Poor / Arm

This article is excerpted from Ellen Brown’s new book Banking on the People: Democratizing Money in the Digital Age, available in paperback.

The U.S. federal debt has more than doubled since the 2008 financial crisis, shooting up from $9.4 trillion in mid-2008 to over $22 trillion in April 2019. The debt is never paid off. The government just keeps paying the interest on it, and interest rates are rising.

“Banking on the People: Democratizing Money in the Digital Age from Democracy Collaborative”
Purchase in the Truthdig Bazaar

In 2018, the Fed announced plans to raise rates by 2020 to “normal” levels — a fed funds target of 3.375 percent — and to sell about $1.5 trillion in federal securities at the rate of $50 billion monthly, further growing the mountain of federal debt on the market. When the Fed holds government securities, it returns the interest to the government after deducting its costs; but the private buyers of these securities will be pocketing the interest, adding to the taxpayers’ bill.

In fact it is the interest, not the debt itself, that is the problem with a burgeoning federal debt

The principal just gets rolled over from year to year.

But the interest must be paid to private bondholders annually by the taxpayers and constitutes one of the biggest items in the federal budget.

Currently the Fed’s plans for “quantitative tightening” are on hold; but assuming it follows through with them, projections are that by 2027 U.S. taxpayers will owe $1 trillion annually just in interest on the federal debt.

That is enough to fund President Donald Trump’s trillion-dollar infrastructure plan every year, and it is a direct transfer of wealth from the middle class to the wealthy investors holding most of the bonds.

Where will this money come from? Crippling taxes, wholesale privatization of public assets, and elimination of social services will not be sufficient to cover the bill.

Bondholder Debt Is Unnecessary

The irony is that the United States does not need to carry a debt to bondholders at all. It has been financially sovereign ever since President Franklin D. Roosevelt took the dollar off the gold standard domestically in 1933.

This was recognized by Beardsley Ruml, Chairman of the Federal Reserve Bank of New York, in a 1945 presentation before the American Bar Association titled “Taxes for Revenue Are Obsolete.”

“The necessity for government to tax in order to maintain both its independence and its solvency is true for state and local governments,” he said, “but it is not true for a national government.”

The government was now at liberty to spend as needed to meet its budget, drawing on credit issued by its own central bank. It could do this until price inflation indicated a weakened purchasing power of the currency.

Then, and only then, would the government need to levy taxes — not to fund the budget but to counteract inflation by contracting the money supply.

The principal purpose of taxes, said Ruml, was “the maintenance of a dollar which has stable purchasing power over the years. Sometimes this purpose is stated as ‘the avoidance of inflation.’

The government could be funded without taxes by drawing on credit from its own central bank; and since there was no longer a need for gold to cover the loan, the central bank would not have to borrow.

It could just create the money on its books.

This insight is a basic tenet of Modern Monetary Theory: the government does not need to borrow or tax, at least until prices are driven up.

It can just create the money it needs.

The government could create money by issuing it directly; or by borrowing it directly from the central bank, which would create the money on its books; or by taking a perpetual overdraft on the Treasury’s account at the central bank, which would have the same effect.

The “Power Revolution” — Transferring the “Money Power” to the Banks

The Treasury could do that in theory, but some laws would need to be changed.

Currently the federal government is not allowed to borrow directly from the Fed and is required to have the money in its account before spending it.

After the dollar went off the gold standard in 1933, Congress could have had the Fed just print money and lend it to the government, cutting the banks out.

But Wall Street lobbied for an amendment to the Federal Reserve Act, forbidding the Fed to buy bonds directly from the Treasury as it had done in the past.

The Treasury can borrow from itself by transferring money from “intragovernmental accounts” — Social Security and other trust funds that are under the auspices of the Treasury and have a surplus – but these funds do not include the Federal Reserve, which can lend to the government only by buying federal securities from bond dealers.

The Fed is considered independent of the government.

Its website states, “The Federal Reserve’s holdings of Treasury securities are categorized as ‘held by the public,’ because they are not in government accounts.”

According to Marriner Eccles, chairman of the Federal Reserve from 1934 to 1948, the prohibition against allowing the government to borrow directly from its own central bank was written into the Banking Act of 1935 at the behest of those bond dealers that have an exclusive right to purchase directly from the Fed.

A historical review on the website of the New York Federal Reserve quotes Eccles as stating, “I think the real reasons for writing the prohibition into the [Banking Act] … can be traced to certain Government bond dealers who quite naturally had their eyes on business that might be lost to them if direct purchasing were permitted.”

The government was required to sell bonds through Wall Street middlemen, which the Fed could buy only through “open market operations” – purchases on the private bond market.

Open market operations are conducted by the Federal Open Market Committee (FOMC), which meets behind closed doors and is dominated by private banker interests.

The FOMC has no obligation to buy the government’s debt and generally does so only when it serves the purposes of the Fed and the banks.

Rep. Wright Patman, Chairman of the House Committee on Banking and Currency from 1963 to 1975, called the official sanctioning of the Federal Open Market Committee in the banking laws of 1933 and 1935 “the power revolution” — the transfer of the “money power” to the banks. Patman said, “The ‘open market’ is in reality a tightly closed market.” Only a selected few bond dealers were entitled to bid on the bonds the Treasury made available for auction each week.

The practical effect, he said, was to take money from the taxpayer and give it to these dealers.

Feeding Off the Real Economy

That massive Wall Street subsidy was the subject of testimony by Eccles to the House Committee on Banking and Currency on March 3-5, 1947.

Patman asked Eccles, “Now, since 1935, in order for the Federal Reserve banks to buy Government bonds, they had to go through a middleman, is that correct?”

Eccles replied in the affirmative.

Patman then launched into a prophetic warning, stating, “I am opposed to the United States Government, which possesses the sovereign and exclusive privilege of creating money, paying private bankers for the use of its own money.

… I insist it is absolutely wrong for this committee to permit this condition to continue and saddle the taxpayers of this Nation with a burden of debt that they will not be able to liquidate in a hundred years or two hundred years.”

The truth of that statement is painfully evident today, when we have a $22 trillion debt that cannot possibly be repaid.

The government just keeps rolling it over and paying the interest to banks and bondholders, feeding the “financialized” economy in which money makes money without producing new goods and services.

The financialized economy has become a parasite feeding off the real economy, driving producers and workers further and further into debt.

In the 1960s, Patman attempted to have the Fed nationalized.

The effort failed, but his committee did succeed in forcing the central bank to return its profits to the Treasury after deducting its costs.

The prohibition against direct lending by the central bank to the government, however, remains in force.

The money power is still with the FOMC and the banks.

A Model We Can No Longer Afford

Today, the debt-growth model has reached its limits, as even the Bank for International Settlements, the “central bankers’ bank” in Switzerland, acknowledges.

In its June 2016 annual report, the BIS said that debt levels were too high, productivity growth was too low, and the room for policy maneuver was too narrow.

“The global economy cannot afford to rely any longer on the debt-fueled growth model that has brought it to the current juncture,” the BIS warned.

But the solutions it proposed would continue the austerity policies long imposed on countries that cannot pay their debts. It prescribed “prudential, fiscal and, above all, structural policies” — “structural readjustment.”

That means privatizing public assets, slashing services, and raising taxes, choking off the very productivity needed to pay the nations’ debts.

That approach has repeatedly been tried and has failed, as witnessed for example in the devastated economy of Greece.

Meanwhile, according to Minneapolis Fed president Neel Kashkari, financial regulation since 2008 has reduced the chances of another government bailout only modestly, from 84 percent to 67 percent.

That means there is still a 67 percent chance of another major systemwide crisis, and this one could be worse than the last.

The biggest banks are bigger, local banks are fewer, and global debt levels are higher.

The economy has farther to fall.

The regulators’ models are obsolete, aimed at a form of “old-fashioned banking” that has long since been abandoned.

We need a new model, one designed to serve the needs of the public and the economy rather than to maximize shareholder profits at public expense.

_____________________

An earlier version of this article was published in Truthout.org.

Ellen Brown is an attorney, founder of the Public Banking Institute, and author of thirteen books including Web of Debt and The Public Bank Solution.

Her latest book is Banking on the People: Democratizing Money in the Digital Age, published by the Democracy Collaborative.

She also co-hosts a radio program on PRN.FM called “It’s Our Money.”

Her 300+ blog articles are posted at EllenBrown.com.

Ellen Brown
Ellen Brown is an attorney, chairman of the Public Banking Institute, and author of twelve books including “Web of Debt” and “The Public Bank Solution.”

 

first of all there is not one form of capitalism and not one form of communism there different “flavors” of the both, where capitalism and communism is the same is marked in orange. (warning, list is by no means complete, feel free to comment)

pros:

  • big individual freedoms (but the NSA is watching you and already calculating your “score”, the Chinese do it in public, the NSA in secret… and if they don’t like you, they might just send you a drone)
  • high innovation (but as companies get bigger and bigger, corruption goes up, innovation and even quality goes down (Microsoft, Apple, BWM are following the path of Nokia and Kodak) often resulting products are useless garbage or even worse: faulty per factory products (they want you to buy more and more instead of less and less, planned obsolescence) whatever sells and people “believe” need to be “cool”)
    • (nobody sleeps in front of Apple-Stores anymore to spend all their money on the latest iPhone XXXXX)
  • in theory – shared responsibility – everyone should take responsibility for his/her own fate/lifes, but in the end everybody only cares about themselves / their wealth / their houses (breeding systematic pathological egoism)
    • a lot of CEOs escape responsibility and thus act irresponsible (they want their 100 Million, no matter how the company is doing or if it will still exist in 3-10 years)
    • most people do know how and why to take responsibility in their own hands
      • responsibility would mean, give them a piece of land and teach them why it is important to take care of it and grow healthy vegetables in for themselves, instead of depending on a monetary system that is monolithic, highly instable/fragile and to buy from food-monopoly of companies, instead of producing your own.
    • most people will not take more responsibility than for themselves (often do not feel responsible even for their own children)

cons:

  • fake elections: you can vote but it does not make any big difference in policy making
    • money influences lawmaking too much
  • concentration of wealth leads to fascism (concentration of undemocratic power) riots and uprisings between “the lazy filthy rich” vs “the lazy super poor without any perspective” (without hope to improvement)
  • privatization and exploitation: the term “privare” is latin and means “to deprive, take, rob” – people that “own too much” land – will be filthy rich even when working nothing – because they tax the not-owners more and more (greed) to the point of collapse (all restaurants close down and move out of town, no restaurant can afford the rent)
    • definition of filthy rich: if you can not remember the last time you cleaned your own bathroom yourself. (because employees will do it for you)
  • treats nature very recklessly
  • unstable (unpredictable bubbles and crashes)
  • insecure (the free market feels not responsible for society, it is up to the individual)
  • unsustainable (in the current form at least)
  • too much competition that starts in childhood
  • mass surveillance of the public (thanks Snowden! no one ever thought this would be possible)
  • corruption
  • science and universities are very much “market driven” means dependent on external money from sponsors (big pharma, big industry) thus studies and research results might be “blatant lies” to sell a product, studies are conducted in a truth-manipulating way – this will and can even stall scientific progress because what “does not pay off” will not be studied
  • healthcare is very expensive – half of the population can not afford it.
  • public school might be free but of bad quality (massively underfunded, budget got destroyed)
  • private school very expensive, 90% can not afford it
  • university very expensive
  • freedom of speech:
    • you can say what you think – but expect every word you say – every word you typed on a phone or in a computer to be recorded by the NSA (your government) and stored forever, analyzed forever and in the worst case – used in a manipulative way against you in court – forever. (Julian Assange, 1984)
    • comedians are allowed to speak truth to power, if it is funny and not insulting their boss (whoever that is, nobody knows)

pros:

  • everyone has a job (even if the way of conducting that job was with outdated technology, low innovation, inefficient, low safety standards)
  • healthcare is free
  • school and education is free
  • money was not the problem
  • no competition
  • science and universities do not need to “earn private money” – do not need to fake studies (except if the result does not please the boss, e.g. boss decision was wrong needs to be reversed): research is actually independent and studies and results should be “more true” (conducted in a non-manipulative way) unless someone tries to please politics and thus fakes progress (well this will not work for long)

cons:

  • fake elections: you can vote – but there are only two parties – if you vote the non-governmental party – that’s it – off to slave labor camp with you
  • not so much individual freedom – the state commands you to study this and that – work at this or that (state owned) company
  • low innovation, because people were not encouraged to think for themselves, innovation was stagnant
  • low variety of buy-able products
  • treats nature pretty much as recklessly as capitalism
  • exploitation: some people that were not fond of the regime were used as slave labor in Gulags (working camps)
  • mass surveillance of the public
  • corruption
  • all responsibility is with the government
    • if the government makes bad decisions the consequences might be very devastating for all society
    • this can be seen as an advantage for people that are good employees but bad CEOs
  • freedom of speech is very limited
    • people have gone to slave labor camps for making a joke about the government
    • while this might be – of course – insulting – it also deprives the system of learning about it’s mistakes early

How society should be:

Dalai-lama: “The meaning of life is to be happy” (in Buddhist terms this means deep inner satisfaction, this can not be bought)

A happy, safe, sustainable society that keeps on learning and developing itself.

  1. allow people to learn:
    • it shall be allowed to think and speak about how society works in order to improve it for everybody.
  2. gap between rich and poor shall be non existing or slim
    • the gap between rich and poor is not so big
    • where the poor get the feeling, if they work hard, they can improve their living standards
  3. sustainability:
    • the way of survival/conducting business shall be in a way that can be passed on to children and grand children
    • respect for the balances of nature, balance in everything is very important a human body that is not in balance will die.
  4. purpose in life:
    • everyone should actually contribute to society as much as he/she can
    • do truly important work that actually matters
    • no bullshit jobs
    • no lazy “stupid” super rich
    • no lazy “paralyzed” depressed super poor
    • no exploitation
  5. sharing and recycling of resources
    • it is outright wrong, that people born in a country can not afford their own land (not a single hectare) how are they supposed to survive?
    • yes resources are finite – but not a single human being “invented” and created the finite resources of this planet (oil, gold, silver) so actually it belongs to everybody
    • it is very important to produce products that last long and the resources consumed can easily be recovered
  6. never consider your concept of society complete
    • if mankind stops learning it will stop existing
    • when it comes to self reflection and learning capitalism and communism have both been pretty stubborn – the first does not want to hear what threatens profits – the second does not want to hear what criticizes governmental decisions (right or wrong).
    • both systems need to think about a constructive freedom of speech way that helps both systems learn and develop further – towards a hopefully better society.

In liberal capitalism people enjoy a lot of freedoms – so they can fully live out their individual ideas of what might or might not make them happy.

In theory you can be a Muslim gay men married to a lesbian woman (just because you can) and become an child care taker that as a second job works on weapons of mass destruction – while campaigning for peace on the weekend.

In the end – it is always about survival of life (not only the species homo often not-so-sapiens) on this planet – in the solar system – in the universe – in this reality.

At the same time – capitalism gives no sustainable concept for survival to the people – either you come up with your own plan (which might work or might fail miserably again and again) or you have no concept – you have no job – you do not know what to do – you basically go straight from school to state-sponsored-joblessness.

In communism liberal freedoms were not so big – the state decided for you what you would study – what job you would pursuit – because they had the data – where workforce would be needed in 3-4 years time.

I have heard young school children are so confused – they do not know what they shall study.

What career is worth pursuing.

Because it is not only important – that you like your job – it also should generate an income so you can build a house and survive as a family.

If you go to a state-entity that manages joblessness a “JobCenter” – they have a lot of data – a lot – but they still can not tell a school kid “if i was you i would do this and that”.

They can not.

People with environmental sustainability concept- by Rawpixel. View all resources by Rawpixel Ellipsis
People with environmental sustainability concept- by Rawpixel. View all resources by Rawpixel Ellipsis

So school kids are completely left in the dark.

What happens is often children learn from their parents – if they have a good job – they will do the same – if their job sucks (low job security, low pay or no work to do at all in this field) they most certainly will do something else.

There needs to be a sate given – binding – scientific sound and sustainable concept for basic survival for “the average jill an joe” living in “modern” high tech societies with modern fiat money.

If there is not – it is simply irresponsible – for the state and everybody – to leave people in the dark and let them figure themselves out how to survive and fix all the problems in their lifes.

This most certainly will lead to chaos and violence – because – even if you would give them “free stuff” aka fancy digital or colored paper money – people still need a purpose and meaning in their lifes.

what will definitely NOT fix the problem is raising rents and taxes (on things people need to survive) until breakdown of society. Running away from problems – just in case you have not noticed will also not fix them. Everybody should fix the problems in their own country.

After all people – families – just want to survive – in the US, in Europe, in Russia, in China, in India – everywhere if “the market” “the economy” “the monetary system” “the state” is not helping them – they shall step down and get out of the way.

Yes – it really is that bad.

Date 17 November 2018 – present
(6 months and 17 days)
Location

 France

Caused by
Goals
Methods
Status
  • Ongoing
Concessions
given
  • Cancellation of fuel tax and six-month moratorium on diesel and petrol price changes[46]
    • <- this is absolutely pathetic. if the oil and car industry would not be so corrupt – we would have cheap super reliable safe flying cars on renewable hydrogen (a CO2 neutral fuel that can be produced by everybody that has electricity)
    • here you can see best how “fuel” people and society depends on – is used as a weapon of mass control since decades – how those in power risk the collapse of society – just to stay in power a bit longer or make a little bit more profit in the short term – instead of working and investing in solutions that help everybody. CATASTORPHIC!
  • Promise that most would see an effective increase in the minimum wage of €100 per month by 2019[47]
  • Announcement that price of Électricité de France blue tariffs would not increase before March 2019[48]
  • Elimination of tax on overtime and end-of-year bonuses[49]
  • Decrease of fuel and motor taxes[50]

The Gilet Jaunes are just the beginning…

… the rise of the far right will be way more devastating for “the world order” – because just as the left – their aim is to destroy the corrupt current status quo.

… but instead of fixing the problem – “the market” will just say “okay – far right got voted in – we just shift investments more towards the weapons industry and gas chambers”.

does not sound like a solution to me – actually not a solution at all – just the beginning of more catastrophes and problems.

France: ‘Neither Macron nor Le Pen’ – Students barricade school entrance in protest

You can close your eyes – but the truth – will stay true – no matter what.

The big “mistake” the far-right does: it does not question the monetary system.

It is simply not on their radar.

Because they see the problems somewhere else.

Which will lead them – again – to unsustainable and catastrophic solutions – even the far-right fanatics will have to admit – are no solutions.

Elon Musk: “unsustainable means – it is going to end.”