RETURN TO THE GREENBACK DOLLAR
We no longer have a government “of the people, by the people, for the people.” We have a government run by and for Big Business, and Big Business has gotten control because its affiliated banks have monopolized the business of issuing the national money supply, a function the Constitution delegated solely to Congress. What hides behind the banner of “free enterprise” today is a system in which giant corporate monopolies have used their affiliated banking trusts to generate unlimited funds to buy up competitors, the media, and the government itself, forcing truly independent private enterprise out. Big private banks are allowed to create money out of nothing, lend it at interest, foreclose on the collateral, and determine who gets credit and who doesn’t. They can advance massive loans to their affiliated corporations and hedge funds, which use the money to raid competitors and manipulate markets. If some players have the power to create money and others don’t, the playing field is not “level” but allows some favored players to dominate and coerce others. These giant cartels can be brought to heel only by cutting off their source of power – the power to create money — and returning it to its rightful sovereign owners, the people themselves.
Two independent monetary systems have competed for dominance in the United States ever since we were a collection of colonies. In provincial America, paper money was issued by local governments. In England at the same time, paper banknotes were issued and lent privately by banks, headed by the Bank of England, the first private central bank. The major flaw in the private banking system was that the banks created the principal but not the interest necessary to pay back their loans, so more money was always owed back than was put into the money supply, requiring more loans to be taken out to cover the interest, spiraling the people into debt.The most effective and efficient of the American colonial systems was in Pennsylvania, where a publicly-owned bank issued paper money and lent it to farmers. The money returned to the government with interest, preventing inflation; and to keep enough money in the system to prevent the debt spiral of the private banking system, the government issued and spent a sum of money on public works as well. The Pennsylvania system worked so well that it completely funded the provincial government without taxes or inflation. Benjamin Franklin and others maintained that the chief reason for the American Revolution was that Parliament forbade the colonies from issuing their own money. Paper money issued by the Revolutionary government got the colonists through the war, but the British heavily counterfeited the Continental currency as a deliberate war tactic, and by the end of the war it had been inflated so much that it was nearly worthless. Fear of inflation led the Continental Congress to completely omit paper money from the Constitution, which does not say who can issue it or under what circumstances. The private banks filled the breach, and by 1913 the U.S. had the same private central banking system that England had. Ever since the dollar went off the gold standard in 1933, all of our money except coins and a few rare U.S. Notes has been created privately by banks (including the private Federal Reserve) and lent to the government and the people. Two centuries after the Revolution was fought, the pyramid scheme of lending 10 dollars and requiring 11 back has reached its mathematical limits. We are “all borrowed up” and the banking system is imploding. It is time we tried the system for which our forefathers fought and died: real, debt-free, publicly-issued U.S. money. This tack would not only not add to inflation but could actually reduce or eliminate it. Inflation results from an increase in “demand” (money) over “supply” (goods and services). Today inflation is caused by borrowing to repay debt: the money created into existence by banks goes to pay interest rather than to produce goods and services. If the government were to issue money and use it to pay for real goods and services (roads and bridges, sustainable energy development, health services, and the like), demand and supply would remain in balance and inflation would not result. The “Federal” Reserve is actually a privately-owned corporation that issues money and lends it to the government. A truly federal central bank would issue funds directly to the Treasury as debt-free U.S. Notes, or as “national credit.” This was done successfully in Australia and New Zealand during the 1930s and 1940s. A state-owned central bank funded public projects that put people back to work, at a time when most of the rest of the world was struggling with a depression brought on by a global shortage of bank-created money. Today we are facing the same sort of bank-created credit crisis, and it could be resolved in the same way. Steps Congress might take include:1. Amending the Federal Reserve ActFederal Reserve Act to make the Federal Reserve a truly federal agency, acting under the auspices of Congress in conjunction with the Treasury.
2. Updating the Constitutional provision that “Congress shall have the exclusive power to coin money [and] regulate the value thereof” to read, “Congress shall have the exclusive power to create the national currency in all its forms, including not only coins and paper dollars but the nation’s credit issued as commercial loans; and it shall not delegate this power to any private entity.”
3. Authorizing new issues of federal legal tender backed by “the full faith and credit of the United States,” to be spent on programs that promoted the general welfare. To prevent inflation, this currency would be advanced only for programs that contributed new goods and services to the economy, keeping supply in balance with demand. Issues of the new currency would also be capped by some ceiling — the unused productive capacity of the national work force, or the difference between the Gross Domestic Product and the nation’s purchasing power (wages and spendable income).
4. Advancing credit interest-free to state and local governments, for rebuilding infrastructure and other public projects. The emphasis would be on projects that were self-sustaining, such as the development of cheap, effective alternative sources of energy (wind, solar, ocean wave, etc.) that could be sold to the public for a fee; or the repurchase of homes in default, to be resold or rented as low-income housing.
5. Establishing a network of national banks to serve as local bank branches of the newly-federalized banking system, either by FDIC takeover of currently insolvent banks or by the purchase of viable banks with newly-issued U.S. currency. Besides serving depository banking functions, these national banks would be authorized to service the credit needs of the public by advancing the national credit as loans. Any interest charged on advances of this credit would be returned to the Treasury, to be used in place of taxes.
6. Authorizing the Treasury to buy back and retire the federal government’s outstanding debt as it comes due, using newly-issued U.S. Notes or Federal Reserve Notes. In most cases this could be done online, without physical paper transfers.
7. Regulation and control of the exploding derivatives crisis, either by imposing a modest .25 percent Tobin tax on all derivative trades in order to track and regulate them, or by imposing an outright ban on derivatives trading. If the handful of banks responsible for 97 percent of all derivative trades were found after audit to be insolvent, they could be put into receivership and their derivative trades could be unwound by the FDIC as receiver.
8. Initiating a new round of international agreements modeled on the Bretton Woods Accords, addressing the following monetary issues among others:
— The pegging of national currency exchange rates to the value either of an agreed-upon standardized price index or an agreed-upon “basket” of commodities;
— International regulation of, or elimination of, speculation in derivatives, short sales, and other forms of trading that are used to manipulate markets;
— Interest-free loans of a global currency issued Greenback-style by a truly democratic international congress, on the model of the Special Drawing Rights of the IMF; and
— The elimination of burdensome and unfair international debts. This could be done by simply writing the debts off the books of the issuing banks, reversing the sleight of hand by which the loan money was created in the first place.Just as we need publicly-operated police, courts and laws to keep individual and corporate predators at bay, so we need a system of truly national banks, in which the power to create the money and advance the credit of the people is retained by the people. We trust government with sweeping powers to declare and conduct wars, provide for the general welfare, and establish and enforce laws. We should trust it to create the national money supply in all its forms. The federal government need not and should not go into debt. A government with a properly designed and monitored system of publicly-issued money could fund itself without taxes, debt or inflation.
Ellen Brown, J.D.,
March 6, 2008
March 6, 2008
It seems like that’s the perfect solution to most of our immediate problems.
The only question is how to get the government to DO it.
How can one get members of Congress and presidential candidates to address the issues?
True. We need a major grassroots movement that can’t be ignored. I think it’s starting to happen though, and will continue to grow as the economy gets worse and the “solutions” get more insane and obviously Wall Street-oriented.
Hello Ellen,
In your #2 above, add …”and Congress shall in nowise be permitted to delegate said power to any entity whatsoever.”
Or something like that.
Apathy, greed and ignorance reign supreme.
Best regards,
Jim Johnston
Done! Thanks.
Hi Helen
I’m with you all the way. How can we speed up this grassroots movement?
Can writing to our “elected officals” help? Need information on how to contact these people……..And how can we find find out if these people are On the Take themselves?
Thanks George, I’m just writing an article on that. Stay tuned!
Dear Ellen!
Thank you for bringing the worlds most important issue to the surface. I will read your book as soon as I can. A Swedish translation is on the way, as I understood.
I have written a book called MONEY OM PLANET TERMS. It is published in Swedish, and now the publisher is searching for someone to translate it to English.
In the book I propose a nature-congruent system imitating the solar energy we exchange in trade.
After 19 years of development the idea boiled down to time-limited electronic money issued as daily basic income that only can be saved untouched. When used the sums are gradually reduced on the accounts on the market - and re-issued next morning as new basic income, equally distributed among the users in each round. You can see it as a wind to breath or a lifeboat - or a civil preparedness in case of an economic-ecological disaster.
The solidar is complementary and convertible in a speculation-proof way. It is illustrated in a flow picture where you can see how the balanced system works.
Right now we are working for implementing the system as a pilot project on the biggest Island in the Baltic Sea.
You can read the web site: http://www.solidar.lir be
or you can send an e-mail so I can send an English A4 summary to you. Maybe it would fit in your blog.
All best wishes,
Åsa Brandberg, Sweden
The problem is that no one now trusts the American government, or indeed, any other government in the world. Politics, and politicians have developed an appalling reputation, and the idea of entrusting them with the production of interest free money may seem ludicrous to many even if its via an “independent” public body.
The question is people have to decide which is the best of both “evils”..the banks, or governments.. to deal with money creation. I suspect in spite of the credit crunch many even now would side with the former, and their corporate buddies.
Not if they understood what money really is and where it comes from. Government gets the money it wants, created out of nothing, either way. Either it borrows money created out of nothing from the Federal Reserve and the banks, and we the taxpayers owe the money back with interest in perpetuity, or the government creates it directly, interest-free. Of course we need responsible government, but how are we going to get it? We have to get rid of the giant private money-creating machine that is in control of the government now.
[...] Monetary Proposal We no longer have a government “of the people, by the people, for the people.” We have a government run by and for Big Business, and Big Business has gotten control because its affiliated banks have monopolized the business of issuing the national money supply, a function the Constitution delegated solely to Congress. What hides behind the banner of “free enterprise” today is a system in which giant corporate monopolies have used their affiliated banking trusts to generate unlimited funds to buy up competitors, the media, and the government itself, forcing truly independent private enterprise out. Big private banks are allowed to create money out of nothing, lend it at interest, foreclose on the collateral, and determine who gets credit and who doesn’t. They can advance massive loans to their affiliated corporations and hedge funds, which use the money to raid competitors and manipulate markets. If some players have the power to create money and others don’t, the playing field is not “level” but allows some favored players to dominate and coerce others. These giant cartels can be brought to heel only by cutting off their source of power – the power to create money — and returning it to its rightful sovereign owners, the people themselves. [...]
I remember the con job that first year constitutional law tried to be. Venerating that execrable McCulloch case was a big part of it. Overrule McCulloch v. Maryland by people power.
I see the need to crowd out fiat debt-based money by noncooperation and creation and use of ITHACAHOURS money.
Money was minted by monarchs, that the people worshipped them (read–Caesar), instead of G-d. Herein lies the sin of idolatry, carried around in each person’s pocket and purse.
Money was minted by oligarchical bankers to create the illusion of overthrowing a monarchy while enthroning a more difficult idol than a mere monarch. It is easier for a committee of idols to claim there is no idolatry going on than one human ruler. So idolatry rages more fiercely, because people have so many illusions to dispel, not the least of which is the saying, “In G-d We Trust” imprinted upon currency. It is sad to say, but I beleve that many people believe in G-d because the money says that G-d exists.
The people’s currency is the next and final step, in which we cast down the last idols, enthone ourselves, and affirm our faith in one another–the closest approximation to active faith in G-d as each of us understands G-d.
Ellen,
In response to your most recent comment I concur.
Governments have broached every spending limit man has devised. Fortunately, at the state level, an aroused electorate is able to effect change fairly quickly to stem abuses and waste. Not so at the level of our central government.
Yes, as you stated, “we have to get rid of the giant private money-creating machine that is in control of the government now.” But that is only part of the solution.
Just as life surrounding the meandering Kissimmee River in Florida was devastated when the U.S. Army Corps of Engineers ’straightened’ the river into a canal, so too was life in America reshuffled by imposition of the fed’s economic reforms.
Whereas monetary power, in the form of taxes, used to flow from the people to their various levels of state government, and power flowed from the sovereign states, through their Congressional representatives, to empower and throttle the central government, now since the 1913 federal income tax and the cruel inflationary tax, among others, power floods unabated directly to the central government’s executive and beneficiaries.
We need for our funds to meander again through fifty parallel streams of checks and balances, all at independent rates controlled by the people within each state according to their current needs and abilities, some of which spills through to a necessarily frugal Congress of highly committed and accountable senators and representatives.
The only method I see to effect this change in American power flow, and in Congress, is for the people of each state to permanently rally themselves to become again the formidable force of soverign power some had once been. Each state ought to send its Congressional representatives to Washington, D.C. armed with the knowledge and confidence of their mission: to effect control and change in our central government necessary to negotiate the demands of our sovereign states as specifically declared by their people.
We Americans can accomplish this in our fifty different ways, and with the advent of the Internet do so in record time. I predict the functions of all unconstitutional federal programs could rapidly be moved out to the fifty states, trimming the central government to strictly constitutional activities within an 8 year presidency.
What then? American governments again “deriving their just powers from the consent of the governed.”
Peter Nickitas raises an important issue. The theological model assumes a Platonic Ideal as the spiritual absolute. The universal state of the absolute is basis, not apex. Zero, not one. So the spiritual absolute would be the raw essence out of which we rise, not an ideal form from which we fell. The top down religious model serves to validate top down political and economic models in ways that are very hard to effectively debate, without going to the subconscious paradigms that support them.
Nature is a dualism of bottom up processes that motivate and are defined by top down structure. Much as an eco-system motivates the individual organisms defining it. Yet the structure is effect, not cause. Like a shell, when it gets to confining, it is shed so the vital process can continue. Form follows function.
This might seem somewhat off topic, but the growing tensions between the worlds monotheistic religions, which all assume their model to be supreme, are as much a source of danger to this world as those taking advantage of the current monetary model. Currently these parallel arguments might be distracting to each other, but neither are going to gain significant traction until the crumbling middle class stability reaches a crisis stage and there are no more easy answers, so people really begin to look for honest solutions. At which point, these two approaches might begin to support each other and be the legs of a larger movement.
Maturity is when our parents go from being the model we follow, to the foundation we rise from. Humanity is at that stage.
Ellen:
My hat is off to John Merryman. His model serves to explain the strength and success of the American republic, provided the tenets of its constitution are not being violated. [Presumeably his model allows the apex of one structure (the state) to serve as part of the foundation of another (the nation)?]
I wish to suggest (also off topic) that our formidable national strength is BASED upon fifty underlying, autonomous sovereign states, all of which must be simultaneously toppled to effect an overthrow of the American government. That opportunity exists only when the national structure successfully hypothesises a non-functional intervening state structure, as is the case today, placing central government in an hypothicated position of absolute control.
The impending collapse of the American Economy may serve as John Merryman’s “crumbling middle class stability (reaching) a crisis stage,” i.e. it may become our salvation. Can we prepare to break the hypothication, invalidate current “top down political and economic models,” and reimpose the bottom up constitutional model to save this nation during this opportune period of collapse? It only takes effort for state populations to pump up their apparent power, and that effort could begin now.
As an aside … would permitting non-forex state monetary systems to coexist with the American national monetary system serve to strengthen recognition of state sovereignty and autonomy while simplifying control and regulation of the national currency? What if the national monetary system were under a gold standard, and if the state currencies were redeemable only in (and pegged to) that national currency? Could we fly with a lot less gold?
I’m not sure I follow all that, but I used to read Rudolf Steiner in my youth. He said cells have a natural tendency to go their separate ways until order is imposed by a higher organizing force from the top. He was talking about the ego structuring the body, but I imagine it’s the same with the body politic and the enlightened philosopher-king of Plato. The problem is the “enlightened” part. The problem with any grassroots movement or with democracy in general is finding leaders or a set of rules we can all agree on or trust. Maybe we can’t really pull it off until we reach some higher state in which we’re all tapped into the same conscious field, like cells in a body. Steiner’s point though was that the structure isn’t created by the cells; it organizes the cells, which would never have gotten together without the higher organizing principle being imposed on them. Not that I’m arguing for a strong central government. I think the central government has gotten out of hand. I’m arguing for enlightenment, a mass raising of consciousness, enlightened blades of grass forming into a grassroots movement, a communion or community of minds. The Internet may provide the conscious field we all tap into. It just needs an infusion of higher consciousness . . .
The money power has completely owned the government and press since the late 1800’s. No political struggle working within the system has any chance of success against the money power. Effective democracy at this stage requires efforts outside the system. We must disabuse ourselves of false hope in institutional remedies and safeguards.
So, if what you are saying is true, then you believe that we are essentially going into a deflationary depression as the money supply implodes? Thanks Ellen.
Yes, which is why the whole system has to be scrapped and redone. We’re facing the same sort of national bankruptcy FDR faced when he declared “New Rules.” That’s what we’re going to have to do, but with some refinements to improve on his approach. I plan to write an article on that.
Ellen,
Ad 1: The FED does NOT lend money to the government, actually the fed is prohibited from purchasing debt instruments DIRECTLY from the government, they buy it in the open market. (The effect of printing money is the same, though.
Ad2. The FED was created so that money is controlled by an independent body. Ginving the power of printing money to Congress would be lethal and inflation would get out of hand quickly.
Ad 3 Would like like to give the Gov control to keep “supply in balance with demand”? They communists have tried that and failed.
Ad 4. If credit were “interest free” to local governments they just would spend more money and create more inflation. Interest is an inflation dampener, for if it goes up people spend less since their earnings do not increase in proportion to the higher interest. (See housing crisis).
Ad6 Buying back debt with newly issued notes would be highly inflationary.
Ad7 If you want derivatived reported, why impose a tax? the reporting can be forced by regulation, but that would also need some understanding of what is being reported. Obviously, banks have no idea of what they are in for, and even less so regulators.
Ad8. Why a basket of commodities? They are only a minor input into the economy, 60% is services in the US . Perhaps the EU has found a resonable standard in limiting deficits to 3% of GDP, if everyone would do that, you have a “standard” of internal measurement. One could argue that the rate should be 0 rather than 3% with an excemption for recessions that would have to be paid back later (that was the idea of Keynes) but pols never pay back, herin lies the problem.
Why are international debts unfair? If people go out and borrow they should have to pay back. And how do you wipe out the debt? To every borrower their is a depositor, do you want to confiscate their savings? The US is doing that already in devaluing the $ and when foreign investors withdraw, they got 50% less in their own money than they got 7 years ago.
In conclusion: A government that would not constantly live above its means would create less inflation and need for taxation in the future. No new system needed just more reliable and honest politicians, but that intself is an oxymoron, regettably so.
Well, needless to say, I disagree; but it’s a Friday night and I’m heading off for dinner so I’ll be brief. To your points:
1. Correction, on this I don’t disagree, but I would be interested in your citation. I’m not being critical, I actually want to know. Is that in the Federal Reserve Act? I read it and don’t remember seeing it, but it’s all legalize, so I might not have known what I was reading (even though I’m a lawyer and should be able to read the stuff).
2. Inflation HAS gotten out of hand. The government “prints” all the money it needs or wants; if it can’t print green pieces of paper and call them dollars, it prints pink pieces of paper and calls them bonds. Either way, the money is out there and NEVER comes back; the federal debt hasn’t been paid off since Andrew Jackson. If the government could print instead of borrow, at least we wouldn’t have to pay half a trillion dollars in interest on the debt.
3. Really? You think China has failed and we have succeeded? They have the largest positive current account balance in the world, and we have the largest negative current account balance.
4. Not true. Read my articles on Guernsey, New Zealand in the 1930s, etc.
6. (You skipped 5.) I’ve answered this in “Response to Mogambo Guru.”
7 & 8. Don’t understand the questions.
Post-8: “To every borrower there is a depositor” — absolutely not true. Read my book. Banks do not lend out the deposits of their depositors. Every single loan is newly created as it is lent. Read “Modern Money Mechanics.” Read my introduction, posted on my website — many citations.
Birdseye “To every borrower there is a depositor”. Ellen has tried to correct you so I will as well.
NO NO NO! Haven’t you read anything about what money really is not just by Ellen but by HUNDREDS of monetary reform campaigners? Just key in “electronic credit creation”or “monetary reform” into eg google and see the HUNDREDS of websites that will explain it to you. Of course in this massive quantity they can’t be wrong. Please enligten yourself. Don’t allow your mind to stay closed and substantially ignorant (like most people) on the subject of money & debt. I was ignorant too until, working for London Underground in 1998, on Private Finance Initiative Project tender evaluations & financial justifications (which I soon was convinced the guidelines on which were the most outrageous manipulations) and seeing PFIs appalling value for money, I started asking questions and looking beyond corporate media & vested interest kowtowing pundits with what I soon discovered was their “motivated ignorance” about money & debt.
We’ve all got to start learning somewhere about money I suppose. And I’m not talking about Washington Concensus Neo-Liberalism which is what is taught in most finance and economics universities. Maybe coming upon this blog is your REAL knowledge starting point?
OK, so if you don’t trust Ellen try this one out for size, it was one of the first articles I read as a money beginner some 5 years ago. Really powerful & succinct writing; Ideal for any beginner. Nothing to do with Ellen’s books or organisations. http://www.prosperityuk.com/prosperity/articles/casefmr.html
Respectfully,
Tony
An afterthought for Birdseye:
I realise how painful it is for most people to seriously be open-minded to anything that goes against what they have assumed or been taught over decades (often going right back to the very cradle by those we loved & respected and who had absolute power over us)- [conditioning which subconsiously impinges on the vast majority of us]- so I’ll just add the following:
You only need read less than a page of the article I mentioned just now (”The Case for Monetary Reform” (by Bill Clarke) just read the bit 5 WAYS THE MAN-IN-THE-STREET IS BAMBOOZLED - 7 short paragraphs.
See: http://www.prosperityuk.com/articles_and_reviews/articles/casefmr.php
If you want to know about recognised public figures who know and teach and attend meetings about the need for Monetary Reform and a PUBLIC credit (not yet more private credit)- that governments can spend rather than borrowing it at interest as they do now from mostly private banks which the banks create as electronic accounting entries out of thin air, (only about 3% in the UK & most countries of money circulating is government created cash), then try putting the names of current UK Members of Parliament “Austin Mitchell” or “David Chaytor” or “Lord Sudeley” accompanied by the words “Monetary Reform” into google and have a most interesting and revealing read.
OR if like many people you DON’T LIKE READING very much watch the watch the “Money as debt you tube” film by keying this into google (50 minutes)
To Ellen:
1. Federal Reserve Act 1913
2.Did not dispute inflation but said it would be worse if you leave money printing to GOV. Money does “never come back” (pricisely because the pols don’t make an effort to save, in the process to get re-elected.
3. The jury on China is still out, its a capilist eco now with a communist overlay, besides that their stockmarket is down in excess of 50%! Just like 1929.
4. I beg tp differ, even with a “controlled” environment our gov created about 9 trillion in debt. What do you think they would do, if they had the authority to print money?
Yes, to every borrower there is a depositor, except for the accumulated capital (shareholders equity)
Assets
Loans 90
Cash 10
= 100
Liab
Deposits 90
Capital 10
= 100
Assets and Liab have to match hence my statement is correct. I did not deal with who the depositors are, they can be banks of course.
To Tony H.
So Tony, let’s see the Gov prints the money (no interest charged) and then pays the vendor who builds the bridge and the vendor will deposit his proceeds in his bank account and then the bank will not lend that?
If one gives money to the gov (or lets them print it for that matter) rather them have some third party (CB) excert some control, where do you think we would be now?
Hi ellen,
Ive been newly introduced to your articles and these comments. You’ve read steiner on the cell, have you also read him on economics? He hoped to create an illumined economic “commonwealth” bringing order and purpose to the cells. It would need to start he said with the beginning of an accomodative bank. (Now however , like with solidar, it may also need a new safeguarded currency??)
Steiner was devastated when his designs were sidelined and he foresaw Germany heading into multifarious disasters.
Birdseye has the clarity to lead us towards the requirement for a wiser more noble government to be in charge of that money supply. A simple idea and absolutely neccessary but how to realize it when pork barrels win votes??
Hi Mark, I read Steiner so long ago that I don’t even remember which books I read, but that would definitely be true that an economic commonwealth would have to begin with an accommodative bank! Thanks for writing, Ellen
Ive heard rumours that some NewYork retailers also do business in euros. Do they (eu) have a sound regulation of monetary policy? If you and your colleagues began to bypass the feds currency, using euros until you established or found your own currency and banking system, wouldnt that be an extreme leverage to your pollies as to reforming?
Triodos is one “fair trading” european bank, now forty years in existence maybe worth study and discussion?
Would that I and my colleagues had that much leverage! We’re a small, select group. Don’t know about the Euro, but I know the Irish are agin having the ECB for their banker. Thanks for writing though.
I like the idea of a new national monetary system that cuts off the parasites that have bankrupted and enslaved the next eight generations of Americans. Something like what you described except with an interesting twist. Let new banks issue credit in the name of the municipality where the property or business resides. They can take a small and regulated commission for the deal (one time only) and the income stream goes directly to the municipality to be used first for infrastructure improvements and loans to adjacent municipalities with insufficient resource to improve infrastructure. Mass transit initiatives of course should have priority. The banks should not reap the benefit of the continuing income stream. No more muni-bonds need be issued..no one needs to guarantee their credit worthiness. The newbanks need to intermediate the loans and their officers must be closely scrutinized to prevent corruption/kickback schemes. This is why the Municipalities themselves cannot be trusted to do this on their own. It would very rapidly digress into russian style oligarchy.
Also it should be an act of treason to sell any debt of US citizens to foreign agents or agents of foreign interests.
Excellent idea!
In my previous note, I failed to mention that if a municipality has more income than it needs it should go back to the people as direct payments and/or the interest rates on all classes of property should be summarily decreased until a balance is achieved. This is not different from what occurs now when there is a bankruptcy…it goes to sherriff’s sale and the county gets to keep the proceeds. All kinds of NECESSARY local social programs can be supported by this platform but subject to voter approvals. This puts the municipality’s future directly in the hands of their residents.
Could you please comment on The American Monetary Act?
http://www.monetary.org/amacolorpamphlet.pdf
Note the AMI 2008 Monetary Reform Conference at Roosevelt University, in Chicago, Sept. 25-28, 2008
So, Ellen. I have found your article, and I see now, unless this is a different article, that you have changed the wording/assertion regarding the Pennsylvania Currency from “The most brilliant banking model in our national history was established in the first half of the eighteenth century, in Benjamin Franklin’s home province of Pennsylvania.” to “The most effective and efficient of the American colonial systems was in Pennsylvania…”
Now, even if this is not the same paragraph, it refers presumably to the same currency or system. Why then do you not hold this system accountable to solve inflation; and how then do you claim it is “the most effective and efficient of the colonial systems,” or even worse, how do consider it efficient at all, if to solve inflation as you have previously asserted, the interest rates for the Pennsylvania land bank would have to be adjusted constantly as the sum of land purchased at interest changes, land is paid off, and government costs rise and fall? How does the system even tax justly? Worse, how do you fund government at all, when all the land is paid off?
http://perfecteconomy.com/pg-ellen-hodgson-brown-web-of-debt.html
As I have said, “As to solution, I hope we can agree on that some day, or for all the things which are not solution, this country is lost.”
Regards,
mike
Feel free to comment on my opinion of “The American Monetary Act.”
http://perfecteconomy.com/pg-fatal-faults-of-american-monetary-act.html
Correction:
In the first of my two posts I meant instead to ask, “Why then do you not hold this system accountable to solve DEflation?”
(In other words, an inadequate circulation.)
I’m at the American Monetary Institute conference in Chicago and trying to get two articles out on this $700 billion bailout disaster, so can’t contribute to this blog right now, but thanks for writing.
Hello - I tried submitting my second feedback comment on your feedback page but it didn’t accept it. Only the first feedback comment was accepted. The second feedback letter seems more to the point here anyway. Please permit me to simply preface that feedback2 with the following analysis, rather than retype it anew.
Your proposal is great. So are all the ones I have seen. Here is the first order breakdown of issues - your comments on each, in the context of the main feedback below, would be great.
Thanks
a: Central Banking in private hands charges interest for its money creation. Nationalizing the money creation solves this problem.
Your proposal, as did President Lincoln’s addresses this. Thank you.
b: Private Central Bank is a legalized monopoly behavior that permits banks to collude legally for price fixing the interest rate. Thus it helps create the business cycle of expanding and contracting credit by modulating its availability in legal collusion - what I call the business rape cycle.
Bankers profit from this by buying up those small businesses who can’t cut it.
Nationalizing this function, goes to a large extent in managing this price fixing in the better interest of the public rather than the bankers. But it does not entirely eliminate this aspect - because the private banks can still collude in managing credit availability.
How does your proposal address this issue fully to eliminate this predatory “rape cycle” altogether - and only have naturally occurring bankruptcies?
How might one even distinguish between a predatory rape cycle and a genuine business cycle? Who understands this stuff?
c: A Central Bank’s arbitrary money creation by fiat, whether the CB is public or private doesn’t matter, and which is what greenbacks did, creates an inflationary tax - nothing new here.
How have you addressed this inflationary tax?
d: In modern industrialized societies where the demand for capital can be enormous, far more than was prevalent in agrarian or only developing industrialized societies, as Richard Cook, the former Treasury department guy and now a monetary reformer, argues, how can this natural inflationary tax be avoided in such a fiat money system? In the time of the greenbacks, while Lincoln printed around 400 million dollars, or some say 500, that is nothing compared to what is needed to today to simply set up a class-1 semiconductor fab.
How does your proposal address this large demand for capital that would not also pose an inflationary tax?
e: Banking itself, indeed, all of International banking, is based on fractional reserve lending. This is the real source of any banker’s wealth and hence power.
How have you addressed this?
Can you show a method whereby the banks in the world can be made to agree to have a fractional reserve lending ratio of 1?
Here is the feedback2 letter - you may note the issue of gaining a sharper understanding of the problem before proposing realizable solutions. Thanks again.
— original feedback letter below —
Just to add one more comment on your worthy blog, but this time for your readers, it is fine to attempt to instrument a new system - as per the interesting opening quote of Bucky Fuller.
However, IMH analysis, that quote is deceptive.
There is always power behind any new change. Merely having ideas isn’t enough. Take the simple currency of the United States during the colonial times: colonial script. It worked great for the colonies until Benjamin Franklin let the cat out of the bag. It does not take rocket science to create a new system. And there can be any number of these, based on the number of peoples on the planet.
The reality space must reality check proposals. From what I have seen, most are pie in the sky - no existing power will permit it. And if one feels that idealism rooted in platitudes is a solution space, then surely the Ten Commandments, as the Golden Rule, would have been sufficient.
The “moneychangers” power entrenched in the system is enormous. Very good people are likely wasting very precious time designing new systems, that are unrealizable.
Project Humanbeingsfirst has instead decided to focus on forensically dissecting the existing system to understand its key pivot points. It is this quest - to understand the systemic cancerous disease to its DNA level in its present day malignancy, before any seeking a curing protocol that will not only be efficacious with minimum chemotherapy so as not to kill the patient, but also have the chance of being implemented in our short lifetimes.
An article that might interest some to understand the grotesque boundary conditions that one is presently under, and that beyond a certain temporal point, all these conversations will become irrelevant to be better left to any future generation that might be able to free itself from the shackles of fascism and rethink their money in a revolutionary ab initio way: please see “The Enduring Capitalist Conspiracy For World Government”
http://humanbeingsfirst.blogspot.com/2008/09/capitalist-conspiracy-world-government.html
And what the United States Congress can realistically do about it, and what their respective constituency can still prevail upon them to implement as their only leverage upon their Representatives will run out in less than four weeks, please see: “Message to the United States Congress from Project Humanbeingsfirst: It’s now or never!”
http://humanbeingsfirst.blogspot.com/2008/10/message-to-congress-nowornever.html
Thank you.
Zahir Ebrahim
Project Humanbeingsfirst.org
http://humanbeingsfirst.org
Please fix this:
Amending the Federal Reserve ActFederal Reserve Act to make the Federal Reserve a truly federal agency, acting under the auspices of Congress in conjunction with the Treasury.
to
Amending the Federal Reserve Act to make the Federal Reserve a truly federal agency, acting under the auspices of Congress in conjunction with the Treasury.
The basic ideas and some of the details for modern monetary transformation are already out there from guys like Mann, Greco, and Lietaer along with Mahathir from Malaysia who has shown that these ideas can work. And Ellen’s book and articles are an excellent resource to sift through all the madness.
The problem I’m encountering is getting people to listen and read about these ideas. I believe that 95% of people are clueless about what is happening, and most of those would choose to stay uneducated on the matter.
At first glance, the populace would shun these ideas as big government or something from the era of communism– the ghost of McCarthy still breathes down people’s backs.
What I propose is starting the movement from the left through a political action group, because the right is too conservative to make this type of leap. I have just sent a message to truemajority.org to take a look at these ideas to consider advocating them. I’m reluctant to try moveon.org since they are so entrenched in presidential politics–a bit too one-sided. I know True Majority has a huge base that seems to care about our world through action. Does anyone else know of another action group like this?
What are you proposing?
I click on your name and it takes me to http://www.myspace.com/tapwatermusic
HUH?
Why not a national paper money and credit system, with strict oversight by the Department of Treasury, that is based on 100% reserves of gold and/or silver held in deposit by private and/or public institutions, where the monetary unit represents a fixed quantity of these precious metals? The Department of the Treasury would quickly become the most important government office, as it would be charged with maintaining the standard of non-fractional reserve banking. In such a system declining prices would be the sign of a flourishing economy.
This is the perfect solution. Markets will do the problem solving because this is far more efficient. You now get an economy constantly growing at the maximum potential using full employment. It will destroy interest driven economies by pure competition.
See: http://www.naturalmoney.org
The time for talking about a fix is far over. The time to actually fix the problem is NOW.
In general I agree with the idea of having the government issue money as credit. However, I have a couple of questions. If the government is the ultimate source of all money (as it should be) and fractional reserve lending is prohibited (as per the proposed Constitutional amendment), then the government now is now entirely self-funding.
Currently, since the government does not issue money it must use taxes or loans (via sales of treasury bills) to fund operations. If it issues the money directly, it no longer needs taxation or loans to fund operations.
The role of federal taxation can now be fundamentally changed to serve the primary purpose of controlling inflation. Through the use of a national sales tax, such as the FairTax, money can be removed from the system to balance (as much as desired) federal spending. The money taxed out would explicitly be ‘uncreated’ by the government. All government spending would explicitly be newly created money. This is to reinforce the idea of the purposes of the two functions and make clear the operation of the system.
A separate system of taxation can also be created for punitive purposes. This would lay additional taxes on undesirable behaviors such as smoking. (I personally dislike this sort of taxation, but it is a very popular idea, so provisions for it should be made that avoid polluting the monetary control systems).
The advantages of such a sales tax are much discussed, so I won’t mention them, but it is worth considering the implications of the idea that the taxation is not for funding government operations (in a direct sense).
One such implication is that the national sales tax rate (in conjunction with the inflation rate) serves as a very direct indicator of government spending. Whatever the sales tax rate is, every citizen can see on every receipt they receive, exactly how much of their buying power the government is taking away with it’s spending.
In response to Wes Elliot:
Some of the Republican party members are starting to push ideas of monetary reform. Ron Paul has mentioned it and BJ Lawson (currently running in NC) has as well. It’s hard to really call them typical Republicans, but their aiming at closer compliance to what the Constitution says.
On the other hand, I think it was Jefferson that opined that the Constitution belongs to each generation and that new generations should not feel an obligation to strictly follow the rules created by those that came before. We should definitely maintain some respect the rules that seem to be working well for ‘the people’ but for those that are not, no respect is warranted.
The founding fathers’ preferences about monetary policy are probably largely irrelevant today, we should create a system that works for us, with the economy and technology and knowledge that we have today, and encourage our children to do the same.
In response to Dennis:
A 100% reserve gold standard makes it difficult to control the quantity of money in circulation, and also makes it easier for other large entities to influence the value of gold (by manipulating the quantity and movement of gold in world markets).
As the national economy expands a fixed money supply would deflate unless the Treasury obtains more gold from elsewhere. As there is a fixed amount of gold in existence this can cause problems (many large South African gold mines are already experiencing depletion).
Besides all that, a gold standard just doesn’t make any sense. Gold isn’t particularly special, it’s just one of the many different kinds of stuff we can dig up. In the past it’s been useful as a currency because it’s hard to fake, but we have different solutions to that problem now. Today we have the technological sophistication to move on to a monetary system that does not suffer the various problems of a gold standard.
Lovely, all these ideas, but it is all said before.
Please people, forget about politicians, gold standards, Steiners, fluffy philosofies and the lot.
Read Silvio Gesell’s ‘The Natural Economic Order’.
After that, read about the experiment in Worgl, Austria in 1933. This experiment proved Gesell’s theory right.
When Worgl became a success, the Austrian government sent in its troops to kill the experiment and restore power back to the usurers, i.e. banks.
[...] Humanbeingsfirst’s response (edited and revised) to Ellen Brown’s proposal for “RETURN TO THE GREENBACK DOLLAR” based on her book “Web of [...]
I agree with D.J.’s comment. The grass roots solution is to form community currencies and refuse federal reserve notes.
Ellen’s monetary proposal is excellent, but given the fact that the government is completely corrupt and will remain so for the foreseeable future, people have to take action on their own.
Hello Ms. Brown I’ve read your book twice NOW!! I am still astounded and grateful to you and angry at myself ALL at the same time. I’ve lent my copy to many, and have offered to buy a copy for anyone I know who can’t or won’t afford the price. However, I have one question…how do we get the grassroots campaign going in our areas? I believe we have the “perfect storm” for crreation of a new monetary system in the U.S. with outright ownership of the current banks, including the Federal Reserve by federal government and ….elimination of the bogus national debt! Im a little guy…how do I light a match to get this bonfire started in my neighborhood!!
Hi Mike, I’m a little guy too and struggling with the same thing! I’m just finishing another article on the subject. It’s becoming so blatantly obvious that we’ve been had and that there has to be a better way to generate credit that it’s definitely the time in history for “change.”
Dear Ellen, after having read your book several times - and also those of others in the same field – I am quite convinced that this is one of the key challenges facing humanity at the moment. And, although I commend the zeal and conviction of everyone here and in the different organizations I have come across, I am pessimistic.
Maybe the clearest sign of the state of affairs is to observe how people get carried away by the symbolic appeal of Obama, and then don’t pay attention to his appointments or his statements about the way forward.
In my view there is simply no way there will be any real change with Obama or any of the present political elite. The group at the troughs will never let go of their stranglehold voluntarily, especially since the same group dominate the media and congress.
No, I am not into conspiracies, I simply believe in human nature. Real, honest change is one of the hardest things a human can endeavor to get involved with and it will always be easier to sign up for more certain debts for our grandchildren than for uncertain change today. Those in the driver’s seat surely know how to play that card well – and they surely don’t want any change either.
So, in my humble opinion, this is all about more than knowledge or spreading the word, it is about consciousness. How do people notice the issue, withstand the temptation to run for anything temporarily soothing - and how can we get rid of the usurers? How does one start small but aim high?
There seems to be many more questions than answers, but one thing is clear: your work is a tremendously important contribution. Thank You!
Max
There is much in Ellen’s Book…only 30% I read so far and the natural economic order of silvio and worgl experiment. I am about changing the definition and perception of money and having diversity of currency based on shared understanding and vision of social economy that also empowers individual enterprise and creativity. Search for my blog on DEEP Conscious Capitalism at http://www.Bioneers.org
cheers
With respect, the way forward is to work with the present system, and reform it from within. My evolving project of Transfinancial Economics holds the key in which the rich, and more importantly the poor benefit.
When it is better developed it will also be backed up with commissioned, and non-commissioned papers by economists, and other academics. It is expected that it will get the thumbs up because arguably it represents the most powerful way to reform the entire world ever along with Positive Human Politics, or PHP.
Anyway, to return to monetary reform per se a grassroots movement is unlikely to happen or be fully successful (though I hope I could be wrong) in spite of the credit crunch. It would though if there were enough people with will, and vision ofcourse.
However, the biggest problem is peoples apathy, and complacency. This is understandable especially with politicians, and the political process.
This is further enforced by the fact that most of us have become too entangled in the “good things” of our material culture to be bothered in practical terms (ie. activism)about the real issues of world such as poverty, starvation, war, diseases, et cetera.
Ellen Brown has claimed that the main reason why nothing much on the grassroots level has happened to reform the monetary system is simply because not enough people know about it. This ofcourse is naive.
We all know lots of things which are unjust but do we do anything practical about it unless it REALLY DIRECTLY DOES AFFECT US (eg. like being attacked in the street, or our house being destroyed by something like Hurricane Katrina !!!?) The answer is generally no. This is a sad moral inditement of society.
Yet,I sincerely hope (again) I will be proved wrong with the above. Fingers crossed!
Me again!
I have had a much more serious, and closer look at the monetary proposal. There are a number of points to be raised.
i) It is arguably important for people to fully realize that money should be seen in the main as electronic transmissions from one bank account to another.
ii) To what extent is money to be created debt-free, and the rest interest free as a loan? How do charities fit into this, and other kinds of NGOs.
iii) Why should interest on loans have to be used to replace taxation, and to what extent would it cover it? Presumably, the rest of the money is debt-free but transmitted in a controlled,and measured manner…??
I may well have some other questions but I am pressed for time………………..
Apologies for this extra post but I wish to continue with the the above and if Ellen Brown has time she might answer some, or all of the questions.
Here goes…………………………….
iv) No key arguments at least from the Monetary Proposal (as presented by Ellen Brown )seen so far gives the ethical basis on which a Non-Taxation would exist. My old kheper essay (to be removed soon)on TFE gives a short listing of such arguments but they do not appear on the p2pfoundation as yet. I must get that done soon..
v) Though it is undoubted that a certain amount of debt-free money can be created in a measured way without fear of serious inflation no government in the world would accept it. The main reason being is that there are no real DIRECT ELECTRONIC CONTROLS (replacing interest rates, and taxes)to deal with possible serious inflation levels (unlike TFE),
Banks, and/or other similiar organizations would instantly track, and monitor most of the transactions of the economy electronically, and if necessary (if at all in many cases) be able to use an array of one, or more technique to deal with any kind ofinflationary problem.
vi) Again, like the ethical basis of Non-Taxation there are no real arguments as far as I can see for the moral case for the creation, and tranmission of new non-repayable money (ie.debt-free ofcourse to use the Social Credit term). This appears in the p2pfoundation entry on TFE.
vii) For something like the above Monetary Proposal to be accepted it needs help from respected experts before it can gain credibility. This is ofcourse true of TFE though it was actually accepted at one point as a paper for a certain journal. This is very important to grasp….
Moreover, it has to be accepted not just by governments, but also by the rich notably the corporations. There is little point trying to fight them . If you can t beat them join BUT in a way in which you would have influence as to how the Monetary Proposal would be implemented in practical terms with the aid of concerned citizens,policy makers, business leaders, economists, etc.
In TFE banks can still make money even with so-called debt-free money (ie. a special charge on its electronic creation). Moreover, they could be paid for the administration of the electronic inflation controls, and used if, and when necessary at all. No doubt other sources of revenue would emerge to satisfy their lust for super-normal profits…
viii) There is ofcourse an elite of the super-rich. Yet, it is probably dumb beyond belief to think that they are are all involved in some kind of covert global conspiracy for world domination. Admitedly, some may entertain such notions. Yet, there will always be those no matter how rich who would be keen on something like TFE because it would lead to greater global justice but at the same time allow for the time being for them to flourish financially in a tax, and interest free world. In other words, a deal which benefits the rich, the governments, the ngos, and the public in general.
Thus, TFE as far as it goes not waste time trying to get rid of the banking system but rather reform it in a way in which the rich, AND the poor would actually benefit. Thus, with the help of subsidies, interest free loans, and commercial grants the former would be INCENTIVISED as never before to the help the latter because the PROFIT MOTIVE is kept in place until a time when everything is largely automated technologically. Then money itself could become redundant hence leading towards a more just, and hi-tech “utopian” world if the right policies are forwarded.
Hopefully, by then society would have EVOLVED via mass education to no longer being obsessed with base profit motive, and money making via productivity. In other words, a money-less world would emerge.
This process of evolution from capitalism to a more saner world largely free from greed, and overproduction will not happen overnight but it must happen one day. The Venus Project as presented by Jacque Fresco is a good example of what could be in the future. Yet, like virtually everyone else he has no idea HOW this transitional, or evolutionary process would work. TFE holds that key.
PS
Apologies for any possible errors in the above email. I tend to write at speed, and time is not always on ones sides as there are many other matters to attend to.
I’ve decided to run for governor on the Greenback Labor Party in 2010. My one and only plank will be the creation and circulation of Michigan currency to combat the 9% (at least) unemployment in our unhappy state. I’m trying to decide whether the new money should be called
‘Sparties’ or ‘Wolverines’, or something else. Your input would be greatly appreciated.
Thank you,
Warren Raftshol
Ellen,
I have a legal question - does article 1, section 10 of the US Constitution
which says “No state shall . . . emit bills of credit” prohibit states from issuing their own scrip currency? On the face of it, I would say that it does but I seem to recall from somewhere that ‘tax coupons’ , i.e. scrip accepted for state taxes was not prohibited. However when I search for ‘tax coupons’ on Versuslaw, nothing comes up. what is your opinion?
Hi, it’s been interpreted to mean that, but then that section also says no state shall pay any debts in anything but gold coin, which obviously never happens. It needs to be rewritten for the 21st century. Best, Ellen
Xcredit Manifesto
Because there is a major California state budget balancing problem, a US financial crisis, and great computer technology available.
Now is the time for this:
California issuing tax credits to third parties for at least partial payment for services rendered to the state.
These tax credits (I’ll call them xcredits) issued by the state tax bank (xbank) to the public for services to the state can be used by the public to pay California taxes. They don’t expire. An xcredit’s worth in dollars as both a state service payment and as a tax credit is continually adjusted by the xbank to be worth a constant fraction of a representative basket of goods. The xbank will at any time redeem them for a dollar amount that is less than what they would be worth as a tax credit. The xbank can change this redemption value at any time. This discount would be steep enough to encourage using xcredits as tax credits.
When xcredits are applied as tax credits the xbank can have them worth more than the value than was initially received by the state for them. This premium adjustment can be made at any time by the xbank and is not tied to the xcredit itself. The premium is guaranteed to always be positive or zero. This means there is always a positive tax break in doing business with the state in xcredits. This gives suppliers to the state an incentive to receive them as payment for services. This premium keeps the aftermarket value of xcredits high for they are always worth the same or more to taxpayers as the original value of their services to the state.
All trading in xcredits is electronic and online through the xbank. Every xcredit always has an owner–either a taxpayer or the state. Every taxpayer has an xcredit account and can trade xcredits with other taxpayers. All transactions of xcredits must go through the xbank. The xbank controls the transfer of the ownership of each xcredit. When a party becomes the new owner of an xcredit it must pay a small percentage as an xcredit transfer fee.
The xbank can create xcredits to lend. These loans can be for high risk, under serviced social needs. When an xcredit is loaned ownership is transferred. There is never any question of who owns an xcredit. Third party contracting houses (ie banks) can handle collateral issues for xbank xcredit loans. Also banks can buy xcredits and then lend them. They have the xbank transfer the xcredit ownership when they are loaned. This way banks can never loan more xcredits than they own nor can they create xcredits as they can create dollars via fractional reserve banking. The xbank does not lend dollars to the public.
The xbank also maintains an aftermarket in exchanging xcredits and dollars. Taxpayers can trade dollars and xcredits with each other through the xbank. The xcredit-dollar exchange rate is set by the market to a value that can range from the xcredit redemption dollar value to the premium tax value of the xcredit or even higher. The xbank sells or buys xcredits on the xcredit-dollar aftermarket to maintain the stability of the xcredit system.
There can be no run on the xbank because xcredits are always in the owner’s name and available to him. The closest thing to a run would be a mass demand for xcredit conversion to dollars but this can be controlled by the xbank setting the conversion rate appropriately.
Xcredits can only be issued and withdrawn from the system by the xbank.
There is no debt created or interest owed when the xbank creates xcredits.
Xcredits become a preferred exchange medium and value store (state guaranteed zero inflation and deflation). Merchants will offer to receive customer payments in xcredits
The xbank can even issue free xcredits to all state taxpayers to energize the economy.
Speculation in xcredits is controlled because the state controls the circulation volume of these xcredits through xcredit redemtion value, taxation, state spending of xcredits, free xcredit distribution to taxpayers, xcredit loans, and dealing in the open xcredit-dollar market. It can adjust the xcredit transaction volume for a maximum vibrant self sustaining debt free, deflation free, and inflation free economy.
Every taxpayer should get an equal amount of xcredits when there is a free distribution to taxpayers.
This system must be publicly transparent and state controlled.
xcreditbank.org
Where has all the money gone?
The American dollar system as it exists now is a convoluted system. It need not be and should not be. Following are some simplified and general statements of the system.
Essentially all dollars in circulation are book money–accounts in banks (credit). These dollars were created by loans. There is only as much credit in the system as debt. Banks can lend 9 times more money then they have deposits. Where did the initial money come from? The Federal Reserve Bank is a privileged private bank that can lend money to the Federal Government without having to have any reserves to back the loan ( actually the Federal Government gives the Federal Reserve a “federal note” as a reserve which is the same thing as saying it is legal for the Federal Reserve to loan dollars to the US government without any dollar reserve requirement). In this way the Federal Government puts “reserves” ( government securities) in the system which are then leveraged by the banks to create more loans and thus more credit. Note here that the US gov must pay interest on the credit created for it by the Federal Reserve, which doesn’t have to have reserves at all. Why can’t the government create its own credit and owe the money to itself? If it owes it to itself it won’t have to pay it back or pay any interest on it–credit without debt.
The money (loan credit) in the system today depends on the federal debt. The no reserve requirement for the Federal Reserve and the 9:1 reserve requirement for normal banks gives banks the power to leverage this debt to create more loan credit. There are three major problems with this bank created money. First this credit is a loan which must be paid back with interest. The loan credit money supply must continually expand to enable the pay back of the additional interest. The second problem is when banks have non performing loans their reserve is cut so their loaning power is cut by up to 9 times the amount of non performing loans. Banks leverage money into the system and out of the system. Right now they are leveraging money out of the system. Third: Bank deposits are not safe. Witness the current flight into treasuries (0% interest paid as this is written). The whole idea of banks being able to lend deposits is absurd and immoral. Banks should not be allowed to lend deposits. They should only be allowed to lend their own capital and thus no need for deposit reserves because the deposits are always there. This is 100% reserve banking–no lending of deposits. If the reserve requirement was 100% banks would not be able to expand and decrease the credit in the system. This rightfully would be the governments job. The government could let any bank fail because by law they always have 100% reserves for its depositors only the bank owners lose their investment in bank capital.
To solve the “tight” money crisis and bank insolvency the government should nationalize the banks–especially the Federal Reserve, step the reserve ratio towards 100% and inject non loan credit into the system by crediting government accounts in return for “federal reserve notes”–credit without debt. Eventually all the credit in the “dollar” banking system should equal the amount of “federal reserve notes” created and the federal debt should be liquidated with government credit from “federal reserve notes”. In this way credit injection and withdrawal is all done by the government and does not involve debt or interest. All credit in the system will have been created without debt. A loan will not create credit. The credit must already exist in order for it to be loaned.
The Federal Debt is unmanageable and the banking system is based on an out of control convoluted leveraging system. Lets fix it!
http://xcreditbank.org
A few correction to my last article “Where has all the money gone?
Banks can lend 10 times more money then they have deposits.
The reserve ratio is $1 deposit to $10 lent. or 10%
A reserve ratio of $1deposit to $1 lent is 100%
A reserve ratio of $1 deposit to $0 lent is infinity
As I recommend no lending of deposits infinity is the reserve ratio I’m looking for not 100%
My use of Federal reserve notes is confusing and should be ignored.
Updated article is at http://xcreditbank.org
We need a money and tax policy wiki. It would be addressable by entry. Entries would be as brief and readable as possible. The purpose would be to establish a map of policy alternatives that could attract a mass audience of supporters and a very large body of writers and editors.
Yes it would aim to use modern greenbacks, government spending and lending of money into circulation, functional finance to end income taxes by using supply and savings in indexed accounts to prevent unaffordable inflation, prevention of deflation and depression, etc.
Great idea! I wonder how you set that up though.
Hi Ellen,
Re: John Gelles suggestion -
go to http://debtfreemoney.wikispaces.com
then join
then start editting
Ellen,
Web of Debt is mentioned at
http://www.change.org/ideas/view/convert_to_debt-free_money
which is an Obama page for supporters to vote on the most important issues. I didn’t know if you knew about it.
No, didn’t notice that. Thanks!
Dear Ellen,
I have long known Zarlenga (American Monetary Institute) and Searle (Trans-financial Economics) as people, like myself, who dreamt of logical money systems and how to get from here to there.
The money system wiki in my mind would be a wiki that had enough writers and readers to be known — at least widely enough to get a shot at Charley Rose and the PBS News Hour.
The chance of growing such a wiki is very low.
However, there is in progress now what may be a better approach:
1. Obama has to figure how to pay many trillions out to get many more trillions in circulation to beat the depression and deflations now winning the war against the human race.
2. People like Jeffrey Sachs have his attention and Sachs’ targets all over the world will get a lot of spending going in the immediate future.
3. If we could create a series of consensus agendas for submission to Jeffrey Sachs and other open minded economists Like Krugman and James Galbraith, we might make popular some of our ideas on modern versions of greenbacks; inflation protected savings; government financed new industries (in finance, energy, education, health care, etc.,) similar to the aluminum, synthetic rubber, airplane, ship and weapons industries of the mid 1940’s.
4. In all events we would need to bleed writers away from promoting sale of their own books, writing on blogs and forums that did not build agendas. How do you build an agenda? You do not write to a medium that cannot easily hold still for endless edit of the agenda.
5. Two systems I know of will hold still: one is Amazon’s Economic Forum– you can edit any page or paragraph an infinite number of times. Another is wikispaces.com. You can do the same (differently) on it.. Both are free to readers and writers. If two or three people would create a brief readable agenda (or several) they might get others to join in.
Richard Clark is another very popular money reformer who may be of help relative to this discussion.
http://www.globalresearch.ca/index.php?context=va&aid=6401
The great evils of our present banking system (in order to pay of f interest on the loans from the money-creating bank, more loans must be made. As the money supply increases through loans to production, more loans must be made to repay the interest, and so on, forever until the system collapses) were recognized long ago, both the problem and a solution.
In difficult economic times, those who control the resources end up accumulating all the wealth. Look at what happened to the Egyptians during the famine when Joseph was in charge - the Pharaoh ended up owning all of the citizens as slaves.
This is where we are headed unless we change.
The original constitution framers referred often to the Old Testament models. One that was ignored was in Deut 15 - all debts were to be canceled every 7 years. And in Leviticus 25: After 50 years land that was sold was to be returned to the family. Also, in the same chapter, interest was not to be charged to fellow citizens on loans.
This may not work in our day, but the principle remains: charging interest creates a concentration of wealth in those who have been given the authority to lend.
Let’s work together to identify the problem and propose the solution to our elected officials who must answer to us, the citizens. They govern by consent.
My thanks to Ellen Brown for her work,
regards,
Paul
Thanks again Ellen for this site, going into the the 11th month of ignoring the Banks demand for mortgage pmts, not to mention 6 months of credit fraud/cards too, I see there is just too much happening in this country to even be addressed with any alacrity. Like one of your bloggers said, apathy,greed, and ignorance still reign, today. We all KNOW WHATS COMING! Pray for the poor souls who are still playing the game. 2009 will be quite an eye-opener for the rest of America. Too bad their fear has overtaken their faith, let alone some form of curiosity, or god forbid education. I really never realized I lived in such an ignorant country. God Bless You All, and TRY to have a Merry Christmas.
[...] While Kunstler is talking about energy needs, his ideas can be applied to financial realms, where “wishing on a star” and “something for nothing” are cornerstones on Wall Street and on Main Street, where bank “credit” is created out of air to become money. See Ellen Brown http://webofdebt.wordpress.com/monetary-proposal/ [...]
The major flaw in the private banking system was that the banks created the principal but not the interest necessary to pay back their loans, so more money was always owed back than was put into the money supply, requiring more loans to be taken out to cover the interest, spiraling the people into debt.
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This is the “debt virus” fallacy. The fact is that banks spend money into circulation when they pay expenses and dividends, which becomes available to pay interest back to the banks. Money is created when banks credit transaction balances for any reason whatever. We call it money because most transactions are accomplished by the transfer of bank deposit balances, through checks or electronically.
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Benjamin Franklin and others maintained that the chief reason for the American Revolution was that Parliament forbade the colonies from issuing their own money.
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I don’t think you’ll find this claim in any source document dated before the second half of the 19th century, when the Greenbacker propaganda machine was in full swing. Usually you’ll see a bogus “quotation” attributed to Benjamin Franklin. But Franklin was a member of the Committee of Five, which wrote the Declaration of Independence. It’s not in the Declaration of Independence.
Brock
That’s the reason I’ve given multiple sources for the same idea in my book. Historians of the period also said that was the true reason for the revolution. I know that many quotes from famous people are apocryphal, and they’re difficult to track down. Brock, could you keep the discussion of similar things on one blog page please? It’s too confusing jumping around. Thanks.
Ellen Brown, on January 13th, 2009 at 6:21 pm Said:
That’s the reason I’ve given multiple sources for the same idea in my book. Historians of the period also said that was the true reason for the revolution. I know that many quotes from famous people are apocryphal, and they’re difficult to track down. Brock, could you keep the discussion of similar things on one blog page please? It’s too confusing jumping around. Thanks.
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What historian or historians? Please cite.
Brock
Hello Helen:
I have been mulling a lot recently about the design of a sustainable monetary system and came across your nice web site. I’d like to exchange ideas and I find your initiative to start a wiki page very timely for the purpose of having a forum.
I understand your objection to positive interest rates, but I think the problem of positive rates really comes about as this is intertwined with fractional reserve banking and our current monetary order. If we change that at the root, positive interest rates reflecting the convenience yield of holding capital could become natural and harmless.
Up until now there have been three main money-creation mechanisms [deposit-loans, interbank lending and securitizations] and they all were implicit and not very transparent, i.e. they took place in private banks. As the system broke down during the crisis, it is a positive development that central banks have been generating money explicitely by acts of explicit money creation. This change in monetary policy that already occured is an opportunity as it could now be sistematized offering a natural path to a full reserve system.
In brief, I think an ideal full-reserve system should have the following features:
(i) Deposits should be held only for the purpose of custody and not reinvested. This is a fundamental principal of banking law already present in the Codex Romanus on which European continental legal systems are still based. Except that the BIS was then delegated what is in essence legislative authority in banking to overrule sovereign law. Reverting back to the Codex Romanus would however be a viable path in most countries. Once established in law that deposits can be held only for custody, the fractional reserve system is broken.
(ii) Any monetary reform ought to come together with a fiscal reform. In fact the two are very much tied up. In the current system, fiscal policy is meant to favor debt instruments over equity investments. I would just abolish both direct and indirect taxation altogether and eliminate this overhead from the economy. I would then hardwire the taxation system into the monetary system explicitely. Consider having two currencies: a domestic and a convertible currency. Suppose that by law all domestic financial transactions must be executed in domestic currency. Consider extract a substantial daily tax on all deposits in domestic currency, say 15% per year. Also consider applying a substantial tax of say 30% for conversion of domestic dollars to foreign dollars. Convertible dollars instead would be convertible duty-free to domestic dollars. The two tax rates above would be the only two in existence and would be adjusted to control the money supply. Capital taxation would function as a negative interest rate on domestic deposits. By raising these two taxes, one could directly control inflation domestically by systematically wiping off internal currency. In order to save, it will be necessary to pay a substantial one-off conversion tax. The convertible dollar would be the only currency directly convertible into foreign currencies and precious metals.
(iii) Money creation should be carried out explicitely by a government controlled monetary authority. Money creation can be targeted at funding government programs and at financing productive activities in the private sector. Only domestic dollars could be created, not convertible dollars.
In a system where money is created only to fund government expenses, the government would be far too powerful. Instead I believe governments should have a very limited mandate and opportunities should be offered in the private sector. I would not create money for the purpose of issuing credit to finance private consumption, but only to finance productive activities or real estate investments which have physical collateral that can be posted against it. Also, each and every act of money creation should be made public on the internet and there should be government policies establishing how much money to create across the various industry sectors and asset classes.
In this system, only domestic dollars would be created explicitely, while convertible dollars would come into existence as a consequence of conversion. On the other hand, in order to be spent domestically, convertible dollars will have to be converted to domestic dollars. A natural balance will thus be established among the two currencies. The money supply in convertible dollars could be controlled indirectly by setting the conversion tax rate.
regards, Irene
Ellen,
As much as I like your Greenback proposal, I like depreciating scrip even better. I just came across an article written by Shann Turnbull, an Australian, who says
Enactment of the Bankhead-Pettengill Bill of February 1933 to issue one Trillion of “Stamp Script” legal tender would make the Federal Reserve System largely irrelevant.
depreciating scrip
As his article discusses, depreciating scrip is only useful in the real economy. It can’t be invested in any bankster ‘financial instruments’ which starve the real economy for liquidity.
Silvio Gesell worked out the details of sound money over 100 years ago.:
http://en.wikipedia.org/wiki/The_Natural_Economic_Order
http://www.appropriate-economics.org/ebooks/neo/gesell.htm
The implementation of such a system may be difficult with a national currency. The current system could, however, be easily side stepped if local councils were to issue money along the lines of the Worgl experiment:
http://www.globalideasbank.org/site/bank/idea.php?ideaId=904