could be suitable occupations for at least a portion of the time criminals had to spend in lockup. We are a long way from having such a self-sustaining prison system, IMO, but we could begin planning for it. Imagine Bernie Madoff digging gold out of a mine to repay his victims some small bit of what he stole, or sending hand-picked farm veggies to people he made homeless
But I digress…
Certain of what you call “assets” or “rights” (such as building elevated trains over city buildings) I would call into question. Again, the question mark is raised by the division between produced or manufactured, man-made property (or “assets”) and natural resources like oil, water, air (or rivers and oceans as particular instances of these).
I don’t think men (or any particular individual men) have any right to claim permanent ownership over God-created land, sky, air or water, or any other natural resource. Would it have been equitable and just for Adam and Eve to claim ownership of the entire Earth just because they were “the first ones here”? Should everyone subsequently born on earth have to pay rent to Adam & Eve (or their heirs or assigns)?
What right beside raw power gave title to the land in North America to the European settlers? Your answer is that there was none. They took title to the land and divided it up among those new settlers as they saw fit, or found profitable.
But I could go on indefinitely. The point is that wealth is inexorably tied to land and labor, and money is just a temporary token for the exchange of wealth – a bookkeeping entry of some sort. The ruling super-rich elites have used a false concept of money to transfer (steal) the commonweal(h) of this (and all other) nations to the point that they can buy and sell congressmen, senators, judges, and even presidents.
The window of opportunity to fix this money problem is closing. It may have already closed. It may have to collapse before it can be rebuilt.
That’s it for tonight. Cheers, Jere
“The richest 5% in every nation, rich and poor, North and South, East and West, now own between 70% and 95% of their own countries.”
Land monopoly (plus private inheritance) is the very back bone of rule by the rich.
Winston Churchill: “Land Monopoly is not the only monopoly, but it is by far the greatest of monopolies – it is perpetual monopoly, and it is the mother of all other forms of monopoly.”
Here is (part of) “Archimedes” by Mark Twain:
“It is evident that he was an over-rated man. He was in the habit of making a lot of fuss about his screws and levers, but his knowledge of mechanics was in reality of a very limited character. I have never set up for a genius myself, but I know of a mechanical force more powerful than anything the vaunting engineer of Syracuse ever dreamed of. It is the force of land monopoly; it is a screw and lever all in one; it will screw the last penny out of a man’s pocket, and bend everything on earth to its own despotic will.
Give me the private ownership of all the land, and will I move the earth? No; but I will do more. I will undertake to make slaves of all the human beings on the face of it. Not chattel slaves exactly, but slaves nevertheless. What an idiot I would be to make chattel slaves of them. I would have to find them salts and senna when they were sick, and whip them to work when they were lazy.
No, it is not good enough. Under the system I propose the fools would imagine they were all free. I would get a maximum of results, and have no responsibility whatever. They would cultivate the soil; they would dive into the bowels of the earth for its hidden treasures; they would build cities and construct railways and telegraphs; their ships would navigate the ocean; they would work and work, and invent and contrive; their warehouses would be full, their markets glutted, and:
The beauty of the whole concern would be
That everything they made would belong to me.
It would be this way, you see: As I owned all the land, they would of course, have to pay me rent. They could not reasonably expect me to allow them the use of the land for nothing. I am not a hard man, and in fixing the rent I would be very liberal with them. I would allow them, in fact, to fix it themselves. What could be fairer? Here is a piece of land, let us say, it might be a farm, it might be a building site, or it might be something else – if there was only one man who wanted it, of course he would not offer me much, but if the land be really worth anything such a circumstance is not likely to happen.
On the contrary, there would be a number who would want it, and they would go on bidding and bidding one against the other, in order to get it. I should accept the highest offer – what could be fairer? Every increase of population, extension of trade, every advance in the arts and sciences would, as we all know, increase the value of land, and the competition that would naturally arise would continue to force rents upward, so much so, that in many cases the tenants would have little or nothing left for themselves.
In this case a number of those who were hard pushed would seek to borrow, and as for those who were not so hard pushed, they would, as a matter of course, get the idea into their heads that if they only had more capital they could extend their operations, and thereby make their business more profitable. Here I am again. The very man they stand in need of; a regular benefactor of my species, and always ready to oblige them. With such an enormous rent-roll I could furnish them with funds up to the full extent of the available security; they would not expect me to do more, and in the matter of interest I would be equally generous.
I would allow them to fix the rate of it themselves in precisely the same manner as they had fixed the rent. I should then have them by the wool, and if they failed in their payments it would be the easiest thing in the world to sell them out. They might bewail their lot, but business is business. They should have worked harder and been more provident. Whatever inconvenience they might suffer, it would be their concern, and not mine.
What a glorious time I would have of it! Rent and interest, interest and rent, and no limit to either, excepting the ability of the workers to pay. Rents would go up and up, and they would continue to pledge and mortgage, and as they went bung, bung, one after another, it would be the finest sport ever seen. thus, from the simple leverage of land monopoly, not only the great globe itself, but everything on the face of it would eventually belong to me. I would be king and lord of all, and the rest of mankind would be my most willing slaves…
read the rest of Mark Twain’s “Archimedes” here – at a site that is one of the world’s greatest hidden treasures:
http://www.envisioneer.net/RainForest/
Great post, Xavier. Extraordinary link. Thank you.
Cheers, Jere