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Monetary Reform!

Started by Geolibertarian, Dec 07, 2013, 10:01:57 AM

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Geolibertarian

"Having behind us the producing masses of this nation and the world, supported by the commercial interests, the laboring interests and the toilers everywhere, we will answer their demand for a gold standard by saying to them: You shall not press down upon the brow of labor this crown of thorns, you shall not crucify mankind upon a cross of gold." -- http://www.youtube.com/watch?v=DFKSBF6d9O4

"Ron Paul has been the leading champion of sound money in the Congress. Here he explains why sound money means a new gold standard." -- http://mises.org/resources/3150

In 1929 the M2 money supply was approximately $46.6 billion; four years later it was roughly $32.2 billion. This 31% decrease was all it took to bring on a depression so severe and so devastating that it was called the "Great Depression."

Thus, when Austrian Schoolers insist on instituting a new gold standard under the euphemistic guise of "sound money," we would be well advised to consider what effect this would have on the M2 money supply, and hence on the economy -- and hence on our very lives.

Let's assume that a 100% reserve gold-based money system is instituted (since that's what Austrian School icon Murray Rothbard advocated); and -- since gold standard apologists are fond of waxing nostalgic about pre-1913 America (particularly the Gilded Age) -- let's also assume that, in accordance with the Gold Standard Act of 1900, each paper dollar is made "redeemable" in 23.22 grains of gold.

To determine what effect this will have on the M2 money supply -- which is $8.9137 trillion at present -- let's further assume that the U.S. has all the gold that's ever been mined (even though it doesn't) -- 165,000 metric tonnes, or 2.546336 trillion grains, according to the World Gold Council. If we divide that figure by 23.22 grains, we have a maximum M2 money supply of $109.66 billion.

That's a minimum 98.8% decrease!

This would make the 1/3 money supply contraction that occurred between 1929-1933 -- and the magnitude of the resultant depression -- both look miniscule by comparison. The effect of such a severe contraction would be beyond devastating -- it would be GENOCIDAL!

Realizing this, what if we instead made each paper dollar redeemable in merely two grains of gold? The result would be a maximum money supply of $1.273168 trillion, and hence a M2 money supply contraction of at least 85.7%, which, although not quite as bad as the previous figure (98.8%), is still far worse than the contraction that caused the Great Depression.

And if all this wasn't bad enough, there's also the issue of how the current trade deficit would (under the system in question) cause whatever gold we had to be quickly drained from our economy, thereby contracting the money supply even further.

As Byron Dale explains it here:

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"Ok, so now we get that, which makes the total money supply for the United States roughly $1.6 trillion. Ok, if the United States has a trade deficit, like we do right now, of $40.4 billion per month (and it goes up and down a little), it would only take 3.29 years for the total money supply -- or all the gold -- to leave the country just to pay for the trade deficit. And they're not bringing that money back -- or they're not buying things from us -- or we wouldn't have that trade deficit. They're bringing this stuff over in big ships, and then the ships are going back empty. So the money flows over and doesn't comes back, that's why you have a trade deficit. Ok, so now, if we just went to that, with all the gold in the world, in a little over 3 1/4 years we wouldn't have any gold in the country left -- and no money.

"Now what are we going to do?

"Now, if you borrow the gold back at interest, so you can have it back in your country, you've turned the whole thing into a debt money system again."

[Continued...]

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This is why deflation-worshipping Austrian Schoolers never want to talk about specifics. They figure that, if they simply parrot the euphemism "sound money" over and over again, everyone will just blindly assume that it's a good idea, and consequently refrain from determining for themselves what the actual effect of such a system would be.

Conclusion? Although Ron Paul is by far the most honorable politician in Washington, and although he's right on many issues, he is (with all due respect) sadly wrong on the question of what we should replace our current debt-based money system with.

This is why the "end the Fed" mantra is so misleading. It causes people to falsely assume that, if we simply "end" the Federal Reserve System, a much better system will magically and automatically take its place. Yet as we now see, that's not necessarily the case. Not by a long shot.

The solution? Instead of merely "ending" the Fed, we must replace it with the debt-free money system called for on page one of this thread -- a system that avoids both currency-destroying, compound interest-driven hyperinflation AND economy-destroying deflation.

Anything short of this will prove to be, at best, the equivalent of rearranging deck chairs on the Titanic, and, at worst, the equivalent of burning down the house to roast the pig.

Must we find that out the hard way?
"Abolish all taxation save that upon land values." -- Henry George

http://monetary.org
http://schalkenbach.org

Geolibertarian

There are undoubtedly many who believe that the preemptive solution to the deflationary nightmare referred to in the previous post is to institute a gold and silver backing of the dollar.

Is this belief based on an actual study of the matter, or is it the mere product of wishful thinking? Let's find out.

According to the Silver Institute, the total supply of silver is 1,056.8 million ounces, or 507.263 billion grains.

If we add that to the total supply of gold -- 2,546.336 billion grains at present -- we have a combined gold-silver supply of 3,053.599 billion grains (or just over 3 trillion grains).

Now, even though it took a lot more silver (371.25 grains) to make a dollar under the 1792 Coinage Act than it did gold (24.75 grains), let's assume that the newly-instituted gold/silver standard makes each paper dollar "redeemable" in either one grain of gold or one grain of silver.

Note: To understand how small a "grain" is, in the following pic the small golden disk close to the 5cm marker is a piece of pure gold weighing one troy grain:



With that sort of "backing" under a 100% reserve system, the maximum M2 money supply is $3.053599 trillion, which (surprise!) is a mere 34.26 percent of the current M2 money supply ($8.9137 trillion), and hence a minimum decrease of 65.74 percent -- more than twice the money supply contraction that caused the Great Depression. And that's assuming we have the total supply of gold and silver (we don't) and that we don't have a trade deficit that would drain however much gold and silver we actually do have out of the country within a few years (we do).

Do all of you precious metal-obsessed conservatives and libertarians finally get it now?

The very thing that makes gold and silver a great private investment is what makes them a disastrous thing on which to base an entire nation's money supply.
"Abolish all taxation save that upon land values." -- Henry George

http://monetary.org
http://schalkenbach.org

Geolibertarian

Quote from: Geolibertarian on Dec 07, 2013, 10:40:40 AMTo determine what effect this will have on the M2 money supply -- which is $8.9137 trillion at present -- let's further assume that the U.S. has all the gold that's ever been mined (even though it doesn't) -- 165,000 metric tonnes, or 2.546336 trillion grains, according to the World Gold Council. 

From http://www.prisonplanet.com/central-banks-purchase-127-tons-of-gold-in-q1.html:

"Abolish all taxation save that upon land values." -- Henry George

http://monetary.org
http://schalkenbach.org

Geolibertarian

http://www.youtube.com/watch?v=Bi2gOhvpOHg (The Money Masters – part 9 of 22)
http://www.youtube.com/watch?v=Pyaj30n8kZY (The Money Masters – part 10 of 22)

The following excerpts from The Money Masters can be viewed in the two youtube clips above.

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A truly incredible editorial in the London Times explained the central bankers' attitude towards Lincoln's Greenbacks:

    "If this mischievous financial policy, which has its origin in North America, shall become endurated down to a fixture, then that Government will furnish its own money without cost. It will pay off debts and be without debt. It will have all the money necessary to carry on its commerce. It will become prosperous without precedent in the history of the world. The brains, and wealth of all countries will go to North America. That country must be destroyed or it will destroy every monarchy on the globe." -- Times of London

[...]

Allegations that international bankers were responsible for Lincoln's assassination surfaced in Canada 70 years later in 1934. Gerald G. McGeer, a popular and well-respected Canadian attorney, revealed this stunning charge in a five hour speech before the Canadian House of Commons blasting Canada's debt-based money system. Remember: it was 1934, the height of the Great Depression, which was ravaging Canada as well. McGeer had obtained evidence -- deleted from the public record -- provided to him by Secret Service agents at the trial of John Wilks Booth, after Booth's death. McGeer said it showed that Booth was a mercenary working for the international bankers. According to an article in the Vancouver Sun of May 2, 1934:

    "Abraham Lincoln, the martyred Emancipator of the Slaves, was assassinated through the machinations of a group representative of the international bankers who feared the United States President's national credit ambitions....

    "'There was only one group in the world at that time who...had any reason to desire the death of Lincoln.

    "'They were the men opposed to his national currency program, and who had fought him throughout the whole of the Civil War on his policy of greenback currency.'"

Interestingly, McGeer claimed that Lincoln was assassinated not only because international bankers wanted to reestablish a central bank in America, but because they also wanted to base America's currency on gold -- gold they controlled. In other words: put America on a gold standard. Lincoln had done just the opposite by issuing U.S. notes -- Greenbacks -- which were based purely on the good faith and credit of the United States. The article quoted McGeer as saying:

    "'They were the men interested in the establishment of the Gold Standard...and the right of the bankers to manage the currency and credit of every nation in the world.

    "'With Lincoln out of the way they were able to proceed with that plan, and did proceed with it in the United States. Within eight years after Lincoln's assassination silver was demonetized and the Gold Standard money system set up in the United States.'"

Not since Lincoln has the U.S. issued debt-free United States notes.

[...]

With Lincoln out of the way, the money changers' next objective was to gain complete control over America's money. This was no easy task. With the opening of the American west, silver had been discovered in huge quantities. On top of that, Lincoln's Greenbacks were generally popular. Despite the European central bankers' deliberate attacks on Greenbacks, they continued to circulate in the United States -- in fact until a few years ago. According to historian W. Cleon Skousen:

    "Right after the Civil War there was considerable talk about reviving Lincoln's brief experiment with the Constitutional monetary system. Had not the European money-trust intervened, it would have no doubt become an established institution." -- W. Cleon Skousen

It is clear that the concept of America printing her own debt-free money sent shock waves throughout the European central banking elite. They watched with horror as Americans clamored for more Greenbacks. They may have killed Lincoln, but support for his monetary ideas grew.

On April 12, 1866, nearly one year to the day of Lincoln's assassination, Congress went to work at the bidding of the European central banking interests. It passed the Contraction Act, authorizing the Secretary of the Treasury to begin to retire some of the Greenbacks in circulation, and thereby contract the money supply. Authors Theodore R. Thoren and Richard F. Warner explained the results of the money contraction in their classic book on the subject, The Truth In Money Book:

    "The hard times which occurred after the Civil War could have been avoided if the Greenback legislation had continued as President Lincoln had intended. Instead, there were a series of money panics -- what we call 'recessions' -- which put pressure on Congress to enact legislation to place the banking system under centralized control. Eventually, the Federal Reserve Act was passed on December 23, 1913."

In other words, the money changers wanted two things: (1) the reinstitution of a central bank under their exclusive control, and (2) an American currency backed by gold. Their strategy was two-fold.

First of all, cause a series of panics to try to convince the American people that only centralized control of the money supply could provide economic stability.

And secondly, remove so much money from the system, that most Americans would be so desperately poor that they either wouldn't care or would be too weak to oppose the bankers.

In 1866, there was $1.8 billion in currency in circulation in the United States -- about $50.46 per capita. In 1867 alone, half a billion dollars...was removed from the U.S. money supply. Ten years later, in 1876, America's money supply was reduced to only $600 million. In other words, 2/3 of America's money had been called in by the bankers. Only $14.60 per capita remained in circulation. Ten years later [in 1886], the money supply had been reduced to only $400 million, even though the population had boomed. The result was that only $6.67 per capita remained in circulation -- a 760% loss in buying power over 20 years.

Today, economists try to sell the idea that recessions and depressions are a natural part of something they call the "business cycle." The truth is, our money supply is manipulated now just as it was before and after the Civil War.

How did this happen? How did money become so scarce? Simple. Bank loans were called in, and no new ones were given. In addition, silver coins were melted down. In 1872, a man named Ernest Seyd was given a hundred thousand pounds -- about $500 thousand -- by the Bank of England and sent to America to bribe necessary Congressmen to get silver demonetized. He was told that if that was not sufficient, to draw an additional hundred thousand pounds, or as much more as was necessary.

The next year Congress passed the Coinage Act of 1873, and the minting of silver dollars abruptly stopped. In fact, Representative Samuel Hooper, who introduced the bill in the House, acknowledged that Mr. Seyd actually drafted the legislation. But it gets even worse than that. In 1874, Seyd himself admitted who was behind the scheme:

    "I went to America in the winter of 1872-73, authorized to secure, if I could, the passage of a bill demonetizing silver. It was in the interest of those I represented -- the governors of the Bank of England -- to have it done. By 1873, gold coins were the only form of coin money." -- Ernest Seyd

But the contest over control of America's money was not yet over. Only three years later, in 1876, with one-third of America's workforce unemployed, the population was growing restless. People were clamoring for a return to the Greenback money system of President Lincoln, or a return to silver money -- anything that would make money more plentiful. That year, Congress created the United States Silver Commission to study the problem. Their report clearly blamed the monetary contraction on the national bankers. The report is interesting, because it compares the deliberate money contraction by the national bankers after the Civil War to the fall of the Roman Empire:

    "The disaster of the Dark Ages was caused by decreasing money and falling prices.... Without money, civilization could not have had a beginning, and with a diminishing supply, it must languish and unless relieved, finally perish.

    "At the Christian era the metallic money of the Roman Empire amounted to $1,800,000,000. By the end of the Fifteenth century it had shrunk to less than $200,000,000.... History records no other such disastrous transition as that from the Roman Empire to the Dark Ages." -- United States Silver Commission

Despite this report by the Silver Commission, Congress took no action. The next year, 1877, riots broke out from Pittsburgh to Chicago. The torches of starving vandals lit up the sky. The bankers huddled to decide what to do. They decided to hang on. Now that they were back in control (to a certain extent), they were not about to give it up.

At the meeting of the American Bankers Association that year, they urged their membership to do everything in their power to put down the notion of a return to Greenbacks. The ABA secretary, James Buel, authored a letter to the members which blatantly called on the banks to subvert not only Congress but the press:

    "It is advisable to do all in your power to sustain such prominent daily and weekly newspapers, especially the Agricultural and Religious Press, as will oppose the Greenback issue of paper money and that you will also withhold patronage from all applicants who are not willing to oppose the government issue of money.

    "....To repeal the Act creating bank notes, or to restore to circulation the government issue of money will be to provide the people with money and will therefore seriously affect our individual profits as bankers and lenders.

    "See your Congressman at once and engage him to support our interests that we may control legislation." -- James Buel, American Bankers Association

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Keep the above in mind as you read the following goldbug propaganda piece:

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http://www.thegoldstandardnow.org/key-blogs/235-not-dollar-depreciation-gold-standard

Not Dollar Depreciation but the Gold Standard

by Christopher K. Potter
May 03, 2011

Recently a New York Times article screamed "Prices Surge as Investors Rush to Safety of Gold."  In reality there was no rush and the gold price did not surge.  Gold was up less than 0.5% on the day in question and is up only 6% in 2011, less than the increase in the S&P 500.  For 10 years, the gold price has edged quietly higher, rarely moving more than 1% up or down on any given day.  Along the way, the media argued that each new high was driven by panicked investors who were fleeing from equities.  I would argue just the opposite.  Individuals and institutions, reacting rationally to expansionary monetary policy, are merely exchanging cash balances for gold. This has little to do with geopolitical turmoil or perceived troubles in the economy and stock market.  It is a currency trade, pure and simple.

The basic mechanics of monetary policy and money creation remain a mystery to most people.  Few are aware that most new treasury debt is purchased by the Federal Reserve with brand new dollars; that China buys large quantities of dollars every day with newly minted Yuan or that Japan created 39 trillion ($481 billion) new Yen in the two weeks following the earthquake.  As James Grant points out in his March 25th Interest Rate Observer, "when the materialization of nearly a half-trillion dollars in a fortnight's time stops astounding reporters, it's past time for a monetary reappraisal."  Perhaps reporters are more unaware than unimpressed.  With everyone printing at once, the value of one currency relative to another (the exchange rate) never reflects the magnitude of the new supply of money.  All currencies decline together while appearing to not decline at all.  While this provides ample cover for our central bankers to perpetuate the print-off, it results in inflation, progressively severe boom and bust cycles, perpetual deficits and an increasing inequality of wealth.

Under a gold standard, in which paper money is convertible into a fixed weight of gold, the threat of dollar to gold conversion compels monetary restraint on all central banks.  In our present unreserved monetary system, that threat has become reality and the qualities that define our money as sound have been transferred, at the margin, from paper to gold.  We have seen the creation of gold denominated shares by hedge fund manager John Paulson and others; the passage of a bill in the Utah legislature allowing gold and silver coins to be used as legal tender; and the conversion of cash balances into gold bullion by major investment and endowment funds.  Even the manufacturers of our money have been exchanging paper for gold - witness the buying of bullion by the central banks of India, Bangladesh, Sri Lanka, China and Thailand over the last year.

Economic stimulation through currency depreciation is the unwritten, unspoken policy of today's monetary leaders.  While our Federal Reserve receives a disproportionate amount of the blame for this dangerous game, all central banks are active participants.  In response, gold is predictably performing its role as the only supply constrained currency – its price is adjusting upward.  Despite the headlines, it has done so in an orderly, methodical way for over a decade.  Other commodity prices have risen as well, but only the gold price has risen with a consistently tight correlation to the growth in world money.  This has won converts to the idea that gold must be the centerpiece of monetary reform.   It has also shortened the road forward to a modernized gold standard.

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"Abolish all taxation save that upon land values." -- Henry George

http://monetary.org
http://schalkenbach.org

Geolibertarian

http://www.monetary.org/faq.html

Twenty Frequently Asked Questions on The American Monetary Act (AMA)

(August 8, 2009)

For more background, see The Lost Science of Money (LSM) by Stephen Zarlenga, available at our website.

1) Won't the government creating new money for infrastructure and other expenses cause inflation?

No. While this is an important concern, some of it is anti-governmental propaganda and it need not cause inflation, depending on where the new money goes, for example:

When new money is used to create real wealth, such as goods and services and the $2.2 trillion worth of public infrastructure building and repair the engineers tell us is needed over the next 5 years, there need not be inflation because real things of real value are being created at the same time as the money, and the existence of those real values for living, keeps prices down.

If it goes into warfare or bubbles (real estate/Wall Street/etc.) it would create inflationary bubbles with no real production of goods and services. That is the history of private control over money creation. It must end now. Government tends to direct resources more into areas of concern for the whole nation, such as infrastructure, health care, education, etc. The AMA Title 5 specifies infrastructure items including human infrastructure of health care and education to focus on.

Also remember, the American Monetary Act eliminates 'fractional reserve banking' which has been one of the main causes of inflation. And remember new money must be introduced into circulation as the population and economy grow or is improved, or we'd have deflation.

2) How can we trust government with the power to create money? – Won't they go wild (and again cause inflation)? Don't you know that government can't do anything right?

Two Points:

A. The U.S. Constitution binds government to represent the interests of the American people – "to promote the General Welfare" and empowers our Federal Government to create, issue and regulate our money (Article I, Section 8, Clause 5). We must hold our officeholders responsible to the laws. Do you want us to deny the Constitution? In favor of who? Enron? Bear Stearns? J.P. Morgan? Goldman Sachs? Lehman Brothers? Please get real! Our choice is to let those pirates continue to control our money system or to intelligently constitute the MONEY POWER within our government.

Under the American Monetary Act, the Congress, the President and the Board of the Monetary Authority will all be responsible if any inflation or deflation takes place, and the people will know that they are responsible. They are specifically directed to avoid policies that are either inflationary or deflationary.

Do you really trust the "ENRONS" to dominate our money? Look how they have abused that power! And Yes Damn it! Enron was on the Board of the Dallas Federal Reserve Bank!

B. Finally and most importantly, an examination of history, despite the current prejudice and massive propaganda waged against government, shows that government control of money has a far superior historical record to private control over money systems. See the AMA brochure, and the LSM, Chapter 16. History shows that government has a far superior record in controlling the money system than private money creators have. And Yes, that includes the Continental Currency, The Greenbacks, and even the German hyperinflation; which by the way took place under a completely privatized German central bank! The German hyperinflation is really an example of a private money disaster.

The Lost Science of Money book, chapter 12, uncovers the beginnings of the attack on government and found it started with Adam Smith himself in an attempt to block moves to take back the monetary power from the then private Bank of England, and put it back into government, which had done a good job in monarchical management of the money system, with only one exception under Henry VIII.

3) Why should we give the government even more power?

Because our money system belongs to society as a whole. It is too important to trust to unrepresentative and unaccountable private hands, preoccupied with private gain, with little regard for the detrimental consequences of their actions on the country, and outside our system of checks and balances. Just look what they have done!

4) How can we prevent government from abusing its power once it can create money directly?

The same way we prevent it from abusing any power, by upholding the rule of law and by participating in democratic political processes; and through reasonable structural limits.

5) Should we let private banks keep some part of the money creation privilege?

Absolutely not! History shows that the private interests, if given any privileged power over money, eventually undermine the public interest, and take over the whole thing. We know this from historical case studies in at least 4 major historical situations – the U.S. "Greenbacks", The nationalization of the Bank of England, and the Canadian and New Zealand monetary experience. Anyone who proposes allowing the banks to keep any part of the power to create money are either ignorant of monetary history or are shilling for the banks.

Under the American Monetary Act we do have the best of both worlds. We keep the benefits of having the professionalism and expertise of a competitive banking system in the private sector, but we take away the dangers of having them dominate our monetary and public policies with their narrow short term profit focus, by removing their privilege to create money. Ultimately this is a question of morality. No such special privileges can be allowed to particular groups; especially the monetary privilege, which confers power and wealth on them at the expense of the rest of society.

6) Well then, should we nationalize all the banking business?

What kind of "Kool Aid" are you drinking and who gave it to you? The banking business is obviously not a proper function of government; but providing, controlling and overseeing the monetary system is definitely a function of government. No private party can do that properly. Markets have utterly failed to do that. They have concentrated wealth, have harmed the average American and now broken down entirely, except for assistance from our government. Who would keep money in banks today, except for the FDIC guarantees?

But banks should remain privately owned, because when reasonably structured, they perform very necessary functions, and can do it professionally and conveniently. Who within government would run the banking business? Bankers however, have nothing in their training, experience or their souls that qualifies them as masters of the universe – to control our society as the money power confers upon them.

Banks should act as intermediaries for their clients who want to get a return on a deposit or similar investment; and their clients who are willing to pay for the use of that money. But banks must not create the money. The money system belongs to the Nation and our Federal Government must be the only entity with the power to issue and regulate our money as the U.S. Constitution already mandates. We nationalize the monetary system, but don't nationalize the individual banks. That would be a dangerous step towards fascism. Private enterprise is a powerful mechanism that can produce excellent results when properly structured and regulated. That is an important American "theme!" The AMA does not throw out the baby with the bathwater! But it most certainly gets rid of the bathwater, which is private money creation. That acts like a private tax on the rest of us!

We regard such nationalization proposals (nationalize all banking) either as an inability to understand the difference between nationalizing the money system and nationalizing the private banking business, OR as possibly attempts to actually block proper monetary reform, because you'd have to change the essence of America in order to do it. So it distracts from real reform. The AMA reform that we advocate actually puts into place the system that most people think we have now! People think our money is provided by government. They erroneously believe that the Federal Reserve is already a part of our government. They think the banks are lending money which has been deposited with them, not that they are creating that money when they make loans. Under the AMA many of those things people already believe about money and banking actually become true! It's a natural fit with already existing attitudes.

7) Doesn't your AMA proposal merely continue with a fiat money system? Shouldn't we be using gold and silver instead? Wouldn't that provide a more stable money?

Our system is absolutely a fiat money system. But that's a good thing, not a bad one. In reaction to the many problems caused by our privatized fiat money system over the decades, many Americans have blamed fiat money for our troubles, and they support using valuable commodities for money.

But Folks! The problem is not fiat money, because all advanced money is a fiat of the Law! The problem is privately issued fiat money. Then that is like a private tax on all of us imposed by those with the privilege to privately issue fiat money. Private fiat money must now stop forever!

Aristotle gave us the science of money in the 4th century B.C. which he summarized as: "Money exists not by nature but by law!" So Aristotle accurately defines money as a legal fiat.

As for gold, most systems pretending to be gold systems have been frauds which never had the gold to back up their promises. And remember if you are still in a stage of trading things (such as gold) for other things, you are still operating in some form of barter system, not a real money system, and therefore not having the potential advantages as are available through the American Monetary Act!

And finally as regards gold and silver: Please do not confuse a good investment with a good money system. From time to time gold and silver are good investments. However you want very different results from an investment than you want from a money. Obviously you want an investment to go up and keep going up. But you want money to remain fairly stable. Rising money would mean that you'd end up paying your debts in much more valuable money. For example the mortgage on your house would keep rising if the value of money kept rising.

Also, contrary to prevailing prejudice, gold and silver have both been very volatile and not stable at all. Just check out the long term gold chart.

8} How can a bank lend money if they have to keep 100% reserves?

The 100% reserve provision applies only to checking accounts. This question results from economists classifying our AMA as a "100% reserve" plan, as the Chicago Plan was known. But our plan fundamentally reforms the private credit system, replacing it with a government money system. The accounting rules are changed.

Banks will be encouraged to continue their loan activities by lending money that has been deposited with them in savings and time deposit accounts; or lending their capital that has been invested with them. It is in the checking account departments that the banks presently create money when they make loans in a fractional reserve system. This will be stopped by new bank accounting rules. Making loans from savings account is a different matter, because real money, not credit will have been transfered into such accounts, and loaning that out does not create new money or give the bank any seigniorage, that belongs to our society. Some money loaned out of a savings type account might later get redeposited into another savings account and again be reloaned, but its the same money, not any newly created money, and will reflect that way on the bank's books. This is sufficient to solve the problem of banks creating "purchasing media" by loaning their credit which then functions as money in the present system. (for details see the wording on pages 8, 9, and 14 of the American Monetary Act at http://www.monetary.org/amacolorpamphlet.pdf)

Various types of accounts will have differing requirements: e.g. matching time deposits to loan durations, lessening the "borrowing short term and lending long term" problem. Money market and mutual fund type accounts can be very flexible. The principle applied will be to encourage good intermediation of money between clients who want a return on their money and those willing to pay for using it; but will prohibit money creation. Checking accounts will become a warehousing service, for which fees are charged. Good accountancy can achieve these results. (Please see # 9 below for more info on the many sources of money for these accounts.)

9) If banks are no longer allowed to create money, where will banks get enough money to fill client's needs for money under the American Monetary Act?

We devote substantial space to this question because economists so used to confusing credit and money have to get used to the idea of money instead of credit. Usually they want to know how the AMA creates money within the present bank accounting framework. Well it does not! The AMA will change the accounting rules to deal with money not credit.

There will be several substantial sources of money for banks to satisfy their clients money needs:

a) Title III of the AMA converts through an accounting procedure, the existing credit the banks have circulated through loans (about $6 to 7 trillion, roughly the existing "money" supply) into US money, no longer bank credit. That process will indebt the banks to the government for the amount converted over and above their capital. At present when bank loans are repaid to the banks by their customers, those credits/debts go out of circulation/out of existence and the credit money supply contracts as loans are repaid, until they make new loans. But under the American Monetary Act, since it's now money, those monies will not go out of circulation the way the credits did. They are repaid to the government in satisfaction of the debt the banks incurred in converting them from credit to money. That goes into a pool which can be used by Congress for the items in Title V of the AMA (as described on pages 8 and 9), or it can even be re-lent to the banks at an adjusted interest rate. Note: this action de-leverages the banks, but does not reduce the money supply.

b) Probably the most important source of funds for bank lending will be the continuing government expenditures, over and above tax receipts, such as social security and other payments by government on the items in Title V of the American Monetary Act. Also the engineers tell us that $2.2 trillion is now necessary to make our infrastructure safe over the next 5 years. That's $440 billion new money per year. Also the health care and education provisions, and grants to states in Title V can be introduced as new money. ALL these will eventually be deposited into various types of bank accounts where provisions of the Act will allow this money to be lent or invested. The banks will be lending and placing this money that has been deposited with them; not lending credit they create, masquerading as money. They will have to compete to attract such deposits from citizens and companies.

c) Title II of the AMA specifies the repayment of US instruments of indebtedness (bonds/notes/etc). Instead of being rolled over as at present, new US monies will be paid to the bondholders as they become due. Those people/institutions will be looking for places to invest that money. One place would be in bank stock, which is a source of lending funds for banks. Of the $5 to 7 trillion in US bonds and notes privately held, about 3.5 trillion is due within 1 to 5 years; .72 trillion is due in 5 to 10 years; .35 trillion is due in 10 to 20 years. All these amounts will represent newly created US money and will eventually find their way to becoming new lend-able or investable bank deposits and even investments in banks.

d) Finally the AMA does not allow the banks to decide their own leverage situations. The Act essentially eliminates most leverage from the banking system in a healthy, non deflationary way. That will be good. They will no longer be able to pretend they were "banking" when they made bad loans overextending their positions and creating bubbles, in order to grab huge bonuses on imaginary profits. In other words banks will no longer be able to make loans in a bubble creation process. That will be a big improvement!

10) How will the U.S. Treasury create the money?"

The same way the Federal Reserve does now, as simple account entries, but as income, without the accompanying debt obligations. It's described in the AMA, Sec. 103 NEGATIVE FUND BALANCES: The Secretary of the Treasury shall directly issue United States Money to account for any differences between Government appropriations authorized by Congress under law and available Government receipts.

11) Is there any chance the AMA could eliminate the federal income tax?

It "could," and though that's not likely in the near future, it is the direction the AMA goes in. Thanks to the immense savings our government will experience through control over its money system, taxation should decline substantially for middle and lower income groups. It should be raised for the super rich.

In addition the AMA should directly lead to substantial reductions in interest rates, because as the US pays off its national debt in money rather than rolling it over, those receiving those payments will be looking for places to loan and invest those funds. Interest rates should drop substantially.

12) Why does the American Monetary Act have an 8% maximum interest rate, including all fees?

Because before 1980/1981, forty nine States had "anti-usury" laws which limited normal interest rates to a maximum of between 6% and 10% p.a. (one state had 12%). The American Monetary Act takes the middle of this range to represent a restoration of the interest rate limits prevailing across the country prior to 1980/1981. See page 9 of the AMA.

13) Won't you be breaking the sanctity of contracts when you convert the existing bank credit already in circulation, into U.S. Money?

No. First of all a contract requires understanding of the terms by all parties to it, and that certainly did not exist. But more likely it will be viewed as very acceptable by the banks, considering the security it confers on banking, especially when the alternative is going broke. There would be no reason to extend the legal tender privilege (acceptance for taxes) to the credits of any disagreeing banks.

14) How would the ACT affect our position with China?

The ACT would have a number of positive effects on Chinese - American Trade. Particularly it would encourage the Chinese to use more of their dollar earnings to really trade with us rather than just sell to us, and then invest their earnings in US bonds as at present. More details forthcoming!

15) What about other countries, and international systems such as the IMF (International Monetary Fund) and the BIS (Bank for International Settlements)?

We'd expect other countries to follow quickly in our footsteps to each obtain the advantages of issuing their own national monies. The United Nations is already putting forward suggestions that member states shift now to nationally created, debt free; interest free moneys. They are way ahead of the US Congress just now. A much reformed IMF, already organized under United Nations Article 57; #3, will see a greatly expanded role for the SDR and more responsibility for international accounts clearing as well as real assistance to member states, rather than acting as a destructive collection agent for the big banks. The role and importance of the BIS should be rapidly reduced, and perhaps eliminated. Just look at the mess created under their guidance and rules. Some job they did!

16) The latest craze "question" making the rounds in the organized disinformation campaign that is attacking our national psychology, is not a question at all, but a vicious assertion:

"Government is so corrupt and so much in the hands of the worst people and they won't ever let you do this reform! Or any good thing"


This popped up simultaneously from LA to Seattle. I've told friends to put that stupidity out of their minds. This assertion, designed to discourage, is a variant of the Sun Tzu method of winning the battle by convincing the opposition not to fight because they can't win. It reminds me of the cyborg "Borg Wars" line "Resistance is futile" from the Star Trek New Generation series. Don't fall for it!

As our people suffer more deeply from the unfortunate monetary/banking system, any remaining bad elements in government can and must be cleansed. That's what we'll do instead of whining about it. Become a part of the solution not a cry-baby! Get up and fight for your family and nation!

"Put a stone in your stomach!" is an old phrase of Zulu warriors when summoning courage. Earlier tonight I saw an electric message on a local banks billboard:

"If you think you can, you can. If you think you can't, you can't!"

Yeah! We never said all bankers are evil, but there's a very bad controlling element among them.

17) Why didn't nationalized money systems work in the former Soviet countries?

Because their monetary systems were still controlled from within their banking systems, using the same faulty methods. The 1966 Federal Reserve publication Money, Banking, and Credit in Eastern Europe states:

    "In the communist countries, money is created in the same way as in capitalist countries – through the extension of bank credit. This fact is not generally recognized or accepted in the various countries of Eastern Europe. The result is that a good deal of confusion emerges from their economic literature with regard to the nature of money and the role of the monetary process and the function of the banking system.... Since Marx identified money with gold, the official theory holds paper money to be merely a substitute for gold and ignores deposit money." (p. 42-43)

Sound familiar? Their politicians and economists were as dumb as ours!

18) Won't we get hyper-inflation like Zimbabwe?

No. For governments or anyone to issue money, there has to be a functioning society with enough rule of law and physical and social infrastructure to support the creation of values for living. Zimbabwe unfortunately does not have those pre-requisites; thus their society is falling apart.

19) Should we have the individual 50 states own banks? Like North Dakota?

More Kool-Aid and distractions...Look folks the objective is to get the banks out of the Money creation field, not to get the government into banking!! A highly distracting idea that does not in any way accomplish any necessary reform! Instead it gives our fraudulent banking system a moral free pass! It is mind boggling that progressive people fall for this. (see the home page for an in depth article by Jamie Walton on this)

20) How about local currencies?

Local currency movements can help people to understand the money problem but it would be an illusion to think that local currencies would stop a mismanaged, unjust national system from unfairly concentrating wealth; from being a motivating factor for warfare; from financing harmful polluting activities even when saner alternatives exist. Understand also that a national currency properly placed under governmental control gives much greater local control than the present national currency under private control, because locally, our voting power can exert influence on national policy.

And remember the principle of subsidiarity put forward by E.F. Schumacher. His slogan was not "small is beautiful." What E.F. Shumacher actually said is what the AMI is saying: Use an "Appropriate scale"- do things on an appropriate scale. That dominant scale in the currency area is national and will continue to be for the foreseeable future. The appropriateness of acting on the national level must be recognized.
"Abolish all taxation save that upon land values." -- Henry George

http://monetary.org
http://schalkenbach.org

Geolibertarian

http://www.huffingtonpost.com/stephen-zarlenga/reducing-us-debt-and-crea_b_857230.html

Reducing U.S. Debt and Creating Jobs Through Public Control of Our Money System

by Stephen Zarlenga
TheHuffingtonPost.com
May 3, 2011

Coauthored by Greg Coleridge

For all the boisterous talk and debate by Congressional leaders of both parties and the President about the many ways to reduce our nation's deficit and debt while maintaining vital services and programs, there continues to be a roaring silence about a solution that has nothing to do with the budget. It has to do, rather, with our nation's monetary system.

Be it for ignorance or by intention, few federal elected officials have examined how a change in the way money in our nation is created and issued could reduce our nation's deficit and debt and, in doing so, increase millions of vital jobs to transform our economy.

One of the few exceptions is Rep. Dennis Kucinich (D-OH), who during the last Congressional session introduced H.R. 6550, The National Emergency Employment Defense Act. A revised version is expected to be soon reintroduced. Americans would be wise to rally behind it.

The basis of the bill are three essential monetary measures proposed by the American Monetary Institute in their American Monetary Act (AMA). The AMA's recommendations are based on decades of research and centuries of experience; are designed to end the current fiscal crisis in a just and sustainable way, and are aimed to place the U.S. money system under our constitutional system of checks and balances.

The three essential measures include:

[Continued...]


http://www.huffingtonpost.com/stephen-zarlenga/sequesters-shutdowns-and-_b_4086071.html

Sequesters, Shutdowns and Defaults

Stephen Zarlenga
The Huffington Post
Oct. 11, 2013

Never in 225 years has the full faith and credit of the United States been held to ransom. But also never in 225 years has a solution been ready that can resolve this problem: the monetary reform bill HR2990 introduced into the 112th Congress by Dennis Kucinich.

For the 95th time in the last 67 years, Congress and the president are confronted with passing legislation to raise the "debt ceiling."

What citizens should know is that our country can pay off its debt as it comes due; can put millions of people back to work rebuilding our crumbling infrastructure; can provide debt-free federal support for cash-strapped State governments, and end the so called great recession by putting cash in the hands of all our citizens through a citizens dividend. This gives small businesses what they need most - customers with cash to spend on their goods and services. All these things are made possible by the HR 2990 bill introduced by Dennis Kucinich and co-sponsored by John Conyers.

The bill accomplishes this by adjusting our money system from one of "debt money created by banks" when they make loans, to one of "money by law" created as money, not as debt, by our government. That power is already vested in Congress by the Constitution; "The Congress shall have the Power To... coin Money, regulate the Value thereof..." {Article 1, Section 8}.

Congressmen should re-introduce and pass H.R. 2990, The National Emergency Employment Defense Act (NEED) that Congressmen Kucinich and Conyers sponsored in the last Congress.

The banking class and their economists have spread confusion over the nature of money. The confusion is largely responsible for the present misdirection of our leaders. So they allow the destruction of the American middle class, and of our democracy, our privacy and civil liberties. Even the planet is now threatened by degradation of Earth's environment.

Throughout our history, great leaders such as Benjamin Franklin, John Adams, Thomas Jefferson, Andrew Jackson, Martin Van Buren, Wright Patman, Henry Gonzalez and Dennis Kucinich have confronted banks over the main question in our nations past: Who should have the power to create money - the banks for the enrichment of their "elite" owners, or the people through their elected representatives, to promote the general welfare and benefit our entire society.

Congress squabbles but the present system just can't relieve or solve the problem -- because the debt money system itself is the problem!

How The NEED Act Solves the Problem in 3 major steps:

1) The Federal Reserve is incorporated into our government, where people think it is now. A new Monetary Authority is established to avoid both inflation and deflation.

2) Simple accounting rule changes will prohibit banks from creating what we use for money by decisively ending fractional reserve lending. Banks would lend real money they have or receive from savers. This is what people think happens now.

3) Government creates and spends new money into circulation for infrastructure, education and health care; starting with the $2.2 trillion the engineers say we need to make our infrastructure safe, over the next 5 years. This alone will create over 7 million good jobs quickly.

Additionally: The national debt gets paid off as it comes due. If we continued with a "debt-money" system, we could never pay off the debt. The NEED Act provides a tax free Dividend to get money into the hands of all our citizens; and has a provision where 25 percent of new money created each year is granted on a per capita basis to the states for their pressing needs.

The NEED Act begins to heal a great injustice that has been perpetrated on the world's peoples. All the world's great religions have struggled to reconcile monetary policy with the problem of usury. Concepts for the NEED Act originate in Stephen Zarlenga's highly acclaimed The Lost Science of Money book which studies 3,000 years of monetary history, incorporating the perspective of social justice and fairness. Learning from Aristotle, Aquinas, the Scholastic Scholars of the Middle Ages, Alexander Del Mar and some modern thinkers, the problem of "usury" is properly defined as "the taking of something for nothing through the structural misuse of the monetary mechanism." That's what is happening now on a worldwide scale

What has our "debt-money created by banks" system done for us? We have suffered austerity, sequestration, government shutdowns, and economic depression with a real unemployment rate over 20 percent. Millions more who are working are not being paid enough for life's basic necessities, and 8 million families have been thrown out of their homes! We have even been attacked from within by threats to default on the full faith and credit of the United States. All this is utterly unacceptable. The monetary system must be changed.

[Continued...]
"Abolish all taxation save that upon land values." -- Henry George

http://monetary.org
http://schalkenbach.org

Geolibertarian

http://www.globalresearch.ca/the-global-debt-crisis-how-we-got-in-it-and-how-to-get-out/25154

The Global Debt Crisis: How We Got In It, and How to Get Out

by Ellen Brown



Global Research
June 6, 2011

Countries everywhere are facing debt crises today, precipitated by the credit collapse of 2008.  Public services are being slashed and public assets are being sold off, in a futile attempt to balance budgets that can't be balanced because the money supply itself has shrunk.  Governments usually get the blame for excessive spending, but governments did not initiate the crisis.  The collapse was in the banking system, and in the credit that it is responsible for creating and sustaining.

Contrary to popular belief, most of our money today is not created by governments.  It is created by private banks as loans.  The private system of money creation has grown so powerful over the centuries that it has come to dominate governments globally.  The system, however, contains the seeds of its own destruction.  The source of its power is also a fatal design flaw.


The flaw is that banks advance "bank credit" that must be paid back with interest, continually requiring more money to be repaid than was created as loans; and the only way to get additional money from the private banking system is to take out yet more loans, at interest. The system is, in effect, a pyramid scheme. When the banks run out of borrowers to support the pyramid, it must collapse; and we are nearing that point today.

There are more sustainable ways to run a banking and credit system, as will be shown.

How Banks Create Money

The process by which banks create money was explained by the Chicago Federal Reserve in a booklet called "Modern Money Mechanics." It states:

"The actual process of money creation takes place primarily in banks." [p3]

"[Banks] do not really pay out loans from the money they receive as deposits. If they did this, no additional money would be created. What they do when they make loans is to accept promissory notes in exchange for credits to the borrowers' transaction accounts. Loans (assets) and deposits (liabilities) both rise [by the same amount]." [p6]

"With a uniform 10 percent reserve requirement, a $1 increase in reserves would support $10 of additional transaction accounts." [p49]

A $100 deposit supports a $90 loan, which becomes a $90 deposit in another bank, which supports an $81 loan, etc.

That's the conventional model, but banks actually create the loans FIRST. (Picture how a credit card works.) Banks need deposits to clear their outgoing checks, but they find the deposits later. Banks create money as loans, which become checks, which go into other banks. Then, if needed to clear the checks, they borrow the money back from the other banks. In effect, they borrow back the money they just created, pocketing the spread between the interest rates as their profit. The rate at which banks can borrow from each other in the U.S. today (the Fed funds rate) is an extremely low 0.2%.

How the System Evolved

The current system of privately-issued money is traced in "Modern Money Mechanics" to the 17th century goldsmiths. People who left gold with the goldsmiths for safekeeping would be issued paper receipts for it called "banknotes." Other people who wanted to borrow money were also happy to accept paper banknotes in place of gold, since the notes were safer and more convenient to carry around. The sleight of hand came in when the goldsmiths discovered that people would come for their gold only about 10% of the time. That meant that up to ten times as many notes could be printed and lent as the goldsmiths had gold. Ninety percent of the notes were basically counterfeited.

This system was called "fractional reserve" banking and was institutionalized when the Bank of England was founded in 1694. The bank was allowed to lend its own banknotes to the government, forming the national money supply. Only the interest on the loans had to be paid. The debt was rolled over indefinitely.

That is still true today. The U.S. federal debt is never paid off but just continues to grow, forming the basis of the U.S. money supply.

The Public Banking Alternative

There are other ways to create a banking system, ways that would eliminate its ponzi-scheme elements and make the system sustainable. One solution is to make the loans interest-free; but for Western economies today, that transition could be difficult.

Another alternative is for banks to be publicly-owned. If the people collectively own the bank, the interest and profits go back to the government and the people, who benefit from decreased taxes, increased public services, and cheaper public infrastructure. Cutting out interest has been shown to reduce the cost of public projects by 30-50%.

In the United States, this system of publicly-owned banks goes back to the American colonists. The best of the colonial models was in Benjamin Franklin's colony of Pennsylvania, where the government operated a "land bank." Money was printed and lent into the community. It recycled back to the government and could be lent and relent. The system was mathematically sound because the interest and profits were returned to the government, which then spent the money back into the economy in place of taxes. Private banks, by contrast, generally lend their profits back into the economy, or invest in private money-making ventures in which more is always expected back than was originally invested.

During the period that the Pennsylvania system was in place, the colonists paid no taxes except excise taxes, prices did not inflate, and there was no government debt.

How Private Banknotes Became the National U.S. Currency

The Pennsylvania system was sustainable, but some early American colonial governments just printed and spent, inflating the money supply and devaluing the currency. The British merchants complained, prompting King George II to forbid the colonists to issue their own money. Taxes had to be paid to England in gold. That meant going into debt to the English bankers. The result was a massive depression. The colonists finally rebelled and went back to issuing their own money, precipitating the American Revolution.

In an international first, the colonists funded a war against a major power with mere paper receipts, and won. But the British counterattacked by waging a currency war. They massively counterfeited the colonists' paper money, at a time when this was easy to do. By the end of the war, the paper scrip was virtually worthless. After it lost its value, the colonists were so disillusioned with paper money that they left the power to issue it out of the U.S. Constitution.

Meanwhile, Alexander Hamilton, the first U.S. Treasury Secretary, was faced with huge war debts, and he had no money to pay them. He therefore resorted to the ruse used in England known as fractional reserve banking. In 1791, Hamilton set up the First U.S. Bank, a largely private bank that would print banknotes "backed" by gold and lend them to the government.

The ruse worked: the paper banknotes expanded the money supply, the debts were paid, and the economy thrived. But it was the beginning of a system of government funded by debt to private bankers, who lent banknotes only nominally backed by gold.

During the American Civil War, President Lincoln avoided a crippling war debt by returning to the system of government-issued money of the American colonists. He issued U.S. Notes from the Treasury called "Greenbacks" rather than borrowing at usurious interest rates. But Lincoln was assassinated, and Greenback issuance was halted.

In 1913, the privately-owned Federal Reserve was authorized to issue its own Federal Reserve Notes as the national currency. These notes were then lent to the government, eliminating the government's own power to issue money (except for coins). The Federal Reserve was set up to prevent bank runs, but twenty years later we had the Great Depression, the greatest bank run in history. Robert H. Hemphill, Credit Manager of the Federal Reserve Bank of Atlanta, wrote in 1934:

"We are completely dependent on the commercial Banks. Someone has to borrow every dollar we have in circulation, cash or credit. If the Banks create ample synthetic money we are prosperous; if not, we starve."

For the bankers, however, it was a good system. It put them in control.

Setting the Global Debt Trap

Prof. Carroll Quigley was an insider groomed by the international bankers. He wrote in Tragedy and Hope in 1966:

"The powers of financial capitalism had another far reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole.

"The apex of the system was to be the Bank for International Settlements [BIS] in Basle, Switzerland, a private bank owned and controlled by the world's central banks which were themselves private corporations. Each central bank... sought to dominate its government by its ability to control Treasury loans...."

The debt trap was set in stages. In 1971, the dollar went off the gold standard internationally. Currencies were unpegged from gold and allowed to "float" in currency markets, competing with other currencies, making them vulnerable to speculation and manipulation.

In 1973, a secret agreement was entered into in which the OPEC countries would sell oil only in dollars, and the price of oil would be dramatically increased. By 1974, oil prices had increased by 400% from 1971 levels. Countries lacking oil had to borrow dollars from U.S. banks.

In 1981, the Fed funds rate was raised to 20%. At 20% compound interest, debt doubles in under four years. As a result, most of the world became crippled by debt. By 2001, developing nations had repaid the principal originally owed on their debts six times over; but their total debt had quadrupled because of interest payments.

When debtor nations could not pay the banks, the International Monetary Fund stepped in with loans -- with strings attached. The debtors had to agree to "austerity measures," including:

*  cutting social services

*  privatizing banks and public utilities

*  opening markets to foreign investors

*  letting currencies "float."

Today, austerity measures are being imposed not just in developing countries but in the European Union and on U.S. States.

[Continued...]
"Abolish all taxation save that upon land values." -- Henry George

http://monetary.org
http://schalkenbach.org

Geolibertarian

S&P AND THE BILDERBERGERS: ALL PART OF THE PLAN?

Ellen Brown
August 18, 2011
www.webofdebt.com/articles/s_p.php

What just happened in the stock market? Last week, the Dow Jones Industrial Average rose or fell by at least 400 points for four straight days, a stock market first.

The worst drop was on Monday, 8-8-11, when the Dow plunged 624 points. Monday was the first day of trading after US Treasury bonds were downgraded from AAA to AA+ by Standard and Poor's.

But the roller coaster actually began on Tuesday, 8-2-11, the day after the last-minute deal to raise the U.S. debt ceiling -- a deal that was supposed to avoid the downgrade that happened anyway five days later. The Dow changed directions for eight consecutive trading sessions after that, another first.

The volatility was unprecedented, leaving analysts at a loss to explain it. High frequency program trading no doubt added to the wild swings, but why the daily reversals? Why didn't the market head down and just keep going, as it did in September 2008?

The plunge on 8-8-11 was the worst since 2008 and the sixth largest stock market crash ever. According to Der Spiegel, one of the most widely read periodicals in Europe:

    Many economists have been pointing out that last week's panic resembled the fear that swept financial markets after the collapse of US investment bank Lehman Brothers in September 2008.

    Then as now, banks stopped lending each other money. Then as now, banks' cash deposits at the central bank doubled within days.

On Tuesday, August 9, however, the market gained more points from its low than it lost on Monday. Why? A tug of war seemed to be going on between two titanic forces, one bent on crashing the market, the other on propping it up.

The Dubious S&P Downgrade

Many commentators questioned the validity of the downgrade that threatened to collapse the market. Dean Baker, co-director of the Center for Economic and Policy Research, said in a statement:

    "The Treasury Department revealed that S&P's decision was initially based on a $2 trillion error in accounting. However, even after this enormous error was corrected, S&P went ahead with the downgrade. This suggests that S&P had made the decision to downgrade independent of the evidence.

Paul Krugman, writing in the New York Times, was also skeptical, stating:

    Everything I've heard about S&P's demands suggests that it's talking nonsense about the US fiscal situation. The agency has suggested that the downgrade depended on the size of agreed deficit reduction over the next decade, with $4 trillion apparently the magic number. Yet US solvency depends hardly at all on what happens in the near or even medium term: an extra trillion in debt adds only a fraction of a percent of GDP to future interest costs . . . .

    In short, S&P is just making stuff up — and after the mortgage debacle, they really don't have that right.

In an illuminating expose posted on Firedoglake on August 5, Jane Hamsher concluded:

    It's becoming more and more obvious that Standard and Poor's has a political agenda riding on the notion that the US is at risk of default on its debt based on some arbitrary limit to the debt-to-GDP ratio. There is no sound basis for that limit, or for S&P's insistence on at least a $4 trillion down payment on debt reduction, any more than there is for the crackpot notion that a non-crazy US can be forced to default on its debt. . . .

    It's time the media and Congress started asking Standard and Poors what their political agenda is and whom it serves.

Who Drove the S&P Agenda?

Jason Schwarz shed light on this question in an article on Seeking Alpha titled "The Rise of Financial Terrorism". He wrote:

    After the market close on Friday August 5th, we received word that S&P CEO Deven Sharma had taken control of the ratings agency and personally led the push for a U.S. downgrade. There is a lot of evidence that he has deliberately tried to trash the U.S. economy. Even after discovering that the S&P debt calculations were off by $2 trillion, Sharma made the decision to go ahead with the unethical downgrade. This is a guy who was a key contributor at the 2009 Bilderberg Summit that organized 120 of the world's richest men and women to push for an end to the dollar as the global reserve currency.

    Through his writings on "competitive strategy" S&P CEO Sharma considers the United States the PROBLEM in today's world, operating with what he implies is an unfair and reckless advantage. The brutal reality is that for "globalization" to succeed the United States must be torn asunder . . .

Also named by Schwarz as a suspect in the market manipulations was Michel Barnier, head of European Regulation. Barnier triggered an alarming 513-point drop in the Dow on August 4, when he blocked the plan of Hans Hoogervorst, newly appointed Chairman of the International Accounting Standards Board, to save Europe by adopting a new rule called IFRS 9. The rule would have eliminated mark-to-market accounting of sovereign debt from European bank balance sheets. Schwarz writes:

[Continued...]
"Abolish all taxation save that upon land values." -- Henry George

http://monetary.org
http://schalkenbach.org

Geolibertarian

http://www.prisonplanet.com/the-money-masters-behind-the-global-debt-crisis.html

The Money Masters: Behind the Global Debt Crisis

Adrian Salbuchi
Global Research
Sept 26, 2011

In the US, we see untold millions suffering from the impact of mass foreclosures and unemployment; in Greece, Spain, Portugal, Ireland, and Italy, stringent austerity measures are imposed upon the whole population; all coupled with major banking collapses in Iceland, the UK and the US, and indecent bail-outs of "too-big-to-fail" bankers (Newspeak for too powerful to fail).

No doubt, the bulk of the responsibility for these debacles falls squarely on the shoulders of caretaker governments in these countries that are subordinated to Money Power interests and objectives. In country after country, that comes together with embedded corruption, particularly evident today in the UK, Italy and the US.

As we assess some of the key components of today's Global Financial, Currency and Banking Model in this article, readers will hopefully get a better understanding as to why we are all in such a crisis, and that it will tend to get much worse in the months and years to come.

Foundations of a Failed and False Model

Hiding behind the mask of false "laws" allegedly governing "globalised markets and economies," this Financial Model has allowed a small group of people to amass and wield huge and overwhelming power over markets, corporations, industries, governments and the global media. The irresponsible and criminal consequences of their actions are now clear for all to see.

The "Model" we will briefly describe, falls within the framework of a much vaster Global Power System that is grossly unjust and was conceived and designed from the lofty heights of private geopolitical and geo-economic[1] planning centres that function to promote the Global Power Elite's agenda as they prepare their "New World Order" – again, Newspeak for a Coming World Government.[2]

Specifically, we are talking about key think tanks like the Council on Foreign Relations, the Trilateral Commission, the Bilderberg Group, and other similar entities such as the Cato Institute (Monetary Issues), American Enterprise Institute and the Project for a New American Century that conform an intricate, solid, tight and very powerful network, engineering and managing New World Order interests, goals and objectives.

Writing from the stance of an Argentine citizen, I admit we have some "advantages" over the citizens of industrialised countries as the US, UK, European Union, Japan or Australia, in that over the last few decades we have had direct experience of successive catastrophic national crises emanating from inflation, hyper-inflation, systemic banking collapse, currency revamps, sovereign debt bond mega-swaps, military coups and lost wars...

Finance vs the Economy

The Financial system (i.e., a basically unreal Virtual, symbolic and parasitic world), increasingly functions in a direction that is contrary to the interest of the Real Economy (i.e., the Real and concrete world of work, production, manufacturing, creativity, toil, effort and sacrifice done by real people). Over the past decades, Finance and the Economy have gone their totally separate and antagonistic ways, and no longer function in a healthy and balanced relationship that prioritises the Common Good of We the People. This huge conflict between the two can be seen, amongst other places, in today's Financial and Economic System, whose main support lies in the Debt Paradigm, i.e., that nothing can be done unless you first have credit, financing and loans to do it. Thus, the Real Economy becomes dependent on and distorted by the objectives, interests and fluctuations of Virtual Finance.[3]

Debt-Based System

The Real Economy should be financed with genuine funds; however with time, the Global Banking Elite succeeded in getting one Sovereign Nation-State after another to give up its inalienable function of supplying the correct quantity of National Currency as the primary financial instrument to finance the Real Economy. That requires decided action through Policies centred on promoting the Common Good of We The People in each country, and securing the National Interest against the perils posed by internal and external adversaries.

Thus, we can better understand why the financial "law" that requires central banks to always be totally "independent" of Government and the State has become a veritable dogma. This is just another way of ensuring that central banking should always be fully subordinated to the interests of the private banking over-world – both locally in each country, as well as globally.

We find this to prevail in all countries: Argentina, Brazil, Japan, Mexico, the European Union and in just about every other country that adopts so-called "Western" financial practice. Perhaps the best (or rather, the worst) example of this is the United States where the Federal Reserve System is a privately controlled institution outright, with around 97% of its shares being owned by the member banks themselves (admittedly, it does have a very special stock scheme), even though the bankers running "Fed" do everything they can to make it appear as if it is a "public" entity operated by Government, something that it is definitely not.

One of the Global Banking Over-world's permanent goals is – and has been – to maintain full control over all central banks in just about every country, in order to be able to control their public currencies.[4] This, in turn, allows them to impose a fundamental (for them) condition whereby there is never the right quantity of public currency to satisfy the true demand and needs of the Real Economy. That is when those very same private banks that control central banking come on scene to "satisfy the demand for money" of the Real Economy by artificially generating private bank money out of nothing. They call it "credits and loans" and offer to supply it to the Real Economy, but with an "added value" (for them): (a) they will charge interest for them (often at usury levels) and, (b) they will create most of that private bank money out of thin air through the fractional lending system.

At a Geo-economic level, this has also served to generate huge and unnecessary public sovereign debts in country after country all over the world. Argentina is a good example, whose Caretaker Governments are systematically ignorant and unwilling to use one of the sovereign state's key powers: the issuance of high power non-interest generating Public Money (see below for a more detailed definition). Instead, Argentina has allowed IMF (International Monetary Fund) so-called "recipes" that reflect the global banking cartel's own interests to be imposed upon it in fundamental matters like what are the proper functions of its Central Bank, sovereign debt, fiscal policy, and other monetary, banking and financial mechanisms, that are thus systematically used against the Common Good of the Argentine People andagainst the National Interest of the country.

This system and its dreadful results, now and in the past, are so similar in so many other countries – Brazil, Mexico, Greece, Ireland, Iceland, UK, Portugal, Spain, Italy, Indonesia, Hungary, Russia, Ukraine... that it can only reflect a well thought-out and engineered plan, emanating from the highest planning echelons of the Global Power Elite.

Fractional Bank Lending

This banking concept is in use throughout the world's financial markets, and allows private banks to generate "virtual" Money out of thin air (i.e., scriptural annotations and electronic entries into current and savings accounts, and a vast array of lines of credit), in a ratio that is 8, 10, 30, 50 times or more larger than the actual amount of cash (i.e., public money) held by the bank in its vaults. In exchange for lending this private "money" created out of nothing, bankers collect interest, demand collateral with intrinsic value and if the debtor defaults they can then foreclose on their property or other assets.

The ratio that exists between the amount of Dollars or Pesos in its vaults and the amount of credit private banks generate is determined by the central banking authority which fixes the fractional lending leverage level (which is why controlling the central bank is so vital strategically for private banker cartels). This leverage level is a statistical reserve based on actuarial calculations of the portion of account holders who in normal time go to their banks or ATM machines to withdraw their money in cash (i.e., in public money notes). The key factor here is that this works fine in "normal" times, however "normal" is basically a collective psychology concept intimately linked to what those account holders, and the population at large, perceive regarding the financial system in general and each bank in particular.

So, when for whatever reason, "abnormal" times hit – i.e., every time there are (subtly predictable) periodic crises, bank runs, collapses and panics, which seem to suddenly explode as happened in Argentina in 2001 and as is now happening in the US, UK, Ireland, Greece, Iceland, Portugal, Spain, Italy and a growing number of countries – we see all bank account holders running to their banks to try to get their money out in cash. That's when they discover that there is not enough cash in their banks to pay, save for a small fraction of account holders (usually insiders "in the know" or "friends of the bankers").

For the rest of us mortals "there is no more money left," which means that they must resort to whatever public insurance scheme may or may not be in place (e.g., in the US, the state-owned Federal Deposit Insurance Corporation that "insures" up to US$250,000 per account holder with taxpayer money). In countries like Argentina, however, there is no other option but to go out on the streets banging pots and pans against those ominous, solid and firmly closed bronze bank gates and doors. All thanks to the fraudulent fractional bank lending system.

Investment Banking

In the US, so called "Commercial Banks" are those that have large portfolios of checking, savings and fixed deposit accounts for people and companies (e.g., such main street names as CitiBank, Bank of America, JPMorganChase, etc.; in Argentina, we have Standard Bank, BBVA, Galicia, HSBC and others). Commercial Banks operate with fractional lending leverage levels that allow them to lend out "virtual" dollars or pesos for amounts equal to 6, 8 or 10 times the cash actually held in their vaults; these banks are usually more closely supervised by the local monetary authorities of the country.

A different story, however, we had in the US (and still have elsewhere) with so-called global "Investment Banks" (those that make the mega-loans to corporations, major clients and sovereign states), over which there is much less control, so that their leveraging fractional lending ratios are far, far higher. This greater flexibility is what allowed investment banks in the US to "make loans" by, for example, creating out of thin air 26 "virtual" Dollars for every real Dollar in cash they held in their vaults (i.e., Goldman Sachs), or 30 virtual Dollars (Morgan Stanley), or more than 60 virtual Dollars (Merrill Lynch until just before it folded on 15 Sept 2008), or more than 100 virtual Dollars in the cases of collapsed banks Bear Stearns and Lehman Brothers.[5]

Private Money vs Public Money

At this point in our review, it is essential to very clearly distinguish between two types of Money or Currency:

Private Money – This is "Virtual" Money created out of thin air by the private banking system. It generates interests on loans, which increases the amount of Private money in (electronic) circulation, and spreads and expands throughout the entire economy. We then perceive this as "inflation." In actual fact, the main cause of inflation in the economy is structural to the interest-bearing fractional lending banking system, even among industrialised countries. The cause of inflation nowadays is not so much the excessive issuance of Public Money by Government as all so-called banking experts would have us believe but, rather, the combined effect of fractional lending and interest on private banking money.

Public Money – This is the only Real Money there is. It is the actual notes issued by the national currency entity holding a monopoly (i.e., the central bank or some such government agency) and, as Public Money, it does not generate interest, and should not be created by anyone other than the State. Anybody else doing this is a counterfeiter and should end up in jail because counterfeiting Public Money is equivalent to robbing the Real Economy (i.e., "we, the working people") of their work, toil and production capabilities without contributing anything in return in terms of socially productive work. The same should apply to private bankers under the present fractional lending system: counterfeiting money (i.e., creating it out of thin air as a ledger entry or electronic blip on a computer screen) is equivalent to robbing the Real Economy of its work and production capacity without contributing any counter-value in terms of work.

Why We Have Financial Crises

A fundamental concept that lies at the very heart of the present Financial Model can be found in the way huge parasitic profits on the one hand, and catastrophic systemic losses on the other, are effectively transferred to specific sectors of the economy, throughout the entire system, beyond borders and public control.

As with all models, the one we suffer today has its own internal logic which, once properly understood, makes that model predictable. The people who designed it know full well that it is governed by grand cycles having specific expansion and contraction stages, and specific timelines. Thus, they can ensure that in bull market times of growth and gigantic profits (i.e., whilst the system, grows and grows, is relatively stable and generates tons of money out of nothing), all profits are privatised making them flow towards specific institutions, economic sectors, shareholders, speculators, CEO and top management & trader bonuses, "investors", etc who operate the gears and maintain the whole system properly tuned and working.

However, they also know that – like all roller coaster rides – when you reach the very top, the system turns into a bear market that destabilises, spins out of control, contracts and irremediably collapses, as happened to Argentina in 2001 and to the better part of the world since 2008, then all losses are socialised by making Governments absorb them through the most varied transference mechanisms that dump these huge losses onto the population at large (whether in the form of generalised inflation, catastrophic hyperinflation, banking collapses, bail-outs, tax hikes, debt defaults, forced nationalisations, extreme austerity measures, etc).

The Four-sided Global "Ponzi" Pyramid Scheme

As we know, all good pyramids have four sides, and since the Global Financial System is based on a "Ponzi" Pyramid Scheme, there's no reason why this particular pyramid should not have four sides as well.

Below is a summary of the Four-side Global "Ponzi" Pyramid Scheme that lies at the core of today's Financial Model, indicating how these four "sides" function in a coordinated, consistent, and sequential manner.

Side One – Create Public Money Insufficiency. This is achieved, as we explained above, by controlling the National Public entity that issues public money. Its goal is to demonetise the Real Economy so that the latter is forced to seek "alternative funding" for its needs (i.e., so that it has no choice but to resort to private bank loans).

Side Two – Impose Private Banking Fractional Lending Loans. This, as we said, is virtual private money created out of thin air on which bankers charge interest – often at usury levels – thus generating enormous profit for "investors," creditors and all sorts of entities and individuals who operate as parasites living off other people's work. This would never have been the case if each local central bank were to flexibly generate the correct quantity of Public Money necessary to satisfy the needs of the Real Economy in each country and region.

Side Three – Promote a Debt-Based Economic System. In fact, the whole Pyramid Model is based on being able to promote this generalised paradigm that falsely states that what really "moves" the private and public economy is not so much work, creativity, toil and effort of workers, but rather "private investors," "bank loans" and "credit" – i.e., indebtedness. With time, this paradigm has replaced the infinitely wiser, sounder, more balanced and solid concept of corporate profit being reinvested and genuine personal savings being the foundation for future prosperity and security. Pretty much the way Henry Ford, Sr. originally grew his most successful company.

Today, however, Debt reigns supreme and this paradigm has become entrenched and embedded into people's minds thanks to the mainstream media and specialised journals and publications, combined with Ivy League universities' Economics Departments that have all succeeded in imposing such "politically correct" thinking with respect to financial matters, especially those relating to the proper nature and function of Public Money.

The facts are that this Model generates unnecessary loans so that banking creditors can receive huge profits, which includes promoting uncontrolled, unwarranted and often pathological consumerism, which goes hand in hand with the increasing abandonment of the traditional value of "saving for a rainy day."

Such debts having political and strategic goals rather than merely financial ones, are usually given a thin layer of "legality" so that they may be imposed by the creditor on the debtor (i.e., in the case of The Merchant of Venice, the bond entered into between Antonio and Shylock giving the latter the legal right to a pound of the former's flesh; in the case of chronically indebted countries like Argentina, such "legality" is achieved through a complex public debt laundering[6] mechanism carried out by successive formally "democratic" Caretaker Governments to this very day).

Side Four – Privatisation of Profits/Socialisation of Losses. Lastly, and knowing full well that, in the long run, the numbers of the entire Cycle of this Model never add up, and that the whole system will inevitably come crashing down, the Model imposes a highly complex and often subtle financial, legal and media engineering that allows privatising profits and socialising losses. In Argentina, this cycle has become increasingly visible for those who want to see it, because in our country the local "Ponzi" Pyramid Cycle lasts on average 15 to 17 years, i.e., we've had successive collapses involving brutal devaluation (1975), hyperinflation (1989) and systemic banking collapse (2001), however in the industrialised world, that cycle was made to last almost 80 years (i.e., three generations spanning from 1929 to 2008).

Conclusions

The fundamental cause of today's on-going global financial collapse that exerts massive distortions over the Real Economy – and the ensuing social hardship, suffering and violence – is clear: Virtual Finance has usurped a pedestal of supremacy over the Real Economy, which does not legitimately belong to it. Finance must always be subordinated to, and in the service of, the Real Economy just as the Economy must heed the law and social needs of the Political Model executed by a Sovereign Nation-State (as we back-engineer this entire system, we thus understand why it is necessary for the Global Power Elite to first erode the sovereign Nation-State and to eventually do away with it altogether, in order to achieve its monetary, financial and political ends).

In fact, if we look at matters in their proper perspective, we will see that most national economies are pretty much intact, in spite of having been badly bruised by the financial collapse. It is Finance that is in the midst of a massive global collapse, as this Model of "Ponzi" Finance has grown into a sort of malignant "cancerous tumour" that has now "metastasised," threatening to kill the whole economy and social body politic, in just about every country in the world, and certainly in the industrialised countries.

The above comparison of today's financial system with a malignant tumour is more than a mere metaphor. If we look at the figures, we will immediately be able to see signs of this financial "metastasis." For example, The New York Times in their 22 September 2008 edition explains that the main trigger of the financial collapse that had exploded just one week earlier on 15 September was, as we all know, mismanagement and lack of supervision over the "Derivatives" market. The Times then went on to explain that twenty years earlier, in 1988, there was no derivatives market; by 2002 however, Derivatives had grown into a global 102 trillion Dollar market (that's 50% more than the Gross Domestic Product of all the countries in the world, the US, EU, Japan and BRICS nations included), and by September 2008, Derivatives had ballooned into a global 531 trillion Dollar market. That's eight times the GDP of the entire planet! "Financial Metastasis" at its very worst. Since then, some have estimated this Derivatives global market figure to be in the region of One-Quadrillion Dollars...

Naturally, when that collapse began, the caretaker governments in the US, European Union and elsewhere, immediately sprang into action and implemented "Operation Bail-out" of all the mega-banks, insurance companies, stock exchanges and speculation markets, and their respective operators, controllers and "friends." Thus, trillions upon trillions of Dollars, Euros and Pounds were given to Goldman Sachs, Citicorp, Morgan Stanley, AIG, HSBC and other "too big to fail" financial institutions... which is newspeak for "too powerful to fail", because they hold politicians, political parties and governments in their steel grip.

All of this was paid with taxpayer dollars or, even worse, with uncontrolled and irresponsible issuance of Public Money bank notes and treasury bonds, especially by the Federal Reserve Bank which has, in practice, technically hyper-inflated the US Dollar: "Quantitative Easing" they call it, which is Newspeak for hyperinflation.

So far, however, like the proverbial Naked Emperor, nobody dares to state this openly. At least not until some "uncontrolled" event triggers or unmasks what should by now be obvious to all: Emperor Dollar is totally and completely naked.[7] When that happens, we will then see bloody social and civil wars throughout the world and not just in Greece and Argentina.

By then, however, and as always happens, the powerful bankster clique and their well-paid financial and media operators, will be watching the whole hellish spectacle perched in the safety and comfort of their plush boardrooms atop the skyscrapers of New York, London, Frankfurt, Buenos Aires and Sao Paulo...


Footnotes

1. The concept of "Geoeconomics" was coined by the New York-based Council on Foreign Relations, through a studies group honouring Maurice Greenberg, the financier who was for decades CEO of American International Group (AIG) which collapsed in 2008 and had strong conflict-of-interest ties with major insurance and reinsurance broker Marsh Group whose CEO was his son Jeffrey. Both father and son were indicted for fraud by then New York Attorney General Elliot Spitzer. Spitzer would later pay a very heavy price for this after becoming Governor of New York State when someone "discovered" his sex escapades which were quickly blown up into a major scandal by The New York Times...

2. We have described the basic Global Power Elite structure, model and objectives in our e-Book The Coming World Government: Tragedy & Hope?, available through www.asalbuchi.com.ar.

3. For more information, see the Third Pillar of the Second Republic Project "Reject the Debt-Based Economy" on www.secondrepublicproject.com.

4. Some notable exceptions: Today: Libya, Iran, Syria, China; In the past: Peron's Argentina, Germany and Italy in the 30's and 40's.... Are we seeing a pattern here?

5. See The New York Times, 22 September 2008

6. See White Paper comparing Debt Laundering mechanisms to Money Laundering mechanisms, lodged under Pillar No 3 "Reject the Debt-Based Economy" of Second Republic Project in www.secondrepublicproject.com.

7. This is more fully described in the author's book The Coming World Government: Tragedy & Hope?, in the chapter "Death & Resurrection of the US Dollar". Details on www.asalbuchi.com.ar. Also available upon request by E-mail: salbuchi@fibertel.com.ar.
"Abolish all taxation save that upon land values." -- Henry George

http://monetary.org
http://schalkenbach.org

Geolibertarian

THE RETREAT OF THE SHADOW LENDERS:
WHY DEFLATION, NOT INFLATION, IS THE ORDER OF THE DAY


Ellen Brown, June 18th, 2009
http://www.webofdebt.com/articles/quantitative_easing.php


    While contrarians are screaming "hyperinflation!", the money supply is actually shrinking. This is because most money today comes into existence as bank loans, and lending has shrunk substantially. That means the Fed needs to "monetize" debt just to fill the breach.

On June 3, 2009, Federal Reserve Chairman Ben Bernanke assured Congress, "The Federal Reserve will not monetize the debt." Bill Bonner, writing in The Daily Reckoning, said it had a ring to it, like President Nixon's "I am not a crook" and President Clinton's "I did not have sex with that woman." Monetizing the debt is precisely what the Fed will do, says Bonner, because it has no other choice. The Chinese are growing reluctant to lend, the taxpayers are tapped out, and the deficit is at unprecedented levels. "Even good people do bad things when they get in a jam. The Feds are already in pretty deep . . . and they're going a lot deeper."

But Mr. Bernanke denied it. "Either cuts in spending or increases in taxes will be necessary to stabilize the fiscal situation," he said.

Both alternatives will be vigorously opposed, leaving Congress in the same deadlock California has been in for the last year. That makes the monetization option at least worth a look. What is wrong with it? Bill Bonner calls it "larceny on the grandest scale. Rather than honestly repaying what it has borrowed, a government merely prints up extra currency and uses it to pay its loans. The debt is 'monetized' . . . transformed into an increase in the money supply, thereby lowering the purchasing power of everybody's savings."

So say the pundits, but in the past year the Fed has "monetized" over a trillion dollars worth of debt, yet the money supply is not expanding. As investment adviser Mark Sunshine observed in a June 12 blog:

    "While media talking heads were ranting about how the Fed was running their printing presses overtime to push up money supply, the facts were very different. M1 has actually declined since the middle of December, 2008. During the same six month period M2 has only risen by a little less than 3%."

The Fed is no longer reporting M3, the largest measure of the money supply, but according to Sunshine:

    "We know that broader measures of money supply, like M3, haven't materially risen in 2009.

    M3 followers can get a very rough idea of what M3 would have been, if it were published, by looking at the Federal Reserve quarterly Flow of Funds Accounts of the United States which was distributed yesterday. As it turns out, total net borrowing of the United States (private and public) dropped approximately $255 billion in the first quarter and other indicators of M3 fell or are about flat (on a net basis). . . . This data supports the theory that the fall in private borrowing is more than offsetting the rise in government borrowing and therefore, at least for the time being, financing the deficit isn't a problem."

All of this flap about the Fed driving the economy into hyperinflation because it is creating money on its books reflects a fundamental misconception about how our money and banking system actually works. In monetizing the government's debt, the Fed is just doing what banks do every day. All money is created by banks on their books, as many authorities have attested. The Fed is just stepping in where the commercial banking system has failed. Except for coins, which are issued by the government and compose only about one ten-thousandth of the money supply (M3), our money today is nothing but bank credit (or debt); and we're now laboring under a credit freeze, which means banks aren't creating nearly as many loans as they used to. In February, the Bank for International Settlements published research showing that European banks could not settle their debts because of a $2 trillion shortage of U.S. dollars. Proposals for alternative reserve currencies followed. And in March, Blackstone Group CEO Stephen Schwarzman reported that up to 45% of the world's wealth has been destroyed by the credit crisis. The missing "wealth" cannot be restored without putting the missing "money" back into the system, and that means getting the credit engine going again.

Congress, the Treasury and the Federal Reserve have therefore been throwing money at the banks, trying to build up the banks' capital so they can make enough loans to refuel the economy. At a capital requirement of 8%, $8 in capital can be leveraged into $100 in loans. But lending remains far below earlier levels, and it's not because the banks are refusing to lend. The banks insist that they are making as many loans as they're allowed to make with their existing deposit and capital bases. The real bottleneck is with the "shadow lenders" – those investors who, until late 2007, bought massive amounts of bank loans bundled up as "securities," taking those loans off the banks' books, making room for yet more loans to be originated out of the banks' capital and deposit bases. In a Washington Times article titled "Banks Still Standing Amid Credit Rubble," Patrice Hill wrote:

    "Before last fall's financial crisis, banks provided only $8 trillion of the roughly $25 trillion in loans outstanding in the United States, while traditional bond markets provided another $7 trillion, according to the Federal Reserve. The largest share of the borrowed funds - $10 trillion - came from securitized loan markets that barely existed two decades ago. . . .

    "Many legislators in Congress complain that banks aren't lending, and cite that as an excuse to vote against further bank bailout funds. . . . But Mr. Regalia (chief economist at the U.S. Chamber of Commerce) said these critics are wrong. 'Banks are lending more, but 70 percent of the system isn't there anymore,' he said."

Seventy percent of the system isn't there anymore because the traditional bond markets and securitized loan markets have dried up. Writes Hill:

    "Congress' demand that banks fill in for collapsed securities markets poses a dilemma for the banks, not only because most do not have the capacity to ramp up to such large-scale lending quickly. The securitized loan markets provided an essential part of the machinery that enabled banks to lend in the first place. By selling most of their portfolios of mortgages, business and consumer loans to investors, banks in the past freed up money to make new loans. . . .

    "The market for pooled subprime loans, known as collateralized debt obligations (CDOs), collapsed at the end of 2007 and, by most accounts, will never come back. Because of the surging defaults on subprime and other exotic mortgages, investors have shied away from buying the loans, forcing banks and Wall Street firms to hold them on their books and take the losses."

The retreat of the shadow lenders has created a credit freeze globally; and when credit shrinks, the money supply shrinks with it. That means there is insufficient money to buy goods, so workers get laid off and factories get shut down, perpetuating a vicious spiral of economic collapse and depression. To reverse that cycle, credit needs to be restored; and when the banks can't do it, the Fed needs to step in and start "monetizing" debt.

So why don't Fed officials just say that is what they are up to and put our minds at ease? Probably because they can't without exposing the whole banking game. The curtain would be thrown back and we the people would know that our money system is sleight of hand. The banks never had all that money they supposedly lent to us. We've been paying interest for something they created out of thin air! Indeed, their credit money is less substantial than air, which at least has some molecules bouncing around in it. Bank credit exists only in cyberspace.

Ben Bernanke's predecessor Alan Greenspan was sometimes compared to the Wizard of Oz, the little man who hid behind a curtain pulling levers and twisting dials, maintaining the smoke and mirrors illusion that an all-powerful force was keeping things under control. Early in his term, Chairman Bernanke was criticized for revealing too much. "If you're going to play the Wizard," said one TV commentator, "you have to stay behind the curtain." The Chairman has evidently learned his lesson and is now playing the role, wrapping his moves in that veil of mystery expected of the man considered the world's most powerful banker, the Wizard who moves markets with his words.

The problem with the Wizard playing his cards close to the chest is that investors don't know how to play theirs. The Chinese have grown so concerned about the soundness of their dollar investments that the head of China's second-largest bank recently said the U.S. government should start issuing bonds in China's currency, the yuan. What do we want with yuan? We need dollars; and we would be better off getting them from our own central bank than borrowing them from foreign rivals. We could then spend them on projects aimed at internal domestic development – as the Chinese themselves have been doing – and get the wheels of production turning again.

If Ben Bernanke stands by his word and refuses to monetize the federal debt, Congress should consider issuing the money itself, as the U.S. Constitution provides. The "full faith and credit of the United States" is an asset of the United States, and it should properly be issued and lent by the United States rather than by unaccountable private banks and shadow lenders.  The true path to economic recovery – the path from an economy strangled in debt to one blooming in prosperity – is to reclaim money and credit as public resources, transforming money from private master to public servant.
"Abolish all taxation save that upon land values." -- Henry George

http://monetary.org
http://schalkenbach.org

Geolibertarian

INFLATION FEARS: REAL OR HYSTERIA?

Ellen Brown
May 10th, 2011
www.webofdebt.com/articles/inflation_fears.php

Debate continues to rage between the inflationists who say the money supply is increasing, dangerously devaluing the currency, and the deflationists who say we need more money in the economy to stimulate productivity. The debate is not just an academic one, since the Fed's monetary policy turns on it and so does Congressional budget policy.

Inflation fears have been fueled ever since 2009, when the Fed began its policy of "quantitative easing" (effectively "money printing"). The inflationists point to commodity prices that have shot up. The deflationists, in turn, point to the housing market, which has collapsed and taken prices down with it. Prices of consumer products other than food and fuel are also down. Wages have remained stagnant, so higher food and gas prices mean people have less money to spend on consumer goods. The bubble in commodities, say the deflationists, has been triggered by the fear of inflation. Commodities are considered a safe haven, attracting a flood of "hot money" -- investment money racing from one hot investment to another.

To resolve this debate, we need the actual money supply figures. Unfortunately, the Fed quit reporting M3, the largest measure of the money supply, in 2006.

Fortunately, figures are still available for the individual components of M3. Here is a graph that is worth a thousand words. It comes from ShadowStats.com (Shadow Government Statistics or SGS) and is reconstructed from the available data on those components. The red line is the M3 money supply reported by the Fed until 2006. The blue line is M3 after 2006.


The chart shows that the overall U.S. money supply is shrinking, despite the Fed's determination to inflate it with quantitative easing. Like Japan, which has been doing quantitative easing (QE) for a decade, the U.S. is still fighting deflation.

Here is another telling chart – the M1 Money Multiplier from the Federal Reserve Bank of St. Louis:


Barry Ritholtz comments, "All that heavy breathing about the flood of liquidity that was going to pour into the system. Hyper-inflation! Except not so much, apparently." He quotes David Rosenberg: "Fully 100% of both QEs by the Fed merely was new money printing that ended up sitting idly on commercial bank balance sheets. Money velocity and money multiplier are stagnant at best." If QE1 and QE2 are sitting in bank reserve accounts, they're not driving up the price of gold, silver, oil and food; and they're not being multiplied into loans, which are still contracting.

The part of M3 that collapsed in 2008 was the "shadow banking system," including money market funds and repos. This is the non-bank system in which large institutional investors that have substantially more to deposit than $250,000 (the FDIC insurance limit) park their money overnight. Economist Gary Gorton explains [.pdf]:

    The financial crisis . . . was due to a banking panic in which institutional investors and firms refused to renew sale and repurchase agreements (repo) – short-term, collateralized, agreements that the Fed rightly used to count as money. Collateral for repo was, to a large extent, securitized bonds. Firms were forced to sell assets as a result of the banking panic, reducing bond prices and creating losses. There is nothing mysterious or irrational about the panic. There were genuine fears about the locations of subprime risk concentrations among counterparties. This banking system (the "shadow" or "parallel" banking system)-- repo based on securitization -- is a genuine banking system, as large as the traditional, regulated banking system. It is of critical importance to the economy because it is the funding basis for the traditional banking system. Without it, traditional banks will not lend, and credit, which is essential for job creation, will not be created.

Before the banking crisis, the shadow banking system composed about half the money supply; and it still hasn't been restored. Without the shadow banking system to fund bank loans, banks will not lend; and without credit, there is insufficient money to fund businesses, buy products, or pay salaries or taxes. Neither raising taxes nor slashing services will fix the problem. It needs to be addressed at its source, which means getting more credit (or debt) flowing in the local economy.

When private debt falls off, public debt must increase to fill the void. Public debt is not the same as household debt, which debtors must pay off or face bankruptcy. The U.S. federal debt has not been paid off since 1835. Indeed, it has grown continuously since then, and the economy has grown and flourished along with it.

As explained in an earlier article, the public debt is the people's money. The government pays for goods and services by writing a check on the national bank account. Whether this payment is called a "bond" or a "dollar," it is simply a debit against the credit of the nation. As Thomas Edison said in the 1920s:

    If our nation can issue a dollar bond, it can issue a dollar bill. The element that makes the bond good, makes the bill good, also. The difference between the bond and the bill is the bond lets money brokers collect twice the amount of the bond and an additional 20%, whereas the currency pays nobody but those who contribute directly in some useful way. . . . It is absurd to say our country can issue $30 million in bonds and not $30 million in currency. Both are promises to pay, but one promise fattens the usurers and the other helps the people.

That is true, but Congress no longer seems to have the option of issuing dollars, a privilege it has delegated to the Federal Reserve. Congress can, however, issue debt, which as Edison says amounts to the same thing. A bond can be cashed in quickly at face value. A bond is money, just as a dollar is.

An accumulating public debt owed to the IMF or to foreign banks is to be avoided, but compounding interest charges can be eliminated by financing state and federal deficits through state- and federally-owned banks. Since the government would own the bank, the debt would effectively be interest-free. More important, it would be free of the demands of private creditors, including austerity measures and privatization of public assets.

[Continued...]
"Abolish all taxation save that upon land values." -- Henry George

http://monetary.org
http://schalkenbach.org

Geolibertarian

http://truth-out.org/news/item/9430-out-of-the-mouths-of-babes-video-of-12-year-old-money-reformer-tops-a-million-views

A Monetary Policy for the 99%: Twelve-Year-Old Reformer Goes Viral

By Ellen Brown
Truthout
May 29, 2012

The YouTube video of 12-year-old Victoria Grant speaking at the Public Banking in America conference last month has gone viral, topping a million views on various web sites.

    http://www.youtube.com/watch?v=Bx5Sc3vWefE

Monetary reform - the contention that governments, not banks, should create and lend a nation's money - has rarely even made the news, so this is a first. Either the times they are a-changin', or Victoria managed to frame the message in a way that was so simple and clear that even a child could understand it.


12-year old Victoria Grant explains why her homeland,
Canada, and most of the world, is in debt. April 27,
2012 at the Public Banking in America Conference,
Philadelphia, PA. (Screengrab: publicbankingtv)


Basically, her message was that banks create money "out of thin air" and lend it to people and governments at interest. If governments borrowed from their own banks, they could keep the interest and save a lot of money for the taxpayers.

She said her own country of Canada actually did this, from 1939 to 1974. During that time, the government's debt was low and sustainable and it funded all sorts of remarkable things. Only when the government switched to borrowing privately did it acquire a crippling national debt.

Borrowing privately means selling bonds at market rates of interest (which in Canada quickly shot up to 22 percent), and the money for these bonds is ultimately created by private banks. For the latter point, Victoria quoted Graham Towers, head of the Bank of Canada for the first twenty years of its history. He said:

    Each and every time a bank makes a loan, new bank credit is created - new deposits - brand new money. Broadly speaking, all new money comes out of a Bank in the form of loans. As loans are debts, then under the present system all money is debt.

Towers was asked, "Will you tell me why a government with power to create money, should give that power away to a private monopoly and then borrow that which Parliament can create itself, back at interest, to the point of national bankruptcy?" He replied, "If Parliament wants to change the form of operating the banking system, then certainly that is within the power of Parliament."

In other words, said Victoria, "If the Canadian government needs money, they can borrow it directly from the Bank of Canada. The people would then pay fair taxes to repay the Bank of Canada. This tax money would in turn get injected back into the economic infrastructure and the debt would be wiped out. Canadians would again prosper with real money as the foundation of our economic structure and not debt money. Regarding the debt money owed to the private banks such as the Royal Bank, we would simply have the Bank of Canada print the money owing, hand it over to the private banks and then clear the debt to the Bank of Canada."

Problem solved; case closed.

But critics said, "Not so fast." Victoria might be charming, but she was naïve.

One critic was William Watson, writing in the Canadian newspaper The National Post in an article titled "No, Victoria, There Is No Money Monster." Interestingly, he did not deny Victoria's contention that "When you take out a mortgage, the bank creates the money by clicking on a key and generating 'fake money out of thin air.'" Watson acknowledged:

    Well, yes, that's true of any "fractional-reserve" banking system. Even before they were regulated, even before there was a Bank of Canada, banks understood they didn't have to keep reserves equal to the total amount of money they'd lent out: They could count on most depositors most of the time not showing up to take out their money all at once. Which means, as any introduction to monetary economics will tell you, banks can indeed "create" money.

What he disputed was that the Canadian government's monster debt was the result of paying high interest rates to banks. Rather, he said:

    We have a big public debt because, starting in the early 1970s and continuing for three full decades, our governments spent more on all sorts of things, including interest, than they collected in taxes.... The problem was the idea, still widely popular, from the Greek parliament to the streets of Montreal, that governments needn't pay their bills.

That contention is countered, however, by the Canadian government's own auditor general (the nation's top accountant, who reviews the government's books). In 1993, the auditor general noted in his annual report:

"[The] cost of borrowing and its compounding effect have a significant impact on Canada's annual deficits. From Confederation up to 1991-92, the federal government accumulated a net debt of $423 billion. Of this, $37 billion represents the accumulated shortfall in meeting the cost of government programs since Confederation. The remainder, $386 billion, represents the amount the government has borrowed to service the debt created by previous annual shortfalls."

In other words, 91 percent of the debt consists of compounded interest charges. Subtract those and the government would have a debt of only C$37 billion, very low and sustainable, just as it was before 1974.

[Continued...]


10 year old explains the truth about where money comes from...

      http://www.youtube.com/watch?v=bmR4qtEdu0I

----------------------------------

^^  If pre-teen girls can understand both how our debt-based money system works and why we desperately need to replace it with a debt-free system, why can't the average adult male?

Time to turn the ball game off, put the toys away, grow up, and focus on the things that really matter, guys!
"Abolish all taxation save that upon land values." -- Henry George

http://monetary.org
http://schalkenbach.org

Geolibertarian

http://realcurrencies.wordpress.com/2013/04/08/why-tom-woods-is-wrong-about-the-greenbackers/

Why Tom Woods is wrong about the Greenbackers

by Anthony Migchels
Real Currencies
April 8, 2013


                 Tom Woods

Recently the Austrians have been aiming some firepower at the 'Greenbackers' again. As we have documented extensively, Austrianism was developed mainly to organize the opposition against the current monetary order and to mind control it into cheerleading the reinstatement of the Gold Standard, which the Money Power has been planning for decades now. Not much new under the sun, but since they insist, let's have some more fun with their silly antics.

Tom Woods has 34k likes on Facebook, is asked by friends to run for the Senate, is clearly groomed to play a major role in Libertarianism in the future and looks like the Heir Apparent to Lew Rockwell's 'Catholic arm of Libertarianism'. Certainly an influential fellow and he recently opened up a page on his site called 'Why the Greenbackers are wrong'.

As we know, the Greenbackers are the sworn enemies of the Austrians. They don't like to talk too much about them, lest they would get unwarranted attention, and they usually reserve their gall for the Keynesians. But in fact, the Greenbackers are their 'raison d'être', to usurp the real opposition against the Money Power's control of the money supply. So it's probably necessary, even if a tad boring, to rebut this 5100 word screed.

Let's keep in mind what is at stake

We could print enough debt free paper money to pay off the National Debt. This Debt is entirely credit based, for every debt free dollar we print, a credit based dollar would go out of circulation. Meaning: no inflation. After the operation we would have no national debt and the Fed Govt would be spared $450 billion per year in interest payments. This is the Greenback and this is not something the Money Power is going to allow and stopping this is what Austrianism is all about.

This would end the Fed, at least as we know it, and it would nationalize money. This, according to Tom Woods, would mean more socialism. You see, it is clearly better when a private banking cartel prints money, slaps interest on it and a few Trillionaires rake in this $450 billion per year. That is, after all, the 'free market', a great example of 'human action' by the Rothschilds, certainly not to be interfered with.

As we have analyzed in 'Libertarianism's main fault: Blaming the State while ignoring the Money Power', the Money Power, which sits at the top of the international power hierarchy, owns all the money supplies in the world, including that of the US. It uses it to enslave us with interest and the boom-bust cycle.

It can do this, because it forced sovereigns in the past to create de facto currency monopolies through legal tender laws and then hand these to the Money Power.

So reclaiming this currency monopoly actually devolves power from the summit (the Money Power) to one level lower, the Government. In short: less socialism than we have now, not more.

[Continued...]


http://realcurrencies.wordpress.com/2013/04/10/the-daily-bell-usurious-commercial-banking-is-freedom-interest-free-government-money-is-tyranny/

The Daily Bell: Usurious Commercial Banking is Freedom, Interest-Free Government Money is Tyranny

by Anthony Migchels
Real Currencies
April 10, 2013



The Daily Bell is indeed back: trying to reframe the debate once more. Saying Government money printing is always bad because the Money Power controls the State. There is some truth in this but as always evades the real issue. The elves passionately defend commercial banking while not wasting a single word on usury. But Usury is the ultimate Centralizer of Power.

Morphing the classical Marxist vs. Capitalist dialectic into public vs. private, the elves recently have been trying to regain some lost ground (see here and here). Their latest effort is 'Real Evil: Attributing Money Creation to the State'. Money Power controls the State, they correctly note, while 'forgetting' the Money Power is the Banking Cartel they are simultaneously defending as 'free market banks'.

And 't is true: the fact that the Government creates a monopoly, only to hand it to the Money Power to milk the masses and start World Government just shows how utterly subservient to the Money Power Governments all over the world are.

Here's the power pyramid again, it helps to keep a clear view of what is actually at stake.



The Protocols do not promote a free market Utopia. They want an all powerful World State. All its proxies see strong states. Nazism, which is a typical Money Power system, strong State, one Fuehrer, collectivist. Marxism, with its omnipotent State.

The free markets of Capitalism, aka the Money Power Transnational Monopoly, are just a ruse, it's all one big block. Both Capitalism and Marxism are monopolies.

[Continued...]


http://realcurrencies.wordpress.com/2013/06/25/the-sulking-elves-of-the-woods-of-the-north/

The sulking Elves from the Woods of the North

by Anthony Migchels
Real Currencies
June 25, 2013

While some say Elves do not exist, in the days of yesteryear they were well known as tricksters, messing with livestock and fooling people with their strange beliefs. Cross breeding between Elves and humans is possible, but when the Old Norse hero Helgi raped an Elf woman, she bore Skuld, who became so adept at witchcraft that she was almost invincible in battle. So perhaps it's better to leave the Elves alone after all.

The problem is: they won't leave us humans alone and strange noises keep coming from the distant fairy lands of Austrianism. Recently the Elves again opened fire with 'the Con of Public Banking'.

Here's some of their text:

"Ellen Brown has written another statist hagiography called The Public Bank Solution. As a libertarian-oriented website promoting free-market economic approaches, we obviously disagree with her premise.

We don't mind disagreeing with her because she is a nice person and she doesn't do what some allied "neo-Nazi" websites do when confronted with their faulty analyses, which is to immediately launch vicious animadversions in place of logical rebuttals (because they have none).

We call such sites "neo-Nazi," because public banking, LETS and other such alternative solutions have at their heart certain authoritarian premises, either overtly or covertly. A deep fascist impulse seems to run through the conversation.

Do they seek the lash? They may repudiate Hitler, but don't believe it. They are likely in favor of the entire socialist paraphernalia, from private bank confiscation, to top-down monopoly money printing by the state and even the rule of one "superhuman" individual with a self-proclaimed "iron will" of the sort mentioned by Adolf Hitler and Benito Mussolini.

They admire people like Margrit Kennedy and her husband, both of whom had extensive careers with UNESCO. In fact, as we have extensively shown, the United Nations is the foremost backer of certain kinds of alternative LETS systems."


The fascism of denouncing Usury! The iniquity of exposing massive elite financing of Austrianism! How much must these endearing creatures suffer before us primitive humans will understand how we have wronged them?

The conclusion of the Elves' article runs: "The erudite Ms. Brown aside, those supporting such ideas do so with intentions much different than they claim, and some of them are, from what we can tell, maliciously opportunistic and plain evil."

When confronted with this down to earth comment on the article and its conclusion, "Hmmm. I, George Washington's Blog and others who agree with Ellen are a pack of liars – and the North Dakota State Bank is an example of evil? Give me a break please.", they responded: "It is evil to attack Austrian, free-market economics as a knowing part of a Jewish [read: Zionist -- see this and this] genocidal, globalist conspiracy, label those who believe in freedom and write about it at great risk to themselves as elite conspirators, claim that a 10,000 year old freedom conversation is actually a Jewish [read: Zionist] con job, constantly celebrate the state over individual human action, etc. Evil seems to sum it up."

Yes, the cushy 'middle class wages' Gary North was making in the sixties at the Volker Fund and the multi-million dollar mansion that Daily Bell Editor Anthony Wile owns in Toronto certainly indicate grave risks to their health and fortune in valiantly defending the rights of the rich.

And then there is this quote from their article on 'BIS demands Global Depression?':

"This is absolutely true but to blame "Austrianism" for this – and Austrianism is a term of contempt, as the correct phrase is Austrian economics – is entirely disingenuous. Just because one understands the reality of economics doesn't mean one is supportive of the kind of ruin that the BIS now demands."

In all fairness: the Mises Institute itself calls for 'Radical Austrianism', and I assume they actually take pride in the term. But I don't mind taking some credit for having slanted the phrase to become 'derogatory' in their ears. The day is not far off that their 'correct phrase Austrian economics' will sound like a curse too.

The Elves live in the Woods......

A few months ago I responded to Tom Woods' rather simpleminded 'Why the Greenbackers are wrong'. A little while later Woods indirectly answered this with 'the Greenbackers' Fake Quote Industry'. In my response to his original article I made a little fun about the difficulty the Libertarian leadership seems to have with the rather blatant Government conspiracy known as 9/11. Woods simply turns this argument upside down:

Woods: "The correct argument against the Fed is not that we need the federal government to create our money more directly rather than delegating the task to the Fed, but that is the Greenbacker objection to the Fed. No free-market person thinks this way. No one who takes liberty seriously thinks this way. This naivete on the part of the Greenbackers is especially hard to believe since so many of them are 9/11 Truthers. That means their position is this: we believe the U.S. government conspired to kill thousands of its own citizens in the interest of furthering its imperial ambitions, but we think they are the best people to trust with the creation of money.

"Not all Greenbackers are Truthers, to be sure, but the position is terminally naive all the same."


Note that Woods studiously avoids taking a position here himself. In fact, we know his position: he's on the side of the Government. Woods, hating the State, has a wonderful future as a leading Libertarian politician and he certainly is not going to destroy that future with something as silly as 9/11 Truth.

We know all too well how the Libertarians chuckle at the 'conspiracy industry'. That's only one reason we keep warning the Truth Community about this Trojan Horse messing up our affairs.

After this brazen assault on the Truth Community, he goes on to make a little fun about the many fake quotes that circulate in the Populist movement. This is indeed an annoying phenomenon. Two great populist classics, Ellen Brown's 'Web of Debt' and Bill Still's 'the Money Masters' were slightly compromised by these quotes and here at Real Currencies we have been spreading them too, until the uncompromising gaze of the uncanny Name789 sternly reeducated me on these matters. As usual, I was the last to learn, as Bill Still already in 2011 opened up a page warning for bad quotes in his film, after the copyright holders of his film refused his request to correct them. Ellen Brown had no problems admitting some mistakes back in 2010. That's what normal people do when they launch major works and are shown inevitable inaccuracies after the fact.

Here's how Tom Woods concludes his article: "If they can't be bothered to carry out this most fundamental obligation of the scholar (to check quotes, A.M.), how can we believe they have fulfilled the far more laborious task of studying economics beyond the slogans of their fellow Greenbackers? Their record makes me skeptical. You should be skeptical, too."

So because we get a few quotes wrong, people shouldn't believe anything we say and we should now all forget about the $450 billion the US Government loses on 'debt-service' to the banking cartel on the National Debt. Let alone about the $300k interest the common man pays for his $200k mortgage. I'm certain there is a term for this kind of logical fallacy, but I forget what it is.

We should not forget this is coming from a 'Catholic' guy who has managed to ignore 1500 years worth of quotes by Catholic scholars denouncing Usury in his 'the Church and the Market'. According to Mises himself Christianity is 'a religion of hatred' because it despises 'free market' ideology, so I'm not too sure about Woods' scholarship either.

.....and the dark and dangerous Woods are in the cold and dreary North

Of course, it's 'Grumpy Gary' who's behind the 'fake quote' trick. North has been devising sly arguments against all those pesky little monetary reform programs that have been popping up over the last century or so for more than fifty years now and his body of work pervades the entirety of Austrianism. In 2010 he thought to do away with Ellen Brown with the 'fake quote' trick and utterly failed. Previously we discussed his take on usury and how he tried to make the uninitiated believe that the problem is not interest, but fractional reserve banking. Worse still is his outrageous take on Usury in the Bible, exclaiming it's bad to be in debt, but quite alright to lend out money at interest. Talking about bad quotes.......

Anyhow, for a normal person it's always difficult to fathom outright lies. It's always nasty to call someone a liar, because it's hard to prove we're not dealing with honest mistakes and the basic instinct is to stick with the benefit of doubt.

But recently I came across this little gem:

    http://www.youtube.com/watch?v=yqUSbrHguO0

We watch Gary North so you don't have to, so I certainly don't recommend wasting an hour on this dreary piece of work. Here's the deal: North is talking to some young people at a Libertarian get together. It's a seminar in which the youngsters are trained how to deal with 'Greenbackerism' and the 'murky underworld of Social Credit'.

The core of the lecture is how to deal with the notion that economies are depressed because of a lack of purchasing power. North explains a line of reasoning the youngsters can use in arguments when faced with this fundamental economic issue. As we know, Austrianism denies that deflation stifles economic growth and causes depressions. They even go so far as to deny that deflation caused the Great Depression (North does that again at about 29 min in the video). Hilariously, as I cannot help myself from gloatingly repeating, they use this FED study to back up this notion.

Deflation and Usury are closely related to the theme of 'scarcity of money', the notion that there is insufficient liquidity in the economy to finance all plausible trades, causing permanent depression. This is at the core of Social Credit, Keynesianism and Interest-Free Economics. It's also well analyzed in the Protocols.

But whereas there is clear and insurmountable statistical evidence proving that a declining money supply will lead to a contracting economy, Austrianism has only deductionist arguments, i.e. wholly devoid of any empirical proof to counter this.

And this is why the video is so interesting. Because Gary openly admits this. He begins this lecture with a number of tips on how to defend what he (at 6:50) calls 'ideological positions'. Meaning he openly distances himself from any scientific basis for his beliefs.

In short, according to the master Mind Controller Gary North himself , Austrianism promotes the purely ideological position that deflation and scarcity of money do not exist and that 'markets will clear' when they are 'free'. Money has nothing to do with it.

Not only that, in this seminar Gary is teaching the youngsters on how to defend these purely 'ideological' and 'unpopular' positions and he even has no qualms to admit from whom he learned to do it himself: at 10:31 he starts explaining how the communist cadres of the old days went about defending 'unpopular' and 'minority' positions.

Conclusion

We can rest assured that the Libertarian Leadership knows exactly what it's doing. They know quite well that Usury, Deflation and Scarcity of Money are the great problems of money and their whole ideology (and they know full well it's an ideology and thus pseudo-science) is centered around arguments combating those trying to alleviate the suffering of the multitude by addressing these most fundamental problems. They have been paying Gary for more than 50 years to keep us all busy and distracted. They are grooming Tom Woods to push Gary's venom as the future head of the Mises Institute or even in the Senate itself. They are funding Anthony Wile and the Daily Bell to call those looking for answers 'fascists' and 'evil'.

Elves do exist, but they're not really evil. They're just a sorry bunch looking for attention and getting more of it than they should.
"Abolish all taxation save that upon land values." -- Henry George

http://monetary.org
http://schalkenbach.org

Geolibertarian

http://www.globalresearch.ca/goldman-sachs-making-money-by-stealing-it/29823

Goldman Sachs: Making Money by Stealing It

by Stephen Lendman
Global Research, March 17, 2012
sjlendman.blogspot.ca

Money power in private hands and democracy can't co-exist. Wall Street crooks transformed America into an unprecedented money making racket.

Goldman symbolizes master of the universe of financial manipulation (Reuters April 16, 2011)  It's been involved in nearly all financial scandals since the 19th century.

It makes money the old-fashioned way, through market manipulation, the scamming of investors, bribing political Washington, having its executives in top administration posts, and getting open-ended low or no interest rate bailouts when needed.

It's business model and culture assure billions of bonus dollars for company officials, complicit traders, and others on the take.

Compared to Goldman, Bernie Madoff was small-time.

Former bank regulator expert on white-collar crime, public finance, economics, and related law, Bill Black explained Goldman shenanigans pertaining to earlier SEC charges this way:

    "Goldman designed a rigged trifecta. It turned a massive loss into a material profit by selling deeply underwater, toxic CDOs it owned. It helped make John Paulson (CEO of a huge hedge fund that Goldman would love to have as an ally) a massive profit - in a 'profession' where reciprocal favors are key, and blew up its customers that purchased the CDOs."

An SEC civil suit charged Goldman with defrauding customers. It made billions, and settled for $550 million. It was pocket change, the equivalent of four 2009 revenue days. It hardly mattered.

No executive was fined or imprisoned. Grand theft continues unabated. It includes pump-and-dump schemes. The corporate media does not explain. Only scammed customers and insiders who are involved understand.

On March 4, Black used James Q. Wilson's "broken windows" metaphor pertaining to blue collar crime. He applied it to far more serious elite white-collar offenses. None rise to the level of financial ones. The amounts involved are staggering. Broken lives, communities, and economies result. The landscape's littered with them.

No firm's more adept at amassing fraudulent fortunes than Goldman. Its CEO Lloyd Blankfein calls it "doing God's work."

It's also appalling that the Wall Street Journal "serve(s) as cheerleader and apologist for those" who amass wealth by stealing it, said Black.

Goldman Executive Resigns

Broken clocks are right twice a day. On March 14, so was The New York Times. It gave rare op-ed space to high level Goldman executive Greg Smith for views worth sharing. He served as executive director and head of the firm's domestic equity derivatives business in Europe, the Middle East and Africa.

Headlining, "Why I Am Leaving Goldman Sachs," he said:

After almost 12 years with the firm, today was his last day. He worked there "long enough to understand the trajectory of its culture, its people and its identity. And I can honestly say that the environment now is as toxic and destructive as I have ever seen it."

In "simplest terms," he said client interests are sidelined. Goldman thinks only about making money. "The firm has veered so far from the place I joined right out of college that I can no longer in good conscience say that I identify with what it stands for."

In less blunt terms than Black, this writer, and other critics, he stopped short of explaining its grand theft model, but comments he made suggested it.

An earlier Goldman culture contributed to its success, he said. "It revolved around teamwork, integrity, a spirit of humility, and always doing right by our clients."

Exaggerated? Absolutely, whatever minor differences between today and earlier existed. According to Smith, "virtually no trace" of what he admired remains. Whatever pride he once had is now gone. It was time to leave when he no longer could look aspiring students wanting Goldman jobs "in the eye and tell them what a great place this was to work."

How can it be operating like a crime family. It's business model involves grand theft. Customers are defrauded, not helped. Politicians are bought like toothpaste. Laws are subverted and ignored. Others are discarded or rewritten at its behest. Economies are wrecked for profit.

When future Goldman histories are written, honest ones will say Blankfein, president Gary Cohn, and other top executives "lost hold of the firm's culture on their watch. I truly believe that this decline in the firm's moral fiber represents the single most serious threat to its long-run survival."

Smith said his career involved advising two of the largest global hedge funds, five of America's largest asset managers, and three of the Middle East's most prominent sovereign wealth funds. His clients manage over a trillion dollars in assets.

He took pride, he said, advising them "to do what I believe is right for them, even if it means less money for the firm. This view is becoming increasingly unpopular at Goldman Sachs." He knew it was time to leave.

"Leadership used to be about ideas, setting an example and doing the right thing. Today, if you make enough money for the firm (and are not currently an ax murderer), you will be promoted into a position of influence."

Three key ways, include:

(1) Advising clients to invest in assets Goldman wants to dump, including toxic ones.

(2) Getting them to buy what makes Goldman most money.

(3) Trading "any illiquid, opaque product with a three-letter acronym," no matter how much toxic or without merit.

He attended sales meetings devoid of ways to help clients. They're about maximizing Goldman's profit, no matter how illegally. "It makes me ill," he said, "how callously people talk about ripping their clients off. Over the last 12 months, I have seen five different managing directors refer to their own clients as 'muppets.' "

They're marks to be manipulated and scammed for profit. He can't explain how senior managers don't understand that losing client trust means forfeiting their business. No matter if you're the smartest guys in the room. They'll know you're smart enough to scam them without hearing back room insults about "muppets," "ripping eyeballs out," and "getting paid" at their expense.

He hopes his article "can be a wake-up call to" Goldman's board. "Make the client the focal point of your business again. Without clients you will not make money. In fact, you will not exist."

"Weed out the morally bankrupt people, no matter how much money they make for the firm." Make "people want to work here for the right reasons. People who care only about making money will not sustain this firm — or the trust of its clients — for very much longer."

A Final Comment

Goldman's entire history, or at least most of it, reflects predation. Its scams way pre-date Smith's birth. In the 1920s, its Ponzi scheme investment trusts defrauded investors. Goldman profited. They lost out, and when Wall Street crashed were left high, dry, and broke.

One trust sold investors reflected others. Its offering price was $104 a share. It became virtually worthless at $1.75. It lost over 98% of its value. Unwary buyers then and now lose out. Only the stakes get bigger.

Today they're enormous. Getting in bed with Goldman's like swimming with sharks. You're prey. They're predators. Those burned understand Goldman's culture enough to know it's toxic and corrupted.

In 2002, it was largely responsible for Greece's debt problems. It involved circumventing Eurozone rules in return for mortgaging assets.

Using creative accounting, debt was hidden through off-balance sheet shenanigans. Derivatives called cross-currency swaps were used. Government debt issued in dollars and yen was swapped for euros, then later exchanged back to original currencies.

Debt entrapment followed. Greece was held hostage to repay it. The country's been raped and pillaged. Paying bankers comes first. Doing it left Greeks impoverished, high and dry. Goldman profited enormously by scamming an entire country and millions in it.

Its business model thrives on similar schemes globally. It's about profits, no matter the huge cost to others. Expecting this leopard to change spots is like imagining reformers will transform Washington.

Former alderman Paddy Bauler once said "Chicago ain't ready for reform." It's still not ready and may never be.

Neither is political Washington, Goldman, other Wall Street crooks, or their counterparts throughout corporate America.

They connive, cheat, profiteer from wars, drain trillions from households and the national treasury, wage war on labor, sell dangerous products, destroy the environment, and do whatever they damn please complicit with corrupt politicians who let them.

Goldman and other Wall Street giants are the worst of the lot. Standing armies pale by comparison. Michael Hudson calls finance warfare by other means. Generalissimo bankers run everything.

Their job is pillaging households, investors, communities, and countries for profit. Doing so holds humanity hostage. They'll lose everything unless stopped. Job one's assuring that's done. The stakes are too high for failure. It's up to public rage to change things.
"Abolish all taxation save that upon land values." -- Henry George

http://monetary.org
http://schalkenbach.org

Geolibertarian

http://www.globalresearch.ca/big-banks-continue-to-suck-at-the-government-with-never-ending-stealth-bailouts/29941

Big Banks Continue to "Suck at the Government" With Never-Ending Stealth Bailouts

by Washington's Blog



Global Research, March 24, 2012
Washington's Blog

Open-Ended Bailouts Are Continuing

We've previously documented the fact that bailouts of the big banks are continued in stealth mode up to the present day.

True, the banks claim they've repaid the Tarp bailout funds ... but nearly half of the banks "repaid" such bailout funds by borrowing from other government bailout funds (and the rest could only repay money by fudging their accounting and using stealth bailouts which are are a little harder to detect).

Indeed, the government has decided on perpetual bailouts for the too big to fail banks.

Some of the ongoing stealth bailouts include:

[Continued...]

-----------------------------









^^ Keep the above in mind the next time you hear reactionaries wax indignant about "food stamp" recipients.
"Abolish all taxation save that upon land values." -- Henry George

http://monetary.org
http://schalkenbach.org

Geolibertarian

http://www.globalresearch.ca/wall-street-s-protection-racket-of-covert-derivatives-jpmorgan-derivatives-prop-up-u-s-debt/31505

Wall Street's Protection Racket of Covert Derivatives: JPMorgan Derivatives Prop Up U.S. Debt
Why the Senate Won't Touch Jamie Dimon

by Ellen Brown



Global Research
June 20, 2012

When Jamie Dimon, CEO of JPMorgan Chase Bank, appeared before the Senate Banking Committee on June 13, he was wearing cufflinks bearing the presidential seal.  "Was Dimon trying to send any particular message by wearing the presidential cufflinks?" asked CNBC editor John Carney.  "Was he . . . subtly hinting that he's really the guy in charge?"

The groveling of the Senators was so obvious that Jon Stewart did a spoof news clip on it, featured in a Huffington Post piece titled "Jon Stewart Blasts Senate's Coddling Of JP Morgan Chase CEO Jamie Dimon," and Matt Taibbi wrote an op-ed called "Senators Grovel, Embarrass Themselves at Dimon Hearing."  He said the whole thing was painful to watch.

"What is going on with this panel of senators?" asked Stewart.  "They're sucking up to Jamie Dimon like they're on JPMorgan's payroll."  The explanation in a news clip that followed was that JPMorgan Chase is the biggest campaign donor to many of the members of the Banking Committee.

That is one obvious answer, but financial analysts Jim Willie and Rob Kirby think it may be something far larger, deeper, and more ominous.  They contend that the $3 billion-plus losses in London hedging transactions that were the subject of the hearing can be traced, not to European sovereign debt (as alleged), but to the record-low interest rates maintained on U.S. government bonds.

The national debt is growing at $1.5 trillion per year.  Ultra-low interest rates MUST be maintained to prevent the debt from overwhelming the government budget.  Near-zero rates also need to be maintained because even a moderate rise would cause multi-trillion dollar derivative losses for the banks, and would remove the banks' chief income stream, the arbitrage afforded by borrowing at 0% and investing at higher rates.

The low rates are maintained by interest rate swaps, called by Willie a "derivative tool which controls the bond market in a devious artificial manner."  How they control it is complicated, and is explored in detail in the Willie piece here and Kirby piece here.

Kirby contends that the only organization large enough to act as counterparty to some of these trades is the U.S. Treasury itself.  He suspects the Treasury's Exchange Stabilization Fund, a covert entity without oversight and accountable to no one. Kirby also notes that if publicly-traded companies (including JPMorgan, Goldman Sachs, and Morgan Stanley) are deemed to be integral to U.S. national security (meaning protecting the integrity of the dollar), they can legally be excused from reporting their true financial condition.  They are allowed to keep two sets of books.

Interest rate swaps are now over 80 percent of the massive derivatives market, and JPMorgan holds about $57.5 trillion of them.  Without the protective JPMorgan swaps, interest rates on U.S. debt could follow those of Greece and climb to 30%.  CEO Dimon could, then, indeed be "the guy in charge": he could be controlling the lever propping up the whole U.S. financial system.

Hero or Felon?

So should Dimon be regarded as a national hero?  Not if past conduct is any gauge.  Besides the recent $3 billion in JPMorgan losses, which look more like illegal speculation than legal hedging, there is JPM's use of its conflicting positions as clearing house and creditor of MF Global to siphon off funds that should have gone into customer accounts, and its responsibility in dooming Lehman Brothers by withholding $7 billion in cash and collateral.  There is also the fact that Dimon sat on the board of the New York Federal Reserve when it lent $55 billion to JPMorgan in 2008 to buy Bear Stearns for pennies on the dollar.  Dimon then owned nearly three million shares of JPM stock and options, in clear violation of 18 U.S.C. Section 208, which makes that sort of conflict of interest a felony.

Financial analyst John Olagues, a former stock options market maker, points out that the loan was guaranteed by $55 billion of Bear Stearns assets.  If Bear had that much in assets, the Fed could have given it the loan directly, saving it from being swallowed up by JPMorgan.  But Bear did not have a director on the board of the NY Fed.

Olagues also notes that JPMorgan received an additional $25 billion in TARP payments from the Treasury, which were evidently paid off by borrowing from the NY Fed at a very low 0.5%; and that JPM executives received some very large and highly suspicious bonuses called Stock Appreciation Rights and Restricted Stock Units (complicated variants of employee stock options and restricted stock).  In 2009, these bonuses were granted on the day JPMorgan stock reached its lowest value in five years.  The stock quickly rebounded thereafter, substantially increasing the value of the bonuses.  This pattern recurred in 2008 and 2012.

Olagues has evidence of systematic computer-generated selling of JPMorgan stock immediately prior to and on the dates of the granted equity compensation.  Collusion to manipulate the stock to accommodate the grant of options is called "spring-loading" and is a violation of SEC Rule 10 b-5 and tax laws, with criminal and civil penalties.

All of which suggests we could actually have a felon at the helm of our ship of state.

There is a movement afoot to get Dimon replaced on the Board, on the ground that his directorship represents a clear conflict of interest.  In May, Massachusetts Senate candidate Elizabeth Warren called for Dimon's resignation from the NY Fed board, and Vermont Senator Bernie Sanders has used the uproar over the speculative JPM losses to promote an overhaul of the Federal Reserve.  In a release to reporters, Warren said:

    "Four years after the financial crisis, Wall Street has still not been held accountable, and that lack of accountability has history repeating itself—huge, risky financial bets leading to billions in losses. It is time for some accountability. . . . Dimon stepping down from the NY Fed would be at least one small sign that Wall Street will be held accountable for their failures."

But what chance does even this small step have against the gun-to-the-head persuasion of a nightmare collapse of the entire U.S. debt scheme?

Propping Up a Pyramid Scheme

Is there no alternative but to succumb to the Mafia-like Wall Street protection racket of a covert derivatives trade in interest rate swaps?  As Willie and Kirby observe, that scheme itself must ultimately fail, and may have failed already.  They point to evidence that the JPM losses are not just $3 billion but $30 billion or more, and that JPM is actually bankrupt.

The derivatives casino itself is just a last-ditch attempt to prop up a private pyramid scheme in fractional-reserve money creation, one that has progressed over several centuries through a series of "reserves"—from gold, to Fed-created "base money," to mortgage-backed securities, to sovereign debt ostensibly protected with derivatives.  We've seen that the only real guarantor in all this is the government itself, first with FDIC insurance and then with government bailouts of too-big-to-fail banks.  If we the people are funding the banks, we should own them; and our national currency should be issued, not through banks at interest, but through our own sovereign government.

Unlike Greece, which is dependent on an uncooperative European Central Bank for funding, the U.S. still has the legal power to issue its own dollars or borrow them interest-free from its own central bank.  The government could buy back its bonds and refinance them at 0% interest through the Federal Reserve—which now buys them on the open market at interest like everyone else—or it could simply rip them up.

The chief obstacle to that alternative is the bugaboo of inflation, but many countries have proven that this approach need not be inflationary.  Canada borrowed from its own central bank effectively interest free from 1939 to 1974, stimulating productivity without creating inflation; Australia did it from 1912 to 1923; and China has done it for decades.

The private creation of money at interest is the granddaddy of all pyramid schemes; and like all such schemes, it must eventually collapse, despite a quadrillion dollar derivatives edifice propping it up.  Willie and Kirby think that time is upon us.  We need to have alternative, public and cooperative systems ready to replace the old system when it comes crashing down.
"Abolish all taxation save that upon land values." -- Henry George

http://monetary.org
http://schalkenbach.org

Geolibertarian

Note: Is the reason why Ellen Brown (among others -- see this, this and this) continues to get ignored is that her message transcends the narrow parameters of the false Austrian-vs.-Keynesian paradigm? You be the judge...

HOW CONGRESS COULD FIX ITS BUDGET WOES, PERMANENTLY

Ellen Brown
February 8, 2013
www.webofdebt.com/articles/budgetfix.php

As Congress struggles through one budget crisis after another, it is becoming increasingly evident that austerity doesn't work. We cannot possibly pay off a $16 trillion debt by tightening our belts, slashing public services, and raising taxes. Historically, when the deficit has been reduced, the money supply has been reduced along with it, throwing the economy into recession. After a thorough analysis of statistics from dozens of countries forced to apply austerity plans by the World Bank and IMF, former World Bank chief economist Joseph Stiglitz called austerity plans a "suicide pact."

Congress already has in its hands the power to solve the nation's budget challenges – today and permanently. But it has been artificially constrained from using that power by misguided economic dogma, dogma generated by the interests it serves.  We have bought into the idea that there is not enough money to feed and house our population, rebuild our roads and bridges, or fund our most important programs -- that there is no alternative but to slash budgets and deficits if we are to survive. We have a mountain of critical work to do, improving our schools, rebuilding our infrastructure, pursuing our research goals, and so forth. And with millions of unemployed and underemployed, the people are there to do it. What we don't have, we are told, is just the money to bring workers and resources together.

But we do have it.  Or we could.

Money today is simply a legal agreement between parties. Nothing backs it but "the full faith and credit of the United States." The United States could issue its credit directly to fund its own budget, just as our forebears did in the American colonies and as Abraham Lincoln did in the Civil War.

Any serious discussion of this alternative has long been taboo among economists and politicians. But in a landmark speech on February 6, 2013, Adair Turner, chairman of Britain's Financial Services Authority, broke the taboo with a historic speech recommending that approach. According to a February 7th article in Reuters, Turner is one of the most influential financial policy makers in the world.  His recommendation was supported by a 75-page paper explaining why handing out newly-created money to citizens and governments could solve economic woes globally and would not lead to hyperinflation.

Our Money Exists Only at the Will and Pleasure of Banks

Government-issued money would work because it addresses the problem at its source. Today, we have no permanent money supply. People and governments are drowning in debt because our money comes into existence only as a debt to banks at interest. As Robert Hemphill of the Atlanta Federal Reserve observed in the 1930s:

    We are completely dependent on the commercial banks. Someone has to borrow every dollar we have in circulation, cash or credit.  If the banks create ample synthetic money, we are prosperous; if not, we starve.

In the U.S. monetary system, the only money that is not borrowed from banks is the "base money" or "monetary base" created by the Treasury and the Federal Reserve (the Fed). The Treasury creates only the tiny portion consisting of coins. All of the rest is created by the Fed.  

Despite its name, the Fed is at best only quasi-federal; and most of the money it creates is electronic rather than paper. We the people have no access to this money, which is not turned over to the government or the people but goes directly into the reserve accounts of private banks at the Fed.  

It goes there and it stays there. Except for the small amount of "vault cash" available for withdrawal from commercial banks, bank reserves do not leave the doors of the central bank. According to Peter Stella, former head of the Central Banking and Monetary and Foreign Exchange Operations Divisions at the International Monetary Fund:

    In a modern monetary system – fiat money, floating exchange rate world – there is absolutely no correlation between bank reserves and lending. . . . Banks do not lend "reserves". . . .

    Whether commercial banks let the reserves they have acquired through QE sit "idle" or lend them out in the internet bank market 10,000 times in one day among themselves, the aggregate reserves at the central bank at the end of that day will be the same.

Banks do not lend their reserves to us, but they do lend them to each other. The reserves are what they need to clear checks between banks. Reserves move from one reserve account to another; but the total money in bank reserve accounts remains unchanged, unless the Fed itself issues new money or extinguishes it.

The base money to which we have no access includes that created on a computer screen through "quantitative easing" (QE), which now exceeds $3 trillion. That explains why QE has not driven the economy into hyperinflation, as the deficit hawks have long predicted; and why it has not created jobs, as was its purported mission. The Fed's QE money simply does not get into the circulating money supply at all.

What we the people have in our bank accounts is a mere reflection of the base money that is the exclusive domain of the bankers' club. Banks borrow from the Fed and each other at near-zero rates, then lend this money to us at 4% or 8% or 30%, depending on what the market will bear.  Like in a house of mirrors, the Fed's "base money" gets multiplied over and over whenever "bank credit" is deposited and relent; and that illusory house of mirrors is what we call our money supply.

We Need "Quantitative Easing" for the People

The quantitative easing engaged in by central banks today is not what UK Professor Richard Werner intended when he invented the term. Werner advised the Japanese in the 1990s, when they were caught in a spiral of "debt deflation" like the one we are struggling with now. What he had in mind was credit creation by the central bank for productive purposes in the real, physical economy. But like central banks now, the Bank of Japan simply directed its QE firehose at the banks. Werner complains:

    All QE is doing is to help banks increase the liquidity of their portfolios by getting rid of longer-dated and slightly less liquid assets and raising cash. . . . Reserve expansion is a standard monetarist policy and required no new label.

The QE he recommended was more along the lines of the money-printing engaged in by the American settlers in colonial times and by Abraham Lincoln during the American Civil War. The colonists' paper scrip and Lincoln's "greenbacks" consisted, not of bank loans, but of paper receipts from the government acknowledging goods and services delivered to the government. The receipts circulated as money in the economy, and in the colonies they were accepted in the payment of taxes.

The best of these models was in Benjamin Franklin's colony of Pennsylvania, where government-issued money got into the economy by way of loans issued by a publicly-owned bank. Except for an excise tax on liquor, the government was funded entirely without taxes; there was no government debt; and price inflation did not result. In 1938, Dr. Richard A. Lester, an economist at Princeton University, wrote, "The price level during the 52 years prior to the American Revolution and while Pennsylvania was on a paper standard was more stable than the American price level has been during any succeeding fifty-year period."

The Inflation Conundrum

The threat of price inflation is the excuse invariably used for discouraging this sort of "irresponsible" monetary policy today, based on the Milton Friedman dictum that "inflation is everywhere and always a monetary phenomenon." When the quantity of money goes up, says the theory, more money will be chasing fewer goods, driving prices up.

What it overlooks is the supply side of the equation. As long as workers are sitting idle and materials are available, increased "demand" will put workers to work creating more "supply." Supply will rise along with demand, and prices will remain stable.

True, today these additional workers might be in China or they might be robots. But the principle still holds: if we want the increased supply necessary to satisfy the needs of the people and the economy, more money must first be injected into the economy.  Demand drives supply.  People must have money in their pockets before they can shop, stimulating increased production.  Production doesn't need as many human workers as it once did. To get enough money in the economy to drive the needed supply, it might be time to issue a national dividend divided equally among the people.

Increased demand will drive up prices only when the economy hits full productive capacitys. It is at that point, and not before, that taxes may need to be levied—not to fund the federal budget, but to prevent "overheating" and keep prices stable. Overheating in the current economy could be a long time coming, however, since according to the Fed's figures, $4 trillion needs to be added into the money supply just to get it back to where it was in 2008.

Taxes might be avoided altogether, if excess funds were pulled out with fees charged for various government services. A good place to start might be with banking services rendered by publicly-owned banks that returned their profits to the public.

Taking a Lesson from Iceland: Austerity Doesn't Work

The Federal Reserve has lavished over $13 trillion in computer-generated bail-out money on the banks, and still the economy is flagging and the debt ceiling refuses to go away. If this money had been pumped into the real economy instead of into the black hole of the private banking system, we might have a thriving economy today.

We need to take a lesson from Iceland, which turned its hopelessly insolvent economy around when other European countries were drowning in debt despite severe austerity measures. Iceland's president Olafur Grimson was asked at the Davos conference in January 2013 why his country had survived where Europe had failed.  He replied:

"I think it surprises a lot of people that a year ago we were accepted by the world as a failed financial system, but now we are back on recovery with economic growth and very little unemployment, and I think the primary reason is that . . . we didn't follow the traditional prevailing orthodoxies of the Western world in the last 30 years.  We introduced currency controls; we let the banks fail; we provided support for the poor; we didn't introduce austerity measures of the scale you are seeing here in Europe.  And the end result four years later is that Iceland is enjoying progress and recovery very different from the other countries that suffered from the financial crisis." [Emphasis added.]

He added:

"[W]hy do [we] consider the banks to be the holy churches of the modern economy? . . . The theory that you have to bail out banks is a theory about bankers enjoying for their own profit the success and then letting ordinary people bear the failure through taxes and austerity, and people in enlightened democracies are not going to accept that in the long run."

The Road to Prosperity

We are waking up from the long night of our delusion. We do not need to follow the prevailing economic orthodoxies, which have consistently failed and are not corroborated by empirical data.  We need a permanent money supply, and the money must come from somewhere. It is the right and duty of government to provide a money supply that is adequate and sustainable.

It is also the duty of government to provide the public services necessary for a secure and prosperous life for its people. As Thomas Edison observed in the 1920s, if the government can issue a dollar bond, it can issue a dollar bill. Both are backed by "the full faith and credit of the United States."  The government can pay for all the services its people need and eliminate budget crises permanently, simply by issuing the dollars to pay for them, debt-free and interest-free.
"Abolish all taxation save that upon land values." -- Henry George

http://monetary.org
http://schalkenbach.org

Geolibertarian

http://www.prisonplanet.com/stunning-facts-about-how-the-banking-system-really-works-%E2%80%A6-and-how-it-is-destroying-america.html

Stunning Facts About How the Banking System Really Works ... And How It Is Destroying America

Washington's Blog
March 28, 2013

To understand the core problem in America today, we have to look back to the very founding of our country.

The Founding Fathers fought for liberty and justice. But they also fought for a sound economy and freedom from the tyranny of big banks:

"[It was] the poverty caused by the bad influence of the English bankers on the Parliament which has caused in the colonies hatred of the English and . . . the Revolutionary War." - Benjamin Franklin

"There are two ways to conquer and enslave a nation. One is by the sword. The other is by debt." - John Adams

"All the perplexities, confusion and distress in America arise, not from defects in their Constitution or Confederation, not from want of honor or virtue, so much as from the downright ignorance of the nature of coin, credit and circulation." - John Adams

"If the American people ever allow the banks to control issuance of their currency, first by inflation and then by deflation, the banks and corporations that grow up around them will deprive the people of all property until their children will wake up homeless on the continent their fathers occupied". — Thomas Jefferson

"I believe that banking institutions are more dangerous to our liberties than standing armies...The issuing power should be taken from the banks and restored to the Government, to whom it properly belongs." - Thomas Jefferson

"The Founding Fathers of this great land had no difficulty whatsoever understanding the agenda of bankers, and they frequently referred to them and their kind as, quote, 'friends of paper money. They hated the Bank of England, in particular, and felt that even were we successful in winning our independence from England and King George, we could never truly be a nation of freemen, unless we had an honest money system." -Peter Kershaw, author of the 1994 booklet "Economic Solutions"

Indeed, everyone knows that the American colonists revolted largely because of taxation without representation and related forms of oppression by the British. See this and this. But – according to Benjamin Franklin and others in the thick of the action – a little-known factor was actually the mainreason for the revolution.

To give some background on the issue, when Benjamin Franklin went to London in 1764, this is what he observed:

    When he arrived, he was surprised to find rampant unemployment and poverty among the British working classes... Franklin was then asked how the American colonies managed to collect enough money to support their poor houses. He reportedly replied:

    "We have no poor houses in the Colonies; and if we had some, there would be nobody to put in them, since there is, in the Colonies, not a single unemployed person, neither beggars nor tramps."

    In 1764, the Bank of England used its influence on Parliament to get a Currency Act passed that made it illegal for any of the colonies to print their own money. The colonists were forced to pay all future taxes to Britain in silver or gold. Anyone lacking in those precious metals had to borrow them at interest from the banks.

    Only a year later, Franklin said, the streets of the colonies were filled with unemployed beggars, just as they were in England. The money supply had suddenly been reduced by half, leaving insufficient funds to pay for the goods and services these workers could have provided. He maintained that it was "the poverty caused by the bad influence of the English bankers on the Parliament which has caused in the colonies hatred of the English and . . . the Revolutionary War." This, he said, was the real reason for the Revolution: "the colonies would gladly have borne the little tax on tea and other matters had it not been that England took away from the colonies their money, which created unemployment and dissatisfaction."

(for more on the Currency Act, see this.)

Alexander Hamilton echoed similar sentiments:

[Continued...]


http://www.prisonplanet.com/everyone-knows-that-the-federal-reserve-banks-are-private-except-the-american-people.html

Everyone Knows that the Federal Reserve Banks Are PRIVATE ... Except the American People

Washington's Blog
July 13, 2013

The country's most powerful "agency" – the Federal Reserve – is actually no more federal than Federal Express.

The U.S. Supreme Court ruled in 1928:

    Instrumentalities like the national banks or the federal reserve banks, in which there are private interests, are not departments of the government. They are private corporations in which the government has an interest.

The long-time Chairman of the House Banking and Currency Committee (Charles McFadden) said on June 10, 1932:

    Some people think that the Federal Reserve Banks are United States Government institutions. They are private monopolies ....

The Fed itself admitted (via Bloomberg):

    While the Fed's Washington-based Board of Governors is a federal agency subject to the Freedom of Information Act and other government rules, the New York Fed and other regional banks maintain they are separate institutions, owned by their member banks, and not subject to federal restrictions.

For that reason, the New York Fed alleged in the lawsuit brought by Bloomberg to force the Fed to reveal some information about its loans – Bloomberg LP v. Board of Governors of the Federal Reserve System, 08-CV-9595, U.S. District Court, Southern District of New York (Manhattan) – that it was not subject to Federal Freedom of Information Act.

As Bloomberg reported in a separate article:

    The Federal Reserve Bank of New York ... runs most of the lending programs. Most documents relevant to [a freedom of information lawsuit filed by Bloomberg news] are at the New York Fed, which isn't subject to FOIA law [a law which applies to Federal agencies}, according to the central bank. The Board of Governors has 231 pages of documents, to which it is denying access under an exemption for trade secrets.

San Francisco Federal Reserve research analyst David Lang confirmed in 2011:

    (Question): "I had a really quick question, the Federal Reserve Bank of San Francisco specifically, is that formed as a private corporation itself?"

    David Lang: "Ah yes it is actually. yes our state chartered banks, banks under a charter share that and we pay a dividend on those shares."

http://www.youtube.com/watch?v=UOEOa9iraeI (SF Fed admits a private corporation, pay dividends!!!)

The senior counsel for the Federal Reserve confirmed in a court hearing in the Bloomberg lawsuit that the Federal Reserve Banks are "independent corporations", which are "not agencies", are "privately held", and have "private boards of directors".

And Federal Reserve law enforcement officers agree.

Postscript:  The Bank of International Settlements (BIS) – which is the "Central Banks' Central Bank" – is, in turn, owned by the Fed and other central banks:

    The BIS is a closed organization owned by the 55 central banks. The heads of these central banks travel to the Basel headquarters once every two months, and the General Meeting, the BIS's supreme executive body, takes place once a year.

So the private banks own the Fed (and other central banks), and the central banks own BIS.


http://www.prisonplanet.com/the-federal-reserve-is-bailing-out-foreign-banks-more-than-the-american-people-or-economy.html

The Federal Reserve Is Bailing Out FOREIGN Banks ... More than the American People or Economy

Washington'sBlog
July 28, 2013

Federal Reserve Policy Mainly Benefits Big Foreign Banks

We've extensively documented that the Federal Reserve is intentionally locking up bank money so that it is not loaned out to Main Street. Specifically – due to Fed policy – 81.5% of all money created by quantitative easing is sitting there gathering dust in the form of "excess reserves" ... instead of being loaned out to help Main Street or the American economy.

And we've extensively documented that a large percentage of the bailouts went to foreign banks (and see this and this). (A 2010 Fed audit also revealed that of the $1.25 trillion of mortgage-backed securities the central bank purchased after the housing bubble popped, some $442.7 billion -  more than 35% – were bought from foreign banks.)

It turns out that these themes are all connected.

Specifically, most of the Fed-created money which is gathering dust is actually being held by foreign banks.

The Levy Economics Institute noted in May:

[Continued...]


http://www.prisonplanet.com/5-years-after-the-financial-crisis-the-big-banks-are-still-committing-massive-crimes.html

5 Years After the Financial Crisis, The Big Banks Are Still Committing Massive Crimes

Washington's Blog
September 20, 2013

Preface: Not all banks are criminal enterprises. The wrongdoing of a particular bank cannot be attributed to other banks without proof. But – as documented below – many of the biggest banks have engaged in unimaginably bad behavior.

You Won't Believe What They've Done ...

Here are just some of the improprieties by big banks over the last century (you'll see that many shenanigans are continuing today):

[Continued...]
"Abolish all taxation save that upon land values." -- Henry George

http://monetary.org
http://schalkenbach.org

Geolibertarian

http://www.globalresearch.ca/collateral-damage-qe3-and-the-shadow-banking-system/5343591

Collateral Damage: QE3 and the Shadow Banking System

By Ellen Brown
Global Research
July 23, 2013



Rather than expanding the money supply, quantitative easing (QE) has actually caused it to shrink by sucking up the collateral needed by the shadow banking system to create credit. The "failure" of QE has prompted the Bank for International Settlements to urge the Fed to shirk its mandate to pursue full employment, but the sort of QE that could fulfill that mandate has not yet been tried.

Ben Bernanke's May 29th speech signaling the beginning of the end of QE3 provoked a "taper tantrum" that wiped about $3 trillion from global equity markets – this from the mere suggestion that the Fed would moderate its pace of asset purchases, and that if the economy continues to improve, it might stop QE3 altogether by mid-2014. The Fed is currently buying $85 billion in US Treasuries and mortgage-backed securities per month.

The Fed Chairman then went into damage control mode, assuring investors that the central bank would "continue to implement highly accommodative monetary policy" (meaning interest rates would not change) and that tapering was contingent on conditions that look unlikely this year. The only thing now likely to be tapered in 2013is the Fed's growth forecast.

It is a neoliberal maxim that "the market is always right," but as former World Bank chief economist Joseph Stiglitz demonstrated, the maxim only holds when the market has perfect information. The market may be misinformed about QE, what it achieves, and what harm it can do. Getting more purchasing power into the economy could work; but QE as currently practiced may be having the opposite effect.

Unintended Consequences

The popular perception is that QE stimulates the economy by increasing bank reserves, which increase the money supply through a multiplier effect.  But as shown earlier here, QE is just an asset swap – assets for cash reserves that never leave bank balance sheets. As University of Chicago Professor John Cochrane put it in a May 23rd blog:

    QE is just a huge open market operation. The Fed buys Treasury securities and issues bank reserves instead. Why does this do anything? Why isn't this like trading some red M&Ms for some green M&Ms and expecting it to affect your weight? . . .

    We have $3 trillion or so in bank reserves. Bank reserves can only be used by banks, so they don't do much good for the rest of us. While the reserves may not do much for the economy, the Treasuries they remove from it are in high demand.

Cochrane discusses a May 23rd Wall Street Journal article by Andy Kessler titled "The Fed Squeezes the Shadow-Banking System," in which Kessler argued that QE3 has backfired. Rather than stimulating the economy by expanding the money supply, it has contracted the money supply by removing the collateral needed by the shadow banking system. The shadow system creates about half the credit available to the economy but remains unregulated because it does not involve traditional bank deposits. It includes hedge funds, money market funds, structured investment vehicles, investment banks, and even commercial banks, to the extent that they engage in non-deposit-based credit creation. Kessler wrote:

    The Federal Reserve's policy—to stimulate lending and the economy by buying Treasurys—is creating a shortage of safe collateral, the very thing needed to create credit in the shadow banking system for the private economy. The quantitative easing policy appears self-defeating, perversely keeping economic growth slower and jobs scarcer.

That explains what he calls the great economic paradox of our time:

    Despite the Federal Reserve's vast, 4½-year program of quantitative easing, the economy is still weak, with unemployment still high and labor-force participation down. And with all the money pumped into the economy, why is there no runaway inflation? . . . The explanation lies in the distortion that Federal Reserve policy has inflicted on something most Americans have never heard of: "repos," or repurchase agreements, which are part of the equally mysterious but vital "shadow banking system." The way money and credit are created in the economy has changed over the past 30 years. Throw away your textbook.

Fractional Reserve Lending Without the Reserves

The post-textbook form of money creation to which Kessler refers was explained in a July 2012 article by IMF researcher Manmohan Singh titled "The (Other) Deleveraging: What Economists Need to Know About the Modern Money Creation Process." He wrote:

    In the simple textbook view, savers deposit their money with banks and banks make loans to investors . . . . The textbook view, however, is no longer a sufficient description of the credit creation process. A great deal of credit is created through so-called "collateral chains." We start from two principles: credit creation is money creation, and short-term credit is generally extended by private agents against collateral. Money creation and collateral are thus joined at the hip, so to speak. In the traditional money creation process, collateral consists of central bank reserves; in the modern private money creation process, collateral is in the eye of the beholder.

Like the reserves in conventional fractional reserve lending, collateral can be re-used (or rehypothecated) several times over. Singh gives the example of a US Treasury bond used by a hedge fund to get financing from Goldman Sachs. The same collateral is used by Goldman to pay Credit Suisse on a derivative position. Then Credit Suisse passes the US Treasury bond to a money market fund that will hold it for a short time or until maturity. Singh states that at the end of 2007, about $3.4 trillion in "primary source" collateral was turned into about $10 trillion in pledged collateral – a multiplier of about three. By comparison, the US M2 money supply (the credit-money created by banks via fractional reserve lending) was only about $7 trillion in 2007.  Thus credit-creation-via-collateral-chains is a major source of credit in today's financial system.

Exiting Without Panicking the Markets

The shadow banking system is controversial. It funds derivatives and other speculative ventures that may harm the real, producing economy or put it at greater risk. But the shadow system is also a source of credit for many businesses that would otherwise be priced out of the credit market, and for such things as credit cards that we have come to rely on. And whether we approve of the shadow system or not, depriving it of collateral could create mayhem in the markets. According to the Treasury Borrowing Advisory Committee of the Securities and Financial Markets Association, the shadow system could be short as much as $11.2 trillion in collateralunder stressed market conditions. That means that if every collateral claimant tried to grab its collateral in a Lehman-like run, the whole fragile Ponzi scheme could collapse. That alone is reason for the Fed to prevent "taper tantrums" and keep the market pacified. But the Fed is under pressure from the Swiss-based Bank for International Settlements, which has been admonishing central banks to back off from their asset-buying ventures.

An Excuse to Abandon the Fed's Mandate of Full Employment?

The BIS said in its annual report in June:

    Six years have passed since the eruption of the global financial crisis, yet robust, self-sustaining, well balanced growth still eludes the global economy. . . . Central banks cannot do more without compounding the risks they have already created. . . . {They must} encourage needed adjustments rather than retard them with near-zero interest rates and purchases of ever-larger quantities of government securities. . . . Delivering further extraordinary monetary stimulus is becoming increasingly perilous, as the balance between its benefits and costs is shifting. Monetary stimulus alone cannot provide the answer because the roots of the problem are not monetary. Hence, central banks must manage a return to their stabilization role, allowing others to do the hard but essential work of adjustment.

For "adjustment," read "structural adjustment" – imposing austerity measures on the people in order to balance federal budgets and pay off national debts. The Fed has a dual mandate to achieve full employment and price stability. QE was supposed to encourage employment by getting money into the economy, stimulating demand and productivity. But that approach is now to be abandoned, because "the roots of the problem are not monetary." So concludes the BIS, but the failure may not be in the theory but the execution of QE. Businesses still need demand before they can hire, which means they need customers with money to spend. QE has not gotten new money into the real economy but has trapped it on bank balance sheets. A true Bernanke-style helicopter drop, raining money down on the people, has not yet been tried.

[Continued...]
"Abolish all taxation save that upon land values." -- Henry George

http://monetary.org
http://schalkenbach.org

Geolibertarian

http://www.counterpunch.org/2013/09/05/making-the-world-safe-for-banksters/

Making the World Safe for Banksters

Larry Summers and the System

by Ellen Brown
CounterPunch
September 05, 2013

In an August 2013 article titled "Larry Summers and the Secret 'End-game' Memo," Greg Palast posted evidence of a secret late-1990s plan devised by Wall Street and U.S. Treasury officials to open banking to the lucrative derivatives business. To pull this off required the relaxation of banking regulations not just in the US but globally. The vehicle to be used was the Financial Services Agreement of the World Trade Organization.

The "end-game" would require not just coercing support among WTO members but taking down those countries refusing to join. Some key countries remained holdouts from the WTO, including Iraq, Libya, Iran and Syria. In these Islamic countries, banks are largely state-owned; and "usury" – charging rent for the "use" of money – is viewed as a sin, if not a crime. That puts them at odds with the Western model of rent extraction by private middlemen. Publicly-owned banks are also a threat to the mushrooming derivatives business, since governments with their own banks don't need interest rate swaps, credit default swaps, or investment-grade ratings by private rating agencies in order to finance their operations.

Bank deregulation proceeded according to plan, and the government-sanctioned and -nurtured derivatives business mushroomed into a $700-plus trillion pyramid scheme. Highly leveraged,  completely unregulated, and dangerously unsustainable, it collapsed in 2008 when investment bank Lehman Brothers went bankrupt, taking a large segment of the global economy with it. The countries that managed to escape were those sustained by public banking models outside the international banking net.

These countries were not all Islamic. Forty percent of banks globally are publicly-owned. They are largely in the BRIC countries—Brazil, Russia, India and China—which house forty percent of the global population. They also escaped the 2008 credit crisis, but they at least made a show of conforming to Western banking rules. This was not true of the "rogue" Islamic nations, where usury was forbidden by Islamic teaching. To make the world safe for usury, these rogue states had to be silenced by other means. Having failed to succumb to economic coercion, they wound up in the crosshairs of the powerful US military.

Here is some data in support of that thesis.

The End-game Memo

In his August 22nd article, Greg Palast posted a screenshot of a 1997 memo from Timothy Geithner, then Assistant Secretary of International Affairs under Robert Rubin, to Larry Summers, then Deputy Secretary of the Treasury. Geithner referred in the memo to the "end-game of WTO financial services negotiations" and urged Summers to touch base with the CEOs of Goldman Sachs, Merrill Lynch, Bank of America, Citibank, and Chase Manhattan Bank, for whom private phone numbers were provided.

The game then in play was the deregulation of banks so that they could gamble in the lucrative new field of derivatives. To pull this off required, first, the repeal of Glass-Steagall, the 1933 Act that imposed a firewall between investment banking and depository banking in order to protect depositors' funds from bank gambling. But the plan required more than just deregulating US banks. Banking controls had to be eliminated globally so that money would not flee to nations with safer banking laws. The "endgame" was to achieve this global deregulation through an obscure addendum to the international trade agreements policed by the World Trade Organization, called the Financial Services Agreement. Palast wrote:

Until the bankers began their play, the WTO agreements dealt simply with trade in goods–that is, my cars for your bananas.  The new rules ginned-up by Summers and the banks would force all nations to accept trade in "bads" – toxic assets like financial derivatives.

Until the bankers' re-draft of the FSA, each nation controlled and chartered the banks within their own borders.  The new rules of the game would force every nation to open their markets to Citibank, JP Morgan and their derivatives "products."

And all 156 nations in the WTO would have to smash down their own Glass-Steagall divisions between commercial savings banks and the investment banks that gamble with derivatives.

The job of turning the FSA into the bankers' battering ram was given to Geithner, who was named Ambassador to the World Trade Organization.

WTO members were induced to sign the agreement by threatening their access to global markets if they refused; and they all did sign, except Brazil. Brazil was then threatened with an embargo; but its resistance paid off, since it alone among Western nations survived and thrived during the 2007-2009 crisis. As for the others:

    The new FSA pulled the lid off the Pandora's box of worldwide derivatives trade.  Among the notorious transactions legalized: Goldman Sachs (where Treasury Secretary Rubin had been Co-Chairman) worked a secret euro-derivatives swap with Greece which, ultimately, destroyed that nation.  Ecuador, its own banking sector de-regulated and demolished, exploded into riots.  Argentina had to sell off its oil companies (to the Spanish) and water systems (to Enron) while its teachers hunted for food in garbage cans.  Then, Bankers Gone Wild in the Eurozone dove head-first into derivatives pools without knowing how to swim–and the continent is now being sold off in tiny, cheap pieces to Germany.

The Holdouts

That was the fate of countries in the WTO, but Palast did not discuss those that were not in that organization at all, including Iraq, Syria, Lebanon, Libya, Somalia, Sudan, and Iran. These seven countries were named by U.S. General Wesley Clark (Ret.) in a 2007 "Democracy Now" interview as the new "rogue states" being targeted for take down after September 11, 2001. He said that about 10 days after 9-11, he was told by a general that the decision had been made to go to war with Iraq. Later, the same general said they planned to take out seven countries in five years: Iraq, Syria, Lebanon, Libya, Somalia, Sudan, and Iran.

What did these countries have in common? Besides being Islamic, they were not members either of the WTO or of the Bank for International Settlements (BIS). That left them outside the long regulatory arm of the central bankers' central bank in Switzerland. Other countries later identified as "rogue states" that were also not members of the BIS included North Korea, Cuba, and Afghanistan.

The body regulating banks today is called the Financial Stability Board (FSB), and it is housed in the BIS in Switzerland. In 2009, the heads of the G20 nations agreed to be bound by rules imposed by the FSB, ostensibly to prevent another global banking crisis. Its regulations are not merely advisory but are binding, and they can make or break not just banks but whole nations. This was first demonstrated in 1989, when the Basel I Accord raised capital requirements a mere 2%, from 6% to 8%. The result was to force a drastic reduction in lending by major Japanese banks, which were then the world's largest and most powerful creditors. They were undercapitalized, however, relative to other banks. The Japanese economy sank along with its banks and has yet to fully recover.

Among other game-changing regulations in play under the FSB are Basel III and the new bail-in rules. Basel III is slated to impose crippling capital requirements on public, cooperative and community banks, coercing their sale to large multinational banks.

The "bail-in" template was first tested in Cyprus and follows regulations imposed by the FSB in 2011. Too-big-to-fail banks are required to draft "living wills" setting forth how they will avoid insolvency in the absence of government bailouts. The FSB solution is to "bail in" creditors – including depositors – turning deposits into bank stock, effectively confiscating them.

The Public Bank Alternative

Countries laboring under the yoke of an extractive private banking system are being forced into "structural adjustment" and austerity by their unrepayable debt. But some countries have managed to escape. In the Middle East, these are the targeted "rogue nations." Their state-owned banks can issue the credit of the state on behalf of the state, leveraging public funds for public use without paying a massive tribute to private middlemen. Generous state funding allows them to provide generously for their people.

Like Libya and Iraq before they were embroiled in war, Syria provides free education at all levels and free medical care. It also provides subsidized housing for everyone (although some of this has been compromised by adoption of an IMF structural adjustment program in 2006 and the presence of about 2 million Iraqi and Palestinian refugees). Iran too provides nearly free higher education and primary health care.

Like Libya and Iraq before takedown, Syria and Iran have state-owned central banks that issue the national currency and are under government control. Whether these countries will succeed in maintaining their financial sovereignty in the face of enormous economic, political and military pressure remains to be seen.

As for Larry Summers, after proceeding through the revolving door to head Citigroup, he became State Senator Barack Obama's key campaign benefactor. He played a key role in the banking deregulation that brought on the current crisis, causing millions of US citizens to lose their jobs and their homes. Yet Summers is President Obama's first choice to replace Ben Bernanke as Federal Reserve Chairman. Why? He has proven he can manipulate the system to make the world safe for Wall Street; and in an upside-down world in which bankers rule, that seems to be the name of the game.
"Abolish all taxation save that upon land values." -- Henry George

http://monetary.org
http://schalkenbach.org

Geolibertarian

http://www.globalresearch.ca/former-fed-officials-on-quantitative-easing-a-feast-for-wall-street-legalized-bank-robbery-and-high-grade-monetary-heroin/5358206

Former Fed Officials on Quantitative Easing: "A Feast for Wall Street", "Legalized Bank Robbery" and "High Grade Monetary Heroin"

By Stephen Lendman
Global Research
November 15, 2013



Andrew Huszar is a former Fed official. In 2009 and 2010, he managed its $1.25 trillion mortgaged-backed security purchase program.

He's a former Morgan Stanley managing director. He's currently a Rutgers Business School senior fellow. He's a QE confessor.

He witnessed Bernanke's scam up close and personal. It benefits Wall Street. It ignores Main Street. Bernanke planned it that way.

Investopedia calls QE "monetary policy used to increase the money supply by buying government securities or other securities from the market."

It's supposed to "increase the money supply by flooding financial institutions with capital, in an effort to promote increased lending and liquidity."

According to Ellen Brown, QE contracted the money supply. It did so "by sucking up the collateral needed by the shadow banking system to create credit."

It's just an "asset swap." Assets for cash reserves "never leave bank balance sheets."

QE is counterproductive. It's self-defeating. It constrains economic growth. It doesn't create jobs. It benefits Wall Street at the expense of Main Street.

It works when used constructively. Money injected responsibly into the economy creates growth. It creates jobs. When people have money they spend it.

A virtuous cycle of prosperity is possible. America once was sustainably prosperous. Today it's heading for a slow-motion train wreck.

Former Reagan administration Office of Management and Budget Director David Stockman calls QE "high grade monetary heroin."

One day, it'll "kill the patient," he says. It's the closest thing to "legalized bank robbery." It robs poor Peter to benefit rich Paul. It's recklessly out-of-control.

Dallas Fed president Richard Fisher agrees with Stockman. "QE can't go on forever because (it'll) kill the patient," he said.

Bernanke, Yellen and other Fed governors apparently disagree. Pedal to the metal QE defines Fed policy.

What can't go on forever, won't. The longer bad policy continues, the worse the stiff result when it ends.

Reckless Fed policy was initiated. It continues out-of-control. Huszar apologized. On November 11, he headlined his Wall Street Journal op-ed "Confessions of a Quantitative Easier." He began saying:

"I can only say: I'm sorry, America."

"As a former Federal Reserve official, I was responsible for executing the centerpiece program of the Fed's first plunge into the bond-buying experiment known as quantitative easing."

"The central bank continues to spin QE as a tool for helping Main Street."

Baloney! Bernanke and other Fed governors lied. The Fed isn't federal. It's privately owned. Major banks run it. They control policy.

Wall Street's infested with criminals. Grand theft is official policy. Corporate crooks aren't prosecuted. Money power runs America. Major Wall Street banks do most of all.

They play by their own rules. They control Fed policy. Money printing madness enriches them. It does so at the expense of Main Street.

On Wall Street, past is prologue. New scams follow old ones. Washington acts as facilitator. Regulators look the other way. Business as usual continues.

Bernanke is Wall Street's hired hand. So is Janet Yellen. She'll replace him when he steps down in January.

On November 14, she testified before the Senate Banking, Housing and Urban Affairs Committee. She lied saying "the economy is significantly stronger and continues to improve."

She ignored a protracted Main Street Depression. She lied again saying "the Federal Reserve is using its monetary policy tools to promote a more robust recovery."

Huszar exposed her saying he came "to recognize (QE) for what it really is: the greatest backdoor Wall Street bailout of all time."

"We went on a bond-buying spree," he said. It was sold as a way to help Main Street. "Instead it was a feast for Wall Street."

It's part of the greatest ever wealth transfer from ordinary people to banks, other corporate favorites and rich elites.

Since 2009, the world's billionaires doubled their wealth. Their numbers grew from 1,360 in 2009 to 2,170 in 2013.

Their collective $6.5 trillion wealth nearly matches China's GDP. It's the world's second largest economy.

Banks, super-rich elites, and other high net worth investors feasted on easy money. It's like shooting fish in a barrel. They borrow nearly interest free.

They invest for exponential returns. They do what mere mortals can't. Some, perhaps many, get inside information. Market manipulation adds greater wealth.

Yellen knows. She explained nothing. She lied on Capitol Hill. As Fed chairman next year, she promised to continue the scam.

Money printing madness substitutes for stimulative growth polices. Bernanke helped engineer the greatest wealth transfer in history.

America's 1% never had it better. Banks, major corporations, big investors, and high net worth individuals alone benefitted. They did so at the expense of ordinary Americans.

Unemployment, poverty, homelessness, hunger and overall human needs are at Depression era levels.

Manipulative, destructive Fed policy is largely to blame. Obama and Capitol Hill share it.

When finance capital prospers at the expense of ordinary people, economies are hollowed out and wrecked. Neofeudalism follows.

[Continued...]
"Abolish all taxation save that upon land values." -- Henry George

http://monetary.org
http://schalkenbach.org

Geolibertarian

http://www.washingtonsblog.com/2013/11/top-judge.html

Government Excuses for Letting the Banksters Off Scot-Free Are Bogus

The Failure To Punish Wall Street Criminals Is The Core Cause Of Our Sick Economy

By Washington's Blog
November 22, 2013

U.S. Attorney General Eric Holder said:

I am concerned that the size of some of these institutions [banks] becomes so large that it does become difficult for us to prosecute them when we are hit with indications that if you do prosecute, if you do bring a criminal charge, it will have a negative impact on the national economy, perhaps even the world economy.

As we've repeatedly noted, this is wholly untrue.

If the big banks were important to the economy, would so many prominent economists, financial experts and bankers be calling for them to be broken up?

If the big banks generated prosperity for the economy, would they have to be virtually 100% subsidized to keep them afloat?

If the big banks were helpful for an economic recovery, would they be prolonging our economic instability?

In fact, failing to prosecute criminal fraud has been destabilizing the economy since at least 2007 ... and will cause huge crashes in the future.

After all, the main driver of economic growth is a strong rule of law.

Nobel prize winning economist Joseph Stiglitz says that we have to prosecute fraud or else the economy won't recover:

[Continued...]
"Abolish all taxation save that upon land values." -- Henry George

http://monetary.org
http://schalkenbach.org

Geolibertarian

http://www.cooperativeindividualism.org/george-henry_on-greenbacks-free-silver-and-free-banking-1889.html

On Greenbacks, Free Silver, and Free Banking

by Henry George

[Reprinted from The Standard, 14 December, 1889]

The meeting in St. Louis between Powderly, Wright and Beaumont of the Knights of Labor and the officials of the Farmers' alliance and kindred organizations seems to have resulted in establishing relations which will aid in the interchange of views and the gradual concentration on mutual aims, without much definite immediate result. Anything better than this was, however, hardly to be expected, for the strength of these organizations in among the farmers of the west, who from their situation are behind in new matters of discussion.

Though the land resolution adopted does not amount to anything in itself, it at least serves as a peg on which to hang discussion, and the platform recognizes the land question as one of the great questions to which effort is to be directed. One of the best things done was the adoption of a resolution in favor of the Australian ballot, and while all sorts of reforms, or alleged reforms, were indorsed, money, land and transportation are the three matters which it was agreed that the farmers and the workingmen should strive to press to the front.

As has been seen in the Knights of Labor, the land question, as the discussion proceeds, must steadily come to the lead. The land resolution is as follows:

    "We demand the passage of laws prohibiting the alien ownership of land, and that congress take early action to devise some plan to obtain by purchase all land now owned by aliens and foreign syndicates, and that all lands now held by railroads and other corporations in excess of such as is actually used by them be purchased by the government and held for actual settlers only."

The discussion of alien ownership of land inevitably carries with it the discussion of ownership of land; and any discussion of such a scheme of purchase will quickly develop the idea of the single tax as a cheaper and better way of securing land to actual users. The financial demands of the platform are: (1) The issue of a sufficient amount of fractional currency to facilitate exchange through the United States mails. (2) The free and unlimited coinage of silver.

The first of these demands is eminently just and wise. For the withdrawal of the fractional currency from circulation there was no manner of valid excuse. It was simply a little job of the contractionists, silver men and express companies at the expense of the great body of the people, and has inconvenienced the farmers, who must go some distance to a post office to get a postal order, more than any other class. But it is an inconvenience to all, for no system of postal notes or postal orders can be as convenient for small remittances as was this fractional currency. And it is a loss to the people of the United States as a whole, since in the fractional currency a considerable part of the public debt was kept in a non-interest bearing form. That much of the fractional currency was dirty and ill smelling was no argument against it, any more than the dirtiness of a shirt is an argument against the wearing of shirts.

It would be easy to keep fractional currency almost as fresh and as clean as Bank of England notes, if the same policy were adopted of always paying out fresh currency from government offices and depositories. But while the first resolution is entirely good, the second is utterly bad. What does the free and unlimited coinage of silver mean? It means simply that the government mints shall impress on any amount of silver which anyone may bring them for the purpose, that official stamp or "fiat" which now enables seventy-two cents worth of silver, or its representative, to pass current among our people for a dollar. So far as this stamp or "fiat" would add any value to the silver, its effect would he to enable the owners of silver mines, like the Windoms, the Joneses, the Mackays, the banks and the owners of silver in foreign countries to make forced sales of silver to the masses of our people at more than its market price. But the speedy and inevitable result would be the depreciation of our currency and the driving out of circulation of everything but silver and silver notes.

Now it may seem to those who owe money, and it certainly does seem to a good many of the farmers burdened with mortgages, that this would be to their advantage, since they could pay off their debts with a less valuable currency. But nothing is more certain than such a depreciation—like the subsequent appreciation, which sometime would be sure to follow—would really be to the relative benefit of the rich and to the injury of the men who work for a living. The moneyed class can always best guard against and take advantage of any impending change, and, as we all know by experience, when any form of currency begins to depreciate, that is the currency which is forced upon wage workers and which they are the least able to refuse. With the deliberate idea of depreciating the currency there is also mixed some idea of retaliation for the forced contraction of the currency after the war. But two wrongs do not make a right, and in wrongs like these the poorer and most helpless class are always sure to suffer most.

Secretary Windom's proposition that the government should go even further than it yet has into the business of buying silver, is simply an attempt to use the administration for the benefit of the members of the administration, which is a hundred-fold worse than anything John Wanamaker has attempted or apparently thought of.

Mr. Windom, according to a Colorado correspondent of THE STANDARD, is the owner of some two hundred silver claims, which might be somewhat increased in value by the government going into this business. But the farmers might as well ask that the government should buy up wheat as the silver men ask that the government should buy up silver. Any debating club that should discuss the question, Which is the most useful silver or wheat ? would quickly decide in favor of wheat.

In this issue of THE STANDARD we give place to a condensation of a long communication from Mr. Alfred B. Westrup, of what styles itself the "Mutual Bank Propaganda," in reply to a criticism by Thomas G. Shearman upon a circular issued by that concern. As to the article itself it is hardly necessary to say much. Who would profit if everybody were allowed to issue money? Evidently the richer class, who could start banks and issue money, and the large employers of labor, who could in many cases force money on their employes.

Lee Merriwether, the active and efficient labor commissioner of Missouri who recently made an exposure of how the Mendotta mining company was working the "free money racket " on its employes by paying them in checks, has recently investigated similar cases in the southern part of that state. Here are some samples: "Holloday has a store, and if his employes do not wish to purchase his goods they get no wages at all. One of his employes, an intelligent German, whose board shanty, although meagerly furnished, leaky and full of cracks and holes, was scrupulously neat and clean, stated to me that last August, on the so-called pay day, he went to Mr. Holloday and asked that the wages due him be paid in cash, as he wished to return to his old home in Michigan. 'I was feeling very poorly,' said this employe, 'and told Mr. Holloday that I wanted to go back to my old home to die. Mr. Holloday said to me: 'You can die here just us well as in Michigan. I can' t give you anything except checks.' The checks are only good at his store. The railroad won't take them, so I cannot go. My lungs are weak. I want to go to Colorado, but do not see how I shall ever get there, as I am never paid in money.' The wife of this man, who at the time I saw him looked weak and consumptive, told me that although $17.17 wages were due her husband, she could not got enough money to buy a pair of shoes. She talked simply, not complainingly, as though it were the usual and proper thing to be paid in pasteboard, as though Mr. Holloday, in refusing to give her husband his wages in money, merely refused a favor.

While one of my agents, Mr. C. N. Mitchell, ex-mayor of La Plata, Mo., was in the office of the lumber mills, an employe entered and asked for his wages. The cashier handed him a check. Mr. Mitchell heard the employe ask for money. The cashier refused. The employe said he wanted to leave town, that he was tired of working for pasteboard. The cashier coolly replied that he could walk out of town if he wanted to go, that he (the cashier) was authorized to pay only in checks. On another occasion when an employe who had just received a check for his wages asked for cash, the cashier refused, saying: 'I have paid you your wages, but if you want me to buy that check, that is another thing. I will give you $4 for it.' The amount of the check was $7.20. The postmaster of Williamsville buys checks from employes for seventy-five cents on the dollar. Sometimes all that the employe can obtain is fifty cents on the dollar.

I have a number of other statements of Holloday's employes to the effect that they had applied for their wages on pay day, but were refused payment in cash and were compelled to accept checks on his store. One man says that he waited at the office until eleven o'clock at night to see Holloday and get his wages in money. During this time Mr. Holloday remained locked in his private office. At eleven o'clock the clerks forced the employe to leave in order to close the office. He went the three following days, but with no better success and was finally obliged to accept checks in lieu of lawful money of the United States." If the free money people had their way Holloday's pasteboard checks would be lawful money of the United States, and pretty much every large employer would constitute himself a bank and begin issuing this sort of money.

The truth of the matter is that the power to issue money is a valuable privilege which, to secure the best circulating medium and to put all citizens on a footing of equality, ought to be retained by the general government, and to be permitted to no one else, either individual or corporation. The greenbackers, who have insisted that national bank notes should not be permitted, and that all money should be the direct issue of the government , are in the right. It is a pity that so many greenbackers permit themselves to be used by the silver men, instead of insisting on their own principles. If we want two millions of notes issued every month, let them be greenbacks, and let the two millions now expended in buying silver be saved.

Nothing can be clearer than that the silver notes now in circulation do not derive their value from the silver which is supposed to be corded up in the treasury to redeem them. For they circulate at one hundred cents on the dollar, whereas the silver that is supposed to be lying in the treasury vaults for their redemption is only seventy-two cents' worth. They would circulate just as well as if there were no silver in the treasury, and we might as well sell that silver off or put it to some more sensible use than hoarding it—say, for the construction of long-distance telephone wires for the post office department. And what is true of silver is true of gold. It is the credit of the government that furnishes the real basis for our paper money, not any deposit in government vaults.
"Abolish all taxation save that upon land values." -- Henry George

http://monetary.org
http://schalkenbach.org

Geolibertarian

http://www.wealthmoney.org/articles/truth_inflation/

What is the truth about inflation?

A Close Look at the Theory of Inflation

By Byron Dale

Webster's New World College Dictionary states: Inflation – (a) an increase in the amount of money and credit in relation to the supply of goods and services. (b) an increase in the general price level, resulting from this, specif., an excessive or persistent increase, causing a decline in purchasing power.

Let's assume for the moment that Webster's definition is correct. If it is, we need to address the issue of how and on what basis did the amount of money and credit increase without there being an increase in the goods and services. This increase in money and credit could not arise due to the need to pay for any existing goods or due to the need for more money or credit to purchase any increase in goods or services. Black's Law Dictionary defines Credit as: – "Time allowed to the buyer of goods by the seller, in which to make payment for them." –"The right granted by a creditor to a debtor to defer payment of debt or to incur debt and defer its payment."

According to this definition there would need to be an increase in the amount of goods and services coupled with a shortage of money needed to obtain those good or services before there would be any need for credit at all. Almost every one has the lawful authority to create goods or to provide a service. At this time, only banks have the lawful authority to create money. As a general rule the goods are created and the services are rendered before payment is made for the goods and services. Therefore, an increase in money needed only to gain a profit off of money in and of itself, without any ties to an increase in goods, is the only reason and the only way money could be created without there being an increase in goods or services.

The only way an increase in the money supply would increase prices would be if almost everything was bought and sold at auctions where the price is determined by the bidding process. Personal observation and experience has shown me that very few buyers offer to pay more than the seller's asking price.

This fact is proven by the fact that so many things are now sold with the words 'on sale' preceding the asking price. This leads the buyers to believe they are buying the goods at less than the regular selling price. The fact that there is a shortage of money to buy all the goods that are for sale is proven by the fact that there are so many ads promising 'no money down' and 'no interest for a certain length of time' if one will only buy the goods right now.

Many writers use the example of a king taking the metal money he acquires through taxes and other means, then re-coining and debasing it by substituting less valuable metal for the more valuable metal. Therefore, the king is able to issue more coins with the same amount of the more valuable metals, thus inflating the money supply, resulting in increased prices. This only proves that the king believed that he had a shortage of money.

There could only be truth to the idea that the king caused inflation by creating more coins if a person was used to dealing in metal money where it would be possible to recognize that the new coins did not have the same metal composition as the old coins. The seller, upon realizing that he was not receiving as much of the more valuable metal as he was expecting for his goods or services clearly might raise his prices to obtain the same amount of the more valuable metal he was expecting.

Those facts are no longer in play today. We do not use metal money. In fact, we don't even use paper money. We only use bank-generated numbers as our money. Everyone I know, when given the amount of bank-generated numbers that he's expecting, is happy with his deal. No one can tell the difference in numbers like they can tell the difference in metals.

Not one person in ten million truly understands how our money system works, the principle under which it functions or how money gets into circulation so people can use it. Even fewer care. I doubt if one man in two million has any idea what the money supply is or whether it has increased or decreased. So, why would people raise or lower there prices due to an increase or a decrease in the money supply when they don't even know if there's been an increase or a decrease?

If we were using gold as money it is possible, and in fact likely, that in the area of a gold rush there could be a temporary rise in prices on the goods the gold miners needed. That rise in the prices of goods would only last till people found out it was easier to get the gold by supplying the miners with goods rather than trying to find more gold or when most of the new gold was mined out, harder to find, or already owned by a few.

Webster's Dictionary also states: Inflationary spiral – a continuous and accelerating rise in the prices of goods and services, primarily due to the interaction of increases in wages and costs.

A continuous and accelerating rise in the price of goods and services is clearly what we are experiencing. The question is, "Why do costs keep increasing?" To answer that question we have to truly understand how our money gets into circulation. Today, all new money goes into circulation as interest-bearing loans. When money is created as interest bearing debt, the debt owed goes up and the interest on that debt always drives up the cost of doing business. When governments borrow, its interest cost increases followed by an increase in taxes. Interest always increases the cost of doing business. Interest also causes the debt to increase but it does not increase the money supply nor does it increase goods or services. Interest on debt also increases the need for an increase in the money supply to pay the added cost of the interest or someone must suffer a loss of money. Additionally, when the principal of a loan is repaid, the money is extinguished causing a decrease in the money supply until someone borrows more money. When money is loaned into circulation at interest, interest is the only cost that can't be eliminated without stopping the increase in the money supply.

There are only three increases in the cost of doing business that courts will force you to pay: interest, taxes and rent. When one suffers from a rise in interest, taxes or rent they must raise their prices or cut their living standard. When one's standard of living starts to suffer, most people try to get an increase in wages.

Add greed and growing governmental regulations to interest and taxes and you have the true cause of price inflation. Do you really think that the price of gasoline went up to over $4 a gallon because there was a sudden increase in the money supply? It is clear that when the cost of gasoline went up over $4 a gallon, the price of everything that was shipped had to go up or someone's profit had to go down. The continuous increase in the nation's interest bearing debt is the cause of our continuous and accelerating rise in prices.
"Abolish all taxation save that upon land values." -- Henry George

http://monetary.org
http://schalkenbach.org

Geolibertarian

http://www.counterpunch.org/2013/12/13/the-truth-about-deflation/

The Truth About Deflation

It's Closer Than You Think

by Mike Whitney
CounterPunch
December 13, 2013

"We are on the eve of a deflationary shock which will likely reduce equity valuations from very high to very low levels.....it is increasingly likely that one event will be the catalyst to very rapidly change inflationary into deflationary expectations. Indeed, when key prices are already falling across the globe, one should expect one key major credit event to occur." Russell Napier, "An Ill Wind", CLSA, selected excerpts, zero hedge.

Deflationary pressures are greater today than anytime since the end of the recession in March 2009.

In September 2011 the annual rate of inflation was 3.9 percent. At present, the rate is just 1.0 percent and trending lower. Inflation has continued to fall despite five years of zero interest rates and 3 rounds of quantitative easing. For all practical purposes, the Fed's large-scale asset purchases (LSAP) have had no impact on inflation at all, in fact, some analysts believe the Fed's polices may be counterproductive. Take a look at this from Stephen Williamson's New Monetarist Economics blog:

    "Back in days of yore, my concern was that we could indeed get higher inflation. How? I had thought that the Fed had the ability to control inflation, but when push came to shove, they wouldn't do it. Once people caught on to that idea, we could get on a high-inflation path that was self-sustaining. Of course, since I said that, I've continued to work on these problems, and stuff has been happening. In particular, we're not seeing that high-inflation path. How come?...

    ...with the nominal interest rate effectively at the zero lower bound, the rate of inflation is being determined primarily by the liquidity premium on government debt. Once we recognize that, it's not surprising that the inflation rate has been falling for the last three years...

    ...In general, if we think that inflation is being driven by the liquidity premium on government debt at the zero lower bound, then if the Fed keeps the interest rate on reserves where it is for an extended period of time, we should expect less inflation rather than more...

The Fed is stuck. It is committed to a future path for policy, and going back on that policy would require that people at the top absorb some new ideas, and maybe eat some crow. Not likely to happen." ("Liquidity Premia and the Monetary Policy Trap", Stephen Williamson, New Monetarist Economics blog):

   

Williamson is not alone in his belief that the Fed is on the wrong track. Economist Warren Mosler arrives at the same conclusion although there are notable differences in their analysis. Here's a short clip from an article by Mosler which wraps it up in one paragraph:

[Continued...]
"Abolish all taxation save that upon land values." -- Henry George

http://monetary.org
http://schalkenbach.org