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montecristo by dropping a name not many bandy about: Ellen H. Brown. Ms. Brown is the author of the blog Web of Debt and has published an informative book of the same name. She is also one of the names associated with a new economics movement focusing on monetary policy. It's so new, in fact, a rallying name has yet to be, er, coined, though "monetarist" and variations thereon pop up from time to time. The goal of these thinkers: to cut through the years of economics education that has allowed graduates to achieve even doctorate level educations without understanding the basic principals of monetary creation that I briefly outlined in my last post. When it comes to books about how money works, they are few and far between.
In the shocked comment,montecristo asked if I were a "Greenbacker." I honestly don't know if I am or not; though I enjoyed Ms. Brown's book and have had a few email exchanges with her, I'm too aware of gaps in my understanding to embrace her entire philosophy without first trying to learn what backs it and of what value it might be. I admit I lean in her direction, but that's really neither here nor there. Today, I would like to share in the history of money according to a Greenbacker. I've taken some of the material below from a personal LJ post, edited it down and tried to incorporate more recent news. Enjoy.
Before the American Revolution, Benjamin Franklin journeyed to London to petition the King over concerns faced by the colonists. He was shocked by the poverty he witnessed, the filled poor houses, legions of unemployed and beggars on the street. England was by that time well distanced from the tally sticks and firmly on the gold standard. Londoners asked Franklin how the colonies take care of their unemployed and destitute. He declared that they didn't have any. When asked how this could be, he wrote:
Brown further maintains that deprivations caused by King George's subsequent outlawing of colonial currency -- the very currency that kept the colonial government thriving without gold -- led eventually to the Revolution.
In later years, Franklin tutored a young man named Matthew Carey. His experience must have passed to Matthew, for Matthew's son Henry later became President Abraham Lincoln's chief financial adviser. This is key to understanding what Lincoln did to fund the Union's fight in the Civil War:
And here I diverge from Ms. Brown a bit. I later learned in the book The Poisoner's Handbook that a private family fortune, the Norris', largely helped to finance the Union. Though the details are not there at all, I speculate that the Norris contribution allowed Lincoln to back the United States Note, giving it at least some non-fiat value. That said, there is still value to the Web of Debt observation, in that it means a government can create a currency system as effectively as a private bank.
That last is not an uncontroversial statement, I know, but say it I must. Others are far more worried about the private money and credit trust than I. Nathan A. Martin, for example, takes Brown's ideas, as Mr. Tufnell of Spinal Tap might say, to 11.
Martin has founded Swarm USA, an attempt to decouple our monetary system from the direct control of banks. Like Brown, he notes that, though we as a country have not been on the gold standard for some years, the process that creates deficit money creates the need to pay interest to the banks when it is created . . . interest that has been accumulating for a number of years. Accumulating, and compounding. Martin notes here that "the real amount of money spent on interest last year alone nearly equals the total amount of money our government takes in!"
He maintains that we have reached "debt saturation." That is, the cost of paying down the historic debt has gotten so large that borrowing more money from the Federal Reserve (remember, a collection of privately-owned banks, not a branch of the government) will actually decrease the amount of money in our economy.
Specifically, according to this chart from his site, every new dollar added to the economy carries enough debt to actually suck $.15 out of circulation. If true, we are looking at a prolonged recession the likes of which may never have been seen in this country.
Avoiding the debt spiral is one reason why Brown is a proponent of State Banking. Currently, there is only one state sponsored bank in the United States, the Bank of North Dakota. They are a functional bank, one that makes loans and, thus, creates money just as their counterparts in private enterprise do. The profit from that bank, though, goes not to the private owners but to the State of North Dakota. Here they tap the same dynamic that Benjamin Franklin described hundreds of years ago. In theory, this would avoid taxation; the bank profits would provide funds that otherwise would need to be taxpayer supplied. I doubt the profits are large enough to fund the entire state as Franklin's scrip issuing body funded the colony Franklin called home, but it would offset some taxes, and I doubt any would find too much fault with that.
Based on North Dakota's success with their enterprising bank, other state banks are being considered, including Washington, my home in the Pacific Northwest corner of the country. Some savings are obvious: "State government uses Bank of America, buys goods with U.S. Bank cards, and distributes welfare aid through JP Morgan Chase ATMs." Why should we pay the fees or surrender a portion of the interest to the private banks when that money and savings could directly benefit the state itself?
There are logistical hurdles to be decided first, like how to capitalize the institution. This struck me as interesting, since I experienced a method myself. Back in college, I paid most of my bills by working for a cafe at the State-run university; I was therefore technically a state employee. One day, controversy erupted: everyone's pay was withheld for one pay period. In 1985 (IIRC), the State took the payroll and invested it through a private bank for one pay period in (again, IIRC) a money market fund. After each pay cycle, the old money was distributed (finally!) to the workers and the next was invested. The State was able to generate some interest income through this method.
Why not just stop that old account and transfer it as an initial capitalization?
Enough reminiscing on paychecks past. For those of you interested in these topics, I'll try to locate a list of references later. In the mean time, do check out Ellen Brown's explanation of the Wizard of Oz as an economic policy parable. Spoiler: Dorothy's witch corpse raided slippers were originally silver.
montecristo by dropping a name not many bandy about: Ellen H. Brown. Ms. Brown is the author of the blog Web of Debt and has published an informative book of the same name. She is also one of the names associated with a new economics movement focusing on monetary policy. It's so new, in fact, a rallying name has yet to be, er, coined, though "monetarist" and variations thereon pop up from time to time. The goal of these thinkers: to cut through the years of economics education that has allowed graduates to achieve even doctorate level educations without understanding the basic principals of monetary creation that I briefly outlined in my last post. When it comes to books about how money works, they are few and far between.In the shocked comment,
montecristo asked if I were a "Greenbacker." I honestly don't know if I am or not; though I enjoyed Ms. Brown's book and have had a few email exchanges with her, I'm too aware of gaps in my understanding to embrace her entire philosophy without first trying to learn what backs it and of what value it might be. I admit I lean in her direction, but that's really neither here nor there. Today, I would like to share in the history of money according to a Greenbacker. I've taken some of the material below from a personal LJ post, edited it down and tried to incorporate more recent news. Enjoy.Before the American Revolution, Benjamin Franklin journeyed to London to petition the King over concerns faced by the colonists. He was shocked by the poverty he witnessed, the filled poor houses, legions of unemployed and beggars on the street. England was by that time well distanced from the tally sticks and firmly on the gold standard. Londoners asked Franklin how the colonies take care of their unemployed and destitute. He declared that they didn't have any. When asked how this could be, he wrote:
That is simple. In the colonies we issue our own money. It is called Colonial Scrip. We issue it to pay the government's approved expenses and charities. We make sure it is issued in proper proportions to make the goods pass easily from the producers to the consumers. . . . In this manner, creating for ourselves our own paper money, we control its purchasing power, and we have no interest to pay to no one. You see, a legitimate government can both spend and lend money into circulation, while banks can only lend significant amounts of their promissory bank notes, for they can neither give away nor spend but a tiny fraction of the money the people need. Thus when your bankers here in England place money in circulation, there is always a debt principal to be returned and usury to be paid. The result is that you have always too little credit in circulation to give the workers full employment. You do not have too many workers, you have too little money in circulation, and that which circulates, all bears the endless burden of unpayable debt and usury.
(Ellen Hodgson Brown, Web of Debt, Third Millennium Press, 2008, pp. 40-41, emphasis by the author.)
Brown further maintains that deprivations caused by King George's subsequent outlawing of colonial currency -- the very currency that kept the colonial government thriving without gold -- led eventually to the Revolution.
In later years, Franklin tutored a young man named Matthew Carey. His experience must have passed to Matthew, for Matthew's son Henry later became President Abraham Lincoln's chief financial adviser. This is key to understanding what Lincoln did to fund the Union's fight in the Civil War:
Lincoln tapped into the same cornerstone that had gotten the impoverished colonists through the American Revolution and a long period of internal development before that: he authorized the government to issue its own paper fiat money. National control was reestablished over banking, and the economy was jump-started with a 600 percent increase in government spending and cheap credit directed at production. . . . Officially called United States Notes, these nineteenth century tallies were popularly called "Greenbacks" because they were printed on the back with green ink (a feature the dollar retains today). They were basically just receipts acknowledging work done or goods delivered, which could be traded in the community for an equivalent value of goods or services. The Greenbacks represented man-hours rather than borrowed gold. Lincoln is quoted as saying, "The wages of men should be recognized as more important than the wages of money."
(Brown, ibid, pp. 82-83.)
And here I diverge from Ms. Brown a bit. I later learned in the book The Poisoner's Handbook that a private family fortune, the Norris', largely helped to finance the Union. Though the details are not there at all, I speculate that the Norris contribution allowed Lincoln to back the United States Note, giving it at least some non-fiat value. That said, there is still value to the Web of Debt observation, in that it means a government can create a currency system as effectively as a private bank.
That last is not an uncontroversial statement, I know, but say it I must. Others are far more worried about the private money and credit trust than I. Nathan A. Martin, for example, takes Brown's ideas, as Mr. Tufnell of Spinal Tap might say, to 11.
Martin has founded Swarm USA, an attempt to decouple our monetary system from the direct control of banks. Like Brown, he notes that, though we as a country have not been on the gold standard for some years, the process that creates deficit money creates the need to pay interest to the banks when it is created . . . interest that has been accumulating for a number of years. Accumulating, and compounding. Martin notes here that "the real amount of money spent on interest last year alone nearly equals the total amount of money our government takes in!"
He maintains that we have reached "debt saturation." That is, the cost of paying down the historic debt has gotten so large that borrowing more money from the Federal Reserve (remember, a collection of privately-owned banks, not a branch of the government) will actually decrease the amount of money in our economy.
Specifically, according to this chart from his site, every new dollar added to the economy carries enough debt to actually suck $.15 out of circulation. If true, we are looking at a prolonged recession the likes of which may never have been seen in this country.
Avoiding the debt spiral is one reason why Brown is a proponent of State Banking. Currently, there is only one state sponsored bank in the United States, the Bank of North Dakota. They are a functional bank, one that makes loans and, thus, creates money just as their counterparts in private enterprise do. The profit from that bank, though, goes not to the private owners but to the State of North Dakota. Here they tap the same dynamic that Benjamin Franklin described hundreds of years ago. In theory, this would avoid taxation; the bank profits would provide funds that otherwise would need to be taxpayer supplied. I doubt the profits are large enough to fund the entire state as Franklin's scrip issuing body funded the colony Franklin called home, but it would offset some taxes, and I doubt any would find too much fault with that.
Based on North Dakota's success with their enterprising bank, other state banks are being considered, including Washington, my home in the Pacific Northwest corner of the country. Some savings are obvious: "State government uses Bank of America, buys goods with U.S. Bank cards, and distributes welfare aid through JP Morgan Chase ATMs." Why should we pay the fees or surrender a portion of the interest to the private banks when that money and savings could directly benefit the state itself?
There are logistical hurdles to be decided first, like how to capitalize the institution. This struck me as interesting, since I experienced a method myself. Back in college, I paid most of my bills by working for a cafe at the State-run university; I was therefore technically a state employee. One day, controversy erupted: everyone's pay was withheld for one pay period. In 1985 (IIRC), the State took the payroll and invested it through a private bank for one pay period in (again, IIRC) a money market fund. After each pay cycle, the old money was distributed (finally!) to the workers and the next was invested. The State was able to generate some interest income through this method.
Why not just stop that old account and transfer it as an initial capitalization?
Enough reminiscing on paychecks past. For those of you interested in these topics, I'll try to locate a list of references later. In the mean time, do check out Ellen Brown's explanation of the Wizard of Oz as an economic policy parable. Spoiler: Dorothy's witch corpse raided slippers were originally silver.
(no subject)
Date: 17/2/12 04:13 (UTC)(no subject)
Date: 17/2/12 04:20 (UTC)(no subject)
Date: 17/2/12 04:22 (UTC)(no subject)
Date: 17/2/12 05:33 (UTC)Thou canst not nationalize what is not private to begin with.
(no subject)
Date: 17/2/12 09:24 (UTC)(no subject)
Date: 17/2/12 14:14 (UTC)It *isn't* accountable to congressional committee?
The only context in which the Fed is private is that someone pointed at it and said "private". It's a government entity as surely as fannie and freddie always were in fact.
(no subject)
Date: 17/2/12 15:49 (UTC)(no subject)
Date: 17/2/12 16:17 (UTC)(no subject)
Date: 17/2/12 16:19 (UTC)(no subject)
Date: 17/2/12 16:32 (UTC)(no subject)
Date: 17/2/12 19:23 (UTC)(no subject)
Date: 17/2/12 16:04 (UTC)(no subject)
Date: 17/2/12 16:07 (UTC)I would say this is a correct statement.
(no subject)
Date: 17/2/12 16:16 (UTC)(no subject)
Date: 17/2/12 19:46 (UTC)(no subject)
Date: 17/2/12 19:55 (UTC)(no subject)
Date: 17/2/12 07:32 (UTC)(no subject)
Date: 17/2/12 15:52 (UTC)(no subject)
Date: 17/2/12 15:54 (UTC)(no subject)
Date: 17/2/12 19:47 (UTC)I approve.
(no subject)
Date: 17/2/12 18:07 (UTC)Think of a economic system as having finite limits. Most economists believe in such erroneous ideas such as growth, which give the impression that the system is infinite. It's not. No matter if it's a gold standard or a fiat system or something even more imaginative, there is still only so much gold/cash to go around.
I believe economics is akin to Sir Issac's physics... For every action there is equally opposite reaction. So for every wealthy person there are equal and opposite poor people. In other words if there are only 100 bars of gold in the world and somebody has 50 of them, everybody else has to split up the remaining 50.
Because there is only so many trillion dollars in circulation and the Forbes list (http://www.forbes.com/wealth/billionaires) says there are only 1210 billionaires globally, whatever cash is leftover has to be distributed to the remaining global population of 6,994,808,709 (as of 22:45 UTC (EST+5) Feb 16, 2012) (http://www.google.ca/publicdata/explore?ds=d5bncppjof8f9_&met_y=sp_pop_totl&tdim=true&dl=en&hl=en&q=global+population) And understand it's going to distributed quite unevenly.
Two things happened 250 years ago. #1 America had a remarkably sizable population labouring for mere sustenance. I'm talking about negro slaves, mohawk fur trappers and all the settlers living off the land. The distribution of currency was thereby limited.
#2 America started with a relatively even playing field. With perhaps a few exceptions Kings and Queens and the very elite of European society simply didn't emigrate to the New World. While there were certainly some more wealthy then others, ( like Stephen Girard (http://en.wikipedia.org/wiki/Stephen_Girard)) there wasn't yet a community of elite. It would take until the likes of Rockefeller, Vanderbilt, Morgan and Astor to establish that community and birth the sizable disparity we have today.
(no subject)
Date: 17/2/12 19:53 (UTC)Yes!!!
This is why podcasts and blogs that usually held to topics such as energy inputs have switched to the economy.
(no subject)
Date: 17/2/12 13:53 (UTC)http://www.lrb.co.uk/v34/n04/andrew-haldane/the-doom-loop
(no subject)
Date: 17/2/12 17:40 (UTC)(no subject)
Date: 17/2/12 15:12 (UTC)Ah, I like this rationale.
(no subject)
Date: 17/2/12 18:18 (UTC)(no subject)
Date: 17/2/12 15:50 (UTC)