Michael Rozeff has just posted a piece on LewRockwell.com called “The Many Fallacies of Ellen Brown,” responding to my article titled “Time for an Economic Bill of Rights” (below). Here is a short reply.
Mr. Rozeff seems to think that (1) saving the government money is a bad idea, and (2) keeping the status quo, in which private bankers get the inflated cost of money — a cost that is passed on to the consumer — is a good idea. If he actually believes that, one has to wonder about his competence; and if he doesn’t, one has to wonder about his motives and whom he represents. The post is an appeal to emotion and fear, and mischaracterizes what I said.
The point of my article is that the interest paid by the government could be returned to the government, if the government owned the bank. The government could then spend this money into the economy or reduce taxes by that amount. How this would make government 80% of the economy or turn it communist, as claimed by Mr. Rozeff, is not clear. Forty percent of the German banking sector is publicly-owned. Has this made Germany a communist country? No. The German economy is the most robust and productive in the EU, and it remains capitalist. The public banks service the small and medium-sized privately-owned businesses that are the productive strength of the economy. See my earlier article here. Similarly in Canada: it borrowed from its own central bank effectively interest free until 1974, and accomplished remarkable things with this government-issued capital expenditure, including funding its health care system.
On Margrit Kennedy’s figure of 40% for interest paid on household debt, see her graphs posted here.
The problem with the monetary scheme today is the skyrocketing inequality of wealth, which is mathematically unsustainable; and this gross inequality is caused by the private ownership of credit. “Them that has, gets.” They are the few at the top, the 10% who collect the interest paid by everyone else. A major point made by Margrit Kennedy is that interest is a huge regressive tax, overwhelmingly paid by the bottom 80% who can least afford it, overwhelmingly enjoyed by the uppermost 10%, rigging society with a huge wealth transfer in the wrong direction.
A prevailing economic fallacy is that the total debt borne by the people is unimportant, because it is a zero-sum game: “we owe it to ourselves.” This would be true if “we” and “ourselves” were the same entities, but under the current scheme, they are not. As if everyone in France being in debt to Marie Antoinette would make no difference no matter how high the total debt, even if interest extracted from the average Frenchman for payment to Marie Antoinette climbed so high they could no longer feed themselves, because after all, it is just money owed within France, and one person’s liability is another person’s asset.
The current banking system is unsustainable because the populace does not have enough money left over after paying interest and other costs to purchase the nation’s GDP. Production of GDP therefore drops due to insufficient demand, in a descending spiral called “recession” or “depression.” If the interest is returned to the public, the system becomes sustainable.
“Finance capitalism” is the antithesis of real, industrial capitalism. It is a parasite on industrial capitalism, destroying it from within. As economist Michael Hudson writes:
“To save society, its victims must see that asset-price inflation fueled by debt leveraging makes them poorer, not richer, and that financialization is the destroyer and exploiter of industrial capital as well as of labor.”
Friedrich Hayek, one of the patron saints of Lew Rockwell Libertarianism, wrote in The Road to Serfdom that one price of freedom that needs to be accepted is that it leads inevitably to economic inequality. He cited the then-prevailing salary of a CEO, which was about 30 times the salary of the lowest paid worker. That was in 1944. Today the salary of Bank of America’s CEO is over 400 times larger than that of a beginning teller. Would Hayek think that that disparity was acceptable? Would he think the multiple should be allowed to grow without limit? And even if he would, CAN it keep growing without limit?
When the parasite runs out of its food source, it must and will perish. When that happens, we need to be ready with something new and improved. Better yet, we need to be ready before it happens – or we may find ourselves with a “new” one-world currency and a “new” one-world government.