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Video: Ellen Brown: “Ford Was Right, If People Knew How Money Is Created, We’d...

Please Support The Show – http://richieallen.co.uk/ http://www.EllenBrown.com/ http://www.WebOfDebt.com/ https://www.facebook.com/therichieall... Via Youtube

IT’S OUR MONEY WITH ELLEN BROWN — EMINENT DOMAIN TO THE RESCUE? — 07/02/14

A flood of foreclosures in neighborhoods, cities and towns can cause everyone’s real estate equity to plunge. Some towns would like to step-in to protect their communities, but they can’t get the mortgage notes written down to affordable levels for contractual reasons. The solution: use eminent domain  to claim the properties for the municipality, then renegotiate them on behalf of struggling homeowners.  Ellen talks with the pre-eminent legal mind behind the emerging eminent domain stratagem, Cornell professor Robert Hockett, whose idea has been catching on in towns across America, including some of the biggest.

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It’s Our Money with Ellen Brown — Where They Hid Our Civic Treasure and...

It’s Our Money with Ellen Brown – Where They Hid Our Civic Treasure and How We Can Get Our Hands On It

One of the best kept deceptions within common civic parlance is that our cities, states and communities are “broke” – a meme perpetuated by a lack of public knowledge about what governments do with their money and a highly profitable investment industry that uses those funds for substantial private profits that suck outrageous sums out of our common wealth.

This week It’s Our Money with Ellen Brown provides a look into where our “buried” civic treasure can be found and how we can use it to create substantial public benefit. Ellen shows how private financing of civic projects has created repeated windfalls for banks and investors, and she later talks with Professor Tom Greco about how communities can create credit-based economies to get free of the all-encompassing web of civic debt.

On the Public Banking Report, co-host Walt McRee discusses the location and contents of every community’s “treasure chest” with Scott Baker, an expert at evaluating how to determine how much is in it and how it can be used to dramatically change local economic prospects.

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It’s Our Money with Ellen Brown — The Dollar’s Global Dance of Debt —

It’s Our Money with Ellen Brown – The Dollar’s Global Dance of Debt –

The status of the dollar as global reserve currency is being threatened by new international monetary powerhouses and the limitations of its debt-based control. This week, Ellen speaks with Mark Pash of the Center for Progressive Economics, who believes that issuance of currency as debt has outlived its usefulness and should be replaced with a credit-based model that covers basic human needs prior to personal accumulation of additional affluence.  Ellen also speaks with Mike Krauss on petro-dollar politics upending America’s hold on global trade as the reserve currency. On the Public Banking Report, co-host Walt McRee talks with John Leonard of the PA Project about new public banking initiatives in one of America’s abandoned industrial centers, western PA, and the promise that public banking agencies may offer to reviving the economy that region.

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“It’s Our Money with Ellen Brown” — An Electoral Lock-Out of Political Challengers...

The major political parties have effectively locked-out any serious democratic challengers to their control on creation of public policy. This week, Green Party candidate for CA Controller Laura Wells talks with Ellen Brown (herself a Green running for CA State Treasurer) about the increasingly difficult path required of challenger candidates to even get their voices heard. They discuss Governor Jerry Brown’s proposed constitutionally-mandated rainy fund that would guarantee the state’s commitment to pay Wall Street at the expense of its own needs, the subject of Ellen’s latest article (“Robbing Main Street to Prop Up Wall Street: Why Jerry Brown’s Rainy Day Fund Is a Bad Idea for California“)

On the Public Banking Report, co-host Walt McRee talks with Lauren Steiner about a new initiative underway in Los Angeles to create a public partnership bank even as a new report shows that the city pays significantly more to Wall Street for fees and interest than it does on its own needs – to the tune of over ¾ of a billion dollars!

http://prn.fm/money-ellen-brown-electoral-lock-political-challengers-helps-guarantee-wall-street-profits-050714/

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Here’s an Idea: Guarantee Every Child an Excellent Education

Let’s get one thing straight: there are plenty of things wrong with America’s school system. But they almost all stem from one major error. We...

Elite’s unwritten style rules mean brown shoes & loud ties a no-no for banking...

Graduates who wear brown shoes, ill-fitting suits, loud ties or white shirts are missing out...

Robbing Main Street to Prop Up Wall Street: Why Jerry Brown’s Rainy Day...

There is no need to sequester funds urgently needed by Main Street to pay for Wall Street’s malfeasance. Californians can have their cake and eat it too – with a state-owned bank.

Governor Jerry Brown is aggressively pushing a California state constitutional amendment requiring budget surpluses to be used to pay down municipal debt and create an emergency “rainy day” fund, in anticipation of the next economic crisis.

On the face of it, it is a sensible idea. As long as Wall Street controls America’s finances and our economy, another catastrophic bust is a good bet.

But a rainy day fund takes money off the table, setting aside funds we need now to reverse the damage done by Wall Street’s last collapse. The brutal cuts of 2008 and 2009 shrank the middle class and gave California the highest poverty rate in the country.

The costs of Wall Street gambling are being thrust on its primary victims. We are given the draconian choice of restoring much-needed services or maintaining austerity conditions in order to pay Wall Street the next time it brings down the economy.

There is another alternative – one that California got very close to implementing in 2011, before Jerry Brown vetoed the bill. AB750, a bill for a feasibility study for a state-owned bank, passed both houses of the state legislature but the governor refused to sign it. He said the study could be done by the Assembly and Senate Banking Committees in-house; but 2-1/2 years later, no further action has been taken on it.

Having a state-owned bank can substitute for a rainy day fund. Banks don’t need rainy day funds, because they have cheap credit lines with other banks. Today those credit lines are at the extremely low Fed funds rate of 0.25%. A state with its own bank can take advantage of this nearly-interest-free credit line not only for emergencies but to cut its long-term financing costs in half.

That is not just California dreaming. There is already a highly successful precedent for the approach. North Dakota is the only state with its own state-owned depository bank, and the only state to fully escape the credit crisis. It has boasted a budget surplus every year since 2008, and its 2.6% unemployment rate is the lowest in the country. Contrast that to California’s, one of the highest.

In a 2009 interview, Bank of North Dakota President Eric Hardmeyer stated that when the dot-com bust caused North Dakota to go over-budget in 2001-02, the bank did act as a rainy day fund for the state. To make up the budget shortfall, the bank declared an extra dividend for the state (its owner),  and the next year the budget was back on track. No massive debt accumulation, no Wall Street bid-rigging, no fraudulent interest-rate swaps, no bond vigilantes, no capital appreciation bonds at 300% interest.

California already has a surfeit of surplus funds tucked around the state, which can be identified in state and local Comprehensive Annual Financial Reports (CAFRs). Clint Richardson, who has made an exhaustive study of California’s CAFR, writes that he has located nearly $600 billion in these funds. California’s surplus funds include those in a Pooled Money Investment Account managed by the state treasurer, which currently contains  $54 billion earning a mere 0.24% interest – almost nothing.

The money in these surplus funds is earmarked for particular purposes, so it cannot be spent on the state budget. However, it can be invested. A small portion could be invested as capital in the state’s own bank, where it could earn a significantly better return than it is getting now. The Bank of North Dakota has had a return on equity ranging between 17% and 26% every year since 2008.

California has massive potential capital and deposit bases, which could be leveraged into credit, as all banks do. The Bank of England just formally admitted in its quarterly bulletin that banks don’t lend their deposits. They simply advance credit created on their books. The deposits remain in demand accounts, available as needed by the depositors (in this case the state).

The Wall Street megabanks in which California invests and deposits its money are not using this massive credit power to develop California’s economy. Rather, they are using it to reap short-term profits for their own accounts – much of it extremely short-term, “earned” by skimming profits through computerized high-frequency program trading. Meanwhile, Wall Street is sucking massive sums in interest, fees, and interest rate swap payments out of California and into offshore tax havens.

Rather than setting aside our hard-earned surplus to pay the piper on demand, we could be using it to create the credit necessary to establish our own economic independence. California is the ninth largest economy in the world, and the world looks to us for creative leadership.

“As goes California, so goes the nation.” We can lead the states down the path of debt peonage, or we can be a model for establishing state economic sovereignty.

___________________

Ellen Brown is an attorney, founder of the Public Banking Institute, and a candidate for California State Treasurer running on a state bank platform. She is the author of twelve books, including the best-selling Web of Debt and her latest book, The Public Bank Solution, which explores successful public banking models historically and globally.

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Senate Confirms Yellen; Paul, Cruz, Others Demand Fed Audit

By a vote of 56 to 26, the U.S. Senate confirmed Janet Yellen (shown) as the next chair of the Federal Reserve, following Ben...

Senate confirms Janet Yellen as Fed Chair

Move signifies continued free money...

Summers Is Out; Yellen Is In; the Fed Rolls On

Just when it appeared that Larry Summers had the nomination for the next Fed chair all wrapped up, Summers called the White House on...

Scott Brown Is Out!

Sally Quinn: First of all Scott brown is a hunk. And I think that the fact that he posed semi-nude in a magazine gave him a huge advantage in terms of public recognition.

Sally Quinn made these statements when Brown got the teabaggers upset with his vote on the Financial Reform bill. Even BillO laughed at Quinn's description of Brown, but apparently he is stroke material for Republicans. This was back in 2010 when Scott was the flavor of the tea party.

Flashing back to the present, Scott Brown will not run for John Kerry's seat.

Former Massachusetts Republican senator Scott Brown announced Friday that he will not run in the special election for outgoing Democratic Sen. John Kerry’s seat. Brown’s decision means Kerry’s seat is likely to remain in Democratic hands.

“…I was not at all certain that a third Senate campaign in less than four years, and the prospect of returning to a Congress even more partisan than the one I left, was really the best way for me to continue in public service at this time,” Brown said in a statement.

“And I know it’s not the only way for me to advance the ideals and causes that matter most to me.“That is why I am announcing today that I will not be a candidate for the United States Senate in the upcoming special election.”

That's another Republican pin-up gone. Good riddance to you. sir. Does he have eyes on running for governor? We shall see, but this is excellent news for Democrats and Ed Markley. Anti-choice conservaDem Steve Lynch is now running for the job and Howie has some info on him.

The almost universal favorite for the Democratic nomination, with endorsements from the DSCC and from Kerry, is progressive champion Ed Markey, the dean of the Massachusetts delegation, who has a stupendous record in the House, not just as a dependable voter but as a leader on some of the most important issues facing the country, particularly around Climate Change and the environment. His lifetime ProgressivePunch crucial issues score is 94.70, a fraction better than Jerry Nadler and Barbara Lee and a just bit below fellow Massachusetts Reps Jim McGovern and John Tierney.

But Markey isn't the only congressman looking for the promotion to the Senate. Way down at the other end of the political spectrum, conservative Democrat-- and anti-Choice fanatic-- Stephen Lynch would also like to run. His lifetime Progressive Punch crucial vote score is a dismal 78.72. (This session Markey has a 100 rating so far and Lynch has a 33.33 rating, one of the lowest of any Democrat in Congress.) This afternoon, at Iron Worker's Hall in Boston, Lynch announced he would challenge Markey for the nomination (after campaigning at diners in Springfield and Worcester all morning). The primary is set for April 30 and the general election will be June 25. Markey has around $3,000,000 on hand for the challenge, while Lynch has something like $800,000 in his campaign warchest.

As a state legislator Lynch had a 100 percent voting record from Massachusetts Citizens for Life, a group usually associated with Republicans.

We've added Ed Markey to our Blue America page so please donate if you can. He's a real progressive and we need more of them in Congress.

Dane Wigington, Matt Stannard, Marc Armstrong on “It’s Our Money”

Posted on May 8, 2015 by Ellen Brown

Connecting the Dots – 05.06.15

At what point are you willing to challenge your own notions of what’s really going on? Can you even imagine that the mavens of the Money Power would threaten human survival to serve themselves for even bigger personal profits? Ellen’s guest, researcher Dane Wigington, has a trove of data to suggest that they would. And they do so in the form of geoengineering, a covert tool allegedly being used to control natural systems for private profit. We also hear commentary from Matt Stannard about the economics of the Baltimore uprising and from Marc Armstrong about America’s only publicly-owned depository bank, the Bank of North Dakota, which just issued its latest annual report — it’s another record-setting winner!

Listen here.

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New video: “You know a politician or talking head doesn’t ‘get it’ when ....

--2014--

784. Oct. 6-9, speaker, Praxis Peace Institute conference, THE ECONOMICS OF SUSTAINABILITY-Emerging Models for a Healthy Planet, Cowell Theater, Fort Mason, San Francisco

783. Sept. 12-14, participant, RENY Rethinkecon conference, http://rethinkecon.com/, NY City

782. Aug. 20, interview with Rohan Freeman, ignoranti.org, 10 a.m. PST

781. July 29-Aug. 5. Moving Beyond Capitalism conference, San Miguel de Allende, Mexico

780. July 9, speaker, 2014 Annual Conference of the Council of Georgist Organizations, Inc., Radisson Newport Beach Hotel, near the Orange County John Wayne Airport, 9:15 a.m. PT

779. July 2nd IT’S OUR MONEY WITH ELLEN BROWN – EMINENT DOMAIN TO THE RESCUE? – Progressive Radio Network. Listen to archive here.

778. June 29, interview with Stephen Golden, KABC radio, Pasadena, 7 pm PT

777. June 25, interview, Kerry Lutz - Financial Survival Network, 1 pm ET. Listen to archive here.

776. June 21, participant and speaker, General Assembly of the Green Party of California, http://www.cagreens.org/ga/2014-06/agenda-draft-to-counties, Santa Barbara

775. June 7, interview with Doug Bennett, Unspun: An Experiment in Truth-Telling, KKRN Community radio, 9 am PT Listen to archive here.

774. June 2, interview, Voice of Russia (pre-recorded, check their site).

773. May 31, interview, the Joe Whitehead Show, http://thejoewhiteheadshow.com/, 11:30 am, EDT

772. May 26, interview, Wealth DNA Radio Show, Blog Talk Radio, wealthdna.us, noon EST

771. May 26, Speaker at Occupy SF Forum, Unite HERE Local 2 Union Hall, 215 Golden Gate Ave., San Francisco -- along with Laura Wells, Lt. Gov. candidate Jena Goodman, Sect. of State candidate David Curtis, and Congressional candidate Barry Hermanson, 6 pm

770. May 26, interview on the Wealth DNA Radio Show (Blog Talk Radio: wealthdna.us) noon ET

769. May 25, "Occupy Oakland" barbecue at Mike Wilson’s house: 3413 Belmont Ave., El Cerrito, 1:30 pm

768. May 25, interview, the Bob Charles Show, Web Radio Station http://www.kinetichifi.com/, 2 pm EST

767. May 24, Attend and speak at the Sacramento "March against Monsanto" anti-GMO event (starts at the North steps of the State Capitol building).

766. May 23, c. 11:00 am -- Speak to the "Campus Greens" at De Anza College, Cupertino

765. May 23. Ellen and Laura Wells will speak at the "Green Party Candidates Night" -- at the Richmond Progressive Alliance office, in the Bobby Bowens Progressive Center, 1021 Macdonald Ave., Richmond, 7 pm

764. May 22, Monterey Co. Green Party candidates forum, with Cindy Sheehan and Laura Wells, Monterey College of Law, 100 Col. Durham St., Seaside, CA 93955, 7 pm

763. May 20, interview with Sinclair Noe, Financial Review, MoneyRadio.com (pre-recorded, check for air time.)

762. May 15, interview with Alan Butler, Butler on Business, Liberty Express Radio, 10 AM EDT

761. May 14, interview with Stanley Montieth, The Doctor Stan Show, Radio Liberty, 7 am PST

760. May 13, interview with Robert Stark and Jeff Crow, Valley Talk Live, centralvalleytalk.com, Fresno, 4 pm PT. Listen to archive here.

759. May 11, Skype participant, Green Party candidate Q&A event, Lieblyl Proctor Library
6501 Telegraph Avenue
Oakland, CA 94607
Between 65th and 66th St. 5 pm

758. May 10, United We Stand Festival, Pauley Pavilion, UCLA,
https://unitedwestandfest.com/confirmed-guests/

757. May 6, inteview with Rock Cash, The People Speak Radio. Listen to archive here.

756. May 1, interview with Stephen Lendman, The Progressive Newshour, 9 a.m. PDT

755. April 29, moderator, Great Minds #66 with Nomi Prins, Los Angeles, CA., 7 pm PT

754. April 23, Ellen interviews Nomi Prins on It's Our Money. Listen to archive here.

753. April 21, interview with Robert Stark and Jeff Crow, Valley Talk Live, centralvalleytalk.com, Fresno, 4:30 PT

752. April 17, interview Dr. Rima Truth Reports, with Dr. Rima Laibow, 10 pm EST

751. April 17, interview with Greg Hunter, USAWatchdog.com, 11:30 EST

750. April 8, It's Our Money with Ellen Brown, interiews Kevin Zeese and Margaret Flowers. Listen to archive here.

749. April 8, interview with Alan Butler, Butler on Business, Liberty Express Radio, 11:30 AM EDT

748. April 3, interview with Stephen Lendman, The Progressive Newshour, 9 a.m. PDT

747. April 3, interview with James Banks, KGNU radio, Boulder, CO, 5 p.m. PT

746. April 2, interview, WHDTWorldNews, Nextnewsnetwork.com, 10:30 a. m. PDT

745. March 26, 1 pm PDT, It’s Our Money with Ellen Brown. Ellen interviews Prof. ROBERT HOCKETT--fascinating background material for understanding the banks' role in the foreclosure mess and the eminent domain solution. Listen to the archive here.

744. March 24, interview with Kevin Zeese JD and Margaret Flowers MD, Clearing the FOG on We Act Radio, 1480 AM Washington, DC, 8 a.m. PDT

743. March 23rd, "Banking for the People—Not for Wall Street," Agenda for a Prophetic Faith Lecture Series, Claremont United Methodist Church, 211 W. Foothill Blvd., Claremont, CA 91711, http://www.claremontumc.org/, 7 pm PT

742. Apr. 13, Interview with Chris Moore, KDKA Pittsburgh, 5 pm EST

741. March 18, 2 pm, Democratic Club, Friendly Valley Conference Room, Newhall, CA.

740. March 13, interview with Fred Smart, American Underground Network, 8 pm, CDT

739. March 12, 12 pm PDT, It's Our Money radio show with Ellen Brown, featuring Prof. TIM CANOVA on the Federal Reserve. Listen to archive here.

738. March 4, interview with Tom Kiely, INN World Report, 4:30 PST

737. Feb. 23, interview with Stephen Lendman, The Progressive Newshour, 10 a.m. PST

736. Feb 20, interview with Bill Deller, 3CR radio, Melbourne, Australia, 3 pm, PST

735. Feb. 17, interview, Strike Debt Bay Area, KPFA, Berkeley, 2 pm (?) PST

734. Feb16, interview with Gary Dubin, The Foreclosure Hour (http://www.foreclosurehour.com/the-host.html), 5 pm PST

733. Feb. 11, interview with Clint Richardson, RBN 5 pm PST

732. Feb 9, interview with Stephen Golden, DEFENDING THE AMERICAN DREAM, KABC Los Angeles, 6 am, PST Listen to the archive here.

731. Feb. 6, interview, Move to Amend Reports, http://www.blogtalkradio.com/movetoamend, 5 pm PST

730. Feb. 5, interview with Sinclair Noe, Financial Review, MoneyRadio.com, 9:30 am PST

729. January 30, interview, Kerry Lutz - Financial Survival Network, 12 pm EST

728. January 30, interview with Tom Kiely, INN World Report, 4:30 PST

727. January 29, interview on Latin Waves, 8 pm PST

726. January 28, Green Party Shadow Cabinet response to State of the Union Speech. http://www.livestream.com/greenpartyus 6 pm PST

725. January 26, interview with Stephen Lendman, The Progressive Newshour, 10 a.m. PST. Listen here.

724. January 23, interview, The Tim Dahaney Show, 12 noon PST. Listen here.

723. January 22, interview with Utrice Leid, "Leid Stories,", PRN.FM, 1 pm EST

722. January 21, interview, Independent Underground Radio LIVE, 9:15 PST. Listen here.

721. January 12, Open Forum with Green Party candidates Luis Rodriguez, Laura Wells and Ellen Brown, hosted by LULAC (League of United Latin American Citizens) 11277 GARDEN GROVE BLVD., Garden Grove, CA. 2-4 pm

720. January 11, interview with Bill Still on running for California Treasurer. Watch it here. And see another one here.

719. January 8, interview, The Tim Dahaney Show, 12 noon PST. Listen here. (It's the one labelled "Take the Fed Reserve Public.")

718. Jan 7, interview, The Burt Cohen Show, 12 noon ET

--2013--

717. Dec. 30, interview, Stuart Vener Tells It Like It Is, see http://stuartvener.com for stations, 11:30 am EST

716. Dec. 26, interview Dr. Rima Truth Reports, with Dr. Rima Laibow and Ralph Fucetola, 10 pm EST

715. Dec. 21, interview, KPRO Radio San Francisco, 9:30 am PST

714. Dec. 18, interview, The Power Hour with Joyce Riley, 8 a.m. CT

713. Dec. 18, interview, Unwrapped Radio, WRFG, http://www.tuneinradio.com/, 12:40 EST

712. Dec. 15, interview with Stephen Lendman, The Progressive Newshour, 10 a.m. PST, listen here.
711. Dec. 15, presentation, A Public Bank for Mendocino, at the Crown Hall in Mendocino, Ca., 7 pm

710. Dec. 15, presentation, Why We Need to Own Our Own Bank, Mendocino Environmental Center
106 West Standley, Ukiah, CA 95482, 2 pm

709. Dec. 14, presentation, Why We Need to Own Our Own Bank, Little Lake Grange, Willits, Ca. 7 pm

708. Dec. 13, interview on All About Money, KZYX radio, 9 a.m. PST

707. Dec. 13, interview, Radio Islam, WCEV 1450 AM, 12:05 pm, CST

706. Dec. 12, appearance with Doug McKenty, "The Shift," Mendocino TV, 4:30 pm PST

705. Dec. 11, interview on WHDT World News, http://NNN.is/on-WHDT, 5:30 and 11:00 pm EST. Watch the archive here.

704. Dec. 11, interview, WORT Community Radio, Madison, Wisconsin, 6:10 a.m. PST

703. Dec. 11, interview with Sinclair Noe, Financial Review, MoneyRadio.com, 10:30 PST

702. Dec. 9, UnWrapped Radio, Atlanta, 1 pm PST.

701. Dec. 9, GOHarrison, KPFK Los Angeles, 3:30 pm PST.

700. Dec. 9, interview, Air Cascadia show, KBOO radio, Portland, 10 am PST

699. Dec. 5, interview, WHDT World News TV, 2 pm PST

698. Dec. 4, interview with David Swanson, talknationradio, 7pm PST

697. Dec. 4, interview with Rob Kall, The Rob Kall Bottom-Up Radio Show, 1360 AM, 7:30 pm EST

696. Dec. 3, interview with Kim Greenhouse, It's Rainmaking Time, listen here.

695. Dec. 2, interview with Val Muchowski, Women's Voices, KZYX, 7 p.m. PST

694. Nov. 29, interview with Gregg Hunter, USAWatchdog.com, 11:30 PST

693. Nov. 16, interview This is Hell! radio show, WNUR 89.3 fm, thisishell.com/live, 11.20 a.m. EST. Listen to archive here

692. Nov. 15, interview with George Berry, The Financial News Network Show, truthfrequencyradio.com, 1 pm PST

691. Nov. 14, interview with Stanley Montieth, The Doctor Stan Show, Radio Liberty, 4 pm PSTf

690. Nov. 14, interview with Neil Foster, Reality Bytes show, Awake Radio (UK), Shazziz Radio (US), 8 pm UK time.

689. Nov. 13, interview with Bonnie Faulkner, KPFA, Los Angeles. Listen to archive here.

688. Nov. 12, interview with Tom Kiely, INN World Report, 4:30 PST

687. Nov. 11, interview, Between the Lines News Magazine, WPKN radio, Bridgeport, CT, 9 p.m. ET. Listen to archive here

686. Nov. 10, skype participant, forum at the Putrajaya International Islamic Arts and Cultural Festival, "Global Economic and Monetary Crisis: What Needs to be Done?" Putrajaya, Malaysia, 11 a.m. MYT, 7 pm, Nov. 9 PST

685. Nov. 3, interview with Stephen Lendman, The Progressive Newshour, 10 a.m. PST

684. Oct. 31, interview with Voice of Russia radio, American edition, 2:30 pm, CET (Central Europe Time.) Listen to archive here.

683. Oct. 23, interview with Daniel Estulin on RT tv

682. Oct. 16, interview with Per Fereng, KBOO radio, Portland, 11 am PST

681. Oct. 15, presentation, "The Public Banking Forum in Ireland," 7-9 PM, Hudson Bay Hotel, Athlone, Ireland.

680. Oct. 14, presentation, Cork, Ireland

679. Oct. 12, presentation, "The Public Banking Forum in Ireland," 2-4 PM, Springfield Hotel in Leixlip, County Kildare, Ireland. Information on these three events here.

678. October 4, interview with Bill Deller, 3CR radio, Melbourne, Australia, 2:30 pm, PST

677. Oct. 3, interview with Joyce Riley, the Power Hour. Listen to archive here.

676. Oct. 1, interview with Tom Kiely, INN World Report 7:30 EST

675. Sept. 29, interview with Stephen Lendman, The Progressive Newshour, 10 a.m. PST

674. Sept. 27, interviw with Kevin Barrett, AmericanFreedomRadio.com, NoLiesRadio.org:
http://TruthJihadRadio.blogspot.com, 2 pm PST

673. Sept. 19, interview, The Gary Null Show, 9:30 a.m. Pacific

672. Sept. 19, Interview on the Global Research News Hour with Michael Welch--check site for time and archive.

671. Sept. 18, interview with David Sierralupe, Occupy Radio, KWVA, 88.1 FM, Eugene

670. Sept. 15, interview with Niall Bradley, Sott Talk Radio, sott.net, 2 p.m. EST

669. Sept. 14, interview FDLBookSalon, firedoglake.com, 5pm EST

668. Sept. 10, "Turning Hard Times into Good Times" with Jay Taylor, VoiceAmerica, 12:30 pm PST. Listen to archive here.

667. Sept. 9, interview with Ken MacDermotRoe and Del LaPietro, In Context Report, 9 am PST. Listen to archive here.

666. Sept 7, interview with Valerie Kirkgaard, WakingUpInAmerica.com, 6 am, PST. Listen here.

665. Sept. 6, Interview with Al Korelin, The Korelin Economics Report, 12:30 pm PST

664. Sept. 5, discussion of how to bring public banking to Colorado on "It's the Economy, Stupid," KGNU, Boulder, 5 p.m. PST

663. Sept. 5, interview with Patrick Timpone, oneradionetwork.com, 8 a.m. PST

662. Sept. 3, interview (along with Elliott Spitzer?), "Turning Hard Times into Good Times" with Jay Taylor, VoiceAmerica, 1 pm PST Listen to archive here.

661. Sept. 3, interview with Jeanette LaFeve, The People Speak, 6 pm PST

660. Aug. 25, Stephen Lendman, Progressive Radio News Hour, 10 am, PDT

659. Aug. 22, interview with Christopher Greene, AMTV Radio, simulcast in audio/video over GoogleHangouts and American Freedom Radio, 1 p.m. PST

658. Aug. 22, interview, TheAndyCaldwellShow.com,
CalChronicle.com, 3 pm PST

657. Aug. 21, interview with Merry and Burl Hall, blogtalkradio.com/envision-this, 5 pm PST

656. Aug. 21, interview with Lori Lundin, America's Radio News Network, 10:30 a.m. ET.

655. Aug. 16, interview with Sinclair Noe, Moneyradio.com, 4 pm PST

654. Aug. 15, interview with Justine Underhill, Prime Interest, Russia Today TV, 1:30 pm PST

653. Aug 14, interview with Jim Goddard, This Week in Money, 4 pm, PST. Listen to archive here, starting at minute 32.

652. Aug. 14, interview with Mary Glenney, WMNF 88.5, 10 a.m. PST

651. Aug. 14, interview with Chuck Morse, irnusaradio.com, 8 am, PST

650. Aug. 13, interview with Thomas Taplin, Dukascopy TV, Switzerland, 9 am PST

649. Aug 7-11, Madison Democracy conference, https://democracyconvention.org/

648. Aug. 6, radio interview, INN World Report with Tom Kiely, http://feeds.feedburner.com/INNWorldReportRadio 4:30 PST

647. Aug 5, interview with Arnie Arnesen, 94.7 fm, Concord, NH, 9 am PST

646. Aug 3, interview with Diane Horn, Mind Over Matter show, KEXP radio, 90.3 FM, Seattle, 7:00 a.m. PST

645. July 31, interview with Mike Beevers, KFCF Fresno, 4:30 pm PST

644. July 28, Stephen Lendman, Progressive Radio News Hour, 10 am, PDT

643. July 2, interview with Charlie McGrath, Wide Awake News, 6-7 pm PDT.

642. July 2, interview with Arnie Arnesen, 94.7 fm, Concord, NH, 12:30 EST.

641. June 30, interview with Stephen Lendman, Progressive Radio News Hour, 10 am, PDT. Listen to archive here.

640. June 24, interview on RT tv re student debt, 10:30 am PST

639. June 17, interview on The Andy Caldwell Show, 3:30 pm PST

638. June 16, interview with Jason Erb, 5 pm Pacific

637. June 13, interview with Paul Sanford, "Time 4 Hemp-LIVE," http://www.AmericanFreedomRadio.com, 10 am, PST

636. June 6 presentation with Jamie Brown at the Mt. Diablo Peace and Justice Center in Walnut Creek. Info at Favors.org, 7 to 9 pm

635. June 1, interview with Kris Welch, KPFA Los Angeles, 10 am PST

634. May 28, interview with Malihe Razazan, "Your Call" radio, KALW, San Francisco, 10 am PST.

633. May 26, interview with Stephen Lendman, Progressive Radio News Hour, 10 am, PDT

632. May 23 interview with Simit Patel, InformedTrades.com (youtube) 3:30 pm PST

631. May 22, Thousand Oaks, 3 expert panel, "A Parachute For the Fiscal Cliff," University Village 2-4 pm

630. May 22, interview with Jack Rasmus, 11 am PST. Enjoy the interview here.

629. May 22, Guns and Butter show, KPFA, http://www.kpfa.org/archive/id/91790

628. May 14, interview with Charlie McGrath, Wide Awake News, 6-7 pm PDT.

627. May 13, live appearance on RTTV, 3 pm PST Watch it here.

626. May 8, interview with Valli Sharpe-Geisler, Silicon Valley Voice, KKUP, 3 pm PST

625. May 8, interview, the Meria Heller Show, 11 am PST

624. May 4, interview, Latin Waves with Sylvia Richardson, 10 am PST

623. April 30, Jay Taylor, VoiceAmerica, 1 pm PST

622. April 29, interview with Rob Kall, Bottom Up Radio, 9 am Pacific
Listen to archive here.

621. April 28, interview with Stephen Lendman, Progressive Radio News Hour, 10 am, PDT

620. April 25, interview, the the Dr. Katherine Albrecht Show, 5 pm EDT

619. April 17, interview with Mike Harris, rense.com, 1 pm PDT

618. April 16th, speaker, Valley Democrats United (Democratic Party of San Fernando Valley), Van Nuys, Ca. 7-9pm

617. April 13, interview with Darren Weeks, Govern America, noon Eastern, listen here

616. April 9, interview with Charlie McGrath, Wide Awake News, 6-7 pm PDT.

615. April 6, phone conference, Justice Party, http://www.justicepartyusa.org/public_banking_conference_call, 9 a.m.

614. April 5, interview, Butler on Business, 11 a.m. EDT

613. April 3, interview with Michael Welch, Global Research News Hour, 8:30 a.m. PDT

612. April 2, interview with Jay Taylor, VoiceAmerica, 12:30 PDT. Listen here.

611. April 1, interview with Brannon Howse, www.worldviewradio.com, 11 a.m. PDT

610. April 1, interview with Scott Harris, Counterpoint,
WPKN Radio, 8:30 pm, ET Listen to archive here.

609. April 1, interview with Margaret Flowers and Kevin Zeese. Watch and listen to archive here, starting at minute 50. Articles based on the interview are at Truthout.org.

608. March 31, interview with Jason Erb, Exposing Faux Capitalism, Oracle Broadcasting, 11 a.m. Pacific

607. March 31, interview with Stephen Lendman, Progressive Radio News Hour, 10 am, PDT Listen to the archive here.

606. March 29, interview, The Gary Null Show, 9:30 a.m. Pacific

605. March 28, interview with Stan Monteith, radioliberty.com, 9 pm PDT

604. March 28, radio interview, INN World Report with Tom Kiely, http://feeds.feedburner.com/INNWorldReportRadio 4:30 PDT

603. March 27, interview with Charlie McGrath, Wide Awake News, 6-7 pm PdT.

602. March 27, interview with Jack Rasmus on PRN, 11 a.m. PDT

601. March 25, interview on the Richard Kaffenberger show, KTOX, Needles, CA. 3:15 PDT

600. March 22, newly available archived radio interview, Mandelman Matters. Listen here.

599. March 22, interview with James Fetzer, The People Speak Radio, 5-7 pm PDT

598. March 22, interview , Our Times With Craig Barnes, KSFR radio, Santa Fe, 10 a.m. MST

597. March 12, interview, Crisis of Reality with Doug Newberry, oraclebroadcasting.com, 1pm EST.

596. March 11, interview with Stephen Lendman, Progressive Radio News Hour, 10 am, PST

595. March 9, Interview with Sylvia Richardson, Latin Waves, CJSF 90.1FM, 9:30 am PST

594. March 6, interview with Charlie McGrath, wideawakenews.com, 6pm PST. Watch and listen here.

593. March 3, interview with Lateef Kareem Bey, Fix Your Mortgage Mess, 4 pm PST

592. March 2, Interview with Stuart Richardson, Latin Waves, CJSF 90.1FM, 11 am PST

591. Feb. 27, interview with Jim Banks, KGNU, Boulder, 12 pm PST

590. Feb 27, interview with Sinclair Noe, Financial Review, 10 am PST

589. Feb. 25, interview, Crisis of Reality with Doug Newberry, oraclebroadcasting.com, 1pm EST.

588. Feb. 6, Interview with Phil Mackesy, This Week in Money, TalkDigitalNetwork.com, 11 am PST. Listen to the archive here: http://talkdigitalnetwork.com/2013/02/this-week-in-money-70/

587. Feb. 4, interview with Ken Rose, What Now radio show, KOWS RADIO OCCIDENTAL 107.3 FM, 11 am PST.

586. Jan. 31, interview with Tom Kiely, INN World Radio Report, 5:00 pm PST

585. Jan. 27, interview with Stephen Lendman, progressive radio
network, 10 am PST

584. Jan. 23, interview on KPFK, 8pm PST

583. Jan. 22, interview, Crisis of Reality with Doug Newberry, oraclebroadcasting.com, 1pm EST.

582. Jan. 3, interview with Mary Glenney, WMNF 88.5, Tampa, 3 pm EST

581. Jan. 2, interview, The Bev Smith Show, thebevsmithshow.net, 5 pm PST

--- 2012 ---

580. Dec. 27, video interview with Charlie McGrath, Wide Awake News, listen and watch here.

579. Dec. 24, October talk at First Unitarian Church in Portland aired on KBOO radio, http://kboo.fm/, 8:00 am PST

578. Dec. 24, interview with Ron Daniels, the WWRL Morning Show with Mark Riley, wwrl1600.com, 5:05 am PST

577. Dec. 21, interview with Andy Caldwell, TheAndyCaldwellShow.com, KZSB AM1290 Santa Barbara / Ventura and KUHL AM1440 Santa Maria / San Luis Obispo, 3:30 pm PST

576. Dec. 20, interview with Fred Smart, aunetwork.tv, 9 pm EST

575. Dec. 19, interview, Crisis of Reality with Doug Newberry, oraclebroadcasting.com, 1pm EST. Listen here.

574. Dec. 19, interview with Dr. Jack Rasmus, Alternative Visions, Progressive Radio Network, 2 pm EST

573. Dec. 17, The Bev Smith Show, thebevsmithshow.net, 4 pm PST

572. Dec. 15, interview with Stephen Lendman, progressive radio network, 10 am PST. Listen here.

571. Dec. 14, interview with Craig Barnes, Our Times With Craig Barnes, KSFR radio, 9 am PST Listen to the archive here.

570. December 9th, speaker, Mayo Arts Center (10 Mayo Street) in Portland, ME
http://mayostreetarts.org/about-us/where-we-are 7:30-9pm

569. Dec. 7, Vermont's New Economy conference, Vermont College of the Find Arts, Montpelier, VT, 9 am to 4 pm and reception at 4:30. $25
www.global-community.org/neweconomy to register

568. Dec. 5, speaker, Pennsylvania Public Bank Project's Forum on Public Banking, at the David Library of the American Revolution, Washington Crossing, PA, 7pm

567. Nov. 26-27, 3rd Annual World Conference on Riba, Kuala Lumpur, Malaysia

566. Nov. 22, presentation before Royal Scottish Academy -- "A Public Bank for Scotland" (here), Riddle's Court, 322 Lawnmarket, Edinburgh EH1 2PG Scotland, 6 pm

565. Nov 8, Healthy Money Summit, speaking with Hazel Henderson at 1-2 pm PST, information here.

564. Sunday, Oct. 28, Keynote Speaker; The Buck Starts Here, 2:00pm, sponsored by the Kairos Occasional Speakers Series & OFOR, Kairos Milwaukie UCC, Milwaukie, OR.

563. Saturday, Oct. 27, Keynote Speaker; OFOR Saturday Symposium: The Buck Starts Here, 10am - 3pm, Molalla, OR

562. Friday-Sunday, Oct. 26-28, Keynote Speaker; Oregon Fellowship of Reconciliation Fall Retreat - The Buck Starts Here, Camp Adams, Molalla, OR, Friday, 5pm- Sunday 12 noon

561. Friday, October 26, Invited Commentator; screening of “HEIST” (new documentary about the roots of the American economic crisis), sponsored by First Unitarian Church of Portland's Economic Justice Action Groups, Alliance for Democracy, KBOO, Move to Amend, 7:00pm, First Unitarian Church, Portland, OR

560. (Oct. 25-28, Bioneers Conference, Portland, OR)
Oct. 25, Keynote Speaker; sponsored by Portland Fellowship of Reconciliation (PFOR) and the First Unitarian Church of Portland's Economic Justice and Peace Action Groups, 7:00-8:30pm, First Unitarian Church, Portland, OR

559. Oct. 24, interview with Per Fagereng, KBOO radio, Portland, 9 am PST

558. Oct. 24, KPFA "Guns and Butter" interview. Listen to archived show here.

557. Oct. 21, speaker at BBQed Oysters and Beer Fundraiser Party for PBI, San Rafael, CA, 4 pm PST

556. Oct. 14, Live Gaiam tv interview appearance. Watch it here free at 7pm EST.

555. Oct. 12, interview with Matt Rothschild of The Progressive, 10 a.m. Central time

554. October 11-14, speaker, Economic Democracy Collaborative, Madison, Wisconsin

553. Oct. 11, radio interview with Norm Stockwell, WORT, 12 pm CST

552. Oct. 9, interview with Kevin Barrett, No Lies Radio, listen to archive here.

551. Oct. 8, interview, "Mountain Hours Revolution Radio" with Wayne Walton, on RBN, 12-1 pm PST

550. Oct. 7, interview with Lloyd D'Aguilar, "Looking Back Looking Forward", http://lookingbacklookingforward.com/, 2 pm EST

549. Sept. 26, interview with Douglas Newberry, markettoolbox.tv, 1pm EST. Listen here.

548. Sept. 25, interview with Dr. Stanley Montieth, radioliberty.com, 3pm PST

547. Sept. 24, interview with Charlie McGrath, Wide Awake News, 6-7 pm PST.

546. Sept. 22, interview with Stephen Lendman, progressive radio network, 10 am PST

545. Sept. 17 interview along with Hazel Henderson, National Teach In for Occupy Wall Street, http://www.livestream.com/owshdtv 5pm EST

544. Sept. 10, interview with Thomas Taplin, Dukascopy TV (Switzerland), 7 am PST Watch and listen here

543. Sept. 7, interview with Mike Harris, republicbroadcasting.org, 6 am PST

542. Sept. 6, interview with Douglas Newberry, markettoolbox.tv, 1pm EST. Listen here.

541. Aug 28, interview, the Meria Heller Show, 11 am PST. Listen to archive here. And listen to excellent Meria Heller show here.

540. Aug 26, interview with Stephen Lendman, progressive radio network, listen to archive here.

539. August 21, interview with Charlie McGrath, wideawakenews.com. Listen to archive here.

538. Aug 20, interview with Kim Greenhouse, It's Rainmaking Time, listen here.

537. Aug 16, interview with Mike Harris, republicbroadcasting.org, 6 am PST

536. Aug. 14, interview, TheAndyCaldwellshow.com, 4:30pm PST

535. August 13, interview with American Free Press, 1 pm PST

534. July 24, interview along with Victoria Grant, The People Speak, 6pm, PST

533. July 24, interview with Kevin Barrett, NoLiesRadio.org, 9 am PST

532. July 23, interview with Charlie McGrath, wideawakenews.com, 6 pm PST

531. July 22, interview with Dave Hodges, The Common Sense Show, 7 pm PST

530. July 22, interview with Stephen Lendman, progressive radio network, 10 am PST. Listen to archive here.

529. July 19, interview with Mike Beevers, KFCF Fresno, 4:30 pm PST

528. July 10-12, Speaker, Conference on Social Transformation, Faculty of Economics, Split University, Split Croatia

527. July 10, video interview with Max Keiser, the Keiser Report, on the ESM. Watch it here.

526. July 7, Interview with Phil Mackesy, This Week in Money, TalkDigitalNetwork.com, 3 pm PST

525. July 6, video interview with Dr. Mercola, see it here.

524. June 23, Interview with Al Korelin, The Korelin Economics Report, 1 pm PST. Listen to archive here.

523. June 21, interview with Tom Kiely, INN World Radio Report, 4:30 pm PST

522. June 21, interview on the Gary Null Show, 9:20 am PST

521. June 18, interview with Ken Rose, What Now radio show, KOWS RADIO OCCIDENTAL 107.3 FM, 1 pm PST. Listen to archive here.

520. June 17, interview with Bill Resnick, KBOO radio, 9 am PST

519. June 16 interview with Stephen Lendman, progressive radio network, 10 am PST. Listen to archive here.

518. June 9, interview with Sylvia Richardson, Latin Waves, 9:45 am PST. Listen to archive here.

517. June 5, interview, Truth Quest With Melodee, KHEN radio, 7pm PST

516. June 2, interview about Web of Debt, Our Common Ground,http://www.blogtalkradio.com/OCG, 7pm PST

515. June 1, interview with Robert Stark, The Stark Truth listen here.

514. Newly available video of interview on "Moral Politics" -- see it here

513. May 30, interview, The Tim Dahaney Show, ll am PST

512. May 28, interview with Pedro Gatos, "Bringing Light into Darkness", KOOP.ORG, 6 pm CST

511. May 24, interview, Make It Plain With Mark Thompson, SiriusXM Satellite Radio, 2pm PST

510. May 20, interview, Women's View Radio, blogtalkradio.com, 10 am Central Time. Listen here.

509. May 13, interview, www.Blogtalkradio.com/fixyourmortgagemess, 4:15 pm PST

508. May 12, interview with Stephen Lendman, progressive radio network, 10 am PST Listen here.

507. May 9, seminar, Re-imagining Money and Credit, Art bldg. rm 103, El Camino college, Torrance, Ca. 5-7:30 pm

506. May 8, interview with Mike Harris, republicbroadcasting.org, 9 am EST

505. May 7, radio discussion on "The Myth of Austerity", Connect the Dots, KPFK Los Angeles, 7 am PST. Listen here.

504. May 4, interview The Unsolicited Opinion, republicbroadcasting.org, 8 am PST

503. April 27-28, speaker, Public Banking Institute Conference, Friends Center, Philadelphia. Listen here.

502. April 25, speaker Global Teach-In (globalteachin.com), 12 noon EST

501. April 17, Interview with Leo Steel, http://www.blogtalkradio.com/lasteelshoworg, 8:30 pm EST. Listen here.. 31 minutes in.

500. April 14, interview with Stephen Lendman, progressive radio network, 10 am PST

499. April 14, interview with Al Korelin, The Korelin Economics Report

498. April 10th-12th Speaker at Claremont Conference, “Creating Money in a Finite World” Claremont, CA . See video here.

497. April 5, interview , This Week In Money with Phil Mackesy (howestreet.com) 12:30 PST. Listen to the archive here.

496. April 3, speaker at COMER with Paul Hellyer, "Escape From the Web of Debt," Toronto, 7:30 pm

495. March 27, speaker on "Why are we so Broke? New ways to look at the Finances of our State and City," League of Women Voters luncheon, San Diego, 12 noon

494.5 March 24, radio interview, Mandelman Matters. Listen here.

494. March 17, speaker via skype, SCADS conference, London

493. March 15, interview with Per Fagereng, Fight the Empire, KBOO radio, 9:30 am PST

492. March 15, speaker, San Rafael City Hall 6 pm

491. March 13, speaker at Sergio Lub's house, Walnut Creek, info at Favors.org, 6pm

490. March 11, speaker, TedxNewWallStreet. See it here.

489. March 10, interview with Stephen Lendman, progressive radio network, 10 am PST

488. March 6, interview with Melinda Pillsbury-Foster, http://radio.rumormillnews.com/podcast/, 11 am PST

487. Feb. 25, interview with Martin Andelman, http://www.mandelman.ml-implode.com, 9:30 am PST

486. Feb. 25, interview, This Week In Money with Phil Mackesy (howestreet.com), 3 pm PST

485. Feb. 25, interview on CIVL Radio, Latin Waves, How Greece Could Take Down Wall Street, 11:30am PST

484. Feb 23, interview with Thomas Kiely, INN World Report Radio, 7:30 pm EST

483. Feb. 17, featured speaker, Public Banking in America weekly call, 9 am PST

482. Feb. 11, interview with Stephen Lendman, progressive radio network, 10 am PST

481. Feb. 8, interview with Mike Beevers, KFCF Fresno, 4:30 pm PST

480. Feb. 7, interview with Kevin Barrett, NoLiesRadio.org, 9 am PST; listen to archive here

479. Feb. 6, participant, Occupiers and Wells Fargo Executives Gather to Discuss the American Foreclosure Crisis, The Center of Nonprofit Management at California Endowment Building 1000 N. Alameda, Los Angeles, meeting 3 pm and press conference 5:30 pm

478. Feb. 2, interview with Tom Kiely, INN World Report Radio, 7:30 pm EST

477. Feb. 2, interview with Patrick Timpone, oneradionetwork.com, naturalnewsradio.com. Listen to archive here

476. Jan. 31, interview, Liberty Coins and Precious Metals, 9 am PST

475. Jan. 27, interview KPFA, Project Censored, 8:30 am PST

474. Jan. 27, FILMS4CHANGE-INSIDEJOB, panel speaker, Edye Second Space, Santa Monica Performing Arts Center, 7:30 pm

473. Jan 22, interview with Dave Hodges, The Common Sense Show, 7:30 pm PST. Listen live here.

472. Jan. 20, interview with Mike Harris, The Republic Broadcasting Network, 7 am PST

471. Jan. 16, interview with Rob Lorei, WMNF fm, Tampa, 2 pm PST

470. Jan. 14, interview with Stephen Lendman, progressive radio network, 10 am PST

469. Jan. 11, interview with Jeff Rense, rense.com, 8pm PST

Did the Other Shoe Just Drop? Black Rock and PIMCO Sue Banks for $250...

For years, homeowners have been battling Wall Street in an attempt to recover some portion of their massive losses from the housing Ponzi scheme. But progress has been slow, as they have been outgunned and out-spent by the banking titans.

In June, however, the banks may have met their match, as some equally powerful titans strode onto the stage.  Investors led by BlackRock, the world’s largest asset manager, and PIMCO, the world’s largest bond-fund manager, have sued some of the world’s largest banks for breach of fiduciary duty as trustees of their investment funds. The investors are seeking damages for losses surpassing $250 billion. That is the equivalent of one million homeowners with $250,000 in damages suing at one time.

The defendants are the so-called trust banks that oversee payments and enforce terms on more than $2 trillion in residential mortgage securities. They include units of Deutsche Bank AG, U.S. Bank, Wells Fargo, Citigroup, HSBC Holdings PLC, and Bank of New York Mellon Corp. Six nearly identical complaints charge the trust banks with breach of their duty to force lenders and sponsors of the mortgage-backed securities to repurchase defective loans.

Why the investors are only now suing is complicated, but it involves a recent court decision on the statute of limitations. Why the trust banks failed to sue the lenders evidently involves the cozy relationship between lenders and trustees. The trustees also securitized loans in pools where they were not trustees. If they had started filing suit demanding repurchases, they might wind up suedon other deals in retaliation. Better to ignore the repurchase provisions of the pooling and servicing agreements and let the investors take the losses—better, at least, until they sued.

Beyond the legal issues are the implications for the solvency of the banking system itself. Can even the largest banks withstand a $250 billion iceberg? The sum is more than 40 times the $6 billion “London Whale” that shook JPMorganChase to its foundations.

Who Will Pay – the Banks or the Depositors?

The world’s largest banks are considered “too big to fail” for a reason. The fractional reserve banking scheme is a form of shell game, which depends on “liquidity” borrowed at very low interest from other banks or the money market. When Lehman Brothers went bankrupt in 2008, triggering a run on the money market, the whole interconnected shadow banking system nearly went down with it.

Congress then came to the rescue with a taxpayer bailout, and the Federal Reserve followed with its quantitative easing fire hose. But in 2010, the Dodd Frank Act said there would be no more government bailouts. Instead, the banks were to save themselves with “bail ins,” meaning they were to recapitalize themselves by confiscating a portion of the funds of their creditors – including not only their shareholders and bondholders but the largest class of creditor of any bank, their depositors.

Theoretically, deposits under $250,000 are protected by FDIC deposit insurance. But the FDIC fund contains only about $47 billion – a mere 20% of the Black Rock/PIMCO damage claims. Before 2010, the FDIC could borrow from the Treasury if it ran short of money. But since the Dodd Frank Act eliminates government bailouts, the availability of Treasury funds for that purpose is now in doubt.

When depositors open their online accounts and see that their balances have shrunk or disappeared, a run on the banks is likely. And since banks rely on each other for liquidity, the banking system as we know it could collapse. The result could be drastic deleveraging, erasing trillions of dollars in national wealth.

Phoenix Rising

Some pundits say the global economy would then come crashing down. But in a thought-provoking March 2014 article called “American Delusionalism, or Why History Matters,” John Michael Greer disagrees. He notes that historically, governments have responded by modifying their financial systems:

Massive credit collapses that erase very large sums of notional wealth and impact the global economy are hardly a new phenomenon . . . but one thing that has never happened as a result of any of them is the sort of self-feeding, irrevocable plunge into the abyss that current fast-crash theories require.

The reason for this is that credit is merely one way by which a society manages the distribution of goods and services. . . . A credit collapse . . . doesn’t make the energy, raw materials, and labor vanish into some fiscal equivalent of a black hole; they’re all still there, in whatever quantities they were before the credit collapse, and all that’s needed is some new way to allocate them to the production of goods and services.

This, in turn, governments promptly provide. In 1933, for example, faced with the most severe credit collapse in American history, Franklin Roosevelt temporarily nationalized the entire US banking system, seized nearly all the privately held gold in the country, unilaterally changed the national debt from “payable in gold” to “payable in Federal Reserve notes” (which amounted to a technical default), and launched a  series of other emergency measures.  The credit collapse came to a screeching halt, famously, in less than a hundred days. Other nations facing the same crisis took equally drastic measures, with similar results. . . .

Faced with a severe crisis, governments can slap on wage and price controls, freeze currency exchanges, impose rationing, raise trade barriers, default on their debts, nationalize whole industries, issue new currencies, allocate goods and services by fiat, and impose martial law to make sure the new economic rules are followed to the letter, if necessary, at gunpoint. Again, these aren’t theoretical possibilities; every one of them has actually been used by more than one government faced by a major economic crisis in the last century and a half.

That historical review is grounds for optimism, but confiscation of assets and enforcement at gunpoint are still not the most desirable outcomes. Better would be to have an alternative system in place and ready to implement before the boom drops.

The Better Mousetrap

North Dakota has established an effective alternative model that other states might do well to emulate. In 1919, the state legislature pulled its funds out of Wall Street banks and put them into the state’s own publicly-owned bank, establishing financial sovereignty for the state. The Bank of North Dakota has not only protected the state’s financial interests but has been a moneymaker for it ever since.

On a national level, when the Wall Street credit system fails, the government can turn to the innovative model devised by our colonial forebears and start issuing its own currency and credit—a power now usurped by private banks but written into the US Constitution as belonging to Congress.

The chief problem with the paper scrip of the colonial governments was the tendency to print and spend too much. The Pennsylvania colonists corrected that systemic flaw by establishing a publicly-owned bank, which lent money to farmers and tradespeople at interest. To get the funds into circulation to cover the interest, some extra scrip was printed and spent on government services. The money supply thus expanded and contracted naturally, not at the whim of government officials but in response to seasonal demands for credit. The interest returned to public coffers, to be spent on the common weal.

The result was a system of money and credit that was sustainable without taxes, price inflation or government debt – not to mention without credit default swaps, interest rate swaps, central bank manipulation, slicing and dicing of mortgages, rehypothecation in the repo market, and the assorted other fraudulent schemes underpinning our “systemically risky” banking system today.

Relief for Homeowners?

 Will the BlackRock/PIMCO suit help homeowners?  Not directly.  But it will get some big guns on the scene, with the ability to do all sorts of discovery, and the staff to deal with the results.

Fraud is grounds for rescission, restitution and punitive damages.  The homeowners may not have been parties to the pooling and servicing agreements governing the investor trusts, but if the whole business model is proven to be fraudulent, they could still make a case for damages.

In the end, however, it may be the titans themselves who take each other down, clearing the way for a new phoenix to rise from the ashes.

___________________

Ellen Brown is an attorney, founder of the Public Banking Institute, and author of twelve books including the best-selling Web of Debt. In The Public Bank Solution, her latest book, she explores successful public banking models historically and globally. Her websites are http://EllenBrown.comhttp://PublicBankSolution.com, and http://PublicBankingInstitute.org.

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Ann Pettifor on Why the 100% Reserve Solution Is a Bad Idea

Ann Pettifor has written an excellent rebuttal to the full reserve banking solution proposed by Professor Richard Wolf and Positive Money, who are in most ways her allies. Her entree is the Bank of England’s recent acknowledgment that banks create the money they lend. She writes:  

Because I am a vocal critic of the private finance sector, many assume that I would agree with Wolf and Positive Money on nationalising money creation. Not so. I have no objection to the nationalisation of banks. But nationalising banks is a different proposition from nationalising (and centralising) money creation in the hands of a small ‘independent committee’.

The full article is here:

Out of thin air – Why banks must be allowed to create money

Yves Smith has also commented, here:

Why Banks Must Be Allowed to Create Money

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Buying Up the Planet: Out-of-control Central Banks on a Corporate Buying Spree

Finance is the new form of warfare – without the expense of a military overhead and an occupation against unwilling hosts. It is a competition in credit creation to buy foreign resources, real estate, public and privatized infrastructure, bonds and corporate stock ownership. Who needs an army when you can obtain the usual objective (monetary wealth and asset appropriation) simply by financial means?                                                                                       — Dr. Michael Hudson, Counterpunch, October 2010

When the US Federal Reserve bought an 80% stake in American International Group (AIG) in September 2008, the unprecedented $85 billion outlay was justified as necessary to bail out the world’s largest insurance company. Today, however, central banks are on a global corporate buying spree not to bail out bankrupt corporations but simply as an investment, to compensate for the loss of bond income due to record-low interest rates. Indeed, central banks have become some of the world’s largest stock investors.

Central banks have the power to create national currencies with accounting entries, and they are traditionally very secretive. We are not allowed to peer into their books. It took a major lawsuit by Reuters and a congressional investigation to get the Fed to reveal the $16-plus trillion in loans it made to bail out giant banks and corporations after 2008.

What is to stop a foreign bank from simply printing its own currency and trading it on the currency market for dollars, to be invested in the US stock market or US real estate market?  What is to stop central banks from printing up money competitively, in a mad rush to own the world’s largest companies?

Apparently not much. Central banks are for the most part unregulated, even by their own governments. As the Federal Reserve observes on its website:

[The Fed] is considered an independent central bank because its monetary policy decisions do not have to be approved by the President or anyone else in the executive or legislative branches of government, it does not receive funding appropriated by the Congress, and the terms of the members of the Board of Governors span multiple presidential and congressional terms.

As former Federal Reserve Chairman Alan Greenspan quipped, “Quite frankly it does not matter who is president as far as the Fed is concerned. There are no other agencies that can overrule the action we take.”

The Central Bank Buying Spree

That is how “independent” central banks operate, but it evidently not the US central bank that is gambling in the stock market. After extensive quantitative easing, the Fed has a $4.5 trillion balance sheet; but this sum is accounted for as being invested conservatively in Treasuries and agency debt (although QE may have allowed Wall Street banks to invest the proceeds in the stock market by devious means).

Which central banks, then, are investing in stocks? The biggest player turns out to be the People’s Bank of China (PBoC), the Chinese central bank.

According to a June 15th article in USA Today:

Evidence of equity-buying by central banks and other public sector investors has emerged from a large-scale survey compiled by Official Monetary and Financial Institutions Forum (OMFIF), a global research and advisory group. The OMFIF research publication Global Public Investor (GPI) 2014, launched on June 17 is the first comprehensive survey of $29.1 trillion worth of investments held by 400 public sector institutions in 162 countries. The report focuses on investments by 157 central banks, 156 public pension funds and 87 sovereign funds, underlines growing similarities among different categories of public entities owning assets equivalent to 40% of world output.

The assets of these 400 Global Public Investors comprise $13.2 trillion (including gold) at central banks, $9.4 trillion at public pension funds and $6.5 trillion at sovereign wealth funds.

Public pension funds and sovereign wealth funds are well known to be large holders of shares on international stock markets. But it seems they now have rivals from unexpected sources:

One is China’s State Administration of Foreign Exchange (SAFE), part of the People’s Bank of China, the biggest overall public sector investor, with $3.9 trillion under management, well ahead of the Bank of Japan and Japan’s Government Pension Investment Fund (GPIF), each with $1.3 trillion.

SAFE’s investments include significant holdings in Europe. The PBoC itself has been directly buying minority equity stakes in important European companies.

Another large public sector equity owner is Swiss National Bank, with $480 billion under management. The Swiss central bank had 15% of its foreign exchange assets – or $72 billion – in equities at the end of 2013.

Public pension funds and sovereign wealth funds invest their pension contributions and exchange reserves earned in foreign trade, which is fair enough. The justification for central banks to be playing the stock market is less obvious. Their stock purchases are justified as compensating for lost revenue caused by sharp drops in interest rates. But those drops were driven by central banks themselves; and the broad powers delegated to central banks were supposed to be for conducting “monetary policy,” not for generating investment returns. According to the OMFIF, central banks collectively now have $13.2 trillion in assets (including gold). That is nearly 20% of the value of all of the stock markets in the world, which comes to $62 trillion.

From Monetary Policy to Asset Grabs

Central banks are allowed to create money out of nothing in order to conduct the monetary policies necessary to “regulate the value of the currency” and “maintain price stability.”  Traditionally, this has been done with “open market operations,” in which money was either created by the central bank and used to buy federal securities (thereby adding money to the money supply) or federal securities were sold in exchange for currency (shrinking the money supply).

“Quantitative easing” is open market operations on steroids, to the tune of trillions of dollars. But the purpose is allegedly the same—to augment a money supply that shrank by trillions of dollars when the shadow banking system collapsed after 2008. The purpose is not supposed to be to earn an income for the central bank itself. Indeed, the U.S. central bank is required to return the interest earned on federal securities to the federal government, which paid the interest in the first place.

Further, as noted earlier, it is not the US Federal Reserve that has been massively investing in the stock market.  It is the PBoC, which arguably is in a different position than the US Fed. It cannot print dollars or Euros. Rather, it acquires them from local merchants who have earned them legitimately in foreign trade.

However, the PBoC has done nothing to earn these dollars or Euros beyond printing yuan. It trades the yuan for the dollars earned by Chinese sellers, who need local currency to pay their workers and suppliers. The money involved in these transactions has thus doubled. The merchants have been paid in yuan and the central bank has an equivalent sum in dollars or Euros. That means the Chinese central bank’s holdings are created out of thin air no less than the Federal Reserve’s dollars are.

Battle of the Central Banks?

Western central banks have generally worked this scheme discreetly. Not so much the Chinese, whose blatant gaming of the system points up its flaws for all to see.

Georgetown University historian Professor Carroll Quigley styled himself the librarian of the international bankers. In his 1966 book Tragedy and Hope, he wrote that their aim was “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.” This system was to be controlled “in a feudalist fashion by the central banks of the world acting in concert by secret agreements,” central banks that “were themselves private corporations.”

It may be the Chinese, not acting in concert, who break up this cartel. The PBoC is no more transparent than the US Fed, but it is not an “independent” central bank. It is a government agency accountable to the Chinese government and acting on its behalf.

The Chinese have evidently figured out the game of the “independent” central bankers, and to be using it to their own advantage. If the Fed can do quantitative easing, so can the Chinese – and buy up our assets with the proceeds. Owning our corporations rather than our Treasuries helps the Chinese break up US dollar hegemony.

Whatever power plays are going on behind the scenes, it is increasingly clear that they are not serving we-the-people. Banks should not be the exclusive creators of money. We the people, through our representative governments, need to be issuing the national money supply directly, as was done in America under President Abraham Lincoln and in colonial times.

_______________________________

Ellen Brown is an attorney, founder of the Public Banking Institute and the author of twelve books, including the best-selling Web of Debt. Her latest book, The Public Bank Solution, explores successful public banking models historically and globally.

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California’s Top-Two Primary Eliminates Third-Party Rivals

Primary elections originated in the American progressive movement and were intended to take the power of candidate nomination away from party leaders and deliver it to the people.  California’s Top Two Primary takes power away from third parties representing the 99% and delivers it to the 1%.

Voters have increasingly become disillusioned with the Democratic and Republican Parties. According to a poll reported by Rasmussen in April, more than half the country believes that neither of the top two parties represents the American people. As presidential candidate Ron Paul remarked in 2011:

These parties aren’t different, they’re all the same. The monetary policy stays the same. The welfare system stays the same. The foreign policy stays the same. . . . There is but one party.

Or as Ronald Reagan put it, “We don’t need a third party. We need a second party.”

A recent Gallup poll found that nationwide, the share of registered voters identifying as independent has hit a record high of 42 percent. That trend also holds true in California. Yet no third-party or independent candidate for state-wide office will appear on the California general election ballot in November. All were eliminated by Top Two, the new electoral system ushered in by Proposition 14 in 2010. It excludes all but the top-two primary vote-getters from advancing to November, and that effectively means all but the top two political parties.

In the June 3rd California primary, the highest number of votes received by any third party or independent candidate was 218,847, representing 6.4% of voters. That count went to me, running as a Green for state treasurer on a state bank platform. It was the highest percentage ever gotten by a Green in a statewide partisan California election, but it was not enough to leap the top-two barrier. Laura Wells, also running as a Green on a state bank platform, received 5.6% of the vote for state controller. All other third party and independent statewide candidates got a lower percentage in their races, except for one independent who just placed fourth. That means only Democrats and Republicans will be debating the issues in November.

Top Two has not only foreclosed third-party candidates from the general election but has made it substantially harder for them to get on the primary ballot. From 1992 to 2010, the Green, Libertarian, Peace and Freedom, and American Independent parties averaged 127 primary ballot candidates among them in each election cycle. In 2012, in Top Two’s first year, they were able to qualify only 17 for state legislative and congressional races, the fewest since 1966, when only Democrats and Republicans were on the ballot. This dropped to 13 in 2014, with only 10 others running for quadrennial statewide offices, down from 33 in 2010.

California’s Controversial Proposition 14

On Feb. 19, 2009, between 4 and 7 a.m., without any public notice or public hearing, the Legislature placed a major constitutional electoral reform – Proposition 14 – on the June 2010 primary ballot and approved its companion statute, Senate Bill 6.

The Voter Information Guide did not provide a summary or text of SB 6, which fleshes out critical details of Proposition 14; nor did Proposition 14’s official ballot title and summary refer to it. Many potential negative effects of Top Two were hidden from voters, and opportunities to vet and correct them before the measure was placed on the ballot were denied to the public.

This left the field wide open for California’s largest corporations – which enthusiastically favored Proposition 14 because they thought it would result in the election of corporate-friendly public officials – to flood the airwaves with propoganda about how Top Two would increase voter choice. In fact, it has done the opposite, to the point of excluding “no corporate money” candidates from the general election debate.

Several other barriers to participation were added or strengthened by Top Two, without the prior vetting of voters. The number of signatures needed to be on the statewide primary ballot without paying an expensive filing fee jumped from 150 to 10,000 for smaller-party candidates – and that puts the candidate on the ballot only for the June primary, not into November as under the previous system.

Meanwhile, the fee for a candidate statement in the Voter Information Guide – the chief way many voters learn about candidates – was raised to $25 per word, putting the cost of a full statement at more than double the candidate filing fee. The result was to radically reduce the number of words many smaller-party candidates can afford.

The Legislature even eliminated general election write-in candidacies – a right Californians have enjoyed since statehood in 1850.

By eliminating party primaries, Top Two increased the cost of running for office – and the need for early big money – for candidates from all parties. Candidates now have to campaign to the entire electorate in June as well as in November (assuming they manage to reach the general election).  That means the role of money in California politics has only increased as a result of Top Two, making it even easier for “the 1%” to buy elections.

A Voice in the Debate

California houses 39 million people, far too many to reach by knocking on doors. Many people get their news on television. But candidates who cannot afford to buy advertising airtime and who are not invited to the televised debates (or even to the non-televised ones covered by the print media) cannot reach the broader population. That effectively means all candidates without big corporate money backing or enough personal wealth to self-fund.

Third-party candidates have long been excluded from televised debates, on the pretense that they have not polled well enough or raised enough money to be “viable candidates.” Yet hundreds of thousands, if not millions, of voters share their views on various issues. Without big money to contact voters or exposure in the debates, however, third party and other grassroots candidates cannot poll high enough to qualify because voters don’t know anything about them, creating a vicious circle of disempowerment.

But it gets worse. Apparently even the appearance of dissent to the corporate dominance of our politics cannot be tolerated. When Laura Wells attended the Brown-Whitman California gubernatorial debates in San Rafael, California, in 2010 – a race in which she was then the Green Party candidate  for governor – she was arrested just for trying to attend and sit in the audience with a ticket.  The charge, she said, was perfect: “trespassing at a private party.” Jill Stein, the 2012 Green Party candidate for US president, was similarly arrested for merely attempting to attend the presidential debates at Hofstra University, from which she had been excluded. In 2000, then-Green presidential candidate Ralph Nader was blocked from entering a viewing party in the building next door to the presidential debate from which he had been excluded. And in 2002, California Green gubernatorial candidate Peter Camejo was excluded from a gubernatorial debate although he was on the guest list of the Republican nominee in the debate.

Taking Back Our Democracy

Under the current electoral system, corporate-funded politics are strangling democracy. Our political party system needs to be radically overhauled.

At the federal level, the presidential debates are controlled by the Commission on Presidential Debates, a private corporation run by the Democrat and Republican parties and funded by corporate America. The Green Party’s alternative is to create a new publicly-funded People’s Commission on Presidential Debates, and to open its presidential debates to all candidates who appear on at least as many ballots as would represent a majority of the Electoral College and who raise enough funds to otherwise qualify for general election public financing. Also recommended is to amend federal law to remove the non-profit tax exemption status that allows corporations to fund the existing Commission on Presidential Debates and other exclusive, privately-controlled debate entities.

In California, the Green Party recommends overturning Top Two and replacing it with a system of multi-seat districts with proportional representation in the legislature. A constituency or party receiving 10% of the vote would win 10% of the seats, 30% of the vote would win 30% of the seats, and so on. This would lower the cost of getting elected while increasing the diversity of representation to more accurately reflect the voters.

For single-seat statewide executive office, Ranked Choice or “Instant Runoff” Voting is recommended, and has been successfully implemented in a number of countries and municipalities. Voters rank their choices by preference. In a five way race, a voter’s first choice gets five points and his last choice gets one point, with other selections in between. The candidate with the most points wins. There is only one election, so issues get discussed and minor party candidates get heard right up to the end. Ranked Choice Voting gives people more power to vote their true preferences, without being trapped in the “lesser-of-two-evils” dynamic that has been used to stifle real dialogue and choice.

For all elections, public financing is needed, in order to ensure that voters hear from all candidates rather than just the most well-funded.

The money is with the 1%, but the vote count is with the 99%. We can prevail, if we can get that great mass of disillusioned voters into the voting booths. And that is just the sort of game-changing event that Top Two is calculated to prevent.

_________________

Ellen Brown is an attorney, founder of the Public Banking Institute and the author of twelve books, including the best-selling Web of Debt. Her latest book, The Public Bank Solution, explores successful public banking models historically and globally.

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Infrastructure Sticker Shock: Financing Costs More than Construction

Funding infrastructure through bonds doubles the price or worse. Costs can be cut in half by funding through the state’s own bank.

“The numbers are big. There is sticker shock,” said Jason Peltier, deputy manager of the Westlands Water District, describing Governor Jerry Brown’s plan to build two massive water tunnels through the California Delta. “But consider your other scenarios. How much more groundwater can we pump?”

Whether the tunnels are the best way to get water to the Delta is controversial, but the issue here is the cost. The tunnels were billed to voters as a $25 billion project. That estimate, however, omitted interest and fees. Construction itself is estimated at a relatively modest $18 billion. But financing through bonds issued at 5% for 30 years adds $24-40 billion to the tab. Another $9 billion will go to wetlands restoration, monitoring and other costs, bringing the grand total to $51-67 billion – three or four times the cost of construction.

A general rule for government bonds is that they double the cost of projects, once interest has been paid.

The San Francisco Bay Bridge earthquake retrofit was originally slated to cost $6.3 billion, but that was just for salaries and physical materials. With interest and fees, the cost to taxpayers and toll-payers will be over $12 billion.

The bullet train from San Francisco to Los Angeles, another pet project of Jerry Brown and his administration, involves a bond issue approved in 2008 for $10 billion. But when interest and fees are added, $19.5 billion will have to be paid back on this bond, doubling the cost.

And those heavy charges pale in comparison to the financing of “capital appreciation bonds.” As with the “no interest” loans that became notorious in the subprime mortgage crisis, the borrower pays only the principal for the first few years. But interest continues to compound; and after several decades, it can amount to ten times principal or more.

San Diego County taxpayers will pay $1 billion after 40 years for $105 million raised for the Poway Unified School District.

Folsom Cordova used capital appreciation bonds to finance $514,000. The sticker price after interest and fees will be $9.1 million.

In 2013, state lawmakers restricted debt service on capital appreciation bonds to four times principal and limited their term to 25 years. But that still means that financiers receive four times the cost of the project itself – the sort of return considered usurious when we had anti-usury laws with teeth.

Escaping the Interest Trap: The Models of China and North Dakota

California needs $700 billion in infrastructure over the next decade, and the state doesn’t have that sort of money in its general fund. Where will the money come from? Proposals include more private investment, but that means the privatization of what should have been public assets. Infrastructure is touted to investors as the next “fixed income.” But fixed income to investors means perpetual payments by taxpayers and rate-payers for something that should have been public property.

There is another alternative. In the last five years, China has managed to build an impressive 4000 miles of high-speed rail. Where did it get the money? The Chinese government has a hidden funding source: it owns its own banks. That means it gets its financing effectively interest-free.

All banks actually have a hidden funding source. The Bank of England just admitted in its quarterly bulletin that banks don’t lend their deposits. They simply advance credit created on their books. If someone is going to be creating our national money supply and collecting interest on it, it should be we the people, through our own publicly-owned banks.

Models for this approach are not limited to China and other Asian “economic miracles.” The US has its own stellar model, in the state-owned Bank of North Dakota (BND). By law, all of North Dakota’s revenues are deposited in the BND, which is set up as a DBA of the state (“North Dakota doing business as the Bank of North Dakota”). That means all of the state’s capital is technically the bank’s capital. The bank uses its copious capital and deposit pool to generate credit for local purposes.

The BND is a major money-maker for the state, returning a sizable dividend annually to the state treasury. Every year since the 2008 banking crisis, it has reported a return on investment of between 17 percent and 26 percent. While California and other states have been slashing services and raising taxes in order to balance their budgets, North Dakota has actually been lowering taxes, something it has done twice in the last five years.

The BND partners with local banks rather than competing with them, strengthening their capital and deposit bases and allowing them to keep loans on their books rather than having to sell them off to investors or farm the loans out to Wall Street. This practice allowed North Dakota to avoid the subprime crisis that destroyed the housing market in other states.

North Dakota has the lowest unemployment rate in the country, the lowest default rate on credit card debt, one of the lowest foreclosure rates, and the most local banks per capita of any state. It is also the only state to escape the credit crisis altogether, boasting a budget surplus every year since 2008.

Consider the Possibilities

The potential of this public banking model for other states is huge. California’s population is more than 50 times that of North Dakota. California has over $200 billion stashed in a variety of funds identified in its 2012 Comprehensive Annual Financial Report (CAFR), including $58 billion managed by the Treasurer in a Pooled Money Investment Account earning a meager 0.264% annually. California also has over $400 billion in its pension funds (CalPERS and CalSTRS).

This money is earmarked for specific purposes and cannot be spent on the state budget, but it can be invested. A portion could be invested as equity in a state-owned bank, and a larger portion could be deposited in the bank as interest-bearing certificates of deposit. This huge capital and deposit base could then be leveraged by the bank into credit, something all banks do. Since the state would own the bank, the interest would return to the state. Infrastructure could be had interest-free, knocking 50% or more off the sticker price.

By doing its own financing in-house, the state can massively expand its infrastructure without imposing massive debts on future generations. The Golden State can display the innovation and prosperity that makes it worthy of the name once again.

___________________________

Ellen Brown is an attorney, founder of the Public Banking Institute, and a candidate for California State Treasurer running on a state bank platform. She is the author of twelve books, including the best-selling Web of Debt and her latest book, The Public Bank Solution, which explores successful public banking models historically and globally.

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Are Public Banks Unconstitutional? No. Are Private Banks? Maybe.

The movement to break away from Wall Street and form publicly-owned banks continues to gain momentum. But enthusiasts are deterred by claims that a state-owned bank would violate constitutional prohibitions against “lending the credit of the state.”

California’s constitution is typical. It states in Section 17: “The State shall not in any manner loan its credit, nor shall it subscribe to, or be interested in the stock of any company, association, or corporation . . . .”

The language sounds prohibitive, but what does it mean? Hundreds of state and local government entities extend the credit of the state. State agencies make student loans, small business loans, and farm loans. State infrastructure banks explicitly leverage the credit of the state. Legally, state and local governments are extending their credit to private banks every time they deposit their revenues in those banks. When money is deposited, it becomes the property of the bank by law. The depositor becomes a creditor with an IOU or promise to be repaid. The state or local government has thus lent its money to the bank.

How can these blatant extensions of the state’s credit be reconciled with the constitutional prohibitions against the practice?

North Dakota’s constitution has particularly strong language. Article 10, Section 18, provides:

The state, any county or city may make internal improvements and may engage in any industry, enterprise or business, not prohibited by article XX of the constitution, but neither the state nor any political subdivision thereof shall otherwise loan or give its credit or make donations to or in aid of any individual, association or corporation except for reasonable support of the poor, nor subscribe to or become the owner of capital stock in any association or corporation.

Yet this prohibition has not prevented the state from establishing its own bank. Currently the nation’s only state-owned depository bank, the Bank of North Dakota has been a stellar success and has been going strong ever since 1919. In Green vs. Frazier, 253 U.S. 233 (1920), the US Supreme Court upheld the bank’s constitutionality against a Fourteenth Amendment challenge and deferred to the state court on the state constitutional issues, which had been decided in the state’s favor.

In the nineteenth century, Mississippi, Arkansas, Florida, Kentucky, and Indiana all had their own state-owned banks. Some were extremely successful (Indiana had a monopoly state-owned bank). These banks, too, withstood constitutional challenge at the US Supreme Court level.

Were the prohibitions against “lending the credit of the state” simply ignored in these cases? Or might that language have meant something else?

The Constitutional Ban on “Bills of Credit”: Colonial Paper Money

Constitutional provisions against lending the state’s credit go back to the mid-nineteenth century. California’s is in its original constitution, dated 1849. There was then no national currency, and the National Bank Act had not yet been passed.

Several decades earlier, the states had been colonies that issued their own currencies in the form of paper scrip. Typically called “bills of credit”, these paper bills literally involved the extension of the colony’s credit. They were credit vouchers used by the colony to pay for goods and services, which were good in trade for an equivalent sum in goods or services in the marketplace.

Prior to the constitutional convention in the summer of 1787, the colonies exercised their own sovereign power over monetary matters, including issuing their own paper money. After the collapse of the Continental currency during the Revolutionary War, largely due to counterfeiting by the British, the framers were so afraid of paper money that they expressly took that power away from the colonies-turned-states, and they failed to expressly give it even to the federal government. Article I, Section 10, of the U.S. Constitution provides:

No State shall . . . coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts; . . . .

Congress was given the power “To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures.” But language authorizing Congress to “emit Bills of Credit” was struck out after much debate.

The Supreme Court ruled in the Legal Tender Cases after the Civil War that the power to coin money implied the power to print money under the Necessary and Proper Clause, legitimizing the Greenbacks issued by President Lincoln. But in 1850, no state government had the power to extend its own credit in the form of bills of credit or paper money, and whether the federal government had that power was a subject of debate.

However, the expanding economy needed a source of freely-expandable currency and credit, and when local governments could not provide it, private banks filled the void. They issued their own “bank notes” equal to many times their gold holdings, effectively running their own private printing presses.

Was that constitutional? No. The Constitution nowhere gives private banks the power to create the national money supply – and today, private banks are where virtually all of our circulating money supply comes from. Congress ostensibly delegated its authority to issue money to the Federal Reserve in 1913; but it did not delegate that authority to private banks, which have only recently admitted that they do not lend their depositors’ money but actually create new money on their books when they make loans. In the Bank of England’s latest Quarterly Bulletin, it states:

Whenever a bank makes a loan, it simultaneously creates a matching deposit in the borrower’s bank account, thereby creating new money.

This broad exercise of the money power by private banks is nowhere to be found in our federal or state constitutions, but courts have managed to get around that wrinkle. In Constitutional Law in the United States, Emlin McClain summarizes the case law like this:

A state cannot, even for the purpose of borrowing money, exercise the sovereign power of emitting paper currency (Craig v. Missouri). But this prohibition does not interfere with the power of a state to authorize banks to issue bank notes in the form of due-bills or of similar character, intended to pass as currency on the faith and credit of the bank itself, and not of the state which authorizes their issuance.

The anomalous result is that state-chartered banks are able to issue credit that passes as currency, while state governments are not. But so the cases hold, and they apply to public banks as well as private banks.

Public Banks Held Constitutional

John Thom Holdsworth wrote in Money and Banking (1937) that in the mid-nineteenth century, “several of the states established banks owned entirely or in part by the state. There was some question as to the right of these state institutions to issue circulating notes, but the Supreme Court held that such notes were not ‘bills of credit’ within the meaning of the constitutional prohibition.”

In Briscoe v. Bank of Kentucky, 36 U.S. 257 (1837), the Court observed that the charter of the challenged Kentucky state bank contained “no pledge of the faith of the state for the notes issued by the institution. The capital only was liable; and the bank was suable, and could sue.” The Court “upheld the issuance of circulating notes by a state-chartered bank even when the Bank’s stock, funds, and profits belonged to the state, and where the officers and directors were appointed by the state legislature.”

The Court narrowly defined the sort of “bill of credit” prohibited by Article 1, Section 10, as a note issued by the state, on the faith of the state, designed to circulate as money. Since the notes in question were redeemable by the bank and not by the state itself, they were not “bills of credit” for constitutional purposes. The Court found that the notes were backed by the resources of the bank rather than the credit of the state. Moreover, the bank could sue and be sued separate from the state.

These cases are still good law. A state bank – or city bank or county bank – is not in violation of state constitutional prohibitions against lending the credit of the state.

Other Ways to Avoid Constitutional Challenge

In light of those Supreme Court cases, it hardly seems necessary for a city to become a chartered city before establishing its own publicly-owned bank; but that is another way to circumvent this debate. The California Constitution gives cities the power to become charter cities; and while General Law Cities are bound by the state constitution, cities organized under a charter have broad autonomy. They can bypass large swaths of state law, including asserting their independence from the state’s supposed restrictions on lending.

For county-owned banks, the case is not as clear. In California, Government Code 23005 forbids counties from giving their “credit to or in aid of any person or corporation. An indebtedness or liability incurred contrary to this chapter is void.” But the US Supreme Court rulings validating state banks should be equally applicable to county banks; and in any case, enabling legislation can be crafted to allow public banks at any level of government.

There is another way to bypass this whole legal debate: by pursuing the initiative and referendum process pioneered in California. It allows state laws to be proposed directly by the public, and the state’s Constitution to be amended either by public petition (the “initiative”) or by the legislature with a proposed constitutional amendment to the electorate (the “referendum”). In California, the initiative is done by writing a proposed constitutional amendment or statute as a petition, which is submitted to the Attorney General along with a modest submission fee. The petition must be signed by registered voters amounting to 8% (for a constitutional amendment) or 5% (for a statute) of the number of people who voted in the most recent election for governor.

Before sufficient signatures could be collected, a widespread educational campaign would need to be mounted; but just informing the public on this little-understood subject could be worth the effort. Recall the words of Henry Ford:

It is well enough that the people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.

When enough people understand that private banks rather than governments create our money supply, imposing interest and fees that constitute an enormous unnecessary drain on the economy and the people, we might wake up to a new day in banking, finance, and the return of local economic sovereignty.

______________________________

Ellen Brown is an attorney, founder of the Public Banking Institute, and a candidate for California State Treasurer running on a state bank platform. She is the author of twelve books, including the best-selling Web of Debt and her latest book, The Public Bank Solution, which explores successful public banking models historically and globally.

 

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With Greg Hunter on USAWatchDog: Banks Will Take Deposits in the Coming Financial Meltdown,...

--2014--

761. Oct. 6-9, speaker, Praxis Peace Institute conference, THE ECONOMICS OF SUSTAINABILITY-Emerging Models for a Healthy Planet, Cowell Theater, Fort Mason, San Francisco

760. July 29-Aug. 5. Moving Beyond Capitalism conference, San Miguel de Allende, Mexico

759. July 9, speaker, 2014 Annual Conference of the Council of Georgist Organizations, Inc., Radisson Newport Beach Hotel, near the Orange County John Wayne Airport, 9:15 a.m. PT

758. May 26, interview, Wealth DNA Radio Show, Blog Talk Radio, wealthdna.us, noon EST

757. May 10, United We Stand Festival, Pauley Pavilion, UCLA,
https://unitedwestandfest.com/confirmed-guests/

756. May 1, interview with Stephen Lendman, The Progressive Newshour, 9 a.m. PDT

755. April 29, moderator, Great Minds #66 with Nomi Prins, Los Angeles, CA., 7 pm PT

754. April 23, Ellen interviews Nomi Prins on It's Our Money. Listen to archive here.

753. April 21, interview with Robert Stark and Jeff Crow, Valley Talk Live, centralvalleytalk.com, Fresno, 4:30 PT

752. April 17, interview Dr. Rima Truth Reports, with Dr. Rima Laibow, 10 pm EST

751. April 17, interview with Greg Hunter, USAWatchdog.com, 11:30 EST

750. April 8, It's Our Money with Ellen Brown, interiews Kevin Zeese and Margaret Flowers. Listen to archive here.

749. April 8, interview with Alan Butler, Butler on Business, Liberty Express Radio, 11:30 AM EDT

748. April 3, interview with Stephen Lendman, The Progressive Newshour, 9 a.m. PDT

747. April 3, interview with James Banks, KGNU radio, Boulder, CO, 5 p.m. PT

746. April 2, interview, WHDTWorldNews, Nextnewsnetwork.com, 10:30 a. m. PDT

745. March 26, 1 pm PDT, It’s Our Money with Ellen Brown. Ellen interviews Prof. ROBERT HOCKETT--fascinating background material for understanding the banks' role in the foreclosure mess and the eminent domain solution. Listen to the archive here.

744. March 24, interview with Kevin Zeese JD and Margaret Flowers MD, Clearing the FOG on We Act Radio, 1480 AM Washington, DC, 8 a.m. PDT

743. March 23rd, "Banking for the People—Not for Wall Street," Agenda for a Prophetic Faith Lecture Series, Claremont United Methodist Church, 211 W. Foothill Blvd., Claremont, CA 91711, http://www.claremontumc.org/, 7 pm PT

742. Apr. 13, Interview with Chris Moore, KDKA Pittsburgh, 5 pm EST

741. March 18, 2 pm, Democratic Club, Friendly Valley Conference Room, Newhall, CA.

740. March 13, interview with Fred Smart, American Underground Network, 8 pm, CDT

739. March 12, 12 pm PDT, It's Our Money radio show with Ellen Brown, featuring Prof. TIM CANOVA on the Federal Reserve. Listen to archive here.

738. March 4, interview with Tom Kiely, INN World Report, 4:30 PST

737. Feb. 23, interview with Stephen Lendman, The Progressive Newshour, 10 a.m. PST

736. Feb 20, interview with Bill Deller, 3CR radio, Melbourne, Australia, 3 pm, PST

735. Feb. 17, interview, Strike Debt Bay Area, KPFA, Berkeley, 2 pm (?) PST

734. Feb16, interview with Gary Dubin, The Foreclosure Hour (http://www.foreclosurehour.com/the-host.html), 5 pm PST

733. Feb. 11, interview with Clint Richardson, RBN 5 pm PST

732. Feb 9, interview with Stephen Golden, DEFENDING THE AMERICAN DREAM, KABC Los Angeles, 6 am, PST Listen to the archive here.

731. Feb. 6, interview, Move to Amend Reports, http://www.blogtalkradio.com/movetoamend, 5 pm PST

730. Feb. 5, interview with Sinclair Noe, Financial Review, MoneyRadio.com, 9:30 am PST

729. January 30, interview, Kerry Lutz - Financial Survival Network, 12 pm EST

728. January 30, interview with Tom Kiely, INN World Report, 4:30 PST

727. January 29, interview on Latin Waves, 8 pm PST

726. January 28, Green Party Shadow Cabinet response to State of the Union Speech. http://www.livestream.com/greenpartyus 6 pm PST

725. January 26, interview with Stephen Lendman, The Progressive Newshour, 10 a.m. PST. Listen here.

724. January 23, interview, The Tim Dahaney Show, 12 noon PST. Listen here.

723. January 22, interview with Utrice Leid, "Leid Stories,", PRN.FM, 1 pm EST

722. January 21, interview, Independent Underground Radio LIVE, 9:15 PST. Listen here.

721. January 12, Open Forum with Green Party candidates Luis Rodriguez, Laura Wells and Ellen Brown, hosted by LULAC (League of United Latin American Citizens) 11277 GARDEN GROVE BLVD., Garden Grove, CA. 2-4 pm

720. January 11, interview with Bill Still on running for California Treasurer. Watch it here. And see another one here.

719. January 8, interview, The Tim Dahaney Show, 12 noon PST. Listen here. (It's the one labelled "Take the Fed Reserve Public.")

718. Jan 7, interview, The Burt Cohen Show, 12 noon ET

--2013--

717. Dec. 30, interview, Stuart Vener Tells It Like It Is, see http://stuartvener.com for stations, 11:30 am EST

716. Dec. 26, interview Dr. Rima Truth Reports, with Dr. Rima Laibow and Ralph Fucetola, 10 pm EST

715. Dec. 21, interview, KPRO Radio San Francisco, 9:30 am PST

714. Dec. 18, interview, The Power Hour with Joyce Riley, 8 a.m. CT

713. Dec. 18, interview, Unwrapped Radio, WRFG, http://www.tuneinradio.com/, 12:40 EST

712. Dec. 15, interview with Stephen Lendman, The Progressive Newshour, 10 a.m. PST, listen here.
711. Dec. 15, presentation, A Public Bank for Mendocino, at the Crown Hall in Mendocino, Ca., 7 pm

710. Dec. 15, presentation, Why We Need to Own Our Own Bank, Mendocino Environmental Center
106 West Standley, Ukiah, CA 95482, 2 pm

709. Dec. 14, presentation, Why We Need to Own Our Own Bank, Little Lake Grange, Willits, Ca. 7 pm

708. Dec. 13, interview on All About Money, KZYX radio, 9 a.m. PST

707. Dec. 13, interview, Radio Islam, WCEV 1450 AM, 12:05 pm, CST

706. Dec. 12, appearance with Doug McKenty, "The Shift," Mendocino TV, 4:30 pm PST

705. Dec. 11, interview on WHDT World News, http://NNN.is/on-WHDT, 5:30 and 11:00 pm EST. Watch the archive here.

704. Dec. 11, interview, WORT Community Radio, Madison, Wisconsin, 6:10 a.m. PST

703. Dec. 11, interview with Sinclair Noe, Financial Review, MoneyRadio.com, 10:30 PST

702. Dec. 9, UnWrapped Radio, Atlanta, 1 pm PST.

701. Dec. 9, GOHarrison, KPFK Los Angeles, 3:30 pm PST.

700. Dec. 9, interview, Air Cascadia show, KBOO radio, Portland, 10 am PST

699. Dec. 5, interview, WHDT World News TV, 2 pm PST

698. Dec. 4, interview with David Swanson, talknationradio, 7pm PST

697. Dec. 4, interview with Rob Kall, The Rob Kall Bottom-Up Radio Show, 1360 AM, 7:30 pm EST

696. Dec. 3, interview with Kim Greenhouse, It's Rainmaking Time, listen here.

695. Dec. 2, interview with Val Muchowski, Women's Voices, KZYX, 7 p.m. PST

694. Nov. 29, interview with Gregg Hunter, USAWatchdog.com, 11:30 PST

693. Nov. 16, interview This is Hell! radio show, WNUR 89.3 fm, thisishell.com/live, 11.20 a.m. EST. Listen to archive here

692. Nov. 15, interview with George Berry, The Financial News Network Show, truthfrequencyradio.com, 1 pm PST

691. Nov. 14, interview with Stanley Montieth, The Doctor Stan Show, Radio Liberty, 4 pm PSTf

690. Nov. 14, interview with Neil Foster, Reality Bytes show, Awake Radio (UK), Shazziz Radio (US), 8 pm UK time.

689. Nov. 13, interview with Bonnie Faulkner, KPFA, Los Angeles. Listen to archive here.

688. Nov. 12, interview with Tom Kiely, INN World Report, 4:30 PST

687. Nov. 11, interview, Between the Lines News Magazine, WPKN radio, Bridgeport, CT, 9 p.m. ET. Listen to archive here

686. Nov. 10, skype participant, forum at the Putrajaya International Islamic Arts and Cultural Festival, "Global Economic and Monetary Crisis: What Needs to be Done?" Putrajaya, Malaysia, 11 a.m. MYT, 7 pm, Nov. 9 PST

685. Nov. 3, interview with Stephen Lendman, The Progressive Newshour, 10 a.m. PST

684. Oct. 31, interview with Voice of Russia radio, American edition, 2:30 pm, CET (Central Europe Time.) Listen to archive here.

683. Oct. 23, interview with Daniel Estulin on RT tv

682. Oct. 16, interview with Per Fereng, KBOO radio, Portland, 11 am PST

681. Oct. 15, presentation, "The Public Banking Forum in Ireland," 7-9 PM, Hudson Bay Hotel, Athlone, Ireland.

680. Oct. 14, presentation, Cork, Ireland

679. Oct. 12, presentation, "The Public Banking Forum in Ireland," 2-4 PM, Springfield Hotel in Leixlip, County Kildare, Ireland. Information on these three events here.

678. October 4, interview with Bill Deller, 3CR radio, Melbourne, Australia, 2:30 pm, PST

677. Oct. 3, interview with Joyce Riley, the Power Hour. Listen to archive here.

676. Oct. 1, interview with Tom Kiely, INN World Report 7:30 EST

675. Sept. 29, interview with Stephen Lendman, The Progressive Newshour, 10 a.m. PST

674. Sept. 27, interviw with Kevin Barrett, AmericanFreedomRadio.com, NoLiesRadio.org:
http://TruthJihadRadio.blogspot.com, 2 pm PST

673. Sept. 19, interview, The Gary Null Show, 9:30 a.m. Pacific

672. Sept. 19, Interview on the Global Research News Hour with Michael Welch--check site for time and archive.

671. Sept. 18, interview with David Sierralupe, Occupy Radio, KWVA, 88.1 FM, Eugene

670. Sept. 15, interview with Niall Bradley, Sott Talk Radio, sott.net, 2 p.m. EST

669. Sept. 14, interview FDLBookSalon, firedoglake.com, 5pm EST

668. Sept. 10, "Turning Hard Times into Good Times" with Jay Taylor, VoiceAmerica, 12:30 pm PST. Listen to archive here.

667. Sept. 9, interview with Ken MacDermotRoe and Del LaPietro, In Context Report, 9 am PST. Listen to archive here.

666. Sept 7, interview with Valerie Kirkgaard, WakingUpInAmerica.com, 6 am, PST. Listen here.

665. Sept. 6, Interview with Al Korelin, The Korelin Economics Report, 12:30 pm PST

664. Sept. 5, discussion of how to bring public banking to Colorado on "It's the Economy, Stupid," KGNU, Boulder, 5 p.m. PST

663. Sept. 5, interview with Patrick Timpone, oneradionetwork.com, 8 a.m. PST

662. Sept. 3, interview (along with Elliott Spitzer?), "Turning Hard Times into Good Times" with Jay Taylor, VoiceAmerica, 1 pm PST Listen to archive here.

661. Sept. 3, interview with Jeanette LaFeve, The People Speak, 6 pm PST

660. Aug. 25, Stephen Lendman, Progressive Radio News Hour, 10 am, PDT

659. Aug. 22, interview with Christopher Greene, AMTV Radio, simulcast in audio/video over GoogleHangouts and American Freedom Radio, 1 p.m. PST

658. Aug. 22, interview, TheAndyCaldwellShow.com,
CalChronicle.com, 3 pm PST

657. Aug. 21, interview with Merry and Burl Hall, blogtalkradio.com/envision-this, 5 pm PST

656. Aug. 21, interview with Lori Lundin, America's Radio News Network, 10:30 a.m. ET.

655. Aug. 16, interview with Sinclair Noe, Moneyradio.com, 4 pm PST

654. Aug. 15, interview with Justine Underhill, Prime Interest, Russia Today TV, 1:30 pm PST

653. Aug 14, interview with Jim Goddard, This Week in Money, 4 pm, PST. Listen to archive here, starting at minute 32.

652. Aug. 14, interview with Mary Glenney, WMNF 88.5, 10 a.m. PST

651. Aug. 14, interview with Chuck Morse, irnusaradio.com, 8 am, PST

650. Aug. 13, interview with Thomas Taplin, Dukascopy TV, Switzerland, 9 am PST

649. Aug 7-11, Madison Democracy conference, https://democracyconvention.org/

648. Aug. 6, radio interview, INN World Report with Tom Kiely, http://feeds.feedburner.com/INNWorldReportRadio 4:30 PST

647. Aug 5, interview with Arnie Arnesen, 94.7 fm, Concord, NH, 9 am PST

646. Aug 3, interview with Diane Horn, Mind Over Matter show, KEXP radio, 90.3 FM, Seattle, 7:00 a.m. PST

645. July 31, interview with Mike Beevers, KFCF Fresno, 4:30 pm PST

644. July 28, Stephen Lendman, Progressive Radio News Hour, 10 am, PDT

643. July 2, interview with Charlie McGrath, Wide Awake News, 6-7 pm PDT.

642. July 2, interview with Arnie Arnesen, 94.7 fm, Concord, NH, 12:30 EST.

641. June 30, interview with Stephen Lendman, Progressive Radio News Hour, 10 am, PDT. Listen to archive here.

640. June 24, interview on RT tv re student debt, 10:30 am PST

639. June 17, interview on The Andy Caldwell Show, 3:30 pm PST

638. June 16, interview with Jason Erb, 5 pm Pacific

637. June 13, interview with Paul Sanford, "Time 4 Hemp-LIVE," http://www.AmericanFreedomRadio.com, 10 am, PST

636. June 6 presentation with Jamie Brown at the Mt. Diablo Peace and Justice Center in Walnut Creek. Info at Favors.org, 7 to 9 pm

635. June 1, interview with Kris Welch, KPFA Los Angeles, 10 am PST

634. May 28, interview with Malihe Razazan, "Your Call" radio, KALW, San Francisco, 10 am PST.

633. May 26, interview with Stephen Lendman, Progressive Radio News Hour, 10 am, PDT

632. May 23 interview with Simit Patel, InformedTrades.com (youtube) 3:30 pm PST

631. May 22, Thousand Oaks, 3 expert panel, "A Parachute For the Fiscal Cliff," University Village 2-4 pm

630. May 22, interview with Jack Rasmus, 11 am PST. Enjoy the interview here.

629. May 22, Guns and Butter show, KPFA, http://www.kpfa.org/archive/id/91790

628. May 14, interview with Charlie McGrath, Wide Awake News, 6-7 pm PDT.

627. May 13, live appearance on RTTV, 3 pm PST Watch it here.

626. May 8, interview with Valli Sharpe-Geisler, Silicon Valley Voice, KKUP, 3 pm PST

625. May 8, interview, the Meria Heller Show, 11 am PST

624. May 4, interview, Latin Waves with Sylvia Richardson, 10 am PST

623. April 30, Jay Taylor, VoiceAmerica, 1 pm PST

622. April 29, interview with Rob Kall, Bottom Up Radio, 9 am Pacific
Listen to archive here.

621. April 28, interview with Stephen Lendman, Progressive Radio News Hour, 10 am, PDT

620. April 25, interview, the the Dr. Katherine Albrecht Show, 5 pm EDT

619. April 17, interview with Mike Harris, rense.com, 1 pm PDT

618. April 16th, speaker, Valley Democrats United (Democratic Party of San Fernando Valley), Van Nuys, Ca. 7-9pm

617. April 13, interview with Darren Weeks, Govern America, noon Eastern, listen here

616. April 9, interview with Charlie McGrath, Wide Awake News, 6-7 pm PDT.

615. April 6, phone conference, Justice Party, http://www.justicepartyusa.org/public_banking_conference_call, 9 a.m.

614. April 5, interview, Butler on Business, 11 a.m. EDT

613. April 3, interview with Michael Welch, Global Research News Hour, 8:30 a.m. PDT

612. April 2, interview with Jay Taylor, VoiceAmerica, 12:30 PDT. Listen here.

611. April 1, interview with Brannon Howse, www.worldviewradio.com, 11 a.m. PDT

610. April 1, interview with Scott Harris, Counterpoint,
WPKN Radio, 8:30 pm, ET Listen to archive here.

609. April 1, interview with Margaret Flowers and Kevin Zeese. Watch and listen to archive here, starting at minute 50. Articles based on the interview are at Truthout.org.

608. March 31, interview with Jason Erb, Exposing Faux Capitalism, Oracle Broadcasting, 11 a.m. Pacific

607. March 31, interview with Stephen Lendman, Progressive Radio News Hour, 10 am, PDT Listen to the archive here.

606. March 29, interview, The Gary Null Show, 9:30 a.m. Pacific

605. March 28, interview with Stan Monteith, radioliberty.com, 9 pm PDT

604. March 28, radio interview, INN World Report with Tom Kiely, http://feeds.feedburner.com/INNWorldReportRadio 4:30 PDT

603. March 27, interview with Charlie McGrath, Wide Awake News, 6-7 pm PdT.

602. March 27, interview with Jack Rasmus on PRN, 11 a.m. PDT

601. March 25, interview on the Richard Kaffenberger show, KTOX, Needles, CA. 3:15 PDT

600. March 22, newly available archived radio interview, Mandelman Matters. Listen here.

599. March 22, interview with James Fetzer, The People Speak Radio, 5-7 pm PDT

598. March 22, interview , Our Times With Craig Barnes, KSFR radio, Santa Fe, 10 a.m. MST

597. March 12, interview, Crisis of Reality with Doug Newberry, oraclebroadcasting.com, 1pm EST.

596. March 11, interview with Stephen Lendman, Progressive Radio News Hour, 10 am, PST

595. March 9, Interview with Sylvia Richardson, Latin Waves, CJSF 90.1FM, 9:30 am PST

594. March 6, interview with Charlie McGrath, wideawakenews.com, 6pm PST. Watch and listen here.

593. March 3, interview with Lateef Kareem Bey, Fix Your Mortgage Mess, 4 pm PST

592. March 2, Interview with Stuart Richardson, Latin Waves, CJSF 90.1FM, 11 am PST

591. Feb. 27, interview with Jim Banks, KGNU, Boulder, 12 pm PST

590. Feb 27, interview with Sinclair Noe, Financial Review, 10 am PST

589. Feb. 25, interview, Crisis of Reality with Doug Newberry, oraclebroadcasting.com, 1pm EST.

588. Feb. 6, Interview with Phil Mackesy, This Week in Money, TalkDigitalNetwork.com, 11 am PST. Listen to the archive here: http://talkdigitalnetwork.com/2013/02/this-week-in-money-70/

587. Feb. 4, interview with Ken Rose, What Now radio show, KOWS RADIO OCCIDENTAL 107.3 FM, 11 am PST.

586. Jan. 31, interview with Tom Kiely, INN World Radio Report, 5:00 pm PST

585. Jan. 27, interview with Stephen Lendman, progressive radio
network, 10 am PST

584. Jan. 23, interview on KPFK, 8pm PST

583. Jan. 22, interview, Crisis of Reality with Doug Newberry, oraclebroadcasting.com, 1pm EST.

582. Jan. 3, interview with Mary Glenney, WMNF 88.5, Tampa, 3 pm EST

581. Jan. 2, interview, The Bev Smith Show, thebevsmithshow.net, 5 pm PST

--- 2012 ---

580. Dec. 27, video interview with Charlie McGrath, Wide Awake News, listen and watch here.

579. Dec. 24, October talk at First Unitarian Church in Portland aired on KBOO radio, http://kboo.fm/, 8:00 am PST

578. Dec. 24, interview with Ron Daniels, the WWRL Morning Show with Mark Riley, wwrl1600.com, 5:05 am PST

577. Dec. 21, interview with Andy Caldwell, TheAndyCaldwellShow.com, KZSB AM1290 Santa Barbara / Ventura and KUHL AM1440 Santa Maria / San Luis Obispo, 3:30 pm PST

576. Dec. 20, interview with Fred Smart, aunetwork.tv, 9 pm EST

575. Dec. 19, interview, Crisis of Reality with Doug Newberry, oraclebroadcasting.com, 1pm EST. Listen here.

574. Dec. 19, interview with Dr. Jack Rasmus, Alternative Visions, Progressive Radio Network, 2 pm EST

573. Dec. 17, The Bev Smith Show, thebevsmithshow.net, 4 pm PST

572. Dec. 15, interview with Stephen Lendman, progressive radio network, 10 am PST. Listen here.

571. Dec. 14, interview with Craig Barnes, Our Times With Craig Barnes, KSFR radio, 9 am PST Listen to the archive here.

570. December 9th, speaker, Mayo Arts Center (10 Mayo Street) in Portland, ME
http://mayostreetarts.org/about-us/where-we-are 7:30-9pm

569. Dec. 7, Vermont's New Economy conference, Vermont College of the Find Arts, Montpelier, VT, 9 am to 4 pm and reception at 4:30. $25
www.global-community.org/neweconomy to register

568. Dec. 5, speaker, Pennsylvania Public Bank Project's Forum on Public Banking, at the David Library of the American Revolution, Washington Crossing, PA, 7pm

567. Nov. 26-27, 3rd Annual World Conference on Riba, Kuala Lumpur, Malaysia

566. Nov. 22, presentation before Royal Scottish Academy -- "A Public Bank for Scotland" (here), Riddle's Court, 322 Lawnmarket, Edinburgh EH1 2PG Scotland, 6 pm

565. Nov 8, Healthy Money Summit, speaking with Hazel Henderson at 1-2 pm PST, information here.

564. Sunday, Oct. 28, Keynote Speaker; The Buck Starts Here, 2:00pm, sponsored by the Kairos Occasional Speakers Series & OFOR, Kairos Milwaukie UCC, Milwaukie, OR.

563. Saturday, Oct. 27, Keynote Speaker; OFOR Saturday Symposium: The Buck Starts Here, 10am - 3pm, Molalla, OR

562. Friday-Sunday, Oct. 26-28, Keynote Speaker; Oregon Fellowship of Reconciliation Fall Retreat - The Buck Starts Here, Camp Adams, Molalla, OR, Friday, 5pm- Sunday 12 noon

561. Friday, October 26, Invited Commentator; screening of “HEIST” (new documentary about the roots of the American economic crisis), sponsored by First Unitarian Church of Portland's Economic Justice Action Groups, Alliance for Democracy, KBOO, Move to Amend, 7:00pm, First Unitarian Church, Portland, OR

560. (Oct. 25-28, Bioneers Conference, Portland, OR)
Oct. 25, Keynote Speaker; sponsored by Portland Fellowship of Reconciliation (PFOR) and the First Unitarian Church of Portland's Economic Justice and Peace Action Groups, 7:00-8:30pm, First Unitarian Church, Portland, OR

559. Oct. 24, interview with Per Fagereng, KBOO radio, Portland, 9 am PST

558. Oct. 24, KPFA "Guns and Butter" interview. Listen to archived show here.

557. Oct. 21, speaker at BBQed Oysters and Beer Fundraiser Party for PBI, San Rafael, CA, 4 pm PST

556. Oct. 14, Live Gaiam tv interview appearance. Watch it here free at 7pm EST.

555. Oct. 12, interview with Matt Rothschild of The Progressive, 10 a.m. Central time

554. October 11-14, speaker, Economic Democracy Collaborative, Madison, Wisconsin

553. Oct. 11, radio interview with Norm Stockwell, WORT, 12 pm CST

552. Oct. 9, interview with Kevin Barrett, No Lies Radio, listen to archive here.

551. Oct. 8, interview, "Mountain Hours Revolution Radio" with Wayne Walton, on RBN, 12-1 pm PST

550. Oct. 7, interview with Lloyd D'Aguilar, "Looking Back Looking Forward", http://lookingbacklookingforward.com/, 2 pm EST

549. Sept. 26, interview with Douglas Newberry, markettoolbox.tv, 1pm EST. Listen here.

548. Sept. 25, interview with Dr. Stanley Montieth, radioliberty.com, 3pm PST

547. Sept. 24, interview with Charlie McGrath, Wide Awake News, 6-7 pm PST.

546. Sept. 22, interview with Stephen Lendman, progressive radio network, 10 am PST

545. Sept. 17 interview along with Hazel Henderson, National Teach In for Occupy Wall Street, http://www.livestream.com/owshdtv 5pm EST

544. Sept. 10, interview with Thomas Taplin, Dukascopy TV (Switzerland), 7 am PST Watch and listen here

543. Sept. 7, interview with Mike Harris, republicbroadcasting.org, 6 am PST

542. Sept. 6, interview with Douglas Newberry, markettoolbox.tv, 1pm EST. Listen here.

541. Aug 28, interview, the Meria Heller Show, 11 am PST. Listen to archive here. And listen to excellent Meria Heller show here.

540. Aug 26, interview with Stephen Lendman, progressive radio network, listen to archive here.

539. August 21, interview with Charlie McGrath, wideawakenews.com. Listen to archive here.

538. Aug 20, interview with Kim Greenhouse, It's Rainmaking Time, listen here.

537. Aug 16, interview with Mike Harris, republicbroadcasting.org, 6 am PST

536. Aug. 14, interview, TheAndyCaldwellshow.com, 4:30pm PST

535. August 13, interview with American Free Press, 1 pm PST

534. July 24, interview along with Victoria Grant, The People Speak, 6pm, PST

533. July 24, interview with Kevin Barrett, NoLiesRadio.org, 9 am PST

532. July 23, interview with Charlie McGrath, wideawakenews.com, 6 pm PST

531. July 22, interview with Dave Hodges, The Common Sense Show, 7 pm PST

530. July 22, interview with Stephen Lendman, progressive radio network, 10 am PST. Listen to archive here.

529. July 19, interview with Mike Beevers, KFCF Fresno, 4:30 pm PST

528. July 10-12, Speaker, Conference on Social Transformation, Faculty of Economics, Split University, Split Croatia

527. July 10, video interview with Max Keiser, the Keiser Report, on the ESM. Watch it here.

526. July 7, Interview with Phil Mackesy, This Week in Money, TalkDigitalNetwork.com, 3 pm PST

525. July 6, video interview with Dr. Mercola, see it here.

524. June 23, Interview with Al Korelin, The Korelin Economics Report, 1 pm PST. Listen to archive here.

523. June 21, interview with Tom Kiely, INN World Radio Report, 4:30 pm PST

522. June 21, interview on the Gary Null Show, 9:20 am PST

521. June 18, interview with Ken Rose, What Now radio show, KOWS RADIO OCCIDENTAL 107.3 FM, 1 pm PST. Listen to archive here.

520. June 17, interview with Bill Resnick, KBOO radio, 9 am PST

519. June 16 interview with Stephen Lendman, progressive radio network, 10 am PST. Listen to archive here.

518. June 9, interview with Sylvia Richardson, Latin Waves, 9:45 am PST. Listen to archive here.

517. June 5, interview, Truth Quest With Melodee, KHEN radio, 7pm PST

516. June 2, interview about Web of Debt, Our Common Ground,http://www.blogtalkradio.com/OCG, 7pm PST

515. June 1, interview with Robert Stark, The Stark Truth listen here.

514. Newly available video of interview on "Moral Politics" -- see it here

513. May 30, interview, The Tim Dahaney Show, ll am PST

512. May 28, interview with Pedro Gatos, "Bringing Light into Darkness", KOOP.ORG, 6 pm CST

511. May 24, interview, Make It Plain With Mark Thompson, SiriusXM Satellite Radio, 2pm PST

510. May 20, interview, Women's View Radio, blogtalkradio.com, 10 am Central Time. Listen here.

509. May 13, interview, www.Blogtalkradio.com/fixyourmortgagemess, 4:15 pm PST

508. May 12, interview with Stephen Lendman, progressive radio network, 10 am PST Listen here.

507. May 9, seminar, Re-imagining Money and Credit, Art bldg. rm 103, El Camino college, Torrance, Ca. 5-7:30 pm

506. May 8, interview with Mike Harris, republicbroadcasting.org, 9 am EST

505. May 7, radio discussion on "The Myth of Austerity", Connect the Dots, KPFK Los Angeles, 7 am PST. Listen here.

504. May 4, interview The Unsolicited Opinion, republicbroadcasting.org, 8 am PST

503. April 27-28, speaker, Public Banking Institute Conference, Friends Center, Philadelphia. Listen here.

502. April 25, speaker Global Teach-In (globalteachin.com), 12 noon EST

501. April 17, Interview with Leo Steel, http://www.blogtalkradio.com/lasteelshoworg, 8:30 pm EST. Listen here.. 31 minutes in.

500. April 14, interview with Stephen Lendman, progressive radio network, 10 am PST

499. April 14, interview with Al Korelin, The Korelin Economics Report

498. April 10th-12th Speaker at Claremont Conference, “Creating Money in a Finite World” Claremont, CA . See video here.

497. April 5, interview , This Week In Money with Phil Mackesy (howestreet.com) 12:30 PST. Listen to the archive here.

496. April 3, speaker at COMER with Paul Hellyer, "Escape From the Web of Debt," Toronto, 7:30 pm

495. March 27, speaker on "Why are we so Broke? New ways to look at the Finances of our State and City," League of Women Voters luncheon, San Diego, 12 noon

494.5 March 24, radio interview, Mandelman Matters. Listen here.

494. March 17, speaker via skype, SCADS conference, London

493. March 15, interview with Per Fagereng, Fight the Empire, KBOO radio, 9:30 am PST

492. March 15, speaker, San Rafael City Hall 6 pm

491. March 13, speaker at Sergio Lub's house, Walnut Creek, info at Favors.org, 6pm

490. March 11, speaker, TedxNewWallStreet. See it here.

489. March 10, interview with Stephen Lendman, progressive radio network, 10 am PST

488. March 6, interview with Melinda Pillsbury-Foster, http://radio.rumormillnews.com/podcast/, 11 am PST

487. Feb. 25, interview with Martin Andelman, http://www.mandelman.ml-implode.com, 9:30 am PST

486. Feb. 25, interview, This Week In Money with Phil Mackesy (howestreet.com), 3 pm PST

485. Feb. 25, interview on CIVL Radio, Latin Waves, How Greece Could Take Down Wall Street, 11:30am PST

484. Feb 23, interview with Thomas Kiely, INN World Report Radio, 7:30 pm EST

483. Feb. 17, featured speaker, Public Banking in America weekly call, 9 am PST

482. Feb. 11, interview with Stephen Lendman, progressive radio network, 10 am PST

481. Feb. 8, interview with Mike Beevers, KFCF Fresno, 4:30 pm PST

480. Feb. 7, interview with Kevin Barrett, NoLiesRadio.org, 9 am PST; listen to archive here

479. Feb. 6, participant, Occupiers and Wells Fargo Executives Gather to Discuss the American Foreclosure Crisis, The Center of Nonprofit Management at California Endowment Building 1000 N. Alameda, Los Angeles, meeting 3 pm and press conference 5:30 pm

478. Feb. 2, interview with Tom Kiely, INN World Report Radio, 7:30 pm EST

477. Feb. 2, interview with Patrick Timpone, oneradionetwork.com, naturalnewsradio.com. Listen to archive here

476. Jan. 31, interview, Liberty Coins and Precious Metals, 9 am PST

475. Jan. 27, interview KPFA, Project Censored, 8:30 am PST

474. Jan. 27, FILMS4CHANGE-INSIDEJOB, panel speaker, Edye Second Space, Santa Monica Performing Arts Center, 7:30 pm

473. Jan 22, interview with Dave Hodges, The Common Sense Show, 7:30 pm PST. Listen live here.

472. Jan. 20, interview with Mike Harris, The Republic Broadcasting Network, 7 am PST

471. Jan. 16, interview with Rob Lorei, WMNF fm, Tampa, 2 pm PST

470. Jan. 14, interview with Stephen Lendman, progressive radio network, 10 am PST

469. Jan. 11, interview with Jeff Rense, rense.com, 8pm PST

Wall Street Greed: Not Too Big for a California Jury

Sixteen of the world’s largest banks have been caught colluding to rig global interest rates.  Why are we doing business with a corrupt global banking cartel?

United States Attorney General Eric Holder has declared that the too-big-to-fail Wall Street banks are too big to prosecute.  But an outraged California jury might have different ideas. As noted in the California legal newspaper The Daily Journal:

California juries are not bashful – they have been known to render massive punitive damages awards that dwarf the award of compensatory (actual) damages.For example, in one securities fraud case jurors awarded $5.7 million in compensatory damages and $165 million in punitive damages. . . . And in a tobacco case with $5.5 million in compensatory damages, the jury awarded $3 billion in punitive damages . . . .

The question, then, is how to get Wall Street banks before a California jury. How about charging them with common law fraud and breach of contract?  That’s what the FDIC just did in its massive 24-count civil suit for damages for LIBOR manipulation, filed in March 2014 against sixteen of the world’s largest banks, including the three largest US banks – JP Morgan Chase, Bank of America and Citigroup.   

LIBOR (the London Interbank Offering Rate) is the benchmark rate at which banks themselves can borrow. It is a crucial rate involved in over $400 trillion in derivatives called interest-rate swaps, and it is set by the sixteen private megabanks behind closed doors.

The biggest victims of interest-rate swaps have been local governments, universities, pension funds, and other public entities. The banks have made renegotiating these deals prohibitively expensive, and renegotiation itself is an inadequate remedy. It is the equivalent of the grocer giving you an extra potato when you catch him cheating on the scales. A legal action for fraud is a more fitting and effective remedy. Fraud is grounds both for rescission (calling off the deal) as well as restitution (damages), and in appropriate cases punitive damages.

Trapped in a Fraud

Nationally, municipalities and other large non-profits are thought to have as much as $300 billion in outstanding swap contracts based on LIBOR, deals in which they are trapped due to prohibitive termination fees. According to a 2010 report by the SEIU (Service Employees International Union):

The overall effect is staggering. Banks are estimated to have collected as much as $28 billion in termination fees alone from state and local governments over the past two years. This does not even begin to account for the outsized net payments that state and local governments are now making to the banks. . . .

While the press have reported numerous stories of cities like Detroit, caught with high termination payments, the reality is there are hundreds (maybe even thousands) more cities, counties, utility districts, school districts and state governments with swap agreements [that] are causing cash strapped local and city governments to pay millions of dollars in unneeded fees directly to Wall Street.

All of these entities could have damage claims for fraud, breach of contract and rescission; and that is true whether or not they negotiated directly with one of the LIBOR-rigging banks.

To understand why, it is necessary to understand how swaps work. As explained in my last article here, interest-rate swaps are sold to parties who have taken out loans at variable interest rates, as insurance against rising rates. The most common swap is one where counterparty A (a university, municipal government, etc.) pays a fixed rate to counterparty B (the bank), while receiving from B a floating rate indexed to a reference rate such as LIBOR. If interest rates go up, the municipality gets paid more on the swap contract, offsetting its rising borrowing costs. If interest rates go down, the municipality owes money to the bank on the swap, but that extra charge is offset by the falling interest rate on its variable rate loan. The result is to fix borrowing costs at the lower variable rate.

At least, that is how they are supposed to work. The catch is that the swap is a separate financial agreement – essentially an ongoing bet on interest rates. The borrower owes both the interest onits variable rate loan and what it must pay on its separate swap deal. And the benchmarks for the two rates don’t necessarily track each other. The rate owed on the debt is based on something called the SIFMA municipal bond index.  The rate owed by the bank is based on the privately-fixed LIBOR rate.

As noted by Stephen Gandel on CNNMoney, when the rate-setting banks started manipulating LIBOR, the two rates decoupled, sometimes radically. Public entities wound up paying substantially more than the fixed rate they had bargained for – a failure of consideration constituting breach of contract. Breach of contract is grounds for rescission and damages.

Pain and Suffering in California

The SEIU report noted that no one has yet completely categorized all the outstanding swap deals entered into by local and state governments.  But in a sampling of swaps within California, involving ten cities and counties (San Francisco, Corcoran, Los Angeles, Menlo Park, Oakland, Oxnard, Pittsburgh, Richmond, Riverside, and Sacramento), one community college district, one utility district, one transportation authority, and the state itself, the collective tab was $365 million in swap payments annually, with total termination fees exceeding $1 billion.

Omitted from the sample was the University of California system, which alone is reported to have lost tens of millions of dollars on interest-rate swaps. According to an article in the Orange County Register on February 24, 2014, the swaps now cost the university system an estimated $6 million a year. University accountants estimate that the 10-campus system will lose as much as $136 million over the next 34 years if it remains locked into the deals, losses that would be reduced only if interest rates started to rise. According to the article:

Already officials have been forced to unwind a contract at UC Davis, requiring the university to pay $9 million in termination fees and other costs to several banks. That sum would have covered the tuition and fees of 682 undergraduates for a year.

The university is facing the losses at a time when it is under tremendous financial stress. Administrators have tripled the cost of tuition and fees in the past 10 years, but still can’t cover escalating expenses. Class sizes have increased. Families have been angered by the rising price of attending the university, which has left students in deeper debt.

Peter Taylor, the university’s Chief Financial Officer, defended the swaps, saying he was confident that interest rates would rise in coming years, reversing what the deals have lost. But for that to be true, rates would have to rise by multiples that would drive interest on the soaring federal debt to prohibitive levels, something the Federal Reserve is not likely to allow.

The Revolving Door

The UC’s dilemma is explored in a report titled “Swapping Our Future: How Students and Taxpayers Are Funding Risky UC Borrowing and Wall Street Profits.” The authors, a group called Public Sociologists of Berkeley, say that two factors were responsible for the precipitous decline in interest rates that drove up UC’s relative borrowing costs. One was the move by the Federal Reserve to push interest rates to record lows in order to stabilize the largest banks. The other was the illegal effort by major banks to manipulate LIBOR, which indexes interest rates on most bonds issued by UC.

Why, asked the authors, has UC’s management not tried to renegotiate the deals? They pointed to the revolving door between management and Wall Street. Unlike in earlier years, current and former business and finance executives now play a prominent role on the UC Board of Regents.

They include Chief Financial Officer Taylor, who walked through the revolving door from Lehman Brothers, where he was a top banker in Lehman’s municipal finance business in 2007. That was when the bank sold the university a swap related to debt at UCLA that has now become the source of its biggest swap losses. The university hired Taylor for his $400,000-a-year position in 2009, and he has continued to sign contracts for swaps on its behalf since.

Investigative reporter Peter Byrne notes that the UC regent’s investment committee controls $53 billion in Wall Street investments, and that historically it has been plagued by self-dealing. Byrne writes:

Several very wealthy, politically powerful men are fixtures on the regent’s investment committee, including Richard C. Blum (Wall Streeter, war contractor, and husband of U.S. Senator Dianne Feinstein), and Paul Wachter (Gov. Arnold Schwarzenegger’s long-time business partner and financial advisor). The probability of conflicts of interest inside this committee—as it moves billions of dollars between public and private companies and investment banks—is enormous.

Blum’s firm Blum Capital is also an adviser to CalPERS, the California Public Employees’ Retirement System, which also got caught in the LIBOR-rigging scandal. “Once again,” said CalPERS Chief Investment Officer Joseph Dear of the LIBOR-rigging, “the financial services industry demonstrated that it cannot be trusted to make decisions in the long-term interests of investors.” If the financial services industry cannot be trusted, it needs to be replaced with something that can be.

Remedies

The Public Sociologists of Berkeley recommend renegotiation of the onerous interest rate swaps, which could save up to $200 million for the UC system; and evaluation of the university’s legal options concerning the manipulation of LIBOR. As demonstrated in the new FDIC suit, those options include not just renegotiating on better terms but rescission and damages for fraud and breach of contract. These are remedies that could be sought by local governments and public entities across the state and the nation.

The larger question is why our state and local governments continue to do business with a corrupt global banking cartel. There is an alternative. They could set up their own publicly-owned banks, on the model of the state-owned Bank of North Dakota. Fraud could be avoided, profits could be recaptured, and interest could become a much-needed source of public revenue. Credit could become a public utility, dispensed as needed to benefit local residents and local economies.

__________________

Ellen Brown is an attorney, founder of the Public Banking Institute, and a candidate for California State Treasurer running on a state bank platform. She is the author of twelve books, including the best-selling Web of Debt and her latest book, The Public Bank Solution, which explores successful public banking models historically and globally.

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Today on “It’s Our Money” – Nomi Prins

Today’s guest on “It’s Our Money” is Nomi Prins, speaking on her blockbuster new book All the Presidents’ Bankers. Listen to the archive here.

Also check the archives for Kevin Zeese and Margaret Flowers on the burgeoning activist movement; Prof. Robert Hockett on the use of eminent domain to help underwater homeowners; and Prof. Timothy Canova on the Federal Reserve.

Great fun interviewing our favorite experts, on topics we think will interest you!

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The Global Banking Game Is Rigged, and the FDIC Is Suing

Taxpayers are paying billions of dollars for a swindle pulled off by the world’s biggest banks, using a form of derivative called interest-rate swaps; and the Federal Deposit Insurance Corporation has now joined a chorus of litigants suing over it. According to an SEIU report:

Derivatives . . . have turned into a windfall for banks and a nightmare for taxpayers. . . . While banks are still collecting fixed rates of 3 to 6 percent, they are now regularly paying public entities as little as a tenth of one percent on the outstanding bonds, with rates expected to remain low in the future. Over the life of the deals, banks are now projected to collect billions more than they pay state and local governments – an outcome which amounts to a second bailout for banks, this one paid directly out of state and local budgets.

It is not just that local governments, universities and pension funds made a bad bet on these swaps. The game itself was rigged, as explained below. The FDIC is now suing in civil court for damages and punitive damages, a lead that other injured local governments and agencies would be well-advised to follow. But they need to hurry, because time on the statute of limitations is running out.

The Largest Cartel in World History

On March 14, 2014, the FDIC filed suit for LIBOR-rigging against sixteen of the world’s largest banks – including the three largest US banks (JPMorgan Chase, Bank of America, and Citigroup), the three largest UK banks, the largest German bank, the largest Japanese bank, and several of the largest Swiss banks. Bill Black, professor of law and economics and a former bank fraud investigator, calls them “the largest cartel in world history, by at least three and probably four orders of magnitude.”

LIBOR (the London Interbank Offering Rate) is the benchmark rate by which banks themselves can borrow. It is a crucial rate involved in hundreds of trillions of dollars in derivative trades, and it is set by these sixteen megabanks privately and in secret.

Interest rate swaps are now a $426 trillion business. That’s trillion with a “t” – about seven times the gross domestic product of all the countries in the world combined. According to the Office of the Comptroller of the Currency, in 2012 US banks held $183.7 trillion in interest-rate contracts, with only four firms representing 93% of total derivative holdings; and three of the four were JPMorgan Chase, Citigroup, and Bank of America, the US banks being sued by the FDIC over manipulation of LIBOR.

Lawsuits over LIBOR-rigging have been in the works for years, and regulators have scored some very impressive regulatory settlements. But so far, civil actions for damages have been unproductive for the plaintiffs. The FDIC is therefore pursuing another tack.

But before getting into all that, we need to look at how interest-rate swaps work. It has been argued that the counterparties stung by these swaps got what they bargained for – a fixed interest rate. But that is not actually what they got. The game was rigged from the start.

The Sting

Interest-rate swaps are sold to parties who have taken out loans at variable interest rates, as insurance against rising rates. The most common swap is one where counterparty A (a university, municipal government, etc.) pays a fixed rate to counterparty B (the bank), while receiving from B a floating rate indexed to a reference rate such as LIBOR. If interest rates go up, the municipality gets paid more on the swap contract, offsetting its rising borrowing costs. If interest rates go down, the municipality owes money to the bank on the swap, but that extra charge is offset by the falling interest rate on its variable rate loan. The result is to fix borrowing costs at the lower variable rate.

At least, that is how it’s supposed to work. The catch is that the swap is a separate financial agreement – essentially an ongoing bet on interest rates. The borrower owes both the interest onits variable rate loan and what it must pay out on this separate swap deal. And the benchmarks for the two rates don’t necessarily track each other. As explained by Stephen Gandel on CNN Money:

The rates on the debt were based on something called the Sifma municipal bond index, which is named after the industry group that maintains the index and tracks muni bonds. And that’s what municipalities should have bought swaps based on.

Instead, Wall Street sold municipalities Libor swaps, which were easier to trade and [were] quickly becoming a gravy train for the banks.

Historically, Sifma and LIBOR moved together. But that was before the greatest-ever global banking cartel got into the game of manipulating LIBOR. Gandel writes:

In 2008 and 2009, Libor rates, in general, fell much faster than the Sifma rate. At times, the rates even went in different directions. During the height of the financial crisis, Sifma rates spiked. Libor rates, though, continued to drop. The result was that the cost of the swaps that municipalities had taken out jumped in price at the same time that their borrowing costs went up, which was exactly the opposite of how the swaps were supposed to work.

The two rates had decoupled, and it was chiefly due to manipulation. As noted in the SEUI report:

[T]here is . . . mounting evidence that it is no accident that these deals have gone so badly, so quickly for state and local governments. Ongoing investigations by the U.S. Department of Justice and the California, Florida, and Connecticut Attorneys General implicate nearly every major bank in a nationwide conspiracy to rig bids and drive up the fixed rates state and local governments pay on their derivative contracts.

Changing the Focus to Fraud

Suits to recover damages for collusion, antitrust violations and racketeering (RICO), however, have so far failed. In March 2013, SDNY Judge Naomi Reece Buchwald dismissed antitrust and RICO claims brought by investors and traders in actions consolidated in her court, on the ground that the plaintiffs lacked standing to bring the claims. She held that the rate-setting banks’ actions did not affect competition, because those banks were not in competition with one another with respect to LIBOR rate-setting; and that “the alleged collusion occurred in an arena in which defendants never did and never were intended to compete.”

Okay, the defendants weren’t competing with each other. They were colluding with each other, in order to unfairly compete with the rest of the financial world – local banks, credit unions, and the state and local governments they lured into being counterparties to their rigged swaps. The SDNY ruling is on appeal to the Second Circuit.

In the meantime, the FDIC is taking another approach. Its 24-count complaint does include antitrust claims, but the emphasis is on damages for fraud and conspiring to keep the LIBOR rate low to enrich the banks. The FDIC is not the first to bring such claims, but its massive suit adds considerable weight to the approach.

Why would keeping interest rates low enrich the rate-setting banks? Don’t they make more money if interest rates are high?

The answer is no. Unlike most banks, they make most of their money not from ordinary commercial loans but from interest rate swaps. The FDIC suit seeks to recover losses caused to 38 US banking institutions that did make their profits from ordinary business and consumer loans – banks that failed during the financial crisis and were taken over by the FDIC. They include Washington Mutual, the largest bank failure in US history. Since the FDIC had to cover the deposits of these failed banks, it clearly has standing to recover damages, and maybe punitive damages, if intentional fraud is proved.

The Key Role of the Federal Reserve

The rate-rigging banks have been caught red-handed, but the greater manipulation of interest rates was done by the Federal Reserve itself. The Fed aggressively drove down interest rates to save the big banks and spur economic recovery after the financial collapse. In the fall of 2008, it dropped the prime rate (the rate at which banks borrow from each other) nearly to zero.

This gross manipulation of interest rates was a giant windfall for the major derivative banks. Indeed, the Fed has been called a tool of the global banking cartel. It is composed of 12 branches, all of which are 100% owned by the private banks in their districts; and the Federal Reserve Bank of New York has always been the most important by far of these regional Fed banks. New York, of course is where Wall Street is located.

LIBOR is set in London; but as Simon Johnson observed in a New York Times article titled The Federal Reserve and the LIBOR Scandal, the Fed has jurisdiction whenever the “safety and soundness” of the US financial system is at stake. The scandal, he writes, “involves egregious, flagrant criminal conduct, with traders caught red-handed in e-mails and on tape.” He concludes:

This could even become a “tobacco moment,” in which an industry is forced to acknowledge its practices have been harmful – and enters into a long-term agreement that changes those practices and provides continuing financial compensation.

Bill Black concurs, stating, “Our system is completely rotten. All of the largest banks are involved—eagerly engaged in this fraud for years, covering it up.” The system needs a complete overhaul.

In the meantime, if the FDIC can bring a civil action for breach of contract and fraud, so can state and local governments, universities, and pension funds. The possibilities this opens up for California (where I’m currently running for State Treasurer) are huge. Fraud is grounds for rescission (terminating the contract) without paying penalties, potentially saving taxpayers enormous sums in fees for swap deals that are crippling cities, universities and other public entities across the state. Fraud is also grounds for punitive damages, something an outraged jury might be inclined to impose. My next post will explore the possibilities for California in more detail. Stay tuned.

______

Ellen Brown is an attorney, founder of the Public Banking Institute, and a candidate for California State Treasurer running on a state bank platform. She is the author of twelve books, including the best-selling Web of Debt and her latest book, The Public Bank Solution, which explores successful public banking models historically and globally.

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Banking Union Time Bomb: Eurocrats Authorize Bailouts AND Bail-Ins

As things stand, the banks are the permanent government of the country, whichever party is in power.

 – Lord Skidelsky, House of Lords, UK Parliament, 31 March 2011)

On March 20, 2014, European Union officials reached an historic agreement to create a single agency to handle failing banks. Media attention has focused on the agreement involving the single resolution mechanism (SRM), a uniform system for closing failed banks. But the real story for taxpayers and depositors is the heightened threat to their pocketbooks of a deal that now authorizes both bailouts and “bail-ins” – the confiscation of depositor funds. The deal involves multiple concessions to different countries and may be illegal under the rules of the EU Parliament; but it is being rushed through to lock taxpayer and depositor liability into place before the dire state of Eurozone banks is exposed.

The bail-in provisions were agreed to last summer. According to Bruno Waterfield, writing in the UK Telegraph in June 2013:

 Under the deal, after 2018 bank shareholders will be first in line for assuming the losses of a failed bank before bondholders and certain large depositors. Insured deposits under £85,000 (€100,000) are exempt and, with specific exemptions, uninsured deposits of individuals and small companies are given preferred status in the bail-in pecking order for taking losses . . . Under the deal all unsecured bondholders must be hit for losses before a bank can be eligible to receive capital injections directly from the ESM, with no retrospective use of the fund before 2018.

As noted in my earlier articles, the ESM (European Stability Mechanism) imposes an open-ended debt on EU member governments, putting taxpayers on the hook for whatever the Eurocrats (EU officials) demand. And it’s not just the EU that has bail-in plans for their troubled too-big-to-fail banks. It is also the US, UK, Canada, Australia, New Zealand and other G20 nations. Recall that a depositor is an unsecured creditor of a bank. When you deposit money in a bank, the bank “owns” the money and you have an IOU or promise to pay.

Under the new EU banking union, before the taxpayer-financed single resolution fund can be deployed, shareholders and depositors will be “bailed in” for a significant portion of the losses. The bankers thus win both ways: they can tap up the taxpayers’ money and the depositors’ money.

 The Unsettled Question of Deposit Insurance

 But at least, you may say, it’s only the uninsured deposits that are at risk (those over €100,000—about $137,000). Right?

Not necessarily. According to ABC News, “Thursday’s result is a compromise that differs from the original banking union idea put forward in 2012. The original proposals had a third pillar, Europe-wide deposit insurance. But that idea has stalled.”

European Central Bank President Mario Draghi, speaking before the March 20th meeting in the Belgian capital, hailed the compromise plan as “great progress for a better banking union. Two pillars are now in place” – two but not the third. And two are not enough to protect the public.As observed in The Economist in June 2013, without Europe-wide deposit insurance, the banking union is a failure:

[T]he third pillar, sadly ignored, [is] a joint deposit-guarantee scheme in which the costs of making insured depositors whole are shared among euro-zone members. Annual contributions from banks should cover depositors in normal years, but they cannot credibly protect the system in meltdown (America’s prefunded scheme would cover a mere 1.35% of insured deposits). Any deposit-insurance scheme must have recourse to government backing. . . . [T]he banking union—and thus the euro—will make little sense without it.

All deposits could be at risk in a meltdown. But how likely is that?

Pretty likely, it seems . . . .

What the Eurocrats Don’t Want You to Know

Mario Draghi was vice president of Goldman Sachs Europe before he became president of the ECB. He had a major hand in shaping the banking union. And according to Wolf Richter, writing in October 2013, the goal of Draghi and other Eurocrats is to lock taxpayer and depositor liability in place before the panic button is hit over the extreme vulnerability of Eurozone banks:

European banks, like all banks, have long been hermetically sealed black boxes. . . . The only thing known about the holes in the balance sheets of these black boxes, left behind by assets that have quietly decomposed, is that they’re deep. But no one knows how deep. And no one is allowed to know – not until Eurocrats decide who is going to pay for bailing out these banks.

When the ECB becomes the regulator of the 130 largest ECB banks, says Richter, it intends to subject them to more realistic evaluations than the earlier “stress tests” that were nothing but “banking agitprop.”  But these realistic evaluations won’t happen until the banking union is in place. How does Richter know? Draghi himself said so. Draghi said:

 “The effectiveness of this exercise will depend on the availability of necessary arrangements for recapitalizing banks … including through the provision of a public backstop. . . . These arrangements must be in place before we conclude our assessment.”

Richter translates that to mean:

The truth shall not be known until after the Eurocrats decided who would have to pay for the bailouts. And the bank examinations won’t be completed until then, because if any of it seeped out – Draghi forbid – the whole house of cards would collapse, with no taxpayers willing to pick up the tab as its magnificent size would finally be out in the open!

Only after the taxpayers – and the depositors – are stuck with the tab will the curtain be lifted and the crippling insolvency of the banks be revealed. Predictably, panic will then set in, credit will freeze, and the banks will collapse, leaving the unsuspecting public to foot the bill.

 What Happened to Nationalizing Failed Banks?

 Underlying all this frantic wheeling and dealing is the presumption that the “zombie banks” must be kept alive at all costs – alive and in the hands of private bankers, who can then continue to speculate and reap outsized bonuses while the people bear the losses.

But that’s not the only alternative. In the 1990s, the expectation even in the United States was that failed megabanks would be nationalized. That route was pursued quite successfully not only in Sweden and Finland but in the US in the case of Continental Illinois, then the fourth-largest bank in the country and the largest-ever bankruptcy. According to William Engdahl, writing in September 2008:

 [I]n almost every case of recent banking crises in which emergency action was needed to save the financial system, the most economical (to taxpayers) method was to have the Government, as in Sweden or Finland in the early 1990’s, nationalize the troubled banks [and] take over their management and assets … In the Swedish case the end cost to taxpayers was estimated to have been almost nil.

Typically, nationalization involves taking on the insolvent bank’s bad debts, getting the bank back on its feet, and returning it to private owners, who are then free to put depositors’ money at risk again. But better would be to keep the nationalized mega-bank as a public utility, serving the needs of the people because it is owned by the people.

As argued by George Irvin in Social Europe Journal in October 2011:

[T]he financial sector needs more than just regulation; it needs a large measure of public sector control—that’s right, the n-word: nationalisation. Finance is a public good, far too important to be run entirely for private bankers. At the very least, we need a large public investment bank tasked with modernising and greening our infrastructure . . . . [I]nstead of trashing the Eurozone and going back to a dozen minor currencies fluctuating daily, let’s have a Eurozone Ministry of Finance (Treasury) with the necessary fiscal muscle to deliver European public goods like more jobs, better wages and pensions and a sustainable environment.

A Third Alternative – Turn the Government Money Tap Back On

A giant flaw in the current banking scheme is that private banks, not governments, now create virtually the entire money supply; and they do it by creating interest-bearing debt. The debt inevitably grows faster than the money supply, because the interest is not created along with the principal in the original loan.

For a clever explanation of how all this works in graphic cartoon form, see the short French video “Government Debt Explained,” linked here.

The problem is exacerbated in the Eurozone, because no one has the power to create money ex nihilo as needed to balance the system, not even the central bank itself. This flaw could be remedied either by allowing nations individually to issue money debt-free or, as suggested by George Irvin, by giving a joint Eurozone Treasury that power.

The Bank of England just admitted in its Quarterly Bulletin that banks do not actually lend the money of their depositors. What they lend is bank credit created on their books. In the U.S. today, finance charges on this credit-money amount to between 30 and 40% of the economy, depending on whose numbers you believe.  In a monetary system in which money is issued by the government and credit is issued by public banks, this “rentiering” can be avoided. Government money will not come into existence as a debt at interest, and any finance costs incurred by the public banks’ debtors will represent Treasury income that offsets taxation.

New money can be added to the money supply without creating inflation, at least to the extent of the “output gap” – the difference between actual GDP or actual output and potential GDP. In the US, that figure is about $1 trillion annually; and for the EU is roughly €520 billion ($715 billion). A joint Eurozone Treasury could add this sum to the money supply debt-free, creating the euros necessary to create jobs, rebuild infrastructure, protect the environment, and maintain a flourishing economy.

_________________

Ellen Brown is an attorney, founder of the Public Banking Institute, and a candidate for California State Treasurer running on a state bank platform. She is the author of twelve books, including the best-selling Web of Debt and her latest book, The Public Bank Solution, which explores successful public banking models historically and globally.

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Warren’s Post Office Proposal: Palast Aims at the Wrong Target

Investigative reporter Greg Palast is usually pretty good at peering behind the rhetoric and seeing what is really going on. But in tearing into Senator Elizabeth Warren’s support of postal financial services, he has done a serious disservice to the underdogs – both the underbanked and the US Postal Service itself.

In his February 27 article “Liz Warren Goes Postal,” Palast attacked her support of the USPS Inspector General’s proposal to add “non-bank” financial services to the US Postal Service, calling it “cruel, stupid and frightening” and equating it with the unethical payday lending practices it seeks to eliminate.

After “several thousand tweets by enraged liberals,” he wrote a follow-up article called “Brains Lost in Mail—Postal Bank Bunkum,” in which he contends, “the Postal Governors are running a slick, slick campaign” to “use federal property to run illegal loan-sharking shops.” He says they would “team up with commercial banks to cash in on payday predation,” exempting themselves from Warren’s own consumer protection regulations.

His first article concludes:

While the USPS wants to “partner” with big banks, why not, instead, allow community credit unions to use post offices as annexes to provide full, complete, non-usurious neighborhood banking services? This is the type of full-service “postal banking” successful in Switzerland and Japan that is envisioned by Ellen Brown, not the payday predation proposed by the USPS.

I obviously agree with him on the full-service postal banking alternative, but that is not something Congress appears ready to approve. Palast has not looked closely at the white paper from the Inspector General’s office  relied on by Senator Warren, or at the research on payday lending and the inability of credit unions to service that market. The IG’s proposal, rather than fleecing the poor, would save them from being fleeced by offering basic financial services at much reduced rates. And that makes it a very good start.

The Straits and Strictures of the USPS

In analyzing the proposal, we need to consider the stressed circumstances and limitations of the Postal Service. It is fighting for its life, after the nefarious 2006 Postal Accountability and Enhancement Act (PAEA) rendered it insolvent. Apparently intended to force the privatization of the post office, the Act required the prefunding of postal retiree health benefits for 75 years into the future. That means funding workers not yet born, an onerous burden no other public or private company is required to carry.

Worse, as the white paper notes:

The 2006 Postal Accountability and Enhancement Act (PAEA) generally prohibits the Postal Service from offering new nonpostal services. However, given that the Postal Service is already providing money orders and other types of non-bank financial services, it could explore additional options within its existing authority.

Given the hostility among conservatives in Congress to postal expansion of any sort, full-service banking (involving deposits, checking and savings accounts, and home and business loans) is unlikely to be authorized any time soon. But the proposed prepaid Postal Cards would simply be an electronic 21st century extension of paper money orders, and short-term Postal Loans could be construed as advances on those cards. According to the white paper, the proposed Postal Card would cost users less than half what they pay for prepaid cards now, and Postal Loans would cost them less than one-tenth the cost of a payday loan, a substantial savings for the poor.

It sounds good, but where will the post office get the money for the loans if it cannot branch into taking deposits? And where will it get the capital to back the loans when it is insolvent? The white paper states:

Electronic payment products like Postal Cards might be a wise entry point, and would expand upon existing services like paper money orders. . . . The right partners could bring much needed startup cash to the table as part of the deal, overcoming the Postal Service’s current funding limitations.

The white paper also suggests partnering with banks for the back-end network and expertise necessary to deal with a national or global card system. But the RIGHT partners are emphasized:

One important note of caution: the Postal Service should be very mindful to ensure that no partnership damages its reputation. The level of trust the Postal Service has earned from the public is an unmatched asset, and one that should not be jeopardized.

Billions More for the Poor

The white paper notes that more than a quarter of all US households do not have a bank account, or use costly services like payday loans and check-cashing exchanges just to make ends meet. People who filed for bankruptcy in 2012 were on average just $26 per month short of meeting their expenses, so even modest savings would make a major difference to them:

The average underserved household has an annual income of about $25,500 and spends about $2,412 of that just on alternative financial services fees and interest. That amounts to 9.5 percent of their income. To put that into perspective, that is about the same portion of income that the average American household spends on food in one year. In 2012 alone, the underserved paid some $89 billion in fees and interest.

Banks are closing branches all over the country, mostly in low-income areas; but post offices are still to be found everywhere. They could offer affordable financial services that would save the underserved billions of dollars in exorbitant fees and interest.

Postal Loans could be made for less than a tenth of the fees charged for a typical payday loan of the same size. The example is given of a $375 loan paid off in 5-1/2 months. A typical payday lender would charge annual interest of 391%, for a total of $520 in interest and fees. For a comparable Postal Loan, the borrower would pay a $25 upfront loan fee and 25% interest, making the total for interest and fees a mere $48 across the life of the loan. The white paper concludes:

If even one-tenth of the 12 million Americans who take out a payday loan each year got this hypothetical Postal Loan instead, they could collectively save more than half a billion dollars a year in fees and interest. And that is to say nothing of the benefits Postal Loans could bring to the 10 million unbanked U.S. households which cannot even get payday loans.

The proposed Postal Loan could save these marginal borrowers about $100 per month, potentially saving them from bankruptcy:

If this helped decrease personal bankruptcies by just 5%, it would not only help more than 50,000 people a year avoid the lasting stigma and financial effects of bankruptcy, it would also potentially keep some $10 billion a year in loans and other debts from being dragged through bankruptcy court, where much of it would be canceled at tremendous expense to creditors (most of whom are financial institutions). That would be good for American families, for banks, and for the entire country.

The Questionable Credit Union Alternative

Palast argues that his credit union can give the same loan for 10%, but this is doubtful. In a fall 2012 article titled “Are Payday Lending Markets Competitive?”, Victor Stango shows that credit unions, despite their claims, are generally not able to offer competitive payday loans. Few credit unions even offer them, because both credit unions and borrowers themselves find the credit union version unattractive. Stango’s survey found that borrowers actually preferred the higher-priced payday loans, because they had fewer restrictions.

Banks do not generally make small personal loans, even to creditworthy borrowers, because they are not cost-effective for the bank; and the underserved often cannot get credit cards because they have bad or nonexistent credit histories, making them a high credit risk. They therefore turn to payday loans, on which credit unions do offer lower rates; but they can offer them only by being more restrictive on approval and repayment terms and by adding fees. More restrictive terms mean credit union payday loans have lower default risk; but risk-adjusted prices on standard payday loans, says Stango, may actually be no higher than those on credit union payday loans.

The National Credit Union Administration now allows an APR of 28% on short-term small loans. Lenders can’t really afford to do it for less, because there are so many defaults.

As for big banks licking their chops at getting in on the USPS’ 25% short term loans, this hardly seems likely either. Big banks, including Wells Fargo, Bank of America and JPMorgan Chase, are already major funders of payday lenders—the ones in the 391% bracket. The USPS returns will seem paltry by comparison.

Profits to the People

Postal Loans and Postal Cards are only two of a suite of non-bank financial services proposed in the white paper that could result in substantial savings for the poor, while at the same time generating much-needed profits for the struggling Postal Service itself. Postal profits serve the public by keeping the Pony Express running and postage stamps affordable.

The Inspector General’s white paper concludes, “As the Postal Service continues to look for new ways to serve the citizens of the 21st century, non-bank financial services may be the ‘killer app’ for diversifying its revenue base.”

It may also be the killer app for keeping both the poor and the Postal Service itself out of bankruptcy.

_____________________

Ellen Brown is an attorney, president of the Public Banking Institute, and a candidate for California State Treasurer running on a state bank platform. She is the author of twelve books including the best-selling Web of Debt and her latest book, The Public Bank Solution, which explores successful public banking models historically and globally.

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Critiquing Richmond’s eminent domain plan – Prof. Hockett’s response

The comment below to my eminent domain article merited a detailed response, so I sent it to Professor Robert Hockett, the Cornell University law professor who was the principal author of the Richmond plan.  His answer was so useful that I thought I would submit it as a separate post, also below.  Thanks Bob and Marc!

Marc Joffe, on March 4, 2014 at 8:40 pm said:

I am not in a position to debate the legal theory – which looks plausible. But I think you are missing certain facts which make this situation something far more murky than a plucky local government standing up for the little guy against evil banks.

First, Wall Street has already collected its profits from these securitization deals – in the form of fees paid when the mortgages were bundled 7 or more years ago. While we don’t know exactly who owns all the securities that would be negatively impacted by an eminent domain, we do know that a lot of it is held by public employee pension funds. So instead of taking it to the big banks, you may well be taking it to the humble public servant.

Second, not everyone who took on these mortgages is a poor innocent victim. Some wanted to take cash out of their properties for one reason or another, and actually got the money cheap due to the lending bubble. Also, many homeowners with underwater mortgages in Richmond are not poor. The original pool slated for eminent domain included 3000+ square foot McMansions and waterfront properties. Finally, with the recent rebound in home prices, many fewer homes are underwater and foreclosure rates are down – so you are addressing yesterday’s problem.

As for the council, they need to work with Mortgage Resolution Partners because they want someone to cover their legal costs during the inevitable litigation. The City could be driven into bankruptcy if it is forced into endless litigation or suffers an adverse judgement. More disturbing is the recent expose from the Center for Investigative Reporting showing that Richmond public housing – a Council responsibility – is dilapidated and infested with vermin. If we can’t trust elected officials to provide livable public housing why should we rely on them to resolve blight arising from private foreclosures.

Prof. Hockett’s response:

   It never ceases to amaze me how, even after years now of explaining and advocating the eminent domain approach to the underwater PLS loan problem and detailing precisely (a) when it is and when it is not called for, (b) how it works, and (c) the premises upon which it is predicated, people still seem to misunderstand or mischaracterize the plan and entirely overlook or breeze past its fundamental premise.  That premise is, again, that deeply underwater loans are subject to enormous default risk (just look at Fannie’s and Freddie’s 10K filings for a hint as to how high that risk is – nearly 70% for non-prime and 40% even for prime loans), such that one actually RAISES the actuarial value of the targeted loans by purchasing them and writing down principal so long as one targets the RIGHT loans.  That idea is transparently conveyed, I would have thought, in the VERY TITLE of the NY Fed piece: you can pay Paul AND Peter where these loans are concerned.  

    Why, then, do we continue to encounter, again and again, blithe references to ’securities that would be negatively impacted,’ ‘investors who would lose,’ etc.?  The whole POINT of the plan is to target ONLY deeply underwater loans and associated securities that will be POSITIVELY affected.  Those are EXACTLY the loans Richmond and other cities are looking at.  And they are getting the values of those loans appraised by the industry’s own favored appraiser – MIAC.   

    Next, on the ‘yesterday’s problem’ meme, this one entirely ignores the locally concentrated nature of the nation’s underwater mortgage loan problem.  Well more than half of Richmond’s, Irvington NJ’s, Newark NJ’s, Baltimore MD’s, Wayne County MI’s, … etc. etc. etc. … loans are deeply underwater.  (Take a look at the CoreLogic or Zillow ‘heat maps’ for a ‘big picture’ view of the problem’s distribution.)  There is no ‘recovery’ worth the name in these places.  Note moreover that even nationally the underwater rate is still around 20% – after having been between 25% and 30% at its worst.  All this even though we are now approaching year eight – EIGHT! – since home prices began tanking in the summer of ’06!  Are we to wait another 12-16 years for the remainder of the problem to ‘take care of itself?’  And just what is the source of future appreciation supposed to be, given continued real wage and income stagnation, continuing high unemployment, and Fed intentions to taper from historically low interest rates - rates that account for all ‘recovery’ that’s thus far occurred – in coming months?  

    Hope springs eternal, it seems, and that is a beautiful thing.  But it is quite beyond the pale to expect Richmond to watch helplessly – and indeed hopelessly - as thousands more of its own residents are rendered homeless in the name of the beautiful ‘hope’ of pontificating well-to-do financiers. 

    Like remarks hold of one commentator’s observation concerning Richmond’s recent public housing problem.  That is indeed a terrifying story, which I’ve followed carefully from the start, but people like this fellow are drawing the very contrary of the right lesson.  The lesson is not that ‘we can’t trust local government to manage public housing well, therefore let us sit back and watch thousands more lose their homes and be forced into public housing.’  The lesson, rather, is ‘let us finally end the foreclosure crisis, in order both that there be no more demand on scarce public housing resources and that there finally be a restoration of municipal revenue, which of course shrinks to the vanishing point when wave after wave of foreclosure destroys property value and with it the city revenue base – all while, with cruel irony, municipal abatement costs brought on by abandoned and dilapidating homes shoot through the roof.’ 

    There could be no more effective solution to Richmond’s challenges – including those with public housing – than to get its residents back into their own homes, and to prevent any more residents from needlessly LOSING their homes. 

    Finally, I don’t think that the ‘endless litigation’ meme deserves any credence either.  I have repeatedly assessed every one of the four to five putatively ‘legal’ objections that opponents have tried out over the past several years, and literally not a single one of them – not the Takings Clause ‘argument,’ not the Due Process Clause / jurisdictional ‘argument,’ not the ‘dormant’ Commerce Clause ‘argument,’ and not, funniest of all, the Contract Clause ‘argument’ - is serious.  They appear to be meant more to terrorize municipal counsel than actually to impugn the legal bona fides of the eminent domain plan.  (Surely that’s why they flew all over the internet on impressive law firm letterhead long before any suits were filed.)  Opponents have lost two suits against Richmond already on precisely the grounds that I said that they would within minutes of their filing them back last August and September.  I don’t think these opponents are irrational; at some point they are going to stop throwing millions of their own dollars away on comical ’Hail Mary’ lawsuits doomed ab initio to failure, and instead enter into constructive dialogue with the cities on how best to select, and then value, loans locked in PLS trusts whose values can be raised by writing down principal.  Surely Richmond’s reliance on MIAC in appraising its targeted loans ought to reassure them of the cities’ good faith. 

    Because value is now being needlessly lost in the form of continuing – yet avoidable – delinquencies, defaults, and costly foreclosures, what we are talking about here - and what I’ve been talking about all along - is value recoupment.  It’s about ending an ongoing, deadweight loss.  The salvaged value can be distributed solomonically over homeowner, bondholder, and all other stakeholders alike.  And it is precisely this distribution – as well as determining how best to maximize the surplus that is to be distributed – that those who now slander and carp at the cities ought to be JOINING the cities in effecting.  To do otherwise is simply to throw away value.

Editor’s comment: “distributed solomonically” – great image! That sums it up.

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The Stone that Brings Down Goliath? Richmond and Eminent Domain

In a nearly $13 billion settlement with the US Justice Department in November 2013, JPMorganChase admitted that it, along with every other large US bank, had engaged in mortgage fraud as a routine business practice, sowing the seeds of the mortgage meltdown. JPMorgan and other megabanks have now been caught in over a dozen major frauds, including LIBOR-rigging and bid-rigging; yet no prominent banker has gone to jail. Meanwhile, nearly a quarter of all mortgages nationally remain underwater (meaning the balance owed exceeds the current value of the home), sapping homeowners’ budgets, the housing market and the economy. Since the banks, the courts and the federal government have failed to give adequate relief to homeowners, some cities are taking matters into their own hands.

Gayle McLaughlin, the bold mayor of Richmond, California, has gone where no woman dared go before, threatening to take underwater mortgages by eminent domain from Wall Street banks and renegotiate them on behalf of beleaguered homeowners. A member of the Green Party, which takes no corporate campaign money, she proved her mettle standing up to Chevron, which dominates the Richmond landscape. But the banks have signaled that if Richmond or another city tries the eminent domain gambit, they will rush to court seeking an injunction. Their grounds: an unconstitutional taking of private property and breach of contract.

How to refute those charges? There is a way; but to understand it, you first need to grasp the massive fraud perpetrated on homeowners. It is how you were duped into paying more than your house was worth; why you should not just turn in your keys or short-sell your underwater property away; why you should urge Congress not to legalize the MERS scheme; and why you should insist that your local government help you acquire title to your home at a fair price if the banks won’t. That is exactly what Richmond and other city councils are attempting to do through the tool of eminent domain.

The Securitization Fraud That Collapsed the Housing Market

One settlement after another has now been reached with investors and government agencies for the sale of “faulty mortgage bonds,” including a suit brought by Fannie and Freddie that settled in October 2013 for $5.1 billion. “Faulty” is a euphemism for “fraudulent.” It means that mortgages subject to securitization have “clouded” or “defective” titles. And that means the banks and real estate trusts claiming title as owners or nominees don’t actually have title – or have standing to enjoin the city from proceeding with eminent domain. They can’t claim an unconstitutional taking of property because they can’t prove they own the property, and they can’t claim breach of contract because they weren’t the real parties in interest to the mortgages (the parties putting up the money).

“Securitization” involves bundling mortgages into a pool, selling them to a non-bank vehicle called a “real estate trust,” and then selling “securities” (bonds) to investors (called “mortgage-backed securities” or “collateralized debt obligations”). By 2007, 75% of all mortgage originations were securitized. According to investment banker and financial analyst Christopher Whalen, the purpose of securitization was to allow banks to avoid capitalization requirements, enabling them to borrow at unregulated levels.

Since the real estate trusts were “off-balance sheet,” they did not count in the banks’ capital requirements. But under applicable accounting rules, that was true only if they were “true sales.” According to Whalen, “most of the securitizations done by banks over the past two decades were in fact secured borrowings, not true sales, and thus potential frauds on insured depositories.” He concludes, “bank abuses of non-bank vehicles to pretend to sell assets and thereby lower required capital levels was a major cause of the subprime financial crisis.”

In 1997, the FDIC gave the banks a pass on these disguised borrowings by granting them “safe harbor” status. This proved to be a colossal mistake, which led to the implosion of the housing market and the economy at large. Safe harbor status was finally withdrawn in 2011; but in the meantime, “financings” were disguised as “true sales,” permitting banks to grossly over-borrow and over-leverage. Over-leveraging allowed credit to be pumped up to bubble levels, driving up home prices. When the bubble collapsed, homeowners had to pick up the tab by paying on mortgages that far exceeded the market value of their homes. According to Whalen:

[T]he largest commercial banks became “too big to fail” in large part because they used non-bank vehicles to increase leverage without disclosure or capital backing. . . .

The failure of Lehman Brothers, Bear Stearns and most notably Citigroup all were largely attributable to deliberate acts of securities fraud whereby assets were “sold” to investors via non-bank financial vehicles.  These transactions were styled as “sales” in an effort to meet applicable accounting rules, but were in fact bank frauds that must, by GAAP and law applicable to non-banks since 1997, be reported as secured borrowings.  Under legal tests stretching from 16th Century UK law to the Uniform Fraudulent Transfer Act of the 1980s, virtually none of the mortgage backed securities deals of the 2000s met the test of a true sale.

. . . When the crisis hit, it suddenly became clear that the banks’ capital was insufficient.

Today . . . hundreds of billions in claims against banks arising from these purported “sales” of assets remain pending before the courts.

Eminent Domain as a Negotiating Tool

Investors can afford high-powered attorneys to bring investor class actions, but underwater and defaulting homeowners usually cannot; and that is where local government comes in. Eminent domain is a way to bring banks and investors to the bargaining table.

Professor Robert Hockett of Cornell University Law School is the author of the plan to use eminent domain to take underwater loans and write them down for homeowners. He writes on NewYorkFed.org:

[In] the case of privately securitized mortgages, [principal] write-downs are almost impossible to carry out, since loan modifications on the scale necessitated by the housing market crash would require collective action by a multitude of geographically dispersed security holders. The solution . . . Is for state and municipal governments to use their eminent domain powers to buy up and restructure underwater mortgages, thereby sidestepping the need to coordinate action across large numbers of security holders.

The problem is blowback from the banks, but it can be blocked by requiring them to prove title to the properties. Securities are governed by federal law, but real estate law is the domain of the states. Counties have a mandate to maintain clean title records; and legally, clean title requires a chain of “wet” signatures, from A to B to C to D. If the chain is broken, title is clouded. Properties for which title cannot be established escheat (or revert) to the state by law, allowing the government to start fresh with clean title.

New York State law governs most of the trusts involved in securitization. Under it, transfers of mortgages into a trust after the cutoff date specified in the Pooling and Servicing Agreement (PSA) governing the trust are void.

For obscure reasons, the REMICs (Real Estate Mortgage Investment Conduits) claiming to own the properties routinely received them after the closing date specified in the PSAs. The late transfers were done throu gh the fraudulent signatures-after-the-fact called “robo-signing,” which occurred so regularly that they were the basis of a $25 billion settlement between a coalition of state attorneys general and the five biggest mortgage servicers in February 2012. (Why all the robo-signing? Good question. See my earlier article here.)

Until recently, courts have precluded homeowners from raising the late transfers into the trust as a defense to foreclosure, because the homeowners were not parties to the PSAs. But in August 2013, in Glaski v. Bank of America, N.A., 218 Cal. App. 4th 1079 (July 31, 2013), a California appellate court ruled that the question whether the loan ever made it into the asset pool could be raised in determining the proper party to initiate foreclosure. And whether or not the homeowner was a party to the PSA, the city and county have a clear legal interest in seeing that the PSA’s terms were complied with, since the job of the county recorder is to maintain records establishing clean title.

Before the rise of mortgage securitization, any transfer of a note and deed needed to be recorded as a public record, to give notice of ownership and establish a “priority of liens.” With securitization, a private database called MERS (Mortgage Electronic Registration Systems) circumvented this procedure by keeping the deeds as “nominee for the beneficiary,” obscuring the property’s legal owner and avoiding the expense of recording the transfer (usually about $30 each). Estimates are that untraceable property assignments concealed behind MERS may have cost counties nationwide billions of dollars in recording fees. (See my earlier article here.)

Counties thus have not only a fiduciary but a financial interest in establishing clean title to the properties in their jurisdictions. If no one can establish title, the properties escheat and can be claimed free and clear. Eminent domain can be a powerful tool for negotiating loan modifications on underwater mortgages; and if the banks cannot prove title, they have no standing to complain.

The End of “Too Big to Fail”?

Richmond’s city council is only one vote short of the supermajority needed to pursue the eminent domain plan, and it is seeking partners in a Joint Powers Authority that will make the push much stronger. Grassroots efforts to pursue eminent domain are also underway in a number of other cities around the country. If Richmond pulls it off successfully, others will rush to follow.

The result could be costly for some very large banks, but they have brought it on themselves with shady dealings. Christopher Whalen predicts that the FDIC’s withdrawal of “safe harbor” status for the securitization model may herald the end of “too big to fail” for those banks, which will no longer have the power to grossly over-leverage and may have to keep their loans on their books.

Wall Street banks are deemed “too big to fail” only because there is no viable alternative – but there could be. Local governments could form their own publicly-owned banks, on the model of the state-owned Bank of North Dakota. They could then put their revenues, their savings, and their newly-acquired real estate into those public utilities, to be used to generate interest-free credit for the local government (since it would own the bank) and low-cost credit for the local community. For more on this promising option, which has been or is being explored in almost half the state legislatures in the US, see here.

_____________

Ellen Brown is an attorney, president of the Public Banking Institute, and a candidate for California State Treasurer running on a state bank platform. She is the author of twelve books including the best-selling Web of Debt and her latest book, The Public Bank Solution, which explores successful public banking models historically and globally.

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How the Credit Card Gravy Train Is Running Over You

The credit card business is now the banking industry’s biggest cash cow, and it’s largely due to lucrative hidden fees. 

You pay off your credit card balance every month, thinking you are taking advantage of the “interest-free grace period” and getting free credit. You may even use your credit card when you could have used cash, just to get the free frequent flier or cash-back rewards. But those popular features are misleading. Even when the balance is paid on time every month, credit card use imposes a huge hidden cost on users—hidden because the cost is deducted from what the merchant receives, then passed on to you in the form of higher prices.

Visa and MasterCard charge merchants about 2% of the value of every credit card transaction, and American Express charges even more. That may not sound like much. But consider that for balances that are paid off monthly (meaning most of them), the banks make 2% or more on a loan averaging only about 25 days (depending on when in the month the charge was made and when in the grace period it was paid). Two percent interest for 25 days works out to a 33.5% return annually (1.02^(365/25) – 1), and that figure may be conservative.

Merchant fees were originally designed as a way to avoid usury and Truth-in-Lending laws. Visa and MasterCard are independent entities, but they were set up by big Wall Street banks, and the card-issuing banks get about 80% of the fees. The annual returns not only fall in the usurious category, but they are returns on other people’s money – usually the borrower’s own money!  Here is how it works . . . .

The Ultimate Shell Game

Economist Hyman Minsky observed that anyone can create money; the trick is to get it accepted. The function of the credit card company is to turn your IOU, or promise to pay, into a “negotiable instrument” acceptable in the payment of debt. A negotiable instrument is anything that is signed and convertible into money or that can be used as money.

Under Article 9 of the Uniform Commercial Code, when you sign the merchant’s credit card charge receipt, you are creating a “negotiable instrument or other writing which evidences a right to the payment of money.” This negotiable instrument is deposited electronically into the merchant’s checking account, a special account required of all businesses that accept credit.  The account goes up by the amount on the receipt, indicating that the merchant has been paid.  The charge receipt is forwarded to an “acquiring settlement bank,” which bundles your charges and sends them to your own bank. Your bank then sends you a statement and you pay the balance with a check, causing your transaction account to be debited at your bank.

The net effect is that your charge receipt (a negotiable instrument) has become an “asset” against which credit has been advanced.  The bank has simply monetized your IOU, turning it into money.  The credit cycle is so short that this process can occur without the bank’s own money even being involved. Debits and credits are just shuffled back and forth between accounts.

Timothy Madden is a Canadian financial analyst who built software models of credit card accounts in the early 1990s. In personal correspondence, he estimates that payouts from the bank’s own reserves are necessary only about 2% of the time; and the 2% merchant’s fee is sufficient to cover these occasions. The “reserves” necessary to back the short-term advances are thus built into the payments themselves, without drawing from anywhere else.

As for the interest, Madden maintains:

The interest is all gravy because the transactions are funded in fact by the signed payment voucher issued by the card-user at the point of purchase. Assume that the monthly gross sales that are run through credit/charge-cards globally double, from the normal $300 billion to $600 billion for the year-end holiday period. The card companies do not have to worry about where the extra $300 billion will come from because it is provided by the additional $300 billion of signed vouchers themselves. . . .

That is also why virtually all banks everywhere have to write-off 100% of credit/charge-card accounts in arrears for 180 days. The basic design of the system recognizes that, once set in motion, the system is entirely self-financing requiring zero equity investment by the operator . . . . The losses cannot be charged off against the operator’s equity because they don’t have any. In the early 1990′s when I was building computer/software models of the credit/charge-card system, my spreadsheets kept “blowing up” because of “divide by zero” errors in my return-on-equity display.

A Private Sales Tax

All this sheds light on why the credit card business has become the most lucrative pursuit of the banking industry. At one time, banking was all about taking deposits and making commercial and residential loans. But in recent years, according to the Federal Reserve, “credit card earnings have been almost always higher than returns on all commercial bank activities.”

Partly, this is because the interest charged on credit card debt is higher than on other commercial loans. But it is on the fees that the banks really make their money. There are late payment fees, fees for exceeding the credit limit, balance transfer fees, cash withdrawal fees, and annual fees, in addition to the very lucrative merchant fees that accrue at the point of sale whether the customer pays his bill or not. The merchant absorbs the fees, and the customers cover the cost with higher prices.

A 2% merchants’ fee is the financial equivalent of a 2% sales tax – one that now adds up to over $30 billion annually in the US. The effect on trade is worse than either a public sales tax or a financial transaction tax (or Tobin tax), since these taxes are designed to be spent back into the economy on services and infrastructure. A private merchant’s tax simply removes purchasing power from the economy.

As financial blogger Yves Smith observes:

[W]hen anyone brings up Tobin taxes (small charges on every [financial] trade) as a way to pay for the bailout and discourage speculation, the financial services industry becomes utterly apoplectic. . . . Yet here in our very midst, we have a Tobin tax equivalent on a very high proportion of retail trade. . . . [Y]ou can think of the rapacious Visa and Mastercharge charges for debit transactions . . . as having two components: the fee they’d be able to charge if they faced some competition, and the premium they extract by controlling the market and refusing to compete on price. In terms of its effect on commerce, this premium is worse than a Tobin tax.

A Tobin tax is intended to have the positive effect of dampening speculation. A private tax on retail sales has the negative effect of dampening consumer trade. It is a self-destruct mechanism that consumes capital and credit at every turn of the credit cycle.

The lucrative credit card business is a major factor in the increasing “financialization” of the economy. Companies like General Electric are largely abandoning product innovation and becoming credit card companies, because that’s where the money is. Financialization is killing the economy, productivity, innovation, and consumer demand.

Busting the Monopoly

Exorbitant merchant fees are made possible because the market is monopolized by a tiny number of credit card companies, and entry into the market is difficult. To participate, you need to be part of a network, and the network requires that all participating banks charge a pre-set fee.

The rules vary, however, by country. An option available in some countries is to provide cheaper credit card services through publicly-owned banks. In Costa Rica, 80% of deposits are held in four publicly-owned banks; and all offer Visa/MC debit cards and will take Visa/MC credit cards. Businesses that choose to affiliate with the two largest public banks pay no transaction fees for that bank’s cards, and for the cards of other banks they pay only a tiny fee, sufficient to cover the bank’s costs.

That works in Costa Rica; but in the US, Visa/MC fees are pre-set, and public banks would have to charge that fee to participate in the system. There is another way, however, that they could recapture the merchant fees and use them for the benefit of the people: by returning them in the form of lower taxes or increased public services.

Local governments pay hefty fees for credit card use themselves. According to the treasurer’s office, the City and County of San Francisco pay $4 million annually just for bank fees, and more than half this sum goes to merchant fees. If the government could recapture these charges through its own bank, it could use the proceeds to expand public services without raising taxes.

If we allowed government to actually make some money, it could be self-funding without taxing the citizens. When an alternative public system is in place, the private mega-bank dinosaurs will no longer be “too big to fail.” They can be allowed to fade into extinction, in a natural process of evolution toward a more efficient and sustainable system of exchange.

____________

Ellen Brown is an attorney, chairman of the Public Banking Institute, and author of twelve books including the bestselling Web of Debt. In her latest book, The Public Bank Solution, she explores successful public banking models historically and globally. She is currently running for California State Treasurer on a state bank platform.

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Bernanke at Brookings

Bernanke at Brookings

by Stephen Lendman

On January 31, he stepped down as Fed chairman. Janet Yellen replaced him. He's entering a new world of million-dollar book deals. He'll make $100,000 a pop speeches. 

Expect appointments to corporate boards. CEOs value his rainmaking services. 

On February 3, Brookings headlined "Federal Reserve Chairman Ben Bernanke to Join Economic Studies at Brookings."

He's a "Distinguished Fellow in Residence." He's affiliated with the Hutchins Center on Fiscal and Monetary Policy (HCFMP). On January 16, Brookings launched it. 

Its board of trustees vice chair Glenn Hutchins contributed $10 million in seed money. He co-founded the multi-billion dollar private equity firm Silver Lake Partners. Guess what type policies HCFMP will endorse. 

"We are proud to welcome chairman Bernanke into the Brookings family," said president Strobe Talbot. He's Clinton's former deputy secretary of state. He was directly involved in some of his worst policies.

Brookings' agenda is brazenly imperial. It's pro-corporate. It's anti-populist. It feigns concern about inequality. It supports government of, by and for privileged elites alone. Expect Bernanke to fit right in.

His Fed tenure was deplorable. He betrayed the public trust. His record attests to his wickedness. 

His agenda was ruthlessly anti-populist. He did more to thirdworldize America for profit than any of his predecessors. 

He handed Wall Street crooks multi-trillions of dollars. He facilitated the greatest wealth transfer in history. He created a protracted Main Street Depression. No end in sight looms.

Noted investor Jeremy Grantham's commentaries are refreshing. He cuts to the heart of issues. He pulls no punches doing so.

He titled an earlier commentary "Night of the Living Fed: Something Unbelievably Terrifying."

He highlighted "runaway commodities, (zombi) banks back to life, homes destroyed, families evicted, and currency wars."

He blamed Bernanke. "If I were a benevolent dictator," he said, he'd limit the Fed solely to maintaining price stability. 

He'd make sure the economy got enough liquidity to function normally. He's "force (the Fed) to swear off manipulating asset prices through artificially low rates and asymmetric promises."

He referred to the Greenspan/Bernanke put. He'd eliminate "immoral hazard." It's immoral behavior. It's outsized excess. It's grand theft.

It bails out large investors. Doing so encourages imprudent risks. Winning is guaranteed. Regulatory checks are absent. Anything goes is policy.

Things persist "under the guise of 'saving the system,' " said Grantham. Money manipulators have things their way.

Fed chairmen are tools of monied interests. They know who butters their bread. They return favors manyfold. Greenspan did from August 1987 through January 2006.

Bernanke exceeded his worst policies. He did so from February 1, 2006 through January 31, 2014. 

Both chairmen qualify as maestros of misery. They created bubble financial conditions. America's 1% profited hugely. They did so at the expense of most others.

Virtually all global assets are overpriced. Bubble conditions exist. Grantham compared them to Einstein's definition of insanity. The madness of repeating the same mistakes. Expecting a different outcome doesn't work.

Last spring, Grantham compared Fed policy to beating a donkey. He called it the 1% growing economy. "(H)e keeps beating it until it either turns into a horse or drops dead from too much beating," said Grantham.

"We've been conned." We're manipulated to believe "debt is everything." In 1982, it was one-and-a-quarter times GDP.

It's nearly triple that amount now. It has nothing to do with long-term growth. It's an "accounting world. It's paper," said Grantham.

"The real world is the quantity and quality of your people, and the quality and quantity of capital spending."

"Are you building new machines? Are you being inventive?" Are you educating a new generation properly?

"We're in this death grip that only paper things matter." Vital issues go unaddressed. Wealth keeps getting transferred "from the poor to the rich."

Interest rates are outrageously now. They're practically zero. Speculators benefit. Ordinary people lose out. 

Retirees are deprived of vital income. Financial interests are served at the expense of the real economy.

During his tenure as Fed chairman, Bernanke handed speculators over $20 trillion. Most was practically interest free. They took full advantage.

Money printing madness defines Fed policy. Helicopter Ben dropped none on Main Street. In 2002, his helicopter money speech said:

"The US government has a technology, called a printing press (today its electronic equivalent)." 

It "allows it to produce as many US dollars as it wishes at essentially no cost."

Most circulating money is bank-generated credit. It's created out of thin air. It's when banks extend loans.

When old ones are repaid faster than new ones, money supply shrinks. QE is supposed to reverse things.

Things haven't worked out this way. Key is where Fed money goes. Dropping it on Main Street stimulates economic growth.

Handing it to Wall Street crooks parks it in their reserve accounts. It's not used for lending.

Former Reagan budget director David Stockman said it "stayed trapped in the canyons of Wall Street." He called it "high grade monetary heroin."

It's "kill(ing) the patient." It's "legalized bank robbery." It's recklessly out-of-control.

It "inflate(d) yet another unsustainable bubble." They all burst. No exceptions. This time isn't different.

Money printing madness and bailouts reflect "the single most shameful chapter in American financial history," said Stockman.

Bernanke operated by Abraham Maslow's maxim. "(I)f the only tool you have is a hammer, every problem looks like a nail," he said.

QE continues. It's slowing. Yellen can rev it up full bore any time. It's self-defeating. It contracts the money supply. It's by sucking up collateral needed to create credit.

It constrains economic growth. It doesn't create jobs. It solely benefits Wall Street. Banksters made out like bandits. Speculators profited hugely. They did so at the expense of Main Street. 

Financial warfare rages. America and other societies are affected. Ordinary people are hurt most. Hard times keep getting harder.

QE 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 follows. America once was sustainably prosperous. Today it’s in decline. It's heading for third world status. It's more kleptocracy than democracy.

Money power in private hands assures trouble. Ellen Brown explained more. Up to 40% of "everything we buy goes (for) interest."

It goes to "bankers, financiers and bondholders." A third or more of national wealth shifts from Main Street to Wall Street. 

Complicit politicians let it happen. They do so for generous benefits derived. Greed is the national pastime. So is looting America for profit.

Most people think paying bills and credit card charges on time avoids interest charges. Not so, says Brown. 

"Tradesmen, suppliers, wholesalers and retailers all along the chain of production rely on credit to pay their bills."

Their costs pass on to consumers. Unwittingly they pay. Ordinary people make wealthy ones richer. They do so at their own expense. What better argument for public banking than that.

Borrowing from public banks eliminates or greatly reduces interest rate charges. It works at federal, state and local levels.

Public banks don't have to earn profits. They're not beholden to Wall Street or shareholders. They're self-sustaining. They can lend for their own needs. They can do it for businesses, farmers and consumers.

The more loans roll over, the more debt-free money is created. If used productively for growth, it's virtually inflation-free. As long as new money produces goods and services, price stability follows.

Economies flourish. All boats are lifted. Millions of high-pay/good benefit jobs can be created. Homes become more affordable. Foreclosures end. So do out-of-control speculation, booms and busts.

Private savings, pensions, and investments become secure. So do Social Security, Medicare and other vital social programs. They can be in perpetuity.

Surpluses replace deficits. Sustained prosperity follows. It's not pie in the sky. It happened before. It can happen again. 

Good policies achieve good results. Bad ones wreck things for most people. Hard times get harder. Current conditions reflect Exhibit A.

They didn't happen by accident. Bernanke's Fed bears full responsibility. Economist Steve Keen commented on his legacy.

"It certainly won't be as he expected," said Keen. He'll likely "be blamed for causing the 'Great Recession...' "

He blamed his predecessors "for causing the Great Depression."

"His finger-pointing doesn't get any more blatant than" praising Milton Friedman on his 90th birthday. It was in 2002.

"I would like to say to Milton and Anna (Schwartz): Regarding the Great Depression. You're right. We did it. We're very sorry. But thanks to you, we won't do it again."

He's done it and then some. The worst is yet to come. 

"(I)f Ben had truly learned from both his analysis of the data and 'Milton and Anna (Schwartz), then you'd think that surely he would have ensured that the rate of growth of M1" would never drop "to or below zero, wouldn't you?"

That's exactly what happened. America's money supply is lower than when he became Fed chairman. He has no control over whether banks choose to make loans.

Doing so increases money supply growth. Holding back shrinks it. "So on Ben's own theory of what caused the Great Depression, he could quite easily be found guilty," said Keen.

Crisis conditions occurred on his watch. His policies were "the very things he said the Fed got wrong in the late 1920s."

He wrote his own legacy. It won't change now. He's ideologically over-the-top. He's responsible for more human wreckage than any of his predecessors.

He caused epidemic levels of poverty, unemployment and deprivation. He engineered the greatest wealth heist in world history. 

He debauched the dollar. He created multiple market bubbles.
He created worse crisis conditions than in 1929.

Market analyst Yves Smith calls him Greenspan on steroids. He'll be remembered as the economy wrecker of last resort.

He's unapologetic. Debt pyramiding doesn't work. Money printing madness reflects grand theft. Accountability isn't Bernanke's long suit.

He's off to greener pastures. He's cashing in for services rendered. He'll be well rewarded for enriching Wall Street. Banksters take care of their own.

Stephen Lendman lives in Chicago. He can be reached at [email protected] 

His new book is titled "Banker Occupation: Waging Financial War on Humanity."

http://www.claritypress.com/LendmanII.html

Visit his blog site at sjlendman.blogspot.com. 

Listen to cutting-edge discussions with distinguished guests on the Progressive Radio News Hour on the Progressive Radio Network.

It airs Fridays at 10AM US Central time and Saturdays and Sundays at noon. All programs are archived for easy listening.


http://www.progressiveradionetwork.com/the-progressive-news-hour

Prosperity For Main Street, Not Wall Street

--2014--

735. July 29-Aug. 5. Moving Beyond Capitalism conference, San Miguel de Allende, Mexico

734. Feb. 23, interview with Stephen Lendman, The Progressive Newshour, 10 a.m. PST

733. Feb16, interview with Gary Dubin, The Foreclosure Hour (http://www.foreclosurehour.com/the-host.html), 5 pm PST

732. Feb 9, interview with Stephen Golden, DEFENDING THE AMERICAN DREAM, KABC Los Angeles, 6 am, PST

731. Feb. 6, interview, Move to Amend Reports, http://www.blogtalkradio.com/movetoamend, 5 pm PST

730. Feb. 5, interview with Sinclair Noe, Financial Review, MoneyRadio.com, 9:30 am PST

729. January 30, interview, Kerry Lutz - Financial Survival Network, 12 pm EST

728. January 30, interview with Tom Kiely, INN World Report, 4:30 PST

727. January 29, interview on Latin Waves, 8 pm PST

726. January 28, Green Party Shadow Cabinet response to State of the Union Speech. http://www.livestream.com/greenpartyus 6 pm PST

725. January 26, interview with Stephen Lendman, The Progressive Newshour, 10 a.m. PST. Listen here.

724. January 23, interview, The Tim Dahaney Show, 12 noon PST. Listen here.

723. January 22, interview with Utrice Leid, "Leid Stories,", PRN.FM, 1 pm EST

722. January 21, interview, Independent Underground Radio LIVE, 9:15 PST. Listen here.

721. January 12, Open Forum with Green Party candidates Luis Rodriguez, Laura Wells and Ellen Brown, hosted by LULAC (League of United Latin American Citizens) 11277 GARDEN GROVE BLVD., Garden Grove, CA. 2-4 pm

720. January 11, interview with Bill Still on running for California Treasurer. Watch it here.

719. January 8, interview, The Tim Dahaney Show, 12 noon PST. Listen here. (It's the one labelled "Take the Fed Reserve Public.")

718. Jan 7, interview, The Burt Cohen Show, 12 noon ET

--2013--

717. Dec. 30, interview, Stuart Vener Tells It Like It Is, see http://stuartvener.com for stations, 11:30 am EST

716. Dec. 26, interview Dr. Rima Truth Reports, with Dr. Rima Laibow and Ralph Fucetola, 10 pm EST

715. Dec. 21, interview, KPRO Radio San Francisco, 9:30 am PST

714. Dec. 18, interview, The Power Hour with Joyce Riley, 8 a.m. CT

713. Dec. 18, interview, Unwrapped Radio, WRFG, http://www.tuneinradio.com/, 12:40 EST

712. Dec. 15, interview with Stephen Lendman, The Progressive Newshour, 10 a.m. PST, listen here.
711. Dec. 15, presentation, A Public Bank for Mendocino, at the Crown Hall in Mendocino, Ca., 7 pm

710. Dec. 15, presentation, Why We Need to Own Our Own Bank, Mendocino Environmental Center
106 West Standley, Ukiah, CA 95482, 2 pm

709. Dec. 14, presentation, Why We Need to Own Our Own Bank, Little Lake Grange, Willits, Ca. 7 pm

708. Dec. 13, interview on All About Money, KZYX radio, 9 a.m. PST

707. Dec. 13, interview, Radio Islam, WCEV 1450 AM, 12:05 pm, CST

706. Dec. 12, appearance with Doug McKenty, "The Shift," Mendocino TV, 4:30 pm PST

705. Dec. 11, interview on WHDT World News, http://NNN.is/on-WHDT, 5:30 and 11:00 pm EST. Watch the archive here.

704. Dec. 11, interview, WORT Community Radio, Madison, Wisconsin, 6:10 a.m. PST

703. Dec. 11, interview with Sinclair Noe, Financial Review, MoneyRadio.com, 10:30 PST

702. Dec. 9, UnWrapped Radio, Atlanta, 1 pm PST.

701. Dec. 9, GOHarrison, KPFK Los Angeles, 3:30 pm PST.

700. Dec. 9, interview, Air Cascadia show, KBOO radio, Portland, 10 am PST

699. Dec. 5, interview, WHDT World News TV, 2 pm PST

698. Dec. 4, interview with David Swanson, talknationradio, 7pm PST

697. Dec. 4, interview with Rob Kall, The Rob Kall Bottom-Up Radio Show, 1360 AM, 7:30 pm EST

696. Dec. 3, interview with Kim Greenhouse, It's Rainmaking Time, listen here.

695. Dec. 2, interview with Val Muchowski, Women's Voices, KZYX, 7 p.m. PST

694. Nov. 29, interview with Gregg Hunter, USAWatchdog.com, 11:30 PST

693. Nov. 16, interview This is Hell! radio show, WNUR 89.3 fm, thisishell.com/live, 11.20 a.m. EST. Listen to archive here

692. Nov. 15, interview with George Berry, The Financial News Network Show, truthfrequencyradio.com, 1 pm PST

691. Nov. 14, interview with Stanley Montieth, The Doctor Stan Show, Radio Liberty, 4 pm PSTf

690. Nov. 14, interview with Neil Foster, Reality Bytes show, Awake Radio (UK), Shazziz Radio (US), 8 pm UK time.

689. Nov. 13, interview with Bonnie Faulkner, KPFA, Los Angeles. Listen to archive here.

688. Nov. 12, interview with Tom Kiely, INN World Report, 4:30 PST

687. Nov. 11, interview, Between the Lines News Magazine, WPKN radio, Bridgeport, CT, 9 p.m. ET. Listen to archive here

686. Nov. 10, skype participant, forum at the Putrajaya International Islamic Arts and Cultural Festival, "Global Economic and Monetary Crisis: What Needs to be Done?" Putrajaya, Malaysia, 11 a.m. MYT, 7 pm, Nov. 9 PST

685. Nov. 3, interview with Stephen Lendman, The Progressive Newshour, 10 a.m. PST

684. Oct. 31, interview with Voice of Russia radio, American edition, 2:30 pm, CET (Central Europe Time.) Listen to archive here.

683. Oct. 23, interview with Daniel Estulin on RT tv

682. Oct. 16, interview with Per Fereng, KBOO radio, Portland, 11 am PST

681. Oct. 15, presentation, "The Public Banking Forum in Ireland," 7-9 PM, Hudson Bay Hotel, Athlone, Ireland.

680. Oct. 14, presentation, Cork, Ireland

679. Oct. 12, presentation, "The Public Banking Forum in Ireland," 2-4 PM, Springfield Hotel in Leixlip, County Kildare, Ireland. Information on these three events here.

678. October 4, interview with Bill Deller, 3CR radio, Melbourne, Australia, 2:30 pm, PST

677. Oct. 3, interview with Joyce Riley, the Power Hour. Listen to archive here.

676. Oct. 1, interview with Tom Kiely, INN World Report 7:30 EST

675. Sept. 29, interview with Stephen Lendman, The Progressive Newshour, 10 a.m. PST

674. Sept. 27, interviw with Kevin Barrett, AmericanFreedomRadio.com, NoLiesRadio.org:
http://TruthJihadRadio.blogspot.com, 2 pm PST

673. Sept. 19, interview, The Gary Null Show, 9:30 a.m. Pacific

672. Sept. 19, Interview on the Global Research News Hour with Michael Welch--check site for time and archive.

671. Sept. 18, interview with David Sierralupe, Occupy Radio, KWVA, 88.1 FM, Eugene

670. Sept. 15, interview with Niall Bradley, Sott Talk Radio, sott.net, 2 p.m. EST

669. Sept. 14, interview FDLBookSalon, firedoglake.com, 5pm EST

668. Sept. 10, "Turning Hard Times into Good Times" with Jay Taylor, VoiceAmerica, 12:30 pm PST. Listen to archive here.

667. Sept. 9, interview with Ken MacDermotRoe and Del LaPietro, In Context Report, 9 am PST. Listen to archive here.

666. Sept 7, interview with Valerie Kirkgaard, WakingUpInAmerica.com, 6 am, PST. Listen here.

665. Sept. 6, Interview with Al Korelin, The Korelin Economics Report, 12:30 pm PST

664. Sept. 5, discussion of how to bring public banking to Colorado on "It's the Economy, Stupid," KGNU, Boulder, 5 p.m. PST

663. Sept. 5, interview with Patrick Timpone, oneradionetwork.com, 8 a.m. PST

662. Sept. 3, interview (along with Elliott Spitzer?), "Turning Hard Times into Good Times" with Jay Taylor, VoiceAmerica, 1 pm PST Listen to archive here.

661. Sept. 3, interview with Jeanette LaFeve, The People Speak, 6 pm PST

660. Aug. 25, Stephen Lendman, Progressive Radio News Hour, 10 am, PDT

659. Aug. 22, interview with Christopher Greene, AMTV Radio, simulcast in audio/video over GoogleHangouts and American Freedom Radio, 1 p.m. PST

658. Aug. 22, interview, TheAndyCaldwellShow.com,
CalChronicle.com, 3 pm PST

657. Aug. 21, interview with Merry and Burl Hall, blogtalkradio.com/envision-this, 5 pm PST

656. Aug. 21, interview with Lori Lundin, America's Radio News Network, 10:30 a.m. ET.

655. Aug. 16, interview with Sinclair Noe, Moneyradio.com, 4 pm PST

654. Aug. 15, interview with Justine Underhill, Prime Interest, Russia Today TV, 1:30 pm PST

653. Aug 14, interview with Jim Goddard, This Week in Money, 4 pm, PST. Listen to archive here, starting at minute 32.

652. Aug. 14, interview with Mary Glenney, WMNF 88.5, 10 a.m. PST

651. Aug. 14, interview with Chuck Morse, irnusaradio.com, 8 am, PST

650. Aug. 13, interview with Thomas Taplin, Dukascopy TV, Switzerland, 9 am PST

649. Aug 7-11, Madison Democracy conference, https://democracyconvention.org/

648. Aug. 6, radio interview, INN World Report with Tom Kiely, http://feeds.feedburner.com/INNWorldReportRadio 4:30 PST

647. Aug 5, interview with Arnie Arnesen, 94.7 fm, Concord, NH, 9 am PST

646. Aug 3, interview with Diane Horn, Mind Over Matter show, KEXP radio, 90.3 FM, Seattle, 7:00 a.m. PST

645. July 31, interview with Mike Beevers, KFCF Fresno, 4:30 pm PST

644. July 28, Stephen Lendman, Progressive Radio News Hour, 10 am, PDT

643. July 2, interview with Charlie McGrath, Wide Awake News, 6-7 pm PDT.

642. July 2, interview with Arnie Arnesen, 94.7 fm, Concord, NH, 12:30 EST.

641. June 30, interview with Stephen Lendman, Progressive Radio News Hour, 10 am, PDT. Listen to archive here.

640. June 24, interview on RT tv re student debt, 10:30 am PST

639. June 17, interview on The Andy Caldwell Show, 3:30 pm PST

638. June 16, interview with Jason Erb, 5 pm Pacific

637. June 13, interview with Paul Sanford, "Time 4 Hemp-LIVE," http://www.AmericanFreedomRadio.com, 10 am, PST

636. June 6 presentation with Jamie Brown at the Mt. Diablo Peace and Justice Center in Walnut Creek. Info at Favors.org, 7 to 9 pm

635. June 1, interview with Kris Welch, KPFA Los Angeles, 10 am PST

634. May 28, interview with Malihe Razazan, "Your Call" radio, KALW, San Francisco, 10 am PST.

633. May 26, interview with Stephen Lendman, Progressive Radio News Hour, 10 am, PDT

632. May 23 interview with Simit Patel, InformedTrades.com (youtube) 3:30 pm PST

631. May 22, Thousand Oaks, 3 expert panel, "A Parachute For the Fiscal Cliff," University Village 2-4 pm

630. May 22, interview with Jack Rasmus, 11 am PST. Enjoy the interview here.

629. May 22, Guns and Butter show, KPFA, http://www.kpfa.org/archive/id/91790

628. May 14, interview with Charlie McGrath, Wide Awake News, 6-7 pm PDT.

627. May 13, live appearance on RTTV, 3 pm PST Watch it here.

626. May 8, interview with Valli Sharpe-Geisler, Silicon Valley Voice, KKUP, 3 pm PST

625. May 8, interview, the Meria Heller Show, 11 am PST

624. May 4, interview, Latin Waves with Sylvia Richardson, 10 am PST

623. April 30, Jay Taylor, VoiceAmerica, 1 pm PST

622. April 29, interview with Rob Kall, Bottom Up Radio, 9 am Pacific
Listen to archive here.

621. April 28, interview with Stephen Lendman, Progressive Radio News Hour, 10 am, PDT

620. April 25, interview, the the Dr. Katherine Albrecht Show, 5 pm EDT

619. April 17, interview with Mike Harris, rense.com, 1 pm PDT

618. April 16th, speaker, Valley Democrats United (Democratic Party of San Fernando Valley), Van Nuys, Ca. 7-9pm

617. April 13, interview with Darren Weeks, Govern America, noon Eastern, listen here

616. April 9, interview with Charlie McGrath, Wide Awake News, 6-7 pm PDT.

615. April 6, phone conference, Justice Party, http://www.justicepartyusa.org/public_banking_conference_call, 9 a.m.

614. April 5, interview, Butler on Business, 11 a.m. EDT

613. April 3, interview with Michael Welch, Global Research News Hour, 8:30 a.m. PDT

612. April 2, interview with Jay Taylor, VoiceAmerica, 12:30 PDT. Listen here.

611. April 1, interview with Brannon Howse, www.worldviewradio.com, 11 a.m. PDT

610. April 1, interview with Scott Harris, Counterpoint,
WPKN Radio, 8:30 pm, ET Listen to archive here.

609. April 1, interview with Margaret Flowers and Kevin Zeese. Watch and listen to archive here, starting at minute 50. Articles based on the interview are at Truthout.org.

608. March 31, interview with Jason Erb, Exposing Faux Capitalism, Oracle Broadcasting, 11 a.m. Pacific

607. March 31, interview with Stephen Lendman, Progressive Radio News Hour, 10 am, PDT Listen to the archive here.

606. March 29, interview, The Gary Null Show, 9:30 a.m. Pacific

605. March 28, interview with Stan Monteith, radioliberty.com, 9 pm PDT

604. March 28, radio interview, INN World Report with Tom Kiely, http://feeds.feedburner.com/INNWorldReportRadio 4:30 PDT

603. March 27, interview with Charlie McGrath, Wide Awake News, 6-7 pm PdT.

602. March 27, interview with Jack Rasmus on PRN, 11 a.m. PDT

601. March 25, interview on the Richard Kaffenberger show, KTOX, Needles, CA. 3:15 PDT

600. March 22, newly available archived radio interview, Mandelman Matters. Listen here.

599. March 22, interview with James Fetzer, The People Speak Radio, 5-7 pm PDT

598. March 22, interview , Our Times With Craig Barnes, KSFR radio, Santa Fe, 10 a.m. MST

597. March 12, interview, Crisis of Reality with Doug Newberry, oraclebroadcasting.com, 1pm EST.

596. March 11, interview with Stephen Lendman, Progressive Radio News Hour, 10 am, PST

595. March 9, Interview with Sylvia Richardson, Latin Waves, CJSF 90.1FM, 9:30 am PST

594. March 6, interview with Charlie McGrath, wideawakenews.com, 6pm PST. Watch and listen here.

593. March 3, interview with Lateef Kareem Bey, Fix Your Mortgage Mess, 4 pm PST

592. March 2, Interview with Stuart Richardson, Latin Waves, CJSF 90.1FM, 11 am PST

591. Feb. 27, interview with Jim Banks, KGNU, Boulder, 12 pm PST

590. Feb 27, interview with Sinclair Noe, Financial Review, 10 am PST

589. Feb. 25, interview, Crisis of Reality with Doug Newberry, oraclebroadcasting.com, 1pm EST.

588. Feb. 6, Interview with Phil Mackesy, This Week in Money, TalkDigitalNetwork.com, 11 am PST. Listen to the archive here: http://talkdigitalnetwork.com/2013/02/this-week-in-money-70/

587. Feb. 4, interview with Ken Rose, What Now radio show, KOWS RADIO OCCIDENTAL 107.3 FM, 11 am PST.

586. Jan. 31, interview with Tom Kiely, INN World Radio Report, 5:00 pm PST

585. Jan. 27, interview with Stephen Lendman, progressive radio
network, 10 am PST

584. Jan. 23, interview on KPFK, 8pm PST

583. Jan. 22, interview, Crisis of Reality with Doug Newberry, oraclebroadcasting.com, 1pm EST.

582. Jan. 3, interview with Mary Glenney, WMNF 88.5, Tampa, 3 pm EST

581. Jan. 2, interview, The Bev Smith Show, thebevsmithshow.net, 5 pm PST

--- 2012 ---

580. Dec. 27, video interview with Charlie McGrath, Wide Awake News, listen and watch here.

579. Dec. 24, October talk at First Unitarian Church in Portland aired on KBOO radio, http://kboo.fm/, 8:00 am PST

578. Dec. 24, interview with Ron Daniels, the WWRL Morning Show with Mark Riley, wwrl1600.com, 5:05 am PST

577. Dec. 21, interview with Andy Caldwell, TheAndyCaldwellShow.com, KZSB AM1290 Santa Barbara / Ventura and KUHL AM1440 Santa Maria / San Luis Obispo, 3:30 pm PST

576. Dec. 20, interview with Fred Smart, aunetwork.tv, 9 pm EST

575. Dec. 19, interview, Crisis of Reality with Doug Newberry, oraclebroadcasting.com, 1pm EST. Listen here.

574. Dec. 19, interview with Dr. Jack Rasmus, Alternative Visions, Progressive Radio Network, 2 pm EST

573. Dec. 17, The Bev Smith Show, thebevsmithshow.net, 4 pm PST

572. Dec. 15, interview with Stephen Lendman, progressive radio network, 10 am PST. Listen here.

571. Dec. 14, interview with Craig Barnes, Our Times With Craig Barnes, KSFR radio, 9 am PST Listen to the archive here.

570. December 9th, speaker, Mayo Arts Center (10 Mayo Street) in Portland, ME
http://mayostreetarts.org/about-us/where-we-are 7:30-9pm

569. Dec. 7, Vermont's New Economy conference, Vermont College of the Find Arts, Montpelier, VT, 9 am to 4 pm and reception at 4:30. $25
www.global-community.org/neweconomy to register

568. Dec. 5, speaker, Pennsylvania Public Bank Project's Forum on Public Banking, at the David Library of the American Revolution, Washington Crossing, PA, 7pm

567. Nov. 26-27, 3rd Annual World Conference on Riba, Kuala Lumpur, Malaysia

566. Nov. 22, presentation before Royal Scottish Academy -- "A Public Bank for Scotland" (here), Riddle's Court, 322 Lawnmarket, Edinburgh EH1 2PG Scotland, 6 pm

565. Nov 8, Healthy Money Summit, speaking with Hazel Henderson at 1-2 pm PST, information here.

564. Sunday, Oct. 28, Keynote Speaker; The Buck Starts Here, 2:00pm, sponsored by the Kairos Occasional Speakers Series & OFOR, Kairos Milwaukie UCC, Milwaukie, OR.

563. Saturday, Oct. 27, Keynote Speaker; OFOR Saturday Symposium: The Buck Starts Here, 10am - 3pm, Molalla, OR

562. Friday-Sunday, Oct. 26-28, Keynote Speaker; Oregon Fellowship of Reconciliation Fall Retreat - The Buck Starts Here, Camp Adams, Molalla, OR, Friday, 5pm- Sunday 12 noon

561. Friday, October 26, Invited Commentator; screening of “HEIST” (new documentary about the roots of the American economic crisis), sponsored by First Unitarian Church of Portland's Economic Justice Action Groups, Alliance for Democracy, KBOO, Move to Amend, 7:00pm, First Unitarian Church, Portland, OR

560. (Oct. 25-28, Bioneers Conference, Portland, OR)
Oct. 25, Keynote Speaker; sponsored by Portland Fellowship of Reconciliation (PFOR) and the First Unitarian Church of Portland's Economic Justice and Peace Action Groups, 7:00-8:30pm, First Unitarian Church, Portland, OR

559. Oct. 24, interview with Per Fagereng, KBOO radio, Portland, 9 am PST

558. Oct. 24, KPFA "Guns and Butter" interview. Listen to archived show here.

557. Oct. 21, speaker at BBQed Oysters and Beer Fundraiser Party for PBI, San Rafael, CA, 4 pm PST

556. Oct. 14, Live Gaiam tv interview appearance. Watch it here free at 7pm EST.

555. Oct. 12, interview with Matt Rothschild of The Progressive, 10 a.m. Central time

554. October 11-14, speaker, Economic Democracy Collaborative, Madison, Wisconsin

553. Oct. 11, radio interview with Norm Stockwell, WORT, 12 pm CST

552. Oct. 9, interview with Kevin Barrett, No Lies Radio, listen to archive here.

551. Oct. 8, interview, "Mountain Hours Revolution Radio" with Wayne Walton, on RBN, 12-1 pm PST

550. Oct. 7, interview with Lloyd D'Aguilar, "Looking Back Looking Forward", http://lookingbacklookingforward.com/, 2 pm EST

549. Sept. 26, interview with Douglas Newberry, markettoolbox.tv, 1pm EST. Listen here.

548. Sept. 25, interview with Dr. Stanley Montieth, radioliberty.com, 3pm PST

547. Sept. 24, interview with Charlie McGrath, Wide Awake News, 6-7 pm PST.

546. Sept. 22, interview with Stephen Lendman, progressive radio network, 10 am PST

545. Sept. 17 interview along with Hazel Henderson, National Teach In for Occupy Wall Street, http://www.livestream.com/owshdtv 5pm EST

544. Sept. 10, interview with Thomas Taplin, Dukascopy TV (Switzerland), 7 am PST Watch and listen here

543. Sept. 7, interview with Mike Harris, republicbroadcasting.org, 6 am PST

542. Sept. 6, interview with Douglas Newberry, markettoolbox.tv, 1pm EST. Listen here.

541. Aug 28, interview, the Meria Heller Show, 11 am PST. Listen to archive here. And listen to excellent Meria Heller show here.

540. Aug 26, interview with Stephen Lendman, progressive radio network, listen to archive here.

539. August 21, interview with Charlie McGrath, wideawakenews.com. Listen to archive here.

538. Aug 20, interview with Kim Greenhouse, It's Rainmaking Time, listen here.

537. Aug 16, interview with Mike Harris, republicbroadcasting.org, 6 am PST

536. Aug. 14, interview, TheAndyCaldwellshow.com, 4:30pm PST

535. August 13, interview with American Free Press, 1 pm PST

534. July 24, interview along with Victoria Grant, The People Speak, 6pm, PST

533. July 24, interview with Kevin Barrett, NoLiesRadio.org, 9 am PST

532. July 23, interview with Charlie McGrath, wideawakenews.com, 6 pm PST

531. July 22, interview with Dave Hodges, The Common Sense Show, 7 pm PST

530. July 22, interview with Stephen Lendman, progressive radio network, 10 am PST. Listen to archive here.

529. July 19, interview with Mike Beevers, KFCF Fresno, 4:30 pm PST

528. July 10-12, Speaker, Conference on Social Transformation, Faculty of Economics, Split University, Split Croatia

527. July 10, video interview with Max Keiser, the Keiser Report, on the ESM. Watch it here.

526. July 7, Interview with Phil Mackesy, This Week in Money, TalkDigitalNetwork.com, 3 pm PST

525. July 6, video interview with Dr. Mercola, see it here.

524. June 23, Interview with Al Korelin, The Korelin Economics Report, 1 pm PST. Listen to archive here.

523. June 21, interview with Tom Kiely, INN World Radio Report, 4:30 pm PST

522. June 21, interview on the Gary Null Show, 9:20 am PST

521. June 18, interview with Ken Rose, What Now radio show, KOWS RADIO OCCIDENTAL 107.3 FM, 1 pm PST. Listen to archive here.

520. June 17, interview with Bill Resnick, KBOO radio, 9 am PST

519. June 16 interview with Stephen Lendman, progressive radio network, 10 am PST. Listen to archive here.

518. June 9, interview with Sylvia Richardson, Latin Waves, 9:45 am PST. Listen to archive here.

517. June 5, interview, Truth Quest With Melodee, KHEN radio, 7pm PST

516. June 2, interview about Web of Debt, Our Common Ground,http://www.blogtalkradio.com/OCG, 7pm PST

515. June 1, interview with Robert Stark, The Stark Truth listen here.

514. Newly available video of interview on "Moral Politics" -- see it here

513. May 30, interview, The Tim Dahaney Show, ll am PST

512. May 28, interview with Pedro Gatos, "Bringing Light into Darkness", KOOP.ORG, 6 pm CST

511. May 24, interview, Make It Plain With Mark Thompson, SiriusXM Satellite Radio, 2pm PST

510. May 20, interview, Women's View Radio, blogtalkradio.com, 10 am Central Time. Listen here.

509. May 13, interview, www.Blogtalkradio.com/fixyourmortgagemess, 4:15 pm PST

508. May 12, interview with Stephen Lendman, progressive radio network, 10 am PST Listen here.

507. May 9, seminar, Re-imagining Money and Credit, Art bldg. rm 103, El Camino college, Torrance, Ca. 5-7:30 pm

506. May 8, interview with Mike Harris, republicbroadcasting.org, 9 am EST

505. May 7, radio discussion on "The Myth of Austerity", Connect the Dots, KPFK Los Angeles, 7 am PST. Listen here.

504. May 4, interview The Unsolicited Opinion, republicbroadcasting.org, 8 am PST

503. April 27-28, speaker, Public Banking Institute Conference, Friends Center, Philadelphia. Listen here.

502. April 25, speaker Global Teach-In (globalteachin.com), 12 noon EST

501. April 17, Interview with Leo Steel, http://www.blogtalkradio.com/lasteelshoworg, 8:30 pm EST. Listen here.. 31 minutes in.

500. April 14, interview with Stephen Lendman, progressive radio network, 10 am PST

499. April 14, interview with Al Korelin, The Korelin Economics Report

498. April 10th-12th Speaker at Claremont Conference, “Creating Money in a Finite World” Claremont, CA . See video here.

497. April 5, interview , This Week In Money with Phil Mackesy (howestreet.com) 12:30 PST. Listen to the archive here.

496. April 3, speaker at COMER with Paul Hellyer, "Escape From the Web of Debt," Toronto, 7:30 pm

495. March 27, speaker on "Why are we so Broke? New ways to look at the Finances of our State and City," League of Women Voters luncheon, San Diego, 12 noon

494.5 March 24, radio interview, Mandelman Matters. Listen here.

494. March 17, speaker via skype, SCADS conference, London

493. March 15, interview with Per Fagereng, Fight the Empire, KBOO radio, 9:30 am PST

492. March 15, speaker, San Rafael City Hall 6 pm

491. March 13, speaker at Sergio Lub's house, Walnut Creek, info at Favors.org, 6pm

490. March 11, speaker, TedxNewWallStreet. See it here.

489. March 10, interview with Stephen Lendman, progressive radio network, 10 am PST

488. March 6, interview with Melinda Pillsbury-Foster, http://radio.rumormillnews.com/podcast/, 11 am PST

487. Feb. 25, interview with Martin Andelman, http://www.mandelman.ml-implode.com, 9:30 am PST

486. Feb. 25, interview, This Week In Money with Phil Mackesy (howestreet.com), 3 pm PST

485. Feb. 25, interview on CIVL Radio, Latin Waves, How Greece Could Take Down Wall Street, 11:30am PST

484. Feb 23, interview with Thomas Kiely, INN World Report Radio, 7:30 pm EST

483. Feb. 17, featured speaker, Public Banking in America weekly call, 9 am PST

482. Feb. 11, interview with Stephen Lendman, progressive radio network, 10 am PST

481. Feb. 8, interview with Mike Beevers, KFCF Fresno, 4:30 pm PST

480. Feb. 7, interview with Kevin Barrett, NoLiesRadio.org, 9 am PST; listen to archive here

479. Feb. 6, participant, Occupiers and Wells Fargo Executives Gather to Discuss the American Foreclosure Crisis, The Center of Nonprofit Management at California Endowment Building 1000 N. Alameda, Los Angeles, meeting 3 pm and press conference 5:30 pm

478. Feb. 2, interview with Tom Kiely, INN World Report Radio, 7:30 pm EST

477. Feb. 2, interview with Patrick Timpone, oneradionetwork.com, naturalnewsradio.com. Listen to archive here

476. Jan. 31, interview, Liberty Coins and Precious Metals, 9 am PST

475. Jan. 27, interview KPFA, Project Censored, 8:30 am PST

474. Jan. 27, FILMS4CHANGE-INSIDEJOB, panel speaker, Edye Second Space, Santa Monica Performing Arts Center, 7:30 pm

473. Jan 22, interview with Dave Hodges, The Common Sense Show, 7:30 pm PST. Listen live here.

472. Jan. 20, interview with Mike Harris, The Republic Broadcasting Network, 7 am PST

471. Jan. 16, interview with Rob Lorei, WMNF fm, Tampa, 2 pm PST

470. Jan. 14, interview with Stephen Lendman, progressive radio network, 10 am PST

469. Jan. 11, interview with Jeff Rense, rense.com, 8pm PST

Enough Is Enough: Fraud-ridden Banks Are Not L.A.’s Only Option

“Epic in scale, unprecedented in world history. That is how William K. Black, professor of law and economics and former bank fraud investigator, describes the frauds in which JPMorgan Chase (JPM) has now been implicated. They involve more than a dozen felonies, including bid-rigging on municipal bond debt; colluding to rig interest rates on hundreds of trillions of dollars in mortgages, derivatives and other contracts; exposing investors to excessive risk; failing to disclose known risks, including those in the Bernie Madoff scandal; and engaging in multiple forms of mortgage fraud.

So why, asks Chicago Alderwoman Leslie Hairston, are we still doing business with them? She plans to introduce a city council ordinance deleting JPM from the city’s list of designated municipal depositories. As quoted in the January 14th Chicago Sun-Times:

The bank has violated the city code by making admissions of dishonesty and deceit in the way they dealt with their investors in the mortgage securities and Bernie Madoff Ponzi scandals. . . . We use this code against city contractors and all the small companies, why wouldn’t we use this against one of the largest banks in the world?

A similar move has been recommended for the City of Los Angeles by L.A. City Councilman Gil Cedillo. But in a January 19th editorial titled “There’s No Profit in L A. Bashing JPMorgan Chase,” the L.A. Times editorial board warned against pulling the city’s money out of JPM and other mega-banks – even though the city attorney is suing them for allegedly causing an epidemic of foreclosures in minority neighborhoods.

 “L.A. relies on these banks,” says The Times, “for long-term financing to build bridges and restore lakes, and for short-term financing to pay the bills.” The editorial noted that a similar proposal brought in the fall of 2011 by then-Councilman Richard Alarcon, backed by Occupy L.A., was abandoned because it would have resulted in termination fees and higher interest payments by the city.

It seems we must bow to our oppressors because we have no viable alternative – or do we? What if there is an alternative that would not only save the city money but would be a safer place to deposit its funds than in Wall Street banks?

The Tiny State That Broke Free

There is a place where they don’t bow. Where they don’t park their assets on Wall Street and play the mega-bank game, and haven’t for almost 100 years. Where they escaped the 2008 banking crisis and have no government debt, the lowest foreclosure rate in the country, the lowest default rate on credit card debt, and the lowest unemployment rate. They also have the only publicly-owned bank.

The place is North Dakota, and their state-owned Bank of North Dakota (BND) is a model for Los Angeles and other cities, counties, and states.

Like the BND, a public bank of the City of Los Angeles would not be a commercial bank and would not compete with commercial banks. In fact, it would partner with them – using its tax revenue deposits to create credit for lending programs through the magical everyday banking practice of leveraging capital.

The BND is a major money-maker for North Dakota, returning about $30 million annually in dividends to the treasury – not bad for a state with a population that is less than one-fifth that of the City of Los Angeles. Every year since the 2008 banking crisis, the BND has reported a return on investment of 17-26%.

Like the BND, a Bank of the City of Los Angeles would provide credit for city projects – to build bridges, restore lakes, and pay bills – and this credit would essentially be interest-free, since the city would own the bank and get the interest back. Eliminating interest has been shown to reduce the cost of public projects by 35% or more.

Awesome Possibilities

 Consider what that could mean for Los Angeles. According to the current fiscal budget, the LAX Modernization project is budgeted at $4.11 billion. That’s the sticker price. But what will it cost when you add interest on revenue bonds and other funding sources? The San Francisco-Oakland Bay Bridge earthquake retrofit boondoggle was slated to cost about $6 billion. Interest and bank fees added another $6 billion. Funding through a public bank could have saved taxpayers $6 billion, or 50%.

If Los Angeles owned its own bank, it could also avoid costly “rainy day funds,” which are held by various agencies as surplus taxes. If the city had a low-cost credit line with its own bank, these funds could be released into the general fund, generating massive amounts of new revenue for the city.

The potential for the City and County of Los Angeles can be seen by examining their respective Comprehensive Annual Financial Reports (CAFRs). According to the latest CAFRs (2012), the City of Los Angeles has “cash, pooled and other investments” of $11 billion beyond what is in its pension fund (page 85), and the County of Los Angeles has $22 billion (page 66). To put these sums in perspective, the austerity crisis declared by the State of California in 2012 was the result of a declared state budget deficit of only $16 billion.

The L.A. CAFR funds are currently drawing only minimal interest. With some modest changes in regulations, they could be returned to the general fund for use in the city’s budget, or deposited or invested in the city’s own bank, to be leveraged into credit for local purposes.

Minimizing Risk

 Beyond being a money-maker, a city-owned bank can minimize the risks of interest rate manipulation, excessive fees, and dishonest dealings.

Another risk that must now be added to the list is that of confiscation in the event of a “bail in.” Public funds are secured with collateral, but they take a back seat in bankruptcy to the “super priority” of Wall Street’s own derivative claims. A major derivatives fiasco of the sort seen in 2008 could wipe out even a mega-bank’s available collateral, leaving the city with empty coffers.

The city itself could be propelled into bankruptcy by speculative derivatives dealings with Wall Street banks. The dire results can be seen in Detroit, where the emergency manager, operating on behalf of the city’s creditors, put it into bankruptcy to force payment on its debts. First in line were UBS and Bank of America, claiming speculative winnings on their interest-rate swaps, which the emergency manager paid immediately before filing for bankruptcy. Critics say the swaps were improperly entered into and were what propelled the city into bankruptcy. Their propriety is now being investigated by the bankruptcy judge.

Not Too Big to Abandon

Mega-banks might be too big to fail. According to U.S. Attorney General Eric Holder, they might even be too big to prosecute. But they are not too big to abandon as depositories for government funds.

There may indeed be no profit in bashing JPMorgan Chase, but there would be profit in pulling deposits out and putting them in Los Angeles’ own public bank. Other major cities currently exploring that possibility include San Franciscoand Philadelphia.

If North Dakota can bypass Wall Street with its own bank and declare its financial independence, so can the City of Los Angeles. And so can the County. And so can the State of California.

____________

Ellen Brown is an attorney, chairman of the Public Banking Institute, and author of 12 books including The Public Bank Solution. She is currently running for California state treasurer on the Green Party ticket.

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From Austerity to Abundance: Why I Am Running for California Treasurer

Governor Jerry Brown and his staff are exchanging high-fives over balancing California’s budget, but the people on whose backs it was balanced are not rejoicing. The state’s high-wire act has been called “the ultimate in austerity budgets.”

Welfare payments, health care for the poor, and benefits for the elderly and disabled have been slashed. State workers have been downsized. School districts in need of cash have been reduced to borrowing through “capital appreciation bonds” bearing 300% interest. In one notorious case, the Santa Ana school district actually borrowed at 1,000% interest. And the governor acknowledges that California still faces a “wall of debt” amounting to $28 billion. Some analysts put it much higher than that.

At the end of the 20th century, California was ranked the sixth largest economy in the world. By 2012, it had slipped to number twelve. It is coming back up, in part because European countries are falling further into recession; but California’s poverty rate remains the highest in the country. More than eight million Californians struggle to meet their daily needs, and one in four children lives in poverty. Income inequality is higher in the nation’s most populous state than in almost any other.

California cannot solve its budget problems by slashing services that have already been cut to the bone or raising sales taxes that hurt the poor far more than the rich. We are fighting over a pie that remains too small. The pie itself needs to be expanded – and it can be.

How? By reclaiming that portion that is now siphoned off in interest and bank fees.  When tallied up at every stage of production, interest has been calculated to claim one-third of everything we buy.

How can that money be recaptured?  By owning the bank.

The approach was pioneered in North Dakota, the only state to escape the 2008 banking crisis. North Dakota has the lowest unemployment rate in the country, the lowest foreclosure rate, the lowest default rate on credit card debt, and no state debt at all. It is also the only state to own its own bank.

In the fall of 2011, a bill for a feasibility study for a state-owned bank passed both houses of the California legislature. The Public Banking Institute, which I founded and chair, was instrumental in helping to get the bill as far as it got.  But it died when Jerry Brown vetoed it.  His rationale was that we already have a banking committee, and that the matter could be explored in-house. Needless to say, however, we have heard no more about it since.

I am therefore running for California State Treasurer on a state bank platform, along with Laura Wells, who is running for Controller. We are throwing our bonnets in the ring for the opportunity to show the Governor or his successor that a state-owned bank can be our ticket to returning California to the abundance it once enjoyed.

I was a recipient of that abundance myself. I got my undergraduate degree at UC Berkeley in the 1960s, when tuition was free; and my law degree at UCLA Law School in the 1970s, when tuition was $700 a year.  Today it is $13,000 and $45,000 annually, respectively, for in-state students.  In the 1960s, the governor of California was Jerry Brown’s father Pat Brown, a New Deal visionary who believed that investment in education, infrastructure and local business was an investment in the future.  Our goal is to revive that optimistic vision in 2014.

We are running on the endorsement of the Green Party – along with Luis Rodriguez for governor and David Curtis for secretary of state – because Green Party candidates take no corporate money. Candidates who take corporate money – and that means nearly all conventional candidates – are beholden to large corporate interests and cannot properly represent the interests of the disenfranchised 99%.

The North Dakota Model: Banking that Supports Rather Than Exploits the Local Economy

California’s revenues are currently parked in those very largest of corporations, Wall Street banks. These out-of-state banks use our giant asset pool for their own speculative purposes, and the funds are at risk of confiscation in the event of a “bail-in.”

In North Dakota, by contrast, all of the state’s revenues are deposited by law in the state-owned Bank of North Dakota (BND). The BND is set up as a DBA of the state (“North Dakota doing business as the Bank of North Dakota”), which means all of the state’s capital is technically the bank’s capital. The bank uses its copious capital and deposit pool to generate credit for local purposes.

The BND is a major money-maker for the state, returning a sizable dividend annually to the treasury. Every year since the 2008 banking crisis, it has reported a return on investment of between 17 percent and 26 percent. The BND also provides what is essentially interest-free credit for state projects, since the state owns the bank and gets the interest back. The BND partners with local banks rather than competing with them, strengthening their capital and deposit bases and allowing them to keep loans on their books rather than having to sell them off to investors. This practice allowed North Dakota to avoid the subprime crisis that destroyed the housing market in other states.

Consider the awesome potential for California, with its massive capital and deposit bases. California has over $200 billion stashed in a variety of funds identified in its 2012 Comprehensive Annual Financial Report (CAFR), including $58 billion managed by the Treasurer in a Pooled Money Investment Account currently earning a meager 0.264% annually. It also has over $400 billion in its pension funds (CalPERS and CalSTRS).

California’s population of 37 million is more than 50 times that of North Dakota. In 2010, the BND had about $4,500 in deposits and $4,200 in loans per capita.  Multiplying 37 million by $4,200, a State Bank of California could, in theory, generate $155.4 billion in credit for the state; and this credit would effectively be interest-free free, since the state would own the bank.

What could California do with $155 billion in interest-free credit? One possibility would be to refinance its ominous “wall of debt” at 0%. A debt that is interest-free can be rolled over indefinitely without cost to the taxpayers.

Another possibility would be to fund public projects interest-free. Eliminating interest has been shown to reduce the cost of public projects by 35% or more.

Take, for example, the San Francisco Bay Bridge earthquake retrofitting boondoggle, which was originally slated to cost about $6 billion. Interest and bank fees wound up adding another $6 billion to the overall cost to taxpayers. Funding through its own bank could have saved the state $6 billion or 50% on this project.

Then there is the state’s bullet train fiasco, which has been beset with delays, cost overruns, and funding issues. As with the Bay Bridge, costs are projected to double as a result of compounding interest on long-term bonds, imposing huge hidden costs on the next generation of taxpayers. By funding the bullet train through a state-owned bank, its costs, too, could be reduced by 50%.

The Challenge of a “Jungle Primary”

As voters become increasingly disillusioned with big-corporate-money candidates, the third party option is gaining traction. According to a recent Gallup poll, in 2013 42% of Americans identified themselves as political independents, significantly outpacing Democrats at 31% and Republicans at 25%.

The growing threat posed by independent and third-party candidates may explain why it is getting harder and harder to run as one. In California we now have Proposition 14, the Top Two primary, sometimes called the “Louisiana primary” or “jungle primary.” It might better be named the Incumbents’ Benevolent Protection Act.

Proposition 14 requires statewide and congressional California candidates, regardless of party preference, to participate in a nonpartisan blanket primary, with only the top two candidates advancing to the general election.  Incumbents and heavily-funded candidates have historically reaped the benefits of this arrangement. Third party candidates are liable to get knocked out in the first round in June, eliminating them from the November elections.

But the new system does have the advantage that anyone can vote for any candidate in the June primary; so if we can mobilize voters, we have a shot.

There is, however, another new hurdle imposed by Proposition 14. In place of the 150 signatures-in-lieu-of-filing-fee needed earlier, we now need 10,000 signatures – either that or $2,800. But we’re hoping to turn that requirement, too, to advantage, by using it to build the people power and energy necessary to take the June 3, 2014 primary.  If you would like to sign a petition or donate, click here.

There is another way to balance a state budget, one that leads to prosperity rather than austerity. California can stimulate its economy and the job market, restore low-cost higher education, build 21st-century infrastructure, preserve the environment, and relieve the state’s debt burden, by establishing a bank that is owned by the people and returns its profits to the people.

__________________

Ellen Brown is an attorney, president of the Public Banking Institute, and author of twelve books including the bestselling Web of Debt. In The Public Bank Solution, her latest book, she explores successful public banking models historically and globally. Her 200+ credit blog articles are at EllenBrown.com. She is currently running for California State Treasurer on the Green Party ticket.

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Vermonters for a New Economy, Final State Bank Study

After many months of preparation and peer review, the Vermonters for a New Economy group has finally completed the study of the economic impacts of a public bank in Vermont.  Highlights include:

  • over 2,500 new jobs created
  • over $190M in new economic value added
  • over $340M in additional gross state product
  • the existing institutions already have the capital to establish a bank, no new appropriation or bonding needed.
  • recommendation that VEDA’s authority be expanded to include banking, which is what S. 204 proposes this year.

Read the study here.

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AIPAC’s Federal Reserve Vice Chairman

AIPAC's Federal Reserve Vice Chairman

by Stephen Lendman

Napoleon was no democrat. He had his own ideas about conquest and dominance. He knew a thing or two about money power. He said:

"When a government is dependent for money upon the bankers, they and not the government leaders control the nation." 

"This is because the hand that gives is above the hand that takes. Financiers are without patriotism and without decency."

He wasn't the only world figure saying so. Jefferson, Madison and Lincoln said much the same thing. So do independent experts today.

The Fed just commemorated 100 years of financial terrorism. It operates lawlessly. It does so destructively. It enriches bankers. 

It does it at the expense of popular interests. It does it more than ever today. Obama permits it. So does bipartisan complicity.

They let monied interests run America. Whatever they want they get. They take full advantage. They're waging financial war on humanity. 

They do it by controlling money, credit and debt. They do it for private enrichment. They do it at the expense of millions grievously harmed.

In mid-December, Obama nominated Stanley Fischer as Federal Reserve vice chairman. If confirmed, he'll replace Janet Yellen.

She'll become Fed chairman end of January. She'll do so when current chairman Ben Bernanke steps down.

From January 2005 through June 30, 2013, Fischer was Bank of Israel governor. He holds dual US/Israeli citizenship. That alone should disqualify him.

He was involved earlier with the Bank of Israel. In 1980, he was a visiting scholar. In 1985, he was Reagan administration advisor to Israel's economic stabilization program.

At the time, neoliberal policies were implemented. Knesset members amended the Bank of Israel Law. 

Doing so prohibited it from printing money for industrialization, full employment and immigrant absorption. Israel embraced transformative change for the worst.

Power began shifting from various government agencies to the Finance Ministry and Bank of Israel. It's similar to how America was financialized. 

In 1985, Israeli policy included budget deficits reduced to near balance. Inflation was dampened the wrong way.

Wages, public pensions and other social benefits were cut. Shekel debasing began. Unions lost power. Worker exploitation followed.

The Arrangements Law established an emergency Economic Stabilization Plan. Doing so sidestepped normal legislative procedures.

Knesset members were prevented from debating its socially destructive provisions. A race to the bottom followed. It continued throughout the 1990s. It did so under Fisher. It does so today. 

Policies include mass privatizations, welfare and social benefit cuts, wealth disproportionately shifted from ordinary Israelis to corporate interests and super-rich elites, as well as other so-called structural adjustments.

Israel resembles the worst of America. It does so politically, militarily, economically, financially and socially. Both countries are no fit places to live in.

Both threaten humanity. Both are socially destructive. Both favor privilege of popular interests. Fisher represents the worst of Israeli policy.

He hardened it during his tenure as Bank of Israel governor. Imagine what he has in mind for Americans. 

If confirmed, his presence will make hard times for ordinary people harder than ever. He was born in Northern Rhodesia. It's now Zambia. Southern Rhodesia became Zimbabwe.

He studied in England and America. In the early 1970s, he was a University of Chicago associate professor. In 1976, he became a US citizen.

In the late 1970s and 1980s, he taught at MIT. From 1988 to August 1990, he was World Bank vice president and chief economist.

From 1994 through August 2001, he was IMF first deputy managing director. He's a former Citigroup vice president and president of Citigroup International. In late 2001, he became a Group of Thirty member.

Current ones include:

  • former Fed chairman Paul Volcker;

  • former ECB governor Jean-Claude Trichet;

  • current ECB governor Mario Draghi;

  • former Federal Reserve Bank of New York president/Goldman Sachs managing director E. Gerald Corrigan;

  • current Federal Reserve Bank of New York president/former Goldman Sachs partner William Dudley;

  • former Treasury secretary Larry Summers;

  • former Mexican president Ernesto Zedillo;

  • former Treasury secretary Timothy Geithner;

  • former Bank of England governor Mervyn King; and

  • current Bank of England governor Mark Carney, among others with similar credentials.

Fischer is a senior member. Group of Thirty policy is ideologically anti-populist. Its rogues gallery of members support wealth, power and privilege. They spurn popular ones.

They claim a divine right to control money. They want disproportionate amounts to make more of it. They do it the old-fashioned way.

They steal it manipulatively. They do so through fraud, grand theft, market manipulation, front-running, pumping and dumping, naked short selling, scamming investors, running key administration posts, and taking full advantage every time.

They're kleptocrats. They're gangsters. They're criminals. Mafia bosses pale by comparison. Fisher is a gang of 30 member in good standing. Imagine him running the Fed with Janet Yellen.

He harmed ordinary Israelis during his tenure. He'll continue destructive Greenspan/Bernanke policies in Washington. Obama wants him for that reason.

Neoliberalism writ large is official US policy. Wall Street bosses demand it. Whatever they want they get.

In the 1980s, Fisher helped Israel become by far the largest recipient of US aid. Loans increasingly became outright grants. 

Israel today gets billions of dollars in annual aid, the latest weapons and technology, unrestricted US market access, benefits afforded no other nations, and much more. 

It does so in violation of the 1961 US Foreign Assistance Act. It stipulates no aid be provided to governments that engage:

"in a consistent pattern of gross violations of internationally recognized human rights, including torture or cruel, inhuman, or degrading treatment or punishment, prolonged detention without charges, causing the disappearance of persons by the abduction and clandestine detention of those persons, or other flagrant denial of the right to life, liberty, and the security of person, unless such assistance will directly benefit the needy people in such country."

Israel is a serial offender. It's guilty of multiple counts of crimes of war, against humanity and genocide. Its rap sheet is one the world's most blood-drenched.

It doesn't matter. It gets unconscionable amounts of US tax dollars. It does so annually. It gets America to fight its wars. It partners with other US dirty ones.

Fisher is AIPAC's man. He's Israel's man. Imagine appointing a dual US/Israeli citizen. Imagine him becoming the second highest Fed official. Imagine his fealty to Wall Street, not Main Street.

Imagine him supporting Israeli interests. Imagine him doing it at humanity's expense. Imagine his hardline neoliberalism harming millions more than already.

Imagine a Zionist zealot. Imagine one influencing US monetary policy. Imagine someone extremely anti-Iranian. 

As Bank of Israel governor, he helped AIPAC's sanctions campaign. Its goal is financially and politically weakening and isolating Iran. 

He supports regime change. He does so in Syria. He backs the worst of Israeli crimes. He's pro-war, pro-Wall Street, pro-business, pro-privilege, and anti-populist.

He's a deplorable Fed choice. He represents banksterism writ large. He's a globalist in the worst sense. He'll let Israel influence US monetary policy. He'll give AIPAC more control of US foreign policy. 

He supports Israeli belligerence and occupation harshness. His appointment makes regional wars more likely.

He'll lobby for increased Israeli aid. Providing any harms ordinary people everywhere. 

Fischer is polar opposite what's needed. Not according to the Wall Street Journal. It calls him "a dean among the world's top central bankers."

Wall Street bosses want him as Fed second in command. He'll "provide Ms. Yellen with a heavyweight partner," said the Journal.

His experience "places him very much at the center of the economic policy-making establishment of the past two decades..."

He was instrumental in arranging Citigroup's 2008 bailout. "The IMF was a lightning rod during his tenure..." 

He supported the worst of its neoliberal unfairness. He did so as Bank of Israel governor. He's got more of the same in mind for Americans.

Bernanke supports his appointment. In November he said:

"Stan was my teacher in graduate school, and he has been both a role model and a frequent adviser ever since." 

"An expert on financial crises, Stan has written prolifically on the subject and has also served on the front lines."

Former IMF chief economist Simon Johnson questioned his nomination. "What's the rationale for this candidacy," he asked? "I don't get it."

In November, Fisher addressed a Wall Street Journal CEO Council meeting. He called Fed QE "dangerous (but) necessary."

He lied claiming (w)ithout the Fed, we'd have had a much deeper recession."

"Without the extraordinary things that it's done, the economy would be in much worse shape today and we need to remember that."

False! QE reduced the money supply. It did so "by sucking up the collateral needed by the shadow banking system to create credit," said Ellen Brown.

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

Doing so is counterproductive. It’s self-defeating. It constrains economic growth. 

It doesn’t create jobs. It benefits Wall Street. It does it at the expense of Main Street.

It works when used constructively. Money injected responsibly into the economy creates growth. A virtuous circle of prosperity is possible.

It creates jobs. When people have money they spend it. Bernanke's QE wrecked the economy.  He did so to benefit bankers.

A protracted Main Street Depression harms millions. Conditions go from bad to worse. 

Yellen and Fischer endorse the same policy. Imagine greater pain and suffering coming. 

Imagine Obama conspiring with Wall Street to assure it. Imagine bipartisan complicity. Imagine harder than ever hard times. 

Imagine growing millions suffering more than ever. Imagine rogue politicians permitting it. Imagine a nation unfit to live in.

Stephen Lendman lives in Chicago. He can be reached at [email protected] 

His new book is titled "Banker Occupation: Waging Financial War on Humanity."

http://www.claritypress.com/LendmanII.html

Visit his blog site at sjlendman.blogspot.com. 

Listen to cutting-edge discussions with distinguished guests on the Progressive Radio News Hour on the Progressive Radio Network.

It airs Fridays at 10AM US Central time and Saturdays and Sundays at noon. All programs are archived for easy listening.


http://www.progressiveradionetwork.com/the-progressive-news-hour

100 Years Is Enough: Time to Make the Fed a Public Utility

December 23rd, 2013, marks the 100th anniversary of the Federal Reserve, warranting a review of its performance.  Has it achieved the purposes for which it was designed?

The answer depends on whose purposes we are talking about.  For the banks, the Fed has served quite well.  For the laboring masses whose populist movement prompted it, not much has changed in a century.

Thwarting Populist Demands

The Federal Reserve Act was passed in 1913 in response to a wave of bank crises, which had hit on average every six years over a period of 80 years. The resulting economic depressions triggered a populist movement for monetary reform in the 1890s.  Mary Ellen Lease, an early populist leader, said in a fiery speech that could have been written today:

Wall Street owns the country. It is no longer a government of the people, by the people, and for the people, but a government of Wall Street, by Wall Street, and for Wall Street. The great common people of this country are slaves, and monopoly is the master. . . . Money rules . . . .Our laws are the output of a system which clothes rascals in robes and honesty in rags. The parties lie to us and the political speakers mislead us. . . .

We want money, land and transportation. We want the abolition of the National Banks, and we want the power to make loans direct from the government. We want the foreclosure system wiped out.

That was what they wanted, but the Federal Reserve Act that they got was not what the populists had fought for, or what their leader William Jennings Bryan thought he was approving when he voted for it in 1913. In the stirring speech that won him the Democratic presidential nomination in 1896, Bryan insisted:

[We] believe that the right to coin money and issue money is a function of government. . . . Those who are opposed to this proposition tell us that the issue of paper money is a function of the bank and that the government ought to go out of the banking business. I stand with Jefferson . . . and tell them, as he did, that the issue of money is a function of the government and that the banks should go out of the governing business.

He concluded with this famous outcry against the restrictive gold standard:

You shall not press down upon the brow of labor this crown of thorns, you shall not crucify mankind upon a cross of gold.

What Bryan and the populists sought was a national currency issued debt-free and interest-free by the government, on the model of Lincoln’s Greenbacks. What the American people got was a money supply created by private banks as credit (or debt) lent to the government and the people at interest. Although the national money supply would be printed by the U.S. Bureau of Engraving and Printing, it would be issued by the “bankers’ bank,” the Federal Reserve. The Fed is composed of twelve branches, all of which are 100 percent owned by the banks in their districts. Until 1935, these branches could each independently issue paper dollars for the cost of printing them, and could lend them at interest.

1929: The Fed Triggers the Worst Bank Run in History

The new system was supposed to prevent bank runs, but it clearly failed in that endeavor. In 1929, the United States experienced the worst bank run in its history.

The New York Fed had been pouring newly-created money into New York banks, which then lent it to stock speculators. When the New York Fed heard that the Federal Reserve Board of Governors had held an all-night meeting discussing this risky situation, the flood of speculative funding was retracted, precipitating the 1929 stock market crash.

At that time, paper dollars were freely redeemable in gold; but banks were required to keep sufficient gold to cover only 40 percent of their deposits. When panicked bank customers rushed to cash in their dollars, gold reserves shrank. Loans then had to be recalled to maintain the 40 percent requirement, collapsing the money supply.

The result was widespread unemployment and loss of homes and savings, similar to that seen today. In a scathing indictment before Congress in 1934, Representative Louis McFadden blamed the Federal Reserve. He said:

Mr. Chairman, we have in this Country one of the most corrupt institutions the world has ever known. I refer to the Federal Reserve Board and the Federal Reserve Banks . . . .

The depredations and iniquities of the Fed has cost enough money to pay the National debt several times over. . . .

Some people think that the Federal Reserve Banks are United  States  Government  institutions.  They are private monopolies which prey upon the people of these United States for the benefit of themselves and their foreign customers; foreign and domestic speculators and swindlers; and rich and predatory money lenders.

These twelve private credit monopolies were deceitfully and disloyally foisted upon this Country by the bankers who came here from Europe and repaid us our hospitality by undermining our American institutions.

Freed from the Bankers’ “Cross of Gold”

To stop the collapse of the money supply, in 1933 Roosevelt took the dollar off the gold standard within the United States. The gold standard had prevailed since the founding of the country, and the move was highly controversial. Critics viewed it as a crime. But proponents saw it as finally allowing the country to be economically sovereign.

This more benign view was taken by Beardsley Ruml, Chairman of the Federal Reserve Bank of New York, in a presentation before the American Bar Association in 1945. He said 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.’”

It was a remarkable realization. The government could be funded without taxes, by drawing on credit from its own central bank. 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. Only when prices rose across the board, signaling an excess of money in the money supply, would the government need to tax—not to fund the government but simply to keep supply (goods and services) in balance with demand (money).

Ruml’s vision is echoed today in the school of economic thought called Modern Monetary Theory (MMT). But after Roosevelt’s demise, it was not pursued. The U.S. government continued to fund itself with taxes; and when it failed to recover enough to pay its bills, it continued to borrow, putting itself in debt.

The Fed Agrees to Return the Interest

For its first half century, the Federal Reserve continued to pocket the interest on the money it issued and lent to the government. But in the 1960s, Wright Patman, Chairman of the House Banking and Currency Committee, pushed to have the Fed nationalized. To avoid that result, the Fed quietly agreed to rebate its profits to the U.S. Treasury.

In The Strange Case of Richard Milhous Nixon, published in 1973, Congressman Jerry Voorhis wrote of this concession:

It was done, quite obviously, as acknowledgment that the Federal Reserve Banks were acting on the one hand as a national bank of issue, creating the nation’s money, but on the other hand charging the nation interest on its own credit—which no true national bank of issue could conceivably, or with any show of justice, dare to do.

Rebating the interest to the Treasury was clearly a step in the right direction. But the central bank funded very little of the federal debt. Commercial banks held a large chunk of it; and as Voorhis observed, “[w]here the commercial banks are concerned, there is no such repayment of the people’s money.” Commercial banks did not rebate the interest they collected to the government, said Voorhis, although they also “‘buy’ the bonds with newly created demand deposit entries on their books—nothing more.”

Today the proportion of the federal debt held by the Federal Reserve has shot up, due to repeated rounds of “quantitative easing.” But the majority of the debt is still funded privately at interest, and most of the dollars funding it originated as “bank credit” created on the books of private banks.

Time for a New Populist Movement?

The Treasury’s website reports the amount of interest paid on the national debt each year, going back 26 years. At the end of 2013, the total for the previous 26 years came to about $9 trillion on a federal debt of $17.25 trillion. If the government had been borrowing from its own central bank interest-free during that period, the debt would have been reduced by more than half. And that was just the interest for 26 years. The federal debt has been accumulating ever since 1835, when Andrew Jackson paid it off and vetoed the Second U.S. Bank’s renewal; and all that time it has been accruing interest. If the government had been borrowing from its central bank all along, it might have had no federal debt at all today.

In 1977, Congress gave the Fed a dual mandate, not only to maintain the stability of the currency but to promote full employment.  The Fed got the mandate but not the tools, as discussed in my earlier article here.

It may be time for a new populist movement, one that demands that the power to issue money be returned to the government and the people it represents; and that the Federal Reserve be made a public utility, owned by the people and serving them. The firehose of cheap credit lavished on Wall Street needs to be re-directed to Main Street.

__________________________

Ellen Brown is an attorney, president of the Public Banking Institute, and author of twelve books including the bestselling Web of Debt. In The Public Bank Solution, her latest book, she explores successful public banking models historically and globally. Her blog articles are at EllenBrown.com. She is currently running for California State Treasurer on the Green Party ticket.

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Amend the Fed: We Need a Central Bank that Serves Main Street

December 23rd marks the 100th anniversary of the Federal Reserve. Dissatisfaction with its track record has prompted calls to audit the Fed and end the Fed. At the least, Congress needs to amend the Fed, modifying the Federal Reserve Act to give the central bank the tools necessary to carry out its mandates.

The Federal Reserve is the only central bank with a dual mandate. It is charged not only with maintaining low, stable inflation but with promoting maximum sustainable employment. Yet unemployment remains stubbornly high, despite four years of radical tinkering with interest rates and quantitative easing (creating money on the Fed’s books). After pushing interest rates as low as they can go, the Fed has admitted that it has run out of tools.

At an IMF conference on November 8, 2013, former Treasury Secretary Larry Summers suggested that since near-zero interest rates were not adequately promoting people to borrow and spend, it might now be necessary to set interest at below zero. This idea was lauded and expanded upon by other ivory-tower inside-the-box thinkers, including Paul Krugman.

Negative interest would mean that banks would charge the depositor for holding his deposits rather than paying interest on them. Runs on the banks would no doubt follow, but the pundits have a solution for that: move to a cashless society, in which all money would be electronic. “This would make it impossible to hoard cash outside the bank,” wrote Danny Vinik in Business Insider, “allowing the Fed to cut interest rates to below zero, spurring people to spend more.” He concluded:

. . . Summers’ speech is a reminder to all liberals that he is a brilliant economist who grasps the long-term issues of monetary policy and would likely have made an exemplary Fed chair.

Maybe; but to ordinary mortals living in the less rarefied atmosphere of the real world, the proposal to impose negative interest rates looks either inane or like the next giant step toward the totalitarian New World Order. Business Week quotes Douglas Holtz-Eakin, a former director of the Congressional Budget Office: “We’ve had four years of extraordinarily loose monetary policy without satisfactory results, and the only thing they come up with is we need more?”

Paul Craig Roberts, former Assistant Secretary of the Treasury, calls the idea “harebrained.” He is equally skeptical of quantitative easing, the Fed’s other tool for stimulating the economy. Roberts points to Andrew Huszar’s explosive November 11th Wall Street Journal article titled “Confessions of a Quantitative Easer,” in which Huszar says that QE was always intended to serve Wall Street, not Main Street.  Huszar’s assignment at the Fed was to manage the purchase of $1.25 trillion in mortgages with dollars created on a computer screen. He says he resigned when he realized that the real purpose of the policy was to drive up the prices of the banks’ holdings of debt instruments, to provide the banks with trillions of dollars at zero cost with which to lend and speculate, and to provide the banks with “fat commissions from brokering most of the Fed’s QE transactions.”

A Helicopter Drop That Missed Its Target

All this is far from the helicopter drop proposed by Ben Bernanke in 2002 as a quick fix for deflation. He told the Japanese, “The U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost.” Later in the speech he discussed “a money-financed tax cut,” which he said was “essentially equivalent to Milton Friedman’s famous ‘helicopter drop’ of money.” Deflation could be cured, said Professor Friedman, simply by dropping money from helicopters.

But there has been no cloudburst of money raining down on the people. The money has gotten only into the reserve accounts of banks. John Lounsbury, writing in Econintersect, observes that Friedman’s idea of a helicopter drop involved debt-free money printed by the government and landing in people’s bank accounts. “He foresaw the money entering the economy through bank deposits, not through bank reserves which was the pathway available to Bernanke. . . . [W]hen Ben Bernanke fired up his helicopter engines he took the only path available to him.”

Bernanke created debt-free money and bought government debt with it, returning the interest to the Treasury. The result was interest-free credit, a good deal for the government. But the problem, says Lounsbury, is that:

The helicopters dropped all the money into a hole in the ground (excess reserve accounts) and very little made its way into the economy.  It was essentially a rearrangement of the balance sheets of the creditor nation with little impact on the debtor nation.

. . . The fatal flaw of QE is that it delivers money to the accounts of the creditors and does nothing for the accounts of the debtors. Bad debts remain unserviced and the debt crisis continues.

Thinking Outside the Box

Bernanke delivered the money to the creditors because that was all the Federal Reserve Act allowed. If the Fed is to fulfill its mandate, it clearly needs more tools; and that means amending the Act.  Harvard professor Ken Rogoff, who spoke at the November 2013 IMF conference before Larry Summers, suggested several possibilities; and one was to broaden access to the central bank, allowing anyone to have an ATM at the Fed.

Rajiv Sethi, Barnard/Columbia Professor of Economics, expanded on this idea in a blog titled “The Payments System and Monetary Transmission.” He suggested making the Federal Reserve the repository for all deposit banking. This would make deposit insurance unnecessary; it would eliminate the need to impose higher capital requirements; and it would allow the Fed to implement monetary policy by targeting debtor rather than creditor balance sheets. Instead of returning its profits to the Treasury, the Fed could do a helicopter drop directly into consumer bank accounts, stimulating demand in the consumer economy.

John Lounsbury expanded further on these ideas. He wrote in Econintersect that they would open a pathway for investment banking and depository banking to be separated from each other, analogous to that under Glass-Steagall. Banks would no longer be too big to fail, since they could fail without destroying the general payment system of the economy. Lounsbury said the central bank could operate as a true public bank and repository for all federal banking transactions, and it could operate in the mode of a postal savings system for the general populace.

Earlier Central Bank Ventures into Commercial Lending

That sounds like a radical departure today, but the Fed has ventured into commercial banking before. In 1934, Section 13(b) was added to the Federal Reserve Act, authorizing the Fed to “make credit available for the purpose of supplying working capital to established industrial and commercial businesses.” This long-forgotten section was implemented and remained in effect for 24 years. In a 2002 article on the Minneapolis Fed’s website called “Lender of More Than Last Resort,” David Fettig noted that 13(b) allowed Federal Reserve banks to make loans directly to any established businesses in their districts, and to share in loans with private lending institutions if the latter assumed 20 percent of the risk. No limitation was placed on the amount of a single loan.

Fettig wrote that “the Fed was still less than 20 years old and many likely remembered the arguments put forth during the System’s founding, when some advocated that the discount window should be open to all comers, not just member banks.” In Australia and other countries, the central bank was then assuming commercial as well as central bank functions.

Section 13(b) was eventually repealed, but the Federal Reserve Act retained enough vestiges of it in 2008 to allow the Fed to intervene to save a variety of non-bank entities from bankruptcy. The problem was that the tool was applied selectively. The recipients were major corporate players, not local businesses or local governments. Fettig wrote:

Section 13(b) may be a memory, . . . but Section 13 paragraph 3 . . . is alive and well in the Federal Reserve Act. . . . [T]his amendment allows, “in unusual and exigent circumstances,” a Reserve bank to advance credit to individuals, partnerships and corporations that are not depository institutions.

In 2008, the Fed bailed out investment company Bear Stearns and insurer AIG, neither of which was a bank. Bear Stearns got almost $1 trillion in short-term loans, with interest rates as low as 0.5%. The Fed also made loans to other corporations, including GE, McDonald’s, and Verizon.

In 2010, Section 13(3) was modified by the Dodd-Frank bill, which replaced the phrase “individuals, partnerships and corporations” with the vaguer phrase “any program or facility with broad-based eligibility.” As explained in the notes to the bill:

Only Broad-Based Facilities Permitted. Section 13(3) is modified to remove the authority to extend credit to specific individuals, partnerships and corporations. Instead, the Board may authorize credit under section 13(3) only under a program or facility with “broad-based eligibility.”

What programs have “broad-based eligibility” is not clear from a reading of the Section, but it isn’t individuals or local businesses. It also isn’t state and local governments.

No Others Need Apply

In 2009, President Obama proposed that the Fed extend its largess to the cash-strapped cities and states battered by the banking crisis. “Small businesses and state and local governments are having serious difficulty obtaining necessary financing from debt markets,” Obama said. He proposed that the Fed buy municipal bonds to cut their rising borrowing costs.

The proposed municipal bond facility would have been based on the Fed program to buy commercial paper, which had almost single-handedly propped up the market for short-term corporate borrowing. Investors welcomed the muni bond proposal as a first step toward supporting the market.

But Bernanke rejected the proposal. Why? It could hardly be argued that the Fed didn’t have the money. The collective budget deficit of the states for 2011 was projected at $140 billion, a drop in the bucket compared to the sums the Fed had managed to come up with to bail out the banks. According to data released in 2011, the central bank had provided roughly $3.3 trillion in liquidity and $9 trillion in short-term loans and other financial arrangements to banks, multinational corporations, and foreign financial institutions following the credit crisis of 2008. Later revelations pushed the sum up to $16 trillion or more.

Bernanke’s reasoning in saying no to the muni bond facility was that he lacked the statutory tools.. The Fed is limited by statute to buying municipal government debt with maturities of six months or less that is directly backed by tax or other assured revenue, a form of debt that makes up less than 2% of the overall muni market.

The Federal Reserve Act was drafted by bankers to create a banker’s bank that would serve their interests. It is their own private club, and its legal structure keeps all non-members out.  A century after the Fed’s creation, a sober look at its history leads to the conclusion that it is a privately controlled institution whose corporate owners use it to direct our entire economy for their own ends, without democratic influence or accountability.  Substantial changes are needed to transform the Fed, and these will only come with massive public pressure.

Congress has the power to amend the Fed – just as it did in 1934, 1958 and 2010. For the central bank to satisfy its mandate to promote full employment and to become an institution that serves all the people, not just the 1%, the Fed needs fundamental reform.

___________________

Ellen Brown is an attorney, president of the Public Banking Institute, and author of twelve books, including the best-selling Web of Debt. In The Public Bank Solution, her latest book, she explores successful public banking models historically and globally. Her blog articles are at EllenBrown.com.

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Monsanto, the TPP, and Global Food Dominance

Control oil and you control nations,” said US Secretary of State Henry Kissinger in the 1970s.  “Control food and you control the people.”

Global food control has nearly been achieved, by reducing seed diversity with GMO (genetically modified) seeds that are distributed by only a few transnational corporations. But this agenda has been implemented at grave cost to our health; and if the Trans-Pacific Partnership (TPP) passes, control over not just our food but our health, our environment and our financial system will be in the hands of transnational corporations.

Profits Before Populations

Genetic engineering has made proprietary control possible over the seeds on which the world’s food supply depends. “Terminator” genes enable the production of sterile seeds, using a synthetic chemical catalyst appropriately called “Traitor” to induce seed sterility. Farmers must therefore buy seeds from their patent owners year after year. To cover these costs, food prices are raised; but the harm is far greater than to our pocketbooks.

According to an Acres USA interview of plant pathologist Don Huber, Professor Emeritus at Purdue University, two modified traits account for practically all of the genetically modified crops grown in the world today. One involves insect resistance. The other, more disturbing modification involves insensitivity to glyphosate-based herbicides (plant-killing chemicals). Often known as Roundup after the best-selling Monsanto product of that name, glyphosate poisons everything in its path except plants genetically modified to resist it.

Glyphosate-based herbicides are now the most commonly used herbicides in the world. Glyphosate is an essential partner to the GMOs that are the principal business of the burgeoning biotech industry. Glyphosate is a “broad-spectrum” herbicide that destroys indiscriminately, not by killing unwanted plants directly but by tying up access to critical nutrients.

Because of the insidious way in which it works, it has been sold as a relatively benign replacement for the devastating earlier dioxin-based herbicides. But a barrage of experimental data has now shown glyphosate and the GMO foods incorporating it to pose serious dangers to health. Compounding the risk is the toxicity of “inert” ingredients used to make glyphosate more potent. Researchers have found, for example, that the surfactant POEA can kill human cells, particularly embryonic, placental and umbilical cord cells. But these risks have been conveniently ignored.

The widespread use of GMO foods and glyphosate herbicides helps explain the anomaly that the US spends over twice as much per capita on healthcare as the average developed country, yet it is rated far down the scale of the world’s healthiest populations. The World Health Organization has ranked the US LAST out of 17 developed nations for overall health.

Sixty to seventy percent of the foods in US supermarkets are now genetically modified. By contrast, in at least 26 other countries—including Switzerland, Australia, Austria, China, India, France, Germany, Hungary, Luxembourg, Greece, Bulgaria, Poland, Italy, Mexico and Russia—GMOs are totally or partially banned; and significant restrictions on GMOs exist in about sixty other countries.

A ban on GMO and glyphosate use might go far toward improving the health of Americans. But the Trans-Pacific Partnership, a global trade agreement for which the Obama Administration has sought Fast Track status, would block that sort of cause-focused approach to the healthcare crisis.

Roundup’s Insidious Effects

Roundup-resistant crops escape being killed by glyphosate, but they do not avoid absorbing it into their tissues. Herbicide-tolerant crops have substantially higher levels of herbicide residues than other crops. In fact, many countries have had to increase their legally allowable levels—by up to 50 times—in order to accommodate the introduction of GM crops. In the European Union, residues in food are set to rise 100-150 times if a new proposal by Monsanto is approved. Meanwhile, herbicide-tolerant “super-weeds” have adapted to the chemical, requiring even more toxic doses and new toxic chemicals to kill the plant.

Human enzymes are affected by glyphosate just as plant enzymes are: the chemical blocks the uptake of manganese and other essential minerals. Without those minerals, we cannot properly metabolize our food. That helps explain the rampant epidemic of obesity in the United States. People eat and eat in an attempt to acquire the nutrients that are simply not available in their food.

According to researchers Samsell and Seneff in Biosemiotic Entropy: Disorder, Disease, and Mortality (April 2013):

Glyphosate’s inhibition of cytochrome P450 (CYP) enzymes is an overlooked component of its toxicity to mammals. CYP enzymes play crucial roles in biology . . . . Negative impact on the body is insidious and manifests slowly over time as inflammation damages cellular systems throughout the body. Consequences are most of the diseases and conditions associated with a Western diet, which include gastrointestinal disorders, obesity, diabetes, heart disease, depression, autism, infertility, cancer and Alzheimer’s disease.

More than 40 diseases have been linked to glyphosate use, and more keep appearing. In September 2013, the National University of Rio Cuarto, Argentina, published research finding that glyphosate enhances the growth of fungi that produce aflatoxin B1, one of the most carcinogenic of substances. A doctor from Chaco, Argentina, told Associated Press, “We’ve gone from a pretty healthy population to one with a high rate of cancer, birth defects and illnesses seldom seen before.” Fungi growths have increased significantly in US corn crops.

Glyphosate has also done serious damage to the environment. According to an October 2012 report by the Institute of Science in Society:

Agribusiness claims that glyphosate and glyphosate-tolerant crops will improve crop yields, increase farmers’ profits and benefit the environment by reducing pesticide use. Exactly the opposite is the case. . . . [T]he evidence indicates that glyphosate herbicides and glyphosate-tolerant crops have had wide-ranging detrimental effects, including glyphosate resistant super weeds, virulent plant (and new livestock) pathogens, reduced crop health and yield, harm to off-target species from insects to amphibians and livestock, as well as reduced soil fertility.

Politics Trumps Science

In light of these adverse findings, why have Washington and the European Commission continued to endorse glyphosate as safe? Critics point to lax regulations, heavy influence from corporate lobbyists, and a political agenda that has more to do with power and control than protecting the health of the people.

In the ground-breaking 2007 book Seeds of Destruction: The Hidden Agenda of Genetic Manipulation, William Engdahl states that global food control and depopulation became US strategic policy under Rockefeller protégé Henry Kissinger. Along with oil geopolitics, they were to be the new “solution” to the threats to US global power and continued US access to cheap raw materials from the developing world. In line with that agenda, the government has shown extreme partisanship in favor of the biotech agribusiness industry, opting for a system in which the industry “voluntarily” polices itself. Bio-engineered foods are treated as “natural food additives,” not needing any special testing.

Jeffrey M. Smith, Executive Director of the Institute for Responsible Technology, confirms that US Food and Drug Administration policy allows biotech companies to determine if their own foods are safe. Submission of data is completely voluntary. He concludes:

In the critical arena of food safety research, the biotech industry is without accountability, standards, or peer-review. They’ve got bad science down to a science.

Whether or not depopulation is an intentional part of the agenda, widespread use of GMO and glyphosate is having that result. The endocrine-disrupting properties of glyphosate have been linked to infertility, miscarriage, birth defects and arrested sexual development. In Russian experiments, animals fed GM soy were sterile by the third generation. Vast amounts of farmland soil are also being systematically ruined by the killing of beneficial microorganisms that allow plant roots to uptake soil nutrients.

In Gary Null’s eye-opening documentary Seeds of Death: Unveiling the Lies of GMOs, Dr. Bruce Lipton warns, “We are leading the world into the sixth mass extinction of life on this planet. . . . Human behavior is undermining the web of life.”

The TPP and International Corporate Control

As the devastating conclusions of these and other researchers awaken people globally to the dangers of Roundup and GMO foods, transnational corporations are working feverishly with the Obama administration to fast-track the Trans-Pacific Partnership, a trade agreement that would strip governments of the power to regulate transnational corporate activities. Negotiations have been kept secret from Congress but not from corporate advisors, 600 of whom have been consulted and know the details. According to Barbara Chicherio in Nation of Change:

The Trans Pacific Partnership (TPP) has the potential to become the biggest regional Free Trade Agreement in history. . . .

The chief agricultural negotiator for the US is the former Monsanto lobbyist, Islam Siddique.  If ratified the TPP would impose punishing regulations that give multinational corporations unprecedented right to demand taxpayer compensation for policies that corporations deem a barrier to their profits.

. . . They are carefully crafting the TPP to insure that citizens of the involved countries have no control over food safety, what they will be eating, where it is grown, the conditions under which food is grown and the use of herbicides and pesticides.

Food safety is only one of many rights and protections liable to fall to this super-weapon of international corporate control. In an April 2013 interview on The Real News Network, Kevin Zeese called the TPP “NAFTA on steroids” and “a global corporate coup.” He warned:

No matter what issue you care about—whether its wages, jobs, protecting the environment . . . this issue is going to adversely affect it . . . .

If a country takes a step to try to regulate the financial industry or set up a public bank to represent the public interest, it can be sued . . . .

Return to Nature: Not Too Late

There is a safer, saner, more earth-friendly way to feed nations. While Monsanto and US regulators are forcing GM crops on American families, Russian families are showing what can be done with permaculture methods on simple garden plots. In 2011, 40% of Russia’s food was grown on dachas (cottage gardens or allotments). Dacha gardens produced over 80% of the country’s fruit and berries, over 66% of the vegetables, almost 80% of the potatoes and nearly 50% of the nation’s milk, much of it consumed raw. According to Vladimir Megre, author of the best-selling Ringing Cedars Series:

Essentially, what Russian gardeners do is demonstrate that gardeners can feed the world – and you do not need any GMOs, industrial farms, or any other technological gimmicks to guarantee everybody’s got enough food to eat. Bear in mind that Russia only has 110 days of growing season per year – so in the US, for example, gardeners’ output could be substantially greater. Today, however, the area taken up by lawns in the US is two times greater than that of Russia’s gardens – and it produces nothing but a multi-billion-dollar lawn care industry.

In the US, only about 0.6 percent of the total agricultural area is devoted to organic farming. This area needs to be vastly expanded if we are to avoid “the sixth mass extinction.” But first, we need to urge our representatives to stop Fast Track, vote no on the TPP, and pursue a global phase-out of glyphosate-based herbicides and GMO foods. Our health, our finances and our environment are at stake.

____________________________

Ellen Brown is an attorney, president of the Public Banking Institute, and author of twelve books, including the best-selling Web of Debt. In The Public Bank Solution, her latest book, she explores successful public banking models historically and globally. Her blog articles are at EllenBrown.com.

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Public Banking in Costa Rica: A Remarkable Little-known Model

In Costa Rica, publicly-owned banks have been available for so long and work so well that people take for granted that any country that knows how to run an economy has a public banking option. Costa Ricans are amazed to hear there is only one public depository bank in the United States (the Bank of North Dakota), and few people have private access to it.

So says political activist Scott Bidstrup, who writes:

For the last decade, I have resided in Costa Rica, where we have had a “Public Option” for the last 64 years.

There are 29 licensed banks, mutual associations and credit unions in Costa Rica, of which four were established as national, publicly-owned banks in 1949. They have remained open and in public hands ever since—in spite of enormous pressure by the I.M.F. [International Monetary Fund] and the U.S. to privatize them along with other public assets. The Costa Ricans have resisted that pressure—because the value of a public banking option has become abundantly clear to everyone in this country.

During the last three decades, countless private banks, mutual associations (a kind of Savings and Loan) and credit unions have come and gone, and depositors in them have inevitably lost most of the value of their accounts.

But the four state banks, which compete fiercely with each other, just go on and on. Because they are stable and none have failed in 31 years, most Costa Ricans have moved the bulk of their money into them.  Those four banks now account for fully 80% of all retail deposits in Costa Rica, and the 25 private institutions share among themselves the rest.

According to a 2003 report by the World Bank, the public sector banks dominating Costa Rica’s onshore banking system include three state-owned commercial banks (Banco Nacional, Banco de Costa Rica, and Banco Crédito Agrícola de Cartago) and a special-charter bank called Banco Popular,  which in principle is owned by all Costa Rican workers. These banks accounted for 75 percent of total banking deposits in 2003.

In Competition Policies in Emerging Economies: Lessons and Challenges from Central America and Mexico (2008), Claudia Schatan writes that Costa Rica nationalized all of its banks and imposed a monopoly on deposits in 1949. Effectively, only state-owned banks existed in the country after that.  The monopoly was loosened in the 1980s and was eliminated in 1995. But the extensive network of branches developed by the public banks and the existence of an unlimited state guarantee on their deposits has made Costa Rica the only country in the region in which public banking clearly predominates.

Scott Bidstrup comments:

By 1980, the Costa Rican economy had grown to the point where it was by far the richest nation in Latin America in per-capita terms. It was so much richer than its neighbors that Latin American economic statistics were routinely quoted with and without Costa Rica included. Growth rates were in the double digits for a generation and a half.  And the prosperity was broadly shared. Costa Rica’s middle class – nonexistent before 1949 – became the dominant part of the economy during this period.  Poverty was all but abolished, favelas [shanty towns] disappeared, and the economy was booming.

This was not because Costa Rica had natural resources or other natural advantages over its neighbors. To the contrary, says Bidstrup:

At the conclusion of the civil war of 1948 (which was brought on by the desperate social conditions of the masses), Costa Rica was desperately poor, the poorest nation in the hemisphere, as it had been since the Spanish Conquest.

The winner of the 1948 civil war, José “Pepe” Figueres, now a national hero, realized that it would happen again if nothing was done to relieve the crushing poverty and deprivation of the rural population.  He formulated a plan in which the public sector would be financed by profits from state-owned enterprises, and the private sector would be financed by state banking.

A large number of state-owned capitalist enterprises were founded. Their profits were returned to the national treasury, and they financed dozens of major infrastructure projects.  At one point, more than 240 state-owned corporations were providing so much money that Costa Rica was building infrastructure like mad and financing it largely with cash. Yet it still had the lowest taxes in the region, and it could still afford to spend 30% of its national income on health and education.

A provision of the Figueres constitution guaranteed a job to anyone who wanted one. At one point, 42% of the working population of Costa Rica was working for the government directly or in one of the state-owned corporations.  Most of the rest of the economy not involved in the coffee trade was working for small mom-and-pop companies that were suppliers to the larger state-owned firms—and it was state banking, offering credit on favorable terms, that made the founding and growth of those small firms possible.  Had they been forced to rely on private-sector banking, few of them would have been able to obtain the financing needed to become established and prosperous.  State banking was key to the private sector growth. Lending policy was government policy and was designed to facilitate national development, not bankers’ wallets.  Virtually everything the country needed was locally produced.  Toilets, window glass, cement, rebar, roofing materials, window and door joinery, wire and cable, all were made by state-owned capitalist enterprises, most of them quite profitable. Costa Rica was the dominant player regionally in most consumer products and was on the move internationally.

Needless to say, this good example did not sit well with foreign business interests. It earned Figueres two coup attempts and one attempted assassination.  He responded by abolishing the military (except for the Coast Guard), leaving even more revenues for social services and infrastructure.

When attempted coups and assassination failed, says Bidstrup, Costa Rica was brought down with a form of economic warfare called the “currency crisis” of 1982. Over just a few months, the cost of financing its external debt went from 3% to extremely high variable rates (27% at one point).  As a result, along with every other Latin American country, Costa Rica was facing default. Bidstrup writes:

That’s when the IMF and World Bank came to town.

Privatize everything in sight, we were told.  We had little choice, so we did.  End your employment guarantee, we were told.  So we did.  Open your markets to foreign competition, we were told.  So we did.  Most of the former state-owned firms were sold off, mostly to foreign corporations.  Many ended up shut down in a short time by foreigners who didn’t know how to run them, and unemployment appeared (and with it, poverty and crime) for the first time in a decade.  Many of the local firms went broke or sold out quickly in the face of ruinous foreign competition.  Very little of Costa Rica’s manufacturing economy is still locally owned. And so now, instead of earning forex [foreign exchange] through exporting locally produced goods and retaining profits locally, these firms are now forex liabilities, expatriating their profits and earning relatively little through exports.  Costa Ricans now darkly joke that their economy is a wholly-owned subsidiary of the United States.

The dire effects of the IMF’s austerity measures were confirmed in a 1993 book excerpt by Karen Hansen-Kuhn  titled “Structural Adjustment in Costa Rica: Sapping the Economy.” She noted that Costa Rica stood out in Central America because of its near half-century history of stable democracy and well-functioning government, featuring the region’s largest middle class and the absence of both an army and a guerrilla movement. Eliminating the military allowed the government to support a Scandinavian-type social-welfare system that still provides free health care and education, and has helped produce the lowest infant mortality rate and highest average life expectancy in all of Central America.

In the 1970s, however, the country fell into debt when coffee and other commodity prices suddenly fell, and oil prices shot up. To get the dollars to buy oil, Costa Rica had to resort to foreign borrowing; and in 1980, the U.S. Federal Reserve under Paul Volcker raised interest rates to unprecedented levels.

In The Gods of Money (2009), William Engdahl fills in the back story. In 1971, Richard Nixon took the U.S. dollar off the gold standard, causing it to drop precipitously in international markets. In 1972, US Secretary of State Henry Kissinger and President Nixon had a clandestine meeting with the Shah of Iran. In 1973, a group of powerful financiers and politicians met secretly in Sweden and discussed effectively “backing” the dollar with oil. An arrangement was then finalized in which the oil-producing countries of OPEC would sell their oil only in U.S. dollars.  The quid pro quo was military protection and a strategic boost in oil prices.  The dollars would wind up in Wall Street and London banks, where they would fund the burgeoning U.S. debt. In 1974, an oil embargo conveniently caused the price of oil to quadruple.  Countries without sufficient dollar reserves had to borrow from Wall Street and London banks to buy the oil they needed.  Increased costs then drove up prices worldwide.

By late 1981, says Hansen-Kuhn, Costa Rica had one of the world’s highest levels of debt per capita, with debt-service payments amounting to 60 percent of export earnings. When the government had to choose between defending its stellar social-service system or bowing to its creditors, it chose the social services. It suspended debt payments to nearly all its creditors, predominately commercial banks. But that left it without foreign exchange. That was when it resorted to borrowing from the World Bank and IMF, which imposed “austerity measures” as a required condition. The result was to increase poverty levels dramatically.

Bidstrup writes of subsequent developments:

Indebted to the IMF, the Costa Rican government had to sell off its state-owned enterprises, depriving it of most of its revenue, and the country has since been forced to eat its seed corn. No major infrastructure projects have been conceived and built to completion out of tax revenues, and maintenance of existing infrastructure built during that era must wait in line for funding, with predictable results.

About every year, there has been a closure of one of the private banks or major savings coöps.  In every case, there has been a corruption or embezzlement scandal, proving the old saying that the best way to rob a bank is to own one.  This is why about 80% of retail deposits in Costa Rica are now held by the four state banks.  They’re trusted.

Costa Rica still has a robust economy, and is much less affected by the vicissitudes of rising and falling international economic tides than enterprises in neighboring countries, because local businesses can get money when they need it.  During the credit freezeup of 2009, things went on in Costa Rica pretty much as normal. Yes, there was a contraction in the economy, mostly as a result of a huge drop in foreign tourism, but it would have been far worse if local business had not been able to obtain financing when it was needed.  It was available because most lending activity is set by government policy, not by a local banker’s fear index.

Stability of the local economy is one of the reasons that Costa Rica has never had much difficulty in attracting direct foreign investment, and is still the leader in the region in that regard.  And it is clear to me that state banking is one of the principal reasons why.

The value and importance of a public banking sector to the overall stability and health of an economy has been well proven by the Costa Rican experience.  Meanwhile, our neighbors, with their fully privatized banking systems have, de facto, encouraged people to keep their money in Mattress First National, and as a result, the financial sectors in neighboring countries have not prospered.  Here, they have—because most money is kept in banks that carry the full faith and credit of the Republic of Costa Rica, so the money is in the banks and available for lending.  While our neighbors’ financial systems lurch from crisis to crisis, and suffer frequent resulting bank failures, the Costa Rican public system just keeps chugging along.  And so does the Costa Rican economy.

He concludes:

My dream scenario for any third world country wishing to develop, is to do exactly what Costa Rica did so successfully for so many years. Invest in the Holy Trinity of national development—health, education and infrastructure.  Pay for it with the earnings of state capitalist enterprises that are profitable because they are protected from ruinous foreign competition; and help out local private enterprise get started and grow, and become major exporters, with stable state-owned banks that prioritize national development over making bankers rich.  It worked well for Costa Rica for a generation and a half.  It can work for any other country as well.  Including the United States.

The new Happy Planet Index, which rates countries based on how many long and happy lives they produce per unit of environmental output, has ranked Costa Rica #1 globally.  The Costa Rican model is particularly instructive at a time when US citizens are groaning under the twin burdens of taxes and increased health insurance costs. Like the Costa Ricans, we could reduce taxes while increasing social services and rebuilding infrastructure, if we were to allow the government to make some money itself; and a giant first step would be for it to establish some publicly-owned banks.

_______________________________

Ellen Brown is an attorney, president of the Public Banking Institute, and author of twelve books, including the best-selling Web of Debt. In The Public Bank Solution, her latest book, she explores successful public banking models historically and globally. Her blog articles are at EllenBrown.com.

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The Bank Guarantee That Bankrupted Ireland

The Irish have a long history of being tyrannized, exploited, and oppressed—from the forced conversion to Christianity in the Dark Ages, to slave trading of the natives in the 15th and 16th centuries, to the mid-nineteenth century “potato famine” that was really a holocaust. The British got Ireland’s food exports, while at least one million Irish died from starvation and related diseases, and another million or more emigrated.

Today, Ireland is under a different sort of tyranny, one imposed by the banks and the troika—the EU, ECB and IMF. The oppressors have demanded austerity and more austerity, forcing the public to pick up the tab for bills incurred by profligate private bankers.

The official unemployment rate is 13.5%—up from 5% in 2006—and this figure does not take into account the mass emigration of Ireland’s young people in search of better opportunities abroad. Job loss and a flood of foreclosures are leading to suicides. A raft of new taxes and charges has been sold as necessary to reduce the deficit, but they are simply a backdoor bailout of the banks.

At first, the Irish accepted the media explanation: these draconian measures were necessary to “balance the budget” and were in their best interests. But after five years of belt-tightening in which unemployment and living conditions have not improved, the people are slowly waking up. They are realizing that their assets are being grabbed simply to pay for the mistakes of the financial sector.

Five years of austerity has not restored confidence in Ireland’s banks. In fact the banks themselves are packing up and leaving. On October 31st, RTE.ie reported that Danske Bank Ireland was closing its personal and business banking, only days after ACCBank announced it was handing back its banking license; and Ulster Bank’s future in Ireland remains unclear.

The field is ripe for some publicly-owned banks. Banks that have a mandate to serve the people, return the profits to the people, and refrain from speculating. Banks guaranteed by the state because they are the state, without resort to bailouts or bail-ins. Banks that aren’t going anywhere, because they are locally owned by the people themselves.

The Folly of Absorbing the Gambling Losses of the Banks

Ireland was the first European country to watch its entire banking system fail.  Unlike the Icelanders, who refused to bail out their bankrupt banks, in September 2008 the Irish government gave a blanket guarantee to all Irish banks, covering all their loans, deposits, bonds and other liabilities.

At the time, no one was aware of the huge scale of the banks’ liabilities, or just how far the Irish property market would fall.

Within two years, the state bank guarantee had bankrupted Ireland.  The international money markets would no longer lend to the Irish government.

Before the bailout, the Irish budget was in surplus. By 2011, its deficit was 32% of the country’s GDP, the highest by far in the Eurozone. At that rate, bank losses would take every penny of Irish taxes for at least the next three years.

“This debt would probably be manageable,” wrote Morgan Kelly, Professor of Economics at University College Dublin, “had the Irish government not casually committed itself to absorb all the gambling losses of its banking system.”

To avoid collapse, the government had to sign up for an €85 billion bailout from the EU-IMF and enter a four year program of economic austerity, monitored every three months by an EU/IMF team sent to Dublin.

Public assets have also been put on the auction block. Assets currently under consideration include parts of Ireland’s power and gas companies and its 25% stake in the airline Aer Lingus.

At one time, Ireland could have followed the lead of Iceland and refused to bail out its bondholders or to bow to the demands for austerity. But that was before the Irish government used ECB money to pay off the foreign bondholders of Irish banks. Now its debt is to the troika, and the troika are tightening the screws.  In September 2013, they demanded another 3.1 billion euro reduction in spending.

Some ministers, however, are resisting such cuts, which they say are politically undeliverable.

In The Irish Times on October 31, 2013, a former IMF official warned that the austerity imposed on Ireland is self-defeating. Ashoka Mody, former IMF chief of mission to Ireland, said it had become “orthodoxy that the only way to establish market credibility” was to pursue austerity policies. But five years of crisis and two recent years of no growth needed “deep thinking” on whether this was the right course of action. He said there was “not one single historical instance” where austerity policies have led to an exit from a heavy debt burden.

Austerity has not fixed Ireland’s debt problems. Belying the rosy picture painted by the media, in September 2013 Antonio Garcia Pascual, chief euro-zone economist at Barclays Investment Bank, warned that Ireland may soon need a second bailout.

According to John Spain, writing in Irish Central in September 2013:

The anger among ordinary Irish people about all this has been immense. . . . There has been great pressure here for answers. . . . Why is the ordinary Irish taxpayer left carrying the can for all the debts piled up by banks, developers and speculators? How come no one has been jailed for what happened? . . . [D]espite all the public anger, there has been no public inquiry into the disaster.

Bail-in by Super-tax or Economic Sovereignty?

 In many ways, Ireland is ground zero for the austerity-driven asset grab now sweeping the world. All Eurozone countries are mired in debt. The problem is systemic.

In October 2013, an IMF report discussed balancing the books of the Eurozone governments through a super-tax of 10% on all households in the Eurozone with positive net wealth. That would mean the confiscation of 10% of private savings to feed the insatiable banking casino.

The authors said the proposal was only theoretical, but that it appeared to be “an efficient solution” for the debt problem. For a group of 15 European countries, the measure would bring the debt ratio to “acceptable” levels, i.e. comparable to levels before the 2008 crisis.

A review posted on Gold Silver Worlds observed:

[T]he report right away debunks the myth that politicians and main stream media try to sell, i.e. the crisis is contained and the positive economic outlook for 2014.

. . . Prepare yourself, the reality is that more bail-ins, confiscation and financial repression is coming, contrary to what the good news propaganda tries to tell.

A more sustainable solution was proposed by Dr Fadhel Kaboub, Assistant Professor of Economics at Denison University in Ohio. In a letter posted in The Financial Times titled “What the Eurozone Needs Is Functional Finance,” he wrote:

The eurozone’s obsession with “sound finance” is the root cause of today’s sovereign debt crisis. Austerity measures are not only incapable of solving the sovereign debt problem, but also a major obstacle to increasing aggregate demand in the eurozone. The Maastricht treaty’s “no bail-out, no exit, no default” clauses essentially amount to a joint economic suicide pact for the eurozone countries.

. . . Unfortunately, the likelihood of a swift political solution to amend the EU treaty is highly improbable. Therefore, the most likely and least painful scenario for [the insolvent countries] is an exit from the eurozone combined with partial default and devaluation of a new national currency. . . .

The takeaway lesson is that financial sovereignty and adequate policy co-ordination between fiscal and monetary authorities are the prerequisites for economic prosperity.

Standing Up to Goliath

 Ireland could fix its budget problems by leaving the Eurozone, repudiating its blanket bank guarantee as “odious” (obtained by fraud and under duress), and issuing its own national currency. The currency could then be used to fund infrastructure and restore social services, putting the Irish back to work.

Short of leaving the Eurozone, Ireland could reduce its interest burden and expand local credit by forming publicly-owned banks, on the model of the Bank of North Dakota. The newly-formed Public Banking Forum of Ireland is pursuing that option. In Wales, which has also been exploited for its coal, mobilizing for a public bank is being organized by the Arian Cymru ‘BERW’ (Banking and Economic Regeneration Wales).

Irish writer Barry Fitzgerald, author of Building Cities of Gold, casts the challenge to his homeland in archetypal terms:

The Irish are mobilising and they are awakening. They hold the DNA memory of vastly ancient times, when all men and women obeyed the Golden rule of honouring themselves, one another and the planet. They recognize the value of this harmony as it relates to banking. They instantly intuit that public banking free from the soiled hands of usurious debt tyranny is part of the natural order.

In many ways they could lead the way in this unfolding, as their small country is so easily traversed to mobilise local communities.  They possess vast potential renewable energy generation and indeed could easily use a combination of public banking and bond issuance backed by the people to gain energy independence in a very short time.

When the indomitable Irish spirit is awakened, organized and mobilized, the country could become the poster child not for austerity, but for economic prosperity through financial sovereignty.

_____________________

Ellen Brown is an attorney, president of the Public Banking Institute, and author of twelve books, including the best-selling Web of Debt. In The Public Bank Solution, her latest book, she explores successful public banking models historically and globally. Her blog articles are at EllenBrown.com.

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Is Homeland Security Preparing for the Next Wall Street Collapse?

Reports are that the Department of Homeland Security (DHS) is engaged in a massive, covert military buildup. An article in the Associated Press in February confirmed an open purchase order by DHS for 1.6 billion rounds of ammunition. According to an op-ed in Forbes, that’s enough to sustain an Iraq-sized war for over twenty years. DHS has also acquired heavily armored tanks, which have been seen roaming the streets. Evidently somebody in government is expecting some serious civil unrest. The question is, why?

Recently revealed statements by former UK Prime Minister Gordon Brown at the height of the banking crisis in October 2008 could give some insights into that question. An article on BBC News on September 21, 2013, drew from an explosive autobiography called Power Trip by Brown’s spin doctor Damian McBride, who said the prime minister was worried that law and order could collapse during the financial crisis. McBride quoted Brown as saying:

If the banks are shutting their doors, and the cash points aren’t working, and people go to Tesco [a grocery chain] and their cards aren’t being accepted, the whole thing will just explode.

If you can’t buy food or petrol or medicine for your kids, people will just start breaking the windows and helping themselves.

And as soon as people see that on TV, that’s the end, because everyone will think that’s OK now, that’s just what we all have to do. It’ll be anarchy. That’s what could happen tomorrow.

How to deal with that threat? Brown said, “We’d have to think: do we have curfews, do we put the Army on the streets, how do we get order back?”

McBride wrote in his book Power Trip, “It was extraordinary to see Gordon so totally gripped by the danger of what he was about to do, but equally convinced that decisive action had to be taken immediately.” He compared the threat to the Cuban Missile Crisis.

Fear of this threat was echoed in September 2008 by US Treasury Secretary Hank Paulson, who reportedly warned that the US government might have to resort to martial law if Wall Street were not bailed out from the credit collapse.

In both countries, martial law was avoided when their legislatures succumbed to pressure and bailed out the banks. But many pundits are saying that another collapse is imminent; and this time, governments may not be so willing to step up to the plate.

The Next Time WILL Be Different

What triggered the 2008 crisis was a run, not in the conventional banking system, but in the “shadow” banking system, a collection of non-bank financial intermediaries that provide services similar to traditional commercial banks but are unregulated.  They include hedge funds, money market funds, credit investment funds, exchange-traded funds, private equity funds, securities broker dealers, securitization and finance companies. Investment banks and commercial banks may also conduct much of their business in the shadows of this unregulated system.

The shadow financial casino has only grown larger since 2008; and in the next Lehman-style collapse, government bailouts may not be available. According to President Obama in his remarks on the Dodd-Frank Act on July 15, 2010, “Because of this reform, . . . there will be no more taxpayer funded bailouts – period.”

Governments in Europe are also shying away from further bailouts. The Financial Stability Board (FSB) in Switzerland has therefore required the systemically risky banks to devise “living wills” setting forth what they will do in the event of insolvency. The template established by the FSB requires them to “bail in” their creditors; and depositors, it turns out, are the largest class of bank creditor. (For fuller discussion, see my earlier article here.)

When depositors cannot access their bank accounts to get money for food for the kids, they could well start breaking store windows and helping themselves. Worse, they might plot to overthrow the financier-controlled government. Witness Greece, where increasing disillusionment with the ability of the government to rescue the citizens from the worst depression since 1929 has precipitated riots and threats of violent overthrow.

Fear of that result could explain the massive, government-authorized spying on American citizens, the domestic use of drones, and the elimination of due process and of “posse comitatus” (the federal law prohibiting the military from enforcing “law and order” on non-federal property). Constitutional protections are being thrown out the window in favor of protecting the elite class in power.

The Looming Debt Ceiling Crisis

The next crisis on the agenda appears to be the October 17th deadline for agreeing on a federal budget or risking default on the government’s loans. It may only be a coincidence, but two large-scale drills are scheduled to take place the same day, the “Great ShakeOut Earthquake Drill” and the “Quantum Dawn 2 Cyber Attack Bank Drill.” According to a Bloomberg news clip on the bank drill, the attacks being prepared for are from hackers, state-sponsored espionage, and organized crime (financial fraud). One interviewee stated, “You might experience that your online banking is down . . . . You might experience that you can’t log in.” It sounds like a dress rehearsal for the Great American Bail-in.

Ominous as all this is, it has a bright side. Bail-ins and martial law can be seen as the last desperate thrashings of a dinosaur. The exploitative financial scheme responsible for turning millions out of their jobs and their homes has reached the end of the line. Crisis in the current scheme means opportunity for those more sustainable solutions waiting in the wings.

Other countries faced with a collapse in their debt-based borrowed currencies have survived and thrived by issuing their own. When the dollar-pegged currency collapsed in Argentina in 2001, the national government returned to issuing its own pesos; municipal governments paid with “debt-canceling bonds” that circulated as currency; and neighborhoods traded with community currencies. After the German currency collapsed in the 1920s, the government turned the economy around in the 1930s by issuing “MEFO” bills that circulated as currency. When England ran out of gold in 1914, the government issued “Bradbury pounds” similar to the Greenbacks issued by Abraham Lincoln during the US Civil War.

Today our government could avoid the debt ceiling crisis by doing something similar: it could simply mint some trillion dollar coins and deposit them in an account. That alternative could be pursued by the Administration immediately, without going to Congress or changing the law, as discussed in my earlier article here. It need not be inflationary, since Congress could still spend only what it passed in its budget. And if Congress did expand its budget for infrastructure and job creation, that would actually be good for the economy, since hoarding cash and paying down loans have significantly shrunk the circulating money supply.

 Peer-to-peer Trading and Public Banks

At the local level, we need to set up an alternative system that provides safety for depositors, funds small and medium-sized businesses, and serves the needs of the community.

Much progress has already been made on that front in the peer-to-peer economy.  In a September 27th article titled “Peer-to-Peer Economy Thrives as Activists Vacate the System,” Eric Blair reports that the Occupy Movement is engaged in a peaceful revolution in which people are abandoning the established system in favor of a “sharing economy.” Trading occurs between individuals, without taxes, regulations or licenses, and in some cases without government-issued currency.

Peer-to-peer trading happens largely on the Internet, where customer reviews rather than regulation keep sellers honest. It started with eBay and Craigslist and has grown exponentially since. Bitcoin is a private currency outside the prying eyes of regulators. Software is being devised that circumvents NSA spying. Bank loans are being shunned in favor of crowdfunding. Local food co-ops are also a form of opting out of the corporate-government system.

Peer-to-peer trading works for local exchange, but we also need a way to protect our dollars, both public and private. We need dollars to pay at least some of our bills, and businesses need them to acquire raw materials. We also need a way to protect our public revenues, which are currently deposited and invested in Wall Street banks that have heavy derivatives exposure.

To meet those needs, we can set up publicly-owned banks on the model of the Bank of North Dakota, currently our only state-owned depository bank. The BND is mandated by law to receive all the state’s deposits and to serve the public interest. Ideally, every state would have one of these “mini-Feds.” Counties and cities could have them as well. For more information, see http://PublicBankingInstitute.org.

Preparations for martial law have been reported for decades, and it hasn’t happened yet. Hopefully, we can sidestep that danger by moving into a saner, more sustainable system that makes military action against American citizens unnecessary.

______________

Ellen Brown is an attorney, president of the Public Banking Institute, and author of twelve books, including the best-selling Web of Debt. In The Public Bank Solution, her latest book, she explores successful public banking models historically and globally. Her 200-plus blog articles are at EllenBrown.com.

 

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NYT, Room for Debate – “In Banking, Should There Be a ‘Public Option’?”

The New York Times “Room for Debate” section just hosted a debate called ”In Banking, Should There Be a ‘Public Option’?” My oped is here –

We actually need publicly owned banks for a capitalist market economy to run properly. Banking, money and credit are not market goods but are economic infrastructure, just as roads and bridges are physical infrastructure. By providing inexpensive, accessible financing to the free enterprise sector of the economy, public banks make commerce more vital and stable. Public banking is not a radical idea but has been practiced in the U.S. with excellent results for decades, and around the world for centuries.

Read more here.

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What We Could Do with a Postal Savings Bank: Infrastructure that Doesn’t Cost Taxpayers...

The U.S. Postal Service (USPS) is the nation’s second largest civilian employer after WalMart. Although successfully self-funded throughout its long history, it is currently struggling to stay afloat. This is not, as sometimes asserted, because it has been made obsolete by the Internet. In fact the post office has gotten more business from Internet orders than it has lost to electronic email. What has pushed the USPS into insolvency is an oppressive 2006 congressional mandate that it prefund healthcare for its workers 75 years into the future. No other entity, public or private, has the burden of funding multiple generations of employees who have not yet even been born.

The Carper-Coburn bill (S. 1486) is the subject of congressional hearings this week. It threatens to make the situation worse, by eliminating Saturday mail service and door-to-door delivery and laying off more than 100,000 workers over several years.

The Postal Service Modernization Bills brought by Peter DeFazio and Bernie Sanders, on the other hand, would allow the post office to recapitalize itself by diversifying its range of services to meet unmet public needs.

Needs that the post office might diversify into include (1) funding the rebuilding of our crumbling national infrastructure; (2) servicing the massive market of the “unbanked” and “underbanked” who lack access to basic banking services; and (3) providing a safe place to save our money, in the face of Wall Street’s new “bail in” policies for confiscating depositor funds. All these needs could be met at a stroke by some simple legislation authorizing the post office to revive the banking services it efficiently performed in the past.

Funding Infrastructure Tax-free

In a July 2013 article titled “Delivering A National Infrastructure Bank . . . through the Post Office,” Frederic V. Rolando, president of the National Association of Letter Carriers, addressed the woeful state of US infrastructure. He noted that the idea of forming a national infrastructure bank (NIB) has had bipartisan congressional support over the past six years, with senators from both parties introducing bills for such a bank:

An NIB would provide a means to channel public funds into regional and national projects identified by political and community leaders across the country to keep the economy healthy. It could issue bonds, back public-private partnerships and guarantee long-term, low-interest loans to states and investment groups willing to rebuild our schools, hospitals, airports and energy grids. An NIB with $10 billion in capital could leverage hundreds of billions in investments.

What has blocked these bills is opposition to using tax money for the purpose. But Rolando asks:

[W]hat if we set up the NIB without using taxpayer funds? What if we allowed Americans to open savings accounts in the nation’s post offices and directed those funds into national infrastructure bonds that would earn interest for depositors and fund job-creating projects to replace and modernize our crumbling infrastructure?

A post office bank . . . would not offer commercial loans or mortgages. But it could serve the unbanked and fund infrastructure projects selected by a non-partisan NIB.

The Unbanked and Underbanked: A Massive Untapped Market

The “unbanked” are not a small segment of the population. In a 2011 survey, the unbanked and underbanked included about one in four households.  Without access to conventional financial services, people turn to an expensive alternative banking market of bill-pay, prepaid debit cards, check cashing services, and payday loans.  They pay excessive fees and are susceptible to high-cost predatory lenders.

Globally, postal banks are major contributors to financial inclusion. Catering to this underserved population is a revenue-generator for the post office while saving the underbanked large sums in fees. Worldwide, according to the Universal Postal Union, 1 billion people now use the postal sector for savings and deposit accounts, and more than 1.5 billion take advantage of basic transactional services through the post. According to a Discussion Paper of the United Nations Department of Economic and Social Affairs:

The essential characteristic distinguishing postal financial services from the private banking sector is the obligation and capacity of the postal system to serve the entire spectrum of the national population, unlike conventional private banks which allocate their institutional resources to service the sectors of the population they deem most profitable.

Expanding to include postal financial services has been crucial in many countries to maintaining the profitability of their postal network.  Maintaining post offices in some rural or low-income areas can be a losing proposition, so the postal service often cross-subsidizes with other activities to maintain its universal network.  Public postal banks are profitable because their market is large and their costs are low.  The infrastructure is already built and available, advertising costs are minimal, and government-owned banks do not reward their management with extravagant bonuses or commissions that drain profits away.  Profits return to the government and the people.

Wall Street Is No Longer a Safe Place to Keep Our Money

A postal bank could have appeal not just to the unbanked but to savers generally who are concerned about the safety of their deposits. Traditionally, people have deposited their money in banks for three reasons: safety from theft, the convenience of check writing and bill paying, and to earn some interest. Today, not only do our bank deposits earn virtually no interest, but they are not safe from theft – and the prospective thief is Wall Street itself.

The Financial Stability Board (FSB) in Switzerland has mandated that “systemically important” banks come up with “living wills” stating what they would do in the event of insolvency. The template set out by the FSB is for these too-big-to-fail banks to confiscate their creditors’ funds and convert them to bank equity or stock. Legally, “creditors” include the depositors. In fact depositors compose the largest class of creditors of any bank.

In 2009, President Obama agreed along with other G20 leaders to be bound by the regulations imposed by the FSB, giving them the force of law. This agreement should properly have been a treaty, subject to the approval of two-thirds of the Senate; but the deal was sealed on a handshake, ostensibly to prevent another Lehman-style banking collapse. Thus the next time JPMorganChase or Bank of America finds itself on the wrong side of a massive derivatives bet, it can avoid insolvency by recapitalizing itself with our deposits. Both JPM and BOA hold over $1 trillion in deposits and over $70 trillion in derivatives; and with the repeal of Glass-Steagall, the banks have been able to merge these operations. The FDIC deposit insurance fund has only $32 billion in it to cover losses for the entire country.

For guaranteed safety, we need a network of publicly-owned banks devoted solely to taking deposits and providing check-cashing services – no gambling with deposits allowed. The US Post Office can safely and efficiently provide the infrastructure for such a banking network, as it did from 1911 until 1967. The post office is ubiquitous, with branches in every town and community.

A Proven Model

Postal banking systems are also ubiquitous in other countries, where their long record of safe and profitable public banking has proved the viability of the model. The mother of all postal banks was in Great Britain in the 19th century. The leader today is Japan Post Bank (JPB), now the largest depository bank in the world. Not only is it a convenient place for Japanese citizens to save their money, but the government has succeeded in drawing on JPB’s massive deposit base to fund a major portion of the federal budget. Rather than using its deposits to back commercial loans as most banks do, Japan Post invests them in government securities. That means the government is borrowing from its own bank and its own people rather than from foreign bondholders.

That is the basic idea behind the national postal savings and infrastructure bank. The deposits of the nation’s savers can be invested in government securities that are in turn used for rebuilding the nation. It is a win-win-win, providing a way to save the post office while at the same time protecting our deposits and rebuilding our decaying roads and bridges without dipping into taxes. It is also a way to vote with our feet, moving our money out of an increasingly risky and rapacious Wall Street into a network of publicly-owned banks that serves rather than exploits us.

Another Option: Rescind the Prefunding Requirement

Another alternative for putting the USPS in the black, of course, is simply to rescind the healthcare pre-funding requirement that put it in the red. The mandate to fund healthcare 75 years into the future appears so unreasonable as to raise suspicions that the nation’s largest publicly-owned industry has been intentionally targeted for takedown. Why? Is it because competitors want the business, or because private developers want the valuable postal properties that are being systematically sold off to meet its now-crippled the budget?

In a revealing exposé in the September 18th East Bay Express, Peter Byrne provides evidence that C.B. Richard Ellis (CBRE), the company holding the exclusive contract to negotiate sales for the $85 billion postal real estate portfolio, has sold off 52 postal properties for at least $79 million less than their fair market value. Worse, the buyers included its own business partners and shareholders, including Goldman Sachs. CBRE is chaired by Richard C. Blum, the husband of US Senator Dianne Feinstein, a family Byrne says has a history of accessing public pension funds to make private investments (citing here and here).

The post office has been made to look inefficient and obsolete, as if public enterprises are incapable of generating public revenues; yet the postal service has been both self-funding and profitable for over two centuries. If we refuse to allow our government to make money through public enterprises, we will be destined to bear the burden of supporting government with our taxes, while we watch countries such as China, Korea and Japan, which do allow public industries, enjoy the fruits of that profitable and efficient arrangement.

______________

Ellen Brown is an attorney, president of the Public Banking Institute, and author of twelve books including the best-selling Web of Debt. In The Public Bank Solution, her latest book, she explores successful public banking models historically and globally. Her 200-plus blog articles are at EllenBrown.com.

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The Armageddon Looting Machine: The Looming Mass Destruction from Derivatives

Increased regulation and low interest rates are driving lending from the regulated commercial banking system into the unregulated shadow banking system. The shadow banks, although free of government regulation, are propped up by a hidden government guarantee in the form of safe harbor status under the 2005 Bankruptcy Reform Act pushed through by Wall Street. The result is to create perverse incentives for the financial system to self-destruct.

Five years after the financial collapse precipitated by the Lehman Brothers bankruptcy on September 15, 2008, the risk of another full-blown financial panic is still looming large, despite the Dodd Frank legislation designed to contain it. As noted in a recent Reuters article, the risk has just moved into the shadows:

[B]anks are pulling back their balance sheets from the fringes of the credit markets, with more and more risk being driven to unregulated lenders that comprise the $60 trillion “shadow-banking” sector.

Increased regulation and low interest rates have made lending to homeowners and small businesses less attractive than before 2008. The easy subprime scams of yesteryear are no more. The void is being filled by the shadow banking system. Shadow banking comes in many forms, but the big money today is in repos and derivatives. The notional (or hypothetical) value of the derivatives market has been estimated to be as high as $1.2 quadrillion, or twenty times the GDP of all the countries of the world combined.

According to Hervé Hannoun, Deputy General Manager of the Bank for International Settlements, investment banks as well as commercial banks may conduct much of their business in the shadow banking system (SBS), although most are not generally classed as SBS institutions themselves. At least one financial regulatory expert has said that regulated banking organizations are the largest shadow banks.

The Hidden Government Guarantee that Props Up the Shadow Banking System

According to Dutch economist Enrico Perotti, banks are able to fund their loans much more cheaply than any other industry because they offer “liquidity on demand.” The promise that the depositor can get his money out at any time is made credible by government-backed deposit insurance and access to central bank funding.  But what guarantee underwrites the shadow banks? Why would financial institutions feel confident lending cheaply in the shadow market, when it is not protected by deposit insurance or government bailouts?

Perotti says that liquidity-on-demand is guaranteed in the SBS through another, lesser-known form of government guarantee: “safe harbor” status in bankruptcy. Repos and derivatives, the stock in trade of shadow banks, have “superpriority” over all other claims. Perotti writes:

Security pledging grants access to cheap funding thanks to the steady expansion in the EU and US of “safe harbor status”. Also called bankruptcy privileges, this ensures lenders secured on financial collateral immediate access to their pledged securities. . . .

Safe harbor status grants the privilege of being excluded from mandatory stay, and basically all other restrictions. Safe harbor lenders, which at present include repos and derivative margins, can immediately repossess and resell pledged collateral.

This gives repos and derivatives extraordinary super-priority over all other claims, including tax and wage claims, deposits, real secured credit and insurance claims. Critically, it ensures immediacy (liquidity) for their holders. Unfortunately, it does so by undermining orderly liquidation.

When orderly liquidation is undermined, there is a rush to get the collateral, which can actually propel the debtor into bankruptcy.

The amendment to the Bankruptcy Reform Act of 2005 that created this favored status for repos and derivatives was pushed through by the banking lobby with few questions asked. In a December 2011 article titled “Plan B – How to Loot Nations and Their Banks Legally,” documentary film-maker David Malone wrote:

This amendment which was touted as necessary to reduce systemic risk in financial bankruptcies . . . allowed a whole range of far riskier assets to be used . . . . The size of the repo market hugely increased and riskier assets were gladly accepted as collateral because traders saw that if the person they had lent to went down they could get [their] money back before anyone else and no one could stop them.

Burning Down the Barn to Get the Insurance

Safe harbor status creates the sort of perverse incentives that make derivatives “financial weapons of mass destruction,” as Warren Buffett famously branded them. It is the equivalent of burning down the barn to collect the insurance. Says Malone:

All other creditors – bond holders – risk losing some of their money in a bankruptcy. So they have a reason to want to avoid bankruptcy of a trading partner. Not so the repo and derivatives partners. They would now be best served by looting the company – perfectly legally – as soon as trouble seemed likely. In fact the repo and derivatives traders could push a bank that owed them money over into bankruptcy when it most suited them as creditors. When, for example, they might be in need of a bit of cash themselves to meet a few pressing creditors of their own.

The collapse of . . . Bear Stearns, Lehman Brothers and AIG were all directly because repo and derivatives partners of those institutions suddenly stopped trading and ‘looted’ them instead.

The global credit collapse was triggered, it seems, not by wild subprime lending but by the rush to grab collateral by players with congressionally-approved safe harbor status for their repos and derivatives.

Bear Stearns and Lehman Brothers were strictly investment banks, but now we have giant depository banks gambling in derivatives as well; and with the repeal of the Glass-Steagall Act that separated depository and investment banking, they are allowed to commingle their deposits and investments. The risk to the depositors was made glaringly obvious when MF Global went bankrupt in October 2011. Malone wrote:

When MF Global went down it did so because its repo, derivative and hypothecation partners essentially foreclosed on it. And when they did so they then ‘looted’ the company. And because of the co-mingling of clients money in the hypothecation deals the ‘looters’ also seized clients money as well. . . JPMorgan allegedly has MF Global money while other people’s lawyers can only argue about it.

MF Global was followed by the Cyprus “bail-in” – the confiscation of depositor funds to recapitalize the country’s failed banks. This was followed by the coordinated appearance of bail-in templates worldwide, mandated by the Financial Stability Board, the global banking regulator in Switzerland.

The Auto-Destruct Trip Wire on the Banking System

Bail-in policies are being necessitated by the fact that governments are balking at further bank bailouts. In the US, the Dodd-Frank Act (Section 716) now bans taxpayer bailouts of most speculative derivative activities. That means the next time we have a Lehman-style event, the banking system could simply collapse into a black hole of derivative looting. Malone writes:

. . . The bankruptcy laws allow a mechanism for banks to disembowel each other. The strongest lend to the weaker and loot them when the moment of crisis approaches. The plan allows the biggest banks, those who happen to be burdened with massive holdings of dodgy euro area bonds, to leap out of the bond crisis and instead profit from a bankruptcy which might otherwise have killed them. All that is required is to know the import of the bankruptcy law and do as much repo, hypothecation and derivative trading with the weaker banks as you can.

. . . I think this means that some of the biggest banks, themselves, have already constructed and greatly enlarged a now truly massive trip wired auto-destruct on the banking system.

The weaker banks may be the victims, but it is we the people who will wind up holding the bag. Malone observes:

For the last four years who has been putting money in to the banks? And who has become a massive bond holder in all the banks? We have. First via our national banks and now via the Fed, ECB and various tax payer funded bail out funds. We are the bond holders who would be shafted by the Plan B looting. We would be the people waiting in line for the money the banks would have already made off with. . . .

. . . [T]he banks have created a financial Armageddon looting machine. Their Plan B is a mechanism to loot not just the more vulnerable banks in weaker nations, but those nations themselves. And the looting will not take months, not even days. It could happen in hours if not minutes.

Crisis and Opportunity: Building a Better Mousetrap

There is no way to regulate away this sort of risk. If both the conventional banking system and the shadow banking system are being maintained by government guarantees, then we the people are bearing the risk. We should be directing where the credit goes and collecting the interest. Banking and the creation of money-as-credit need to be made public utilities, owned by the public and having a mandate to serve the public. Public banks do not engage in derivatives.

Today, virtually the entire circulating money supply (M1, M2 and M3) consists of privately-created “bank credit” – money created on the books of banks in the form of loans. If this private credit system implodes, we will be without a money supply. One option would be to return to the system of government-issued money that was devised by the American colonists, revived by Abraham Lincoln during the Civil War, and used by other countries at various times and places around the world. Another option would be a system of publicly-owned state banks on the model of the Bank of North Dakota, leveraging the capital of the state backed by the revenues of the state into public bank credit for the use of the local economy.

Change happens historically in times of crisis, and we may be there again today.

_______________

Ellen Brown is an attorney, president of the Public Banking Institute, and author of twelve books including the best-selling Web of Debt. In The Public Bank Solution, her latest book, she explores successful public banking models historically and globally. Her websites are http://WebofDebt.comhttp://PublicBankSolution.com, and http://PublicBankingInstitute.org.

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Making the World Safe for Banksters: Syria in the Cross-hairs

“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.”  —Prof. Caroll Quigley, Georgetown University, Tragedy and Hope (1966)

Iraq and Libya have been taken out, and Iran has been heavily boycotted. Syria is now in the cross-hairs. Why? Here is one overlooked scenario. 

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, he went on to become president of Harvard, where he approved a derivative bet on interest rate swaps that lost over $1 billion for the university.  He resigned in 2006 to manage a hedge fund among other business activities, and went on to become State Senator Barack Obama’s key campaign benefactor.

Summers 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 he 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.

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Ellen Brown is an attorney, president of the Public Banking Institute, and author of twelve books including the best-selling Web of Debt. In The Public Bank Solution, her latest book, she explores successful public banking models historically and globally. Her websites are http://WebofDebt.com, http://PublicBankSolution.com, and http://PublicBankingInstitute.org.

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The Confiscation Scheme Planned for U.S. and U.K. Depositors

The Confiscation Scheme Planned for U.S. and U.K. Depositors

Posted on Mar 28, 2013
eflon (CC BY 2.0)

By Ellen Brown, Web of Debt

This article first appeared at Web of Debt.

Confiscating the customer deposits in Cyprus banks, it seems, was not a one-off, desperate idea of a few Eurozone “troika” officials scrambling to salvage their balance sheets. A joint paper by the US Federal Deposit Insurance Corporation and the Bank of England dated December 10, 2012, shows that these plans have been long in the making; that they originated with the G20 Financial Stability Board in Basel, Switzerland (discussed earlier here); and that the result will be to deliver clear title to the banks of depositor funds. 

New Zealand has a similar directive, discussed in my last article here, indicating that this isn’t just an emergency measure for troubled Eurozone countries. New Zealand’s Voxy reported on March 19th:

The National Government [is] pushing a Cyprus-style solution to bank failure in New Zealand which will see small depositors lose some of their savings to fund big bank bailouts . . . .

Open Bank Resolution (OBR) is Finance Minister Bill English’s favoured option dealing with a major bank failure. If a bank fails under OBR, all depositors will have their savings reduced overnight to fund the bank’s bail out.

Can They Do That?

Although few depositors realize it, legally the bank owns the depositor’s funds as soon as they are put in the bank. Our money becomes the bank’s, and we become unsecured creditors holding IOUs or promises to pay. (See here and here.) But until now the bank has been obligated to pay the money back on demand in the form of cash. Under the FDIC-BOE plan, our IOUs will be converted into “bank equity.”  The bank will get the money and we will get stock in the bank. With any luck we may be able to sell the stock to someone else, but when and at what price? Most people keep a deposit account so they can have ready cash to pay the bills.

The 15-page FDIC-BOE document is called “Resolving Globally Active, Systemically Important, Financial Institutions.”  It begins by explaining that the 2008 banking crisis has made it clear that some other way besides taxpayer bailouts is needed to maintain “financial stability.” Evidently anticipating that the next financial collapse will be on a grander scale than either the taxpayers or Congress is willing to underwrite, the authors state:

An efficient path for returning the sound operations of the G-SIFI to the private sector would be provided by exchanging or converting a sufficient amount of the unsecured debt from the original creditors of the failed company [meaning the depositors] into equity [or stock]. In the U.S., the new equity would become capital in one or more newly formed operating entities. In the U.K., the same approach could be used, or the equity could be used to recapitalize the failing financial company itself—thus, the highest layer of surviving bailed-in creditors would become the owners of the resolved firm. In either country, the new equity holders would take on the corresponding risk of being shareholders in a financial institution.

No exception is indicated for “insured deposits” in the U.S., meaning those under $250,000, the deposits we thought were protected by FDIC insurance. This can hardly be an oversight, since it is the FDIC that is issuing the directive. The FDIC is an insurance company funded by premiums paid by private banks. The directive is called a “resolution process,” defined elsewhere as a plan that “would be triggered in the event of the failure of an insurer . . . .” The only mention of “insured deposits” is in connection with existing UK legislation, which the FDIC-BOE directive goes on to say is inadequate, implying that it needs to be modified or overridden. 

An Imminent Risk

If our IOUs are converted to bank stock, they will no longer be subject to insurance protection but will be “at risk” and vulnerable to being wiped out, just as the Lehman Brothers shareholders were in 2008. That this dire scenario could actually materialize was underscored by Yves Smith in a March 19th post titled When You Weren’t Looking, Democrat Bank Stooges Launch Bills to Permit Bailouts, Deregulate Derivatives. She writes:

In the US, depositors have actually been put in a worse position than Cyprus deposit-holders, at least if they are at the big banks that play in the derivatives casino. The regulators have
turned a blind eye as banks use their depositaries to fund derivatives exposures. And as bad as that is, the depositors, unlike their Cypriot confreres, aren’t even senior creditors. Remember Lehman? When the investment bank failed, unsecured creditors (and remember, depositors are unsecured creditors) got eight cents on the dollar. One big reason was that derivatives counterparties require collateral for any exposures, meaning they are secured creditors. The 2005 bankruptcy reforms made derivatives counterparties senior to unsecured lenders.


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Levy on Deposits ‘Back on Table’ as Cyprus Reels

A week of nervous panic and public outrage continued in Cyprus on Friday as government ministers said a bailout deal was again close to being reached between the island nation and its creditors from mainland Europe.

Police confront demonstrators attempting to pull down security barriers during a protest Friday outside the Cypriot parliament in Nicosia, Cyprus. (Simon Dawson / Bloomberg / March 22, 2013) The country's banks remain closed until next week, but the furor caused by an announcement nearly six days ago—which including a plan to levy individual bank deposits in order to raise funds to secure a loan of 10 billion euros ($13 billion) from the European Union, European Central Bank, and the IMF—has overtaken the country.

As the day turned into evening in the capitol of Nicosia, media reports indicated that parliament might vote on only three bills on Friday, including the restructuring of a key bank in the country, but that legislation surrounding the levying of deposits may not happen until Saturday morning.

Earlier:

Reuters reports:

Averof Neophytou, deputy leader of the ruling Democratic Rally party, said Cypriot political leaders were close to a compromise that would let parliament reverse its rejection of a rescue package offered by euro zone partners a week ago under which holders of bank deposits would suffer losses.

Finance Minister Michael Sarris, returning empty-handed from Moscow, said a bank deposit levy was back "on the table".

Germany warned Cyprus it was "playing with fire", with the clock running down to a Monday deadline set by the European Central Bank when it will sever essential cash flows to Cypriot banks if no bailout program is agreed.

And the Los Angeles Times reports:

Failure to produce a viable bailout scheme by Monday will force the European Central Bank, according to an ultimatum it issued earlier this week, to stop funneling billions of dollars into Cyprus’ cash-strapped financial system, leaving the island nation to fend for itself.

Though Cyprus has a small economy accounting for 0.2% of economic output in the Eurozone, the 17 nations that use the euro currency, letting the island go under could have a ripple effect on the region and perhaps beyond, officials and analysts fear.

Despite its size, Ellen Brown of the Public Banking Institute in the U.S. describes why the battle in Cyprus could have enormous implications for other nations and the world economy.

Cyprus is a small island, of little apparent significance. But one day, the bold move of its legislators may be compared to the Battle of Marathon, the pivotal moment in European history when their Greek forebears fended off the Persians, allowing classical Greek civilization to flourish.  The current battle on this tiny island has taken on global significance.  If the technocrat bankers can push through their confiscation scheme there, precedent will be established for doing it elsewhere when bank bailouts become prohibitive for governments.

Talk of a Eurozone exit has been ongoing thoughout week, with many progressive economists saying that such a threat by Cyprus to exit the single currency may be the only quality leverage it has left in order to refuse what has been termed "a bank robbery" by the European "Troika" against the people of Cyprus.

As Robert Kuttner, writing for The American Prospect on Thursday, argued:

If Cyprus or Greece or Spain or Portugal (or better yet, all of them en bloc) decided to quit the euro and revert to drachmas and pesetas, they would need to block bank accounts, impose currency and capital controls, and default on some of all of their foreign debts, which would be re-denominated in the new local currency. There would be lawsuits up the gazork, but the IMF and ECB would have to step in to limit the broader damage even if they disapproved.

It would not be pretty, but it has been done before. In fact, in the past century, some 69 countries have abandoned currencies. [...]

After a relative brief period of worse economic pain, these small nations would emerge with far greater freedom of action over their own economic destiny. They would have currencies that were a lot cheaper internationally, which would be good for exports and for tourism.

Decrying the position of the Troika, Glen Ford, editor of the Black Agenda Report, said that the austerity measures taking place in Cyprus were happening all over the world, from the countries of southern Europe to the urban cities of the United States.

"In Cyprus," Ford writes, "they are prepared to brazenly snatch euros directly from working and retired people’s accounts to fund a bank bailout, without even bothering to construct a convoluted pathway from the victims’ accounts to their own. They have reached the point of outright confiscation, and will not stop until they have stripped society of the potential to save itself from the ruins."

Reporting on the possible bank runs that could occur, the LA Times adds that "analysts fear that as much as $30 billion could be pulled out of the banks when they reopen Tuesday, which could have consequences on neighboring countries."

“If this proves uncontrollable and unsustainable, Cyprus may go up in flames, singeing Spain and Italy,” said Alexander Apostolides, a leading economic analyst in Nicosia.

_________________________________________________

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A Safe and a Shotgun or Publicly-owned Banks? The Battle of Cyprus

A Safe and a Shotgun or Publicly-owned Banks? The Battle of Cyprus

Posted on Mar 22, 2013
loop_oh (CC BY-ND 2.0)

By Ellen Brown, Web of Debt

This article first appeared at Web of Debt.

“If these worries become really serious, . . . [s]mall savers will take their money out of banks and resort to household safes and a shotgun.”
  —Martin Hutchinson on the attempted EU raid on private deposits in Cyprus banks

The deposit confiscation scheme has long been in the making. US depositors could be next . . . .

On Tuesday, March 19, the national legislature of Cyprus overwhelmingly rejected a proposed levy on bank deposits as a condition for a European bailout. Reuters called it “a stunning setback for the 17-nation currency bloc,” but it was a stunning victory for democracy. As Reuters quoted one 65-year-old pensioner, “The voice of the people was heard.” 

The EU had warned that it would withhold €10 billion in bailout loans, and the European Central Bank (ECB) had threatened to end emergency lending assistance for distressed Cypriot banks, unless depositors – including small savers – shared the cost of the rescue. In the deal rejected by the legislature, a one-time levy on depositors would be required in return for a bailout of the banking system. Deposits below €100,000 would be subject to a 6.75% levy or “haircut”, while those over €100,000 would have been subject to a 9.99% “fine.”

The move was bold, but the battle isn’t over yet.  The EU has now given Cyprus until Monday to raise the billions of euros it needs to clinch an international bailout or face the threatened collapse of its financial system and likely exit from the euro currency zone. 

The Long-planned Confiscation Scheme

The deal pushed by the “troika” – the EU, ECB and IMF – has been characterized as a one-off event devised as an emergency measure in this one extreme case. But the confiscation plan has long been in the making, and it isn’t limited to Cyprus.

In a September 2011 article in the Bulletin of the Reserve Bank of New Zealand titled “A Primer on Open Bank Resolution,” Kevin Hoskin and Ian Woolford discussed a very similar haircut plan that had been in the works, they said, since the 1997 Asian financial crisis.  The article referenced recommendations made in 2010 and 2011 by the Basel Committee of the Bank for International Settlements, the “central bankers’ central bank” in Switzerland.

The purpose of the plan, called the Open Bank Resolution (OBR), is to deal with bank failures when they have become so expensive that governments are no longer willing to bail out the lenders. The authors wrote that the primary objectives of OBR are to:

• ensure that, as far as possible, any losses are ultimately borne by the bank’s shareholders and creditors . . . . 

The spectrum of “creditors” is defined to include depositors:

At one end of the spectrum, there are large international financial institutions that invest in debt issued by the bank (commonly referred to as wholesale funding). At the other end of the spectrum, are customers with cheque and savings accounts and term deposits.

Most people would be surprised to learn that they are legally considered “creditors” of their banks rather than customers who have trusted the bank with their money for safekeeping, but that seems to be the case. According to Wikipedia:

In most legal systems, . . . the funds deposited are no longer the property of the customer. The funds become the property of the bank, and the customer in turn receives an asset called a deposit account (a checking or savings account). That deposit account is a liability of the bank on the bank’s books and on its balance sheet.  Because the bank is authorized by law to make loans up to a multiple of its reserves, the bank’s reserves on hand to satisfy payment of deposit liabilities amounts to only a fraction of the total which the bank is obligated to pay in satisfaction of its demand deposits.

The bank gets the money. The depositor becomes only a creditor with an IOU. The bank is not required to keep the deposits available for withdrawal but can lend them out, keeping only a “fraction” on reserve, following accepted fractional reserve banking principles. When too many creditors come for their money at once, the result can be a run on the banks and bank failure.

The New Zealand OBR said the creditors had all enjoyed a return on their investments and had freely accepted the risk, but most people would be surprised to learn that too. What return do you get from a bank on a deposit account these days? And isn’t your deposit protected against risk by FDIC deposit insurance?

Not anymore, apparently. As Martin Hutchinson observed in Money Morning, “if governments can just seize deposits by means of a ‘tax’ then deposit insurance is worth absolutely zippo.” 


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Quantitative Easing (QE) for the People: Comedian Grillo’s Populist Plan for Italy

Beppe-Grillo-e1361568756286

Default on the public debt, nationalization of the banks, and a citizen dividend could actually save the Italian economy.

Comedian Beppe Grillo was surprised himself when his Five Star Movement got 8.7 million votes in the Italian general election of February 24-25th.  His movement is now the biggest single party in the chamber of deputies, says The Guardian, which makes him “a kingmaker in a hung parliament.”

Grillo’s is the party of “no.” In a candidacy based on satire, he organized an annual “V‑Day Celebration,” the “V” standing for vaffanculo (“f—k off”).  He rejects the status quo—all the existing parties and their monopoly control of politics, jobs, and financing—and seeks a referendum on all international treaties, including NATO membership, free trade agreements and the Euro.

“If we get into parliament,” says Grillo, “we would bring the old system down, not because we would enjoy doing so but because the system is rotten.” Critics fear, and supporters hope, that if his party succeeds, it could break the Euro system.

But being against everything, says Mike Whitney in Counterpunch, is not a platform:

To govern, one needs ideas and a strategy for implementing those ideas. Grillo’s team has neither. They are defined more in terms of the things they are against than things they are for. It’s fine to want to “throw the bums out”, but that won’t put people back to work or boost growth or end the slump. Without a coherent plan to govern, M5S could end up in the political trash heap, along with their right-wing predecessors, the Tea Party.

Steve Colatrella, who lives in Italy and also has an article in Counterpunch on the Grillo phenomenon, has a different take on the surprise win. He says Grillo does have a platform of positive proposals. Besides rejecting all the existing parties and treaties, Grillo’s program includes the following:

  • unilateral default on the public debt;
  • nationalization of the banks; and
  • a guaranteed “citizenship” income of 1000 euros a month.

It is a platform that could actually work. Austerity has been tested for a decade in the Eurozone and has failed, while the proposals in Grillo’s plan have been tested in other countries and have succeeded.

Default: Lessons from Iceland and South America

Default on the public debt has been pulled off quite successfully in Iceland, Argentina, Ecuador, and Russia, among other countries.  Whitney cites a clip from Grillo’s blog suggesting that this is also the way out for Italy:

The public debt has not been growing in recent years because of too much expenditure . . . Between 1980 and 2011, spending was lower than the tax revenue by 484 billion (thus we have been really virtuous) but the interest payments (on the debt of 2,141 billion) that we had to pay in that period have made us poor. In the last 20 years, GDP has been growing slowly, while the debt has exploded.

. . . [S]peculators . . . are contributing to price falls so as to bring about higher interest rates. It’s the usurer’s technique. Thus the debt becomes an opportunity to maximize earnings in the market at the expense of the nation. . . . If financial powerbrokers use speculation to increase their earnings and force governments to pay the highest possible interest rates, the result is recession for the State that’s in debt as well as their loss of sovereignty.

. . . There are alternatives. These are being put into effect by some countries in South America and by Iceland. . . . The risk is that we are going to reach default in any case with the devaluation of the debt, and the Nation impoverished and on its knees. [Beppe Grillo blog]

Bank Nationalization:  China Shows What Can Be Done

Grillo’s second proposal, nationalizing the banks, has also been tested and proven elsewhere, most notably in China. In an April 2012 article in The American Conservative titled “China’s Rise, America’s Fall,” Ron Unz observes:

During the three decades to 2010, China achieved perhaps the most rapid sustained rate of economic development in the history of the human species, with its real economy growing almost 40-fold between 1978 and 2010.  In 1978, America’s economy was 15 times larger, but according to most international estimates, China is now set to surpass America’s total economic output within just another few years.

According to Eamonn Fingleton in In The Jaws of the Dragon (2009), the fountain that feeds this tide is a strong public banking sector:

Capitalism’s triumph in China has been proclaimed in countless books in recent years. . . .  But . . . the higher reaches of its economy remain comprehensively controlled in a way that is the antithesis of everything we associate with Western capitalism.  The key to this control is the Chinese banking system . . . [which is] not only state-owned but, as in other East Asian miracle economies, functions overtly as a major tool of the central government’s industrial policy.

Guaranteed Basic Income—Not Just Welfare

Grillo’s third proposal, a guaranteed basic income, is not just an off-the-wall, utopian idea either. A national dividend has been urged by the “Social Credit” school of monetary reform for nearly a century, and the U.S. Basic Income Guarantee Network has held a dozen annual conferences.  They feel that a guaranteed basic income is the key to keeping modern, highly productive economies humming.

In Europe, the proposal is being pursued not just by Grillo’s southern European party but by the sober Swiss of the north.  An initiative to establish a new federal law for an unconditional basic income was formally introduced in Switzerland in April 2012. The idea consists of giving to all citizens a monthly income that is neither means-tested nor work-related. Under the Swiss referendum system of direct democracy, if the initiative gathers more than 100,000 signatures before October 2013, the Federal Assembly is required to look into it.

Colatrella does not say where Grillo plans to get the money for Italy’s guaranteed basic income, but in Social Credit theory, it would simply be issued outright by the government; and Grillo, who has an accounting background, evidently agrees with that approach to funding.  He said in a presentation available on YouTube:

The Bank of Italy a private join-stock company, ownership comprises 10 insurance companies, 10 foundations, and 10 banks, that are all joint-stock companies . . .  They issue the money out of thin air and lend it to us.  It’s the State who is supposed to issue it.  We need money to work.  The State should say: “There’s scarcity of money?  I’ll issue some and put it into circulation.  Money is plentiful?  I’ll withdraw and burn some of it.” . . . Money is needed to keep prices stable and to let us work.

The Key to a Thriving Economy

Major C.H. Douglas, the thought leader of the Social Credit movement, argued that the economy routinely produces more goods and services than consumers have the money to purchase, because workers collectively do not get paid enough to cover the cost of the things they make.  This is true because of external costs such as interest paid to banks, and because some portion of the national income is stashed in savings accounts, investment accounts, and under mattresses rather than spent on the GDP.

To fill what Social Crediters call “the gap,” so that “demand” rises to meet “supply,” additional money needs to be gotten into the circulating money supply. Douglas recommended doing it with a national dividend for everyone, an entitlement by “grace” rather than “works,” something that was necessary just to raise purchasing power enough to cover the products on the market.

In the 1930s and 1940s, critics of Social Credit called it “funny money” and said it would merely inflate the money supply. The critics prevailed, and the Social Credit solution has not had much chance to be tested. But the possibilities were demonstrated in New Zealand during the Great Depression, when a state housing project was funded with credit issued by the Reserve Bank of New Zealand, the nationalized central bank. According to New Zealand commentator Kerry Bolton, this one measure was sufficient to resolve 75% of unemployment in the midst of the Great Depression.

Bolton notes that this was achieved without causing inflation.  When new money is used to create new goods and services, supply rises along with demand and prices remain stable; but the “demand” has to come first. No business owner will invest in more capacity or production without first seeing a demand. No demand, no new jobs and no economic expansion.

The Need to Restore Economic Sovereignty

The money for a guaranteed basic income could be created by a nationalized central bank in the same way that the Reserve Bank of New Zealand did it, and that central bank “quantitative easing” (QE) is created out of nothing on a computer screen today.  The problem with today’s QE is that it has not gotten money into the pockets of consumers. The money has gotten—and can get—no further than the reserve accounts of banks, as explained here and hereA dividend paid directly to consumers would be “quantitative easing” for the people.

A basic income guarantee paid for with central bank credit would not be “welfare” but would eliminate the need for welfare.  It would be social security for all, replacing social security payments, unemployment insurance, and welfare taxes.  It could also replace much of the consumer debt that is choking the private economy, growing exponentially at usurious compound interest rates.

As Grillo points out, it is not the cost of government but the cost of money itself that has bankrupted Italy. If the country wishes to free itself from the shackles of debt and restore the prosperity it once had, it will need to take back its monetary sovereignty and issue its own money, either directly or through its own nationalized central bank. If Grillo’s party comes to power and follows through with his platform, those shackles on the Italian economy might actually be released.

Ellen Brown is an attorney and the author of eleven books, including Web of Debt: The Shocking Truth About Our Money System and How We Can Break Free. Her websites are webofdebt.com and ellenbrown.com. She is also chairman of the Public Banking Institute. Details of the June 2013 Public Banking Institute conference are here.

Money for the People: Comedian Grillo’s Populist Plan for Italy

Money for the People: Comedian Grillo’s Populist Plan for Italy

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Posted on Mar 7, 2013
ell brown (CC BY 2.0)

By Ellen Brown, Web of Debt

This piece first appeared at Web of Debt.

Comedian Beppe Grillo was surprised himself when his Five Star Movement got 8.7 million votes in the Italian general election of February 24-25th.  His movement is now the biggest single party in the chamber of deputies, says The Guardian, which makes him “a kingmaker in a hung parliament.” 

Grillo’s is the party of “no.” In a candidacy based on satire, he organized an annual “V Day Celebration,” the “V” standing for vaffanculo (“f—k off”).  He rejects the status quo—all the existing parties and their monopoly control of politics, jobs, and financing—and seeks a referendum on all international treaties, including NATO membership, free trade agreements and the Euro.

“If we get into parliament,” says Grillo, “we would bring the old system down, not because we would enjoy doing so but because the system is rotten.” Critics fear, and supporters hope, that if his party succeeds, it could break the Euro system.

But being against everything, says Mike Whitney in Counterpunch, is not a platform:

To govern, one needs ideas and a strategy for implementing those ideas. Grillo’s team has neither. They are defined more in terms of the things they are against than things they are for. It’s fine to want to “throw the bums out”, but that won’t put people back to work or boost growth or end the slump. Without a coherent plan to govern, M5S could end up in the political trash heap, along with their right-wing predecessors, the Tea Party.

Steve Colatrella, who lives in Italy and also has an article in Counterpunch on the Grillo phenomenon, has a different take on the surprise win. He says Grillo does have a platform of positive proposals. Besides rejecting all the existing parties and treaties, Grillo’s program includes the following:

• unilateral default on the public debt;
• nationalization of the banks; and
• a guaranteed “citizenship” income of 1000 euros a month.

It is a platform that could actually work. Austerity has been tested for a decade in the Eurozone and has failed, while the proposals in Grillo’s plan have been tested in other countries and have succeeded.

Default: Lessons from Iceland and South America

Default on the public debt has been pulled off quite successfully in Iceland, Argentina, Ecuador, and Russia, among other countries.  Whitney cites a clip from Grillo’s blog suggesting that this is also the way out for Italy:

The public debt has not been growing in recent years because of too much expenditure . . . Between 1980 and 2011, spending was lower than the tax revenue by 484 billion (thus we have been really virtuous) but the interest payments (on the debt of 2,141 billion) that we had to pay in that period have made us poor. In the last 20 years, GDP has been growing slowly, while the debt has exploded.

. . . [S]peculators . . . are contributing to price falls so as to bring about higher interest rates. It’s the usurer’s technique. Thus the debt becomes an opportunity to maximize earnings in the market at the expense of the nation. . . . If financial powerbrokers use speculation to increase their earnings and force governments to pay the highest possible interest rates, the result is recession for the State that’s in debt as well as their loss of sovereignty.

. . . There are alternatives. These are being put into effect by some countries in South America and by Iceland. . . . The risk is that we are going to reach default in any case with the devaluation of the debt, and the Nation impoverished and on its knees. [Beppe Grillo blog]

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Quantitative Easing for the People: Default on the Public Debt, Nationalize the Banks, and...

Comedian Beppe Grillo was surprised himself when his Five Star Movement got 8.7 million votes in the Italian general election of February 24-25th. His movement is now the biggest single party in the chamber of deputies, says The Guardian, which makes him “a kingmaker in a hung parliament.”

Grillo’s is the party of “no.” In a candidacy based on satire, he organized an annual “V Day Celebration,” the “V” standing for vaffanculo (“f—k off”). He rejects the status quo—all the existing parties and their monopoly control of politics, jobs, and financing—and seeks a referendum on all international treaties, including NATO membership, free trade agreements and the Euro.

“If we get into parliament,” says Grillo, “we would bring the old system down, not because we would enjoy doing so but because the system is rotten.” Critics fear, and supporters hope, that if his party succeeds, it could break the Euro system.

But being against everything, says Mike Whitney in Counterpunch, is not a platform:

To govern, one needs ideas and a strategy for implementing those ideas. Grillo’s team has neither. They are defined more in terms of the things they are against than things they are for. It’s fine to want to “throw the bums out”, but that won’t put people back to work or boost growth or end the slump. Without a coherent plan to govern, M5S could end up in the political trash heap, along with their right-wing predecessors, the Tea Party.

Steve Colatrella, who lives in Italy and also has an article in Counterpunch on the Grillo phenomenon, has a different take on the surprise win. He says Grillo does have a platform of positive proposals. Besides rejecting all the existing parties and treaties, Grillo’s program includes the following:

• unilateral default on the public debt;
• nationalization of the banks; and
• a guaranteed “citizenship” income of 1000 euros a month.

It is a platform that could actually work. Austerity has been tested for a decade in the Eurozone and has failed, while the proposals in Grillo’s plan have been tested in other countries and have succeeded.

Default: Lessons from Iceland and South America

Default on the public debt has been pulled off quite successfully in Iceland, Argentina, Ecuador, and Russia, among other countries. Whitney cites a clip from Grillo’s blog suggesting that this is also the way out for Italy:

The public debt has not been growing in recent years because of too much expenditure . . . Between 1980 and 2011, spending was lower than the tax revenue by 484 billion (thus we have been really virtuous) but the interest payments (on the debt of 2,141 billion) that we had to pay in that period have made us poor. In the last 20 years, GDP has been growing slowly, while the debt has exploded.

. . . [S]peculators . . . are contributing to price falls so as to bring about higher interest rates. It’s the usurer’s technique. Thus the debt becomes an opportunity to maximize earnings in the market at the expense of the nation. . . . If financial powerbrokers use speculation to increase their earnings and force governments to pay the highest possible interest rates, the result is recession for the State that’s in debt as well as their loss of sovereignty.

. . . There are alternatives. These are being put into effect by some countries in South America and by Iceland. . . . The risk is that we are going to reach default in any case with the devaluation of the debt, and the Nation impoverished and on its knees. [Beppe Grillo blog]

Bank Nationalization: China Shows What Can Be Done

Grillo’s second proposal, nationalizing the banks, has also been tested and proven elsewhere, most notably in China. In an April 2012 article in The American Conservative titled “China’s Rise, America’s Fall,” Ron Unz observes:

During the three decades to 2010, China achieved perhaps the most rapid sustained rate of economic development in the history of the human species, with its real economy growing almost 40-fold between 1978 and 2010. In 1978, America’s economy was 15 times larger, but according to most international estimates, China is now set to surpass America’s total economic output within just another few years.

According to Eamonn Fingleton in In The Jaws of the Dragon (2009), the fountain that feeds this tide is a strong public banking sector:

Capitalism’s triumph in China has been proclaimed in countless books in recent years. . . . But . . . the higher reaches of its economy remain comprehensively controlled in a way that is the antithesis of everything we associate with Western capitalism. The key to this control is the Chinese banking system . . . [which is] not only state-owned but, as in other East Asian miracle economies, functions overtly as a major tool of the central government’s industrial policy.

Guaranteed Basic Income—Not Just Welfare

Grillo’s third proposal, a guaranteed basic income, is not just an off-the-wall, utopian idea either. A national dividend has been urged by the “Social Credit” school of monetary reform for nearly a century, and the U.S. Basic Income Guarantee Network has held a dozen annual conferences. They feel that a guaranteed basic income is the key to keeping modern, highly productive economies humming.

A basic income guarantee paid for with central bank credit would not be “welfare” but would eliminate the need for welfare. It would be social security for all, replacing social security payments, unemployment insurance, and welfare taxes.

In Europe, the proposal is being pursued not just by Grillo’s southern European party but by the sober Swiss of the north. An initiative to establish a new federal law for an unconditional basic income was formally introduced in Switzerland in April 2012. The idea consists of giving to all citizens a monthly income that is neither means-tested nor work-related. Under the Swiss referendum system of direct democracy, if the initiative gathers more than 100,000 signatures before October 2013, the Federal Assembly is required to look into it.

Colatrella does not say where Grillo plans to get the money for Italy’s guaranteed basic income, but in Social Credit theory, it would simply be issued outright by the government; and Grillo, who has an accounting background, evidently agrees with that approach to funding. He said in a presentation available on YouTube:

The Bank of Italy a private join-stock company, ownership comprises 10 insurance companies, 10 foundations, and 10 banks, that are all joint-stock companies . . . They issue the money out of thin air and lend it to us. It’s the State who is supposed to issue it. We need money to work. The State should say: “There’s scarcity of money? I’ll issue some and put it into circulation. Money is plentiful? I’ll withdraw and burn some of it.” . . . Money is needed to keep prices stable and to let us work.

The Key to a Thriving Economy

Major C.H. Douglas, the thought leader of the Social Credit movement, argued that the economy routinely produces more goods and services than consumers have the money to purchase, because workers collectively do not get paid enough to cover the cost of the things they make. This is true because of external costs such as interest paid to banks, and because some portion of the national income is stashed in savings accounts, investment accounts, and under mattresses rather than spent on the GDP.

To fill what Social Crediters call “the gap,” so that “demand” rises to meet “supply,” additional money needs to be gotten into the circulating money supply. Douglas recommended doing it with a national dividend for everyone, an entitlement by “grace” rather than “works,” something that was necessary just to raise purchasing power enough to cover the products on the market.

In the 1930s and 1940s, critics of Social Credit called it “funny money” and said it would merely inflate the money supply. The critics prevailed, and the Social Credit solution has not had much chance to be tested. But the possibilities were demonstrated in New Zealand during the Great Depression, when a state housing project was funded with credit issued by the Reserve Bank of New Zealand, the nationalized central bank. According to New Zealand commentator Kerry Bolton, this one measure was sufficient to resolve 75% of unemployment in the midst of the Great Depression.

Bolton notes that this was achieved without causing inflation. When new money is used to create new goods and services, supply rises along with demand and prices remain stable; but the “demand” has to come first. No business owner will invest in more capacity or production without first seeing a demand. No demand, no new jobs and no economic expansion.

The Need to Restore Economic Sovereignty

The money for a guaranteed basic income could be created by a nationalized central bank in the same way that the Reserve Bank of New Zealand did it, and that central bank “quantitative easing” (QE) is created out of nothing on a computer screen today. The problem with today’s QE is that it has not gotten money into the pockets of consumers. The money has gotten—and can get—no further than the reserve accounts of banks, as explained here and here. A dividend paid directly to consumers would be “quantitative easing” for the people.

A basic income guarantee paid for with central bank credit would not be “welfare” but would eliminate the need for welfare. It would be social security for all, replacing social security payments, unemployment insurance, and welfare taxes. It could also replace much of the consumer debt that is choking the private economy, growing exponentially at usurious compound interest rates.

As Grillo points out, it is not the cost of government but the cost of money itself that has bankrupted Italy. If the country wishes to free itself from the shackles of debt and restore the prosperity it once had, it will need to take back its monetary sovereignty and issue its own money, either directly or through its own nationalized central bank. If Grillo’s party comes to power and follows through with his platform, those shackles on the Italian economy might actually be released.

Ellen Brown

Ellen Brown developed her research skills as an attorney practicing civil litigation in Los Angeles. In Web of Debt, her latest of eleven books, she turns those skills to an analysis of the Federal Reserve and “the money trust.” She shows how this private cartel has usurped the power to create money from the people themselves, and how we the people can get it back. She is president of the Public Banking Institute, http://PublicBankingInstitute. org , and has websites at http://WebofDebt.com and http://EllenBrown.com

How the Fed Could Fix the Economy–and Why It Hasn’t

fedreserve

Quantitative easing (QE) is supposed to stimulate the economy by adding money to the money supply, increasing demand. But so far, it hasn’t been working. Why not? Because as practiced for the last two decades, QE does not actually increase the circulating money supply. It merely cleans up the toxic balance sheets of banks. A real “helicopter drop” that puts money into the pockets of consumers and businesses has not yet been tried. Why not?  Another good question . . . .

When Ben Bernanke gave his famous helicopter money speech to the Japanese in 2002, he was not yet chairman of the Federal Reserve.  He said then that the government could easily reverse a deflation, just by printing money and dropping it from helicopters. “The U.S. government has a technology, called a printing press (or, today, its electronic equivalent),” he said, “that allows it to produce as many U.S. dollars as it wishes at essentially no cost.” Later in the speech he discussed “a money-financed tax cut,” which he said was “essentially equivalent to Milton Friedman’s famous ‘helicopter drop’ of money.” Deflation could be cured, said Professor Friedman, simply by dropping money from helicopters.

It seemed logical enough. If the money supply were insufficient for the needs of trade, the solution was to add money to it. Most of the circulating money supply consists of “bank credit” created by banks when they make loans. When old loans are paid off faster than new loans are taken out (as is happening today), the money supply shrinks. The purpose of QE is to reverse this contraction.

But if debt deflation is so easy to fix, then why have the Fed’s massive attempts to pull this maneuver off failed to revive the economy? And why is Japan still suffering from deflation after 20 years of quantitative easing?

On a technical level, the answer has to do with where the money goes. The widespread belief that QE is flooding the economy with money is a myth. Virtually all of the money it creates simply sits in the reserve accounts of banks.

That is the technical answer, but the motive behind it may be something deeper . . . .

An Asset Swap Is Not a Helicopter Drop

As QE is practiced today, the money created on a computer screen never makes it into the real, producing economy. It goes directly into bank reserve accounts, 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:

[B]anks 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.

This point is also stressed in Modern Monetary Theory.  As explained by Prof. Scott Fullwiler:

Banks can’t “do” anything with all the extra reserve balances. Loans create deposits—reserve balances don’t finance lending or add any “fuel” to the economy. Banks don’t lend reserve balances except in the federal funds market, and in that case the Fed always provides sufficient quantities to keep the federal funds rate at its . . . interest rate target.

Reserves are used simply to clear checks between banks. They move from one reserve account to another, but the total money in bank reserve accounts remains unchanged.  Banks can lend their reserves to each other, but they cannot lend them to us.

QE as currently practiced is simply an asset swap. The central bank swaps newly-created dollars for toxic assets clogging the balance sheets of commercial banks. This ploy keeps the banks from going bankrupt, but it does nothing for the balance sheets of federal or local governments, consumers, or businesses.

Central Bank Ignorance or Intentional Sabotage?

Another Look at the Japanese Experience

That brings us to the motive.  Twenty years is a long time to repeat a policy that isn’t working.

UK Professor Richard Werner invented the term quantitative easing when he was advising the Japanese in the 1990s.  He says he had something quite different in mind from the current practice.  He intended for QE to increase the credit available to the real economy.  Today, he says:

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

Werner contends that the Bank of Japan (BOJ) intentionally sabotaged his proposal, adopting his language but not his policy; and other central banks have taken the same approach since.

In his book Princes of the Yen (2003), Werner maintains that in the 1990s, the BOJ consistently foiled government attempts at creating a recovery. As summarized in a review of the book:

The post-war disappearance of the military triggered a power struggle between the Ministry of Finance and the Bank of Japan for control over the economy.  While the Ministry strove to maintain the controlled economic system that created Japan’s post-war economic miracle, the central bank plotted to break free from the Ministry by reverting to the free markets of the 1920s.

. . . They reckoned that the wartime economic system and the vast legal powers of the Ministry of Finance could only be overthrown if there was a large crisis – one that would be blamed on the ministry.  While observers assumed that all policy-makers have been trying their best to kick-start Japan’s economy over the past decade, the surprising truth is that one key institution did not try hard at all.

Werner contends that the Bank of Japan not only blocked the recovery but actually created the bubble that precipitated the downturn:

[T]hose central bankers who were in charge of the policies that prolonged the recession were the very same people who were responsible for the creation of the bubble. . . . [They] ordered the banks to expand their lending aggressively during the 1980s.  In 1989, [they] suddenly tightened their credit controls, thus bringing down the house of cards that they had built up before. . . .

With banks paralysed by bad debts, the central bank held the key to a recovery: only it could step in and create more credit.  It failed to do so, and hence the recession continued for years.  Thanks to the long recession, the Ministry of Finance was broken up and lost its powers. The Bank of Japan became independent and its power has now become legal.

In the US, too, the central bank holds the key to recovery. Only it can create more credit for the broad economy. But reversing recession has taken a backseat to resuscitating zombie banks, maintaining the feudal dominion of a private financial oligarchy.

In Japan, interestingly, all that may be changing with the election of a new administration. As reported in a January 2013 article in Business Week:

Shinzo Abe and the Liberal Democratic Party swept back into power in mid-December by promising a high-octane mix of monetary and fiscal policies to pull Japan out of its two-decade run of economic misery. To get there, Prime Minister Abe is threatening a hostile takeover of the Bank of Japan, the nation’s central bank. The terms of surrender may go something like this: Unless the BOJ agrees to a 2 percent inflation target and expands its current government bond-buying operation, the ruling LDP might push a new central bank charter through the Japanese Diet. That charter would greatly diminish the BOJ’s independence to set monetary policy and allow the prime minister to sack its governor.

From Bankers’ Bank to Government Bank

Making the central bank serve the interests of the government and the people is not a new idea. Prof. Tim Canova points out that central banks have only recently been declared independent of government:

[I]ndependence has really come to mean a central bank that has been captured by Wall Street interests, very large banking interests.  It might be independent of the politicians, but it doesn’t mean it is a neutral arbiter.  During the Great Depression and coming out of it, the Fed took its cues from Congress.  Throughout the entire 1940s, the Federal Reserve as a practical matter was not independent. It took its marching orders from the White House and the Treasury—and it was the most successful decade in American economic history.

To free the central bank from Wall Street capture, Congress or the president could follow the lead of Shinzo Abe and threaten a hostile takeover of the Fed unless it directs its credit firehose into the real economy. The unlimited, near-zero-interest credit line made available to banks needs to be made available to federal and local governments.

When a similar suggestion was made to Ben Bernanke in January 2011, however, he said he lacked the authority to comply. If that was what Congress wanted, he said, it would have to change the Federal Reserve Act.

And that is what may need to be done—rewrite the Federal Reserve Act to serve the interests of the economy and the people.

Webster Tarpley observes that the Fed advanced $27 trillion to financial institutions through the TAF (Term Asset Facility), the TALF (Term Asset-backed Securities Loan Facility), and similar facilities. He proposes an Infrastructure Facility extending credit on the same terms to state and local governments. It might offer to buy $3 trillion in 100-year, zero-coupon bonds, the minimum currently needed to rebuild the nation’s infrastructure. The collateral backing these bonds would be sounder than the commercial paper of zombie banks, since it would consist of the roads, bridges, and other tangible infrastructure built with the loans. If the bond issuers defaulted, the Fed would get the infrastructure.

Quantitative easing as practiced today is not designed to serve the real economy. It is designed to serve bankers who create money as debt and rent it out for a fee. The money power needs to be restored to the people and the government, but we need an executive and legislature willing to stand up to the banks. A popular movement could give them the backbone.  In the meantime, states could set up their own banks, which could leverage the state’s massive capital and revenue base into credit for the local economy.

Ellen Brown is an attorney and president of the Public Banking Institute.  In Web of Debt, her latest of eleven books, she shows how a private, privileged banking oligarchy has usurped the power to create money from the people themselves, and how we the people can get it back. Her websites are http://WebofDebt.com, http://EllenBrown.com, and http://PublicBankingInstitute.org.  The Public Banking Institute is hosting a conference June 2-4, 2013, in San Rafael, CA; details here.

How Congress Could Fix Its Budget Woes, Permanently

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 tur ned 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:

[I]n a modern monetary system – fiat money, floating exchange rate world – there is absolutely no correlation between bank reserves and lending. . . . [B]anks 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:

[A]ll 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.

The Road to Prosperity

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 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.

Ellen Brown

Ellen Brown developed her research skills as an attorney practicing civil litigation in Los Angeles. In Web of Debt, her latest of eleven books, she turns those skills to an analysis of the Federal Reserve and “the money trust.” She shows how this private cartel has usurped the power to create money from the people themselves, and how we the people can get it back. She is president of the Public Banking Institute, http://PublicBankingInstitute. org , and has websites at http://WebofDebt.com and http://EllenBrown.com

How Congress Could Fix Its Budget Woes, Permanently

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 tur ned 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:

[I]n a modern monetary system – fiat money, floating exchange rate world – there is absolutely no correlation between bank reserves and lending. . . . [B]anks 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:

[A]ll 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.

The Road to Prosperity

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 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.

Ellen Brown

Ellen Brown developed her research skills as an attorney practicing civil litigation in Los Angeles. In Web of Debt, her latest of eleven books, she turns those skills to an analysis of the Federal Reserve and “the money trust.” She shows how this private cartel has usurped the power to create money from the people themselves, and how we the people can get it back. She is president of the Public Banking Institute, http://PublicBankingInstitute. org , and has websites at http://WebofDebt.com and http://EllenBrown.com

The US Economy in Crisis: Recovery is an Illusion

economy

Headlines flashed warning signs. Commentaries downplayed them. A Wall Street Journal editorial headlined “As Contractions Go….”

US Q IV GDP shrank, “but not to worry. The report is better than it sounds, the stock market is rocking, and (the Fed will) keep both feet pressed firmly on the monetary accelerator.”

The Financial Times headlined “US outlook still clear despite shower,” saying:

Predicting recession “based on (-0.1% GDP decline) “is a bit like expecting rain because somebody threw a bucket of water out the window.”

The wildcard is “if Congress decides to dump water out the window every month, via across-the-board ‘sequester’ cuts” expected soon.

According to Bloomberg, “R-Word For US Economy in 2013 is Rebound Not Recession.”

According to JP Morgan Chase, Bank of America, and Morgan Stanley economists, America’s economy “will bounce back in (Q I) after plunging defense spending and dwindling inventory growth” hurt Q IV.

Not according to economist John Williams. Recovery is illusory, he says. It’s fake. Phony government numbers conceal weakness. Growth hasn’t occurred since 2006/2007.

Earlier Williams said:

“Indeed, the ‘recovery’ is an illusion that has been created as a direct result of methodological changes in government inflation reporting of recent decades.”

They “resulted in an artificial lowering of official rates of inflation.  The faux growth problem is in the use of understated inflation estimates in deflating a number of economic series.”

“Major economic series that have no underlying pricing base – such as housing starts, payroll employment and consumer confidence – correspondingly do not require inflation adjustment to put them on a consistent theoretical basis with the concept of real (inflation-adjusted) GDP.”

“Those series confirm a history of business activity in recent years that shows a plunge in the economy from 2006/2007 into late-2008/mid-2009, followed by a period of protracted, low-level stagnation, or bottom-bouncing, instead of ‘recovery.’ ”

Williams expects double-dip recession in 2013. It likely began in 2012 Q II or III, he believes.

Last August, market analyst Marc Faber rated odds for global recession at 100%. Little or nothing ahead looks promising. Corporate profits will disappoint.

The Fed can do so much and no more. Money printing has limits. It’s not magic. On January 31, Faber repeated earlier warnings.

“When you print money,” he said, it “doesn’t flow evenly into an economy. It flows to some people or to sectors first, and in this case, it flowed into equities, and until about five months ago into bonds.”

“I believe that markets will punish central banks at some state through an accident.”

Stocks could hit bubble levels and pop. Rising interest rates could collapse bonds.

“For the first time in four years, since the lows in March 2009, I love this market because the higher it goes, the more likely we will have a nice crash, a big time crash.”

He thinks weak global growth and disappointing corporate profits will trigger trouble.

Fed governors are cautious. On January 3, FOMC minutes said:

“With regard to the possible costs and risks of purchases, a number of participants expressed the concern that additional purchases could complicate the Committee’s efforts to eventually withdraw monetary policy accommodation, for example, by potentially causing inflation expectations to rise or by impairing the future implementation of monetary policy.”

“Participants also discussed the implications of continued asset purchases for the size of the Federal Reserve’s balance sheet. Depending on the path for the balance sheet and interest rates, the Federal Reserve’s net income and its remittances to the Treasury could be significantly affected during the period of policy normalization.”

“Participants noted that the Committee would need to continue to assess whether large purchases were having adverse effects on market functioning and financial stability.” ”

“They expressed a range of views on the appropriate pace of purchases, both now and as the outlook evolved. It was agreed that both the efficacy and the costs would need to be carefully monitored and taken into account in determining the size, pace, and composition of asset purchases.”

Governors are conflicted. They have reason to worry. They’re questioning excessive longterm money printing benefits. Artificial schemes don’t work. They cause more harm than good.

Eventually they end. What can’t go on forever won’t. They’ll have to decide when. Economic and market consequences will follow.

Newly released Q IV GDP data showed growth contracted 0.1%. Sequestered deficit cutting suggests further declines. Consumer confidence is low for good reason. Europe, China, Japan, and other major world economies show weakness.

Is America on track for double dip trouble? In Q IV, government and business inventory spending declined. Auto sales alone drove consumer spending gains. Deep discounts, near zero interest rates, and Hurricane Sandy affected purchases stimulated sales.

Exports were down. Weak global manufacturing and trade affected them. Healthcare spending slowed noticeably. US economic growth ground to a halt. Doing so suggests weakness going forward.

Artificial stimulus works only so long. Q III included record defense spending. It accounted for over a third of GDP growth. It followed two years of reduced government spending.

Q III data were released days before November elections. Good news benefited Obama.

True Q III GDP growth was misreported. It wasn’t 3%. When accurately adjusted, it was 1 – 1.5%. It’s been that way for two years. Day of reckoning signs appeared in Q IV.

Multiple quantitative easing rounds barely held economic growth above water. Money printing madness substituted for stimulative growth. Central bank intervention repeated what hasn’t before worked.

European economies are troubled. America shows weakness. Force-fed austerity doesn’t work. Decline replaces prosperity. Living standards deteriorate. Households have less to spend.

Production and consumption suffer. So does the real economy. Financial war helps speculators alone benefit. Eventually expect systemic crisis. It could take months or years to arrive.

Market manipulation delays day of reckoning time. It can’t prevent it. Q IV GDP suggests 2013 weakness. Headwinds may be stiffer than expected.

Payroll tax increases cuts $100 billion from GDP. It does so when stimulus is needed. Consumer sentiment and spending are weak.

Expect sequestered/largely discretionary $1.2 trillion cuts by end of March. Stiff 10 – 20% health insurance premium hikes impact healthcare spending.

Business spending spiked in Q IV. It did so ahead of expected tax law changes. Expect it to slow in Q I. Manufacturing is weak. Housing remains troubled. So is America’s economy. Odds favor double-dip trouble.

Five years after economic collapse, virtually zero growth was achieved. Wall Street was bailed out. Main Street was sold out. Ellen Brown does some of the best financial writing.

Last September, she said America’s economy needs “a good dose of ‘aggregate demand.’ ” It needs money put in people’s pockets.

QE for Wall Street won’t jumpstart the economy. It won’t “reduce unemployment.” It’s stuck at 23%. It’s the highest since Great Depression levels.

QE puts no “money in the pockets of consumers.” It doesn’t “reflate the money supply.”

“(S)ignificantly lower interest rates for homeowners” aren’t achieved. Other consumer purchases don’t benefit.

QE helps bankers, other speculators and investors. Ordinary people are harmed. Economic growth is taxed. It’s monetary poison. It’s harming the dollar.

Finance is a new form of warfare. Money printing madness is based on the wrong-headed notion that Fed-supplied liquidity encourages bank lending to stimulate growth.

Despite multi-trillions of dollars in free zero interest rate money, bank lending to small/medium sized businesses and households is too little to help.

No loans mean no investment, no hiring, and no money in people’s pockets. At the same time, US corporate giants hoard enormous amounts of cash. Estimates range up to $5 trillion.

Fed reports downplay what’s held. Their data include only domestic cash reserves, Treasuries, other bonds, and bank accounts.

Foreign holdings aren’t included. Global trillions aren’t invested. They’re used for salaries, huge bonuses, dividends, stock buybacks, and speculation.

At the same time, inflation-adjusted consumer disposable income declined for decades. Post-9/11, it’s been especially hard hit.

Spending growth is largely credit driven. Insufficient income retards it. Households are debt-entrapped. Eventually they’ll be unable to assume more.

Progressive Radio News Hour regular Jack Rasmus discusses America’s “epic recession.” For five years, its economy “bumped along the bottom.” Conditions ahead look worse, not better.

Fed gamesmanship puts international finance at risk. Economies haven’t been healed. They’ve been wrecked. QE is a zero sum game. It’s financial terrorism.

It sacrifices growth for Wall Street. It hangs ordinary people out to dry. It promises protracted hard times. It leaves growing millions on their own sink or swim.

Let-eat-cake economics doesn’t work. It never did. It doesn’t now. It sparks decline and revolutions, not growth and prosperity.

Stephen Lendman lives in Chicago and can be reached at [email protected] 

His new book is titled “Banker Occupation: Waging Financial War on Humanity.”

http://www.claritypress.com/LendmanII.html

Visit his blog site at sjlendman.blogspot.com and listen to cutting-edge discussions with distinguished guests on the Progressive Radio News Hour on the Progressive Radio Network Thursdays at 10AM US Central time and Saturdays and Sundays at noon. All programs are archived for easy listening.

http://www.progressiveradionetwork.com/the-progressive-news-hour

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Who Owns The Federal Reserve?

Who Owns The Federal Reserve?

“Some people think that the Federal Reserve Banks are United States Government institutions. They are private monopolies which prey upon the people of these United States for the benefit of themselves and their foreign customers; foreign and domestic speculators and swindlers; and rich and predatory money lenders.”

– The Honorable Louis McFadden, Chairman of the House Banking and Currency Committee in the 1930s

The Federal Reserve (or Fed) has assumed sweeping new powers in the last year. In an unprecedented move in March 2008, the New York Fed advanced the funds for JPMorgan Chase Bank to buy investment bank Bear Stearns for pennies on the dollar. The deal was particularly controversial because Jamie Dimon, CEO of JPMorgan, sits on the board of the New York Fed and participated in the secret weekend negotiations.1 In September 2008, the Federal Reserve did something even more unprecedented, when it bought the world’s largest insurance company. The Fed announced on September 16 that it was giving an $85 billion loan to American International Group (AIG) for a nearly 80% stake in the mega-insurer. The Associated Press called it a “government takeover,” but this was no ordinary nationalization. Unlike the U.S. Treasury, which took over Fannie Mae and Freddie Mac the week before, the Fed is not a government-owned agency. Also unprecedented was the way the deal was funded. The Associated Press reported:

“The Treasury Department, for the first time in its history, said it would begin selling bonds for the Federal Reserve in an effort to help the central bank deal with its unprecedented borrowing needs.”2

This is extraordinary. Why is the Treasury issuing U.S. government bonds (or debt) to fund the Fed, which is itself supposedly “the lender of last resort” created to fund the banks and the federal government? Yahoo Finance reported on September 17:

“The Treasury is setting up a temporary financing program at the Fed’s request. The program will auction Treasury bills to raise cash for the Fed’s use. The initiative aims to help the Fed manage its balance sheet following its efforts to enhance its liquidity facilities over the previous few quarters.”

Normally, the Fed swaps green pieces of paper called Federal Reserve Notes for pink pieces of paper called U.S. bonds (the federal government’s I.O.U.s), in order to provide Congress with the dollars it cannot raise through taxes. Now, it seems, the government is issuing bonds, not for its own use, but for the use of the Fed! Perhaps the plan is to swap them with the banks’ dodgy derivatives collateral directly, without actually putting them up for sale to outside buyers. According to Wikipedia (which translates Fedspeak into somewhat clearer terms than the Fed’s own website):

“The Term Securities Lending Facility is a 28-day facility that will offer Treasury general collateral to the Federal Reserve Bank of New York’s primary dealers in exchange for other program-eligible collateral. It is intended to promote liquidity in the financing markets for Treasury and other collateral and thus to foster the functioning of financial markets more generally. . . . The resource allows dealers to switch debt that is less liquid for U.S. government securities that are easily tradable.”

“To switch debt that is less liquid for U.S. government securities that are easily tradable” means that the government gets the banks’ toxic derivative debt, and the banks get the government’s triple-A securities. Unlike the risky derivative debt, federal securities are considered “risk-free” for purposes of determining capital requirements, allowing the banks to improve their capital position so they can make new loans. (See E. Brown, “Bailout Bedlam,” webofdebt.com/articles, October 2, 2008.)

In its latest power play, on October 3, 2008, the Fed acquired the ability to pay interest to its member banks on the reserves the banks maintain at the Fed. Reuters reported on October 3:

“The U.S. Federal Reserve gained a key tactical tool from the $700 billion financial rescue package signed into law on Friday that will help it channel funds into parched credit markets. Tucked into the 451-page bill is a provision that lets the Fed pay interest on the reserves banks are required to hold at the central bank.”3

If the Fed’s money comes ultimately from the taxpayers, that means we the taxpayers are paying interest to the banks on the banks’ own reserves – reserves maintained for their own private profit. These increasingly controversial encroachments on the public purse warrant a closer look at the central banking scheme itself. Who owns the Federal Reserve, who actually controls it, where does it get its money, and whose interests is it serving?

Not Private and Not for Profit?

The Fed’s website insists that it is not a private corporation, is not operated for profit, and is not funded by Congress. But is that true? The Federal Reserve was set up in 1913 as a “lender of last resort” to backstop bank runs, following a particularly bad bank panic in 1907. The Fed’s mandate was then and continues to be to keep the private banking system intact; and that means keeping intact the system’s most valuable asset, a monopoly on creating the national money supply. Except for coins, every dollar in circulation is now created privately as a debt to the Federal Reserve or the banking system it heads.4 The Fed’s website attempts to gloss over its role as chief defender and protector of this private banking club, but let’s take a closer look. The website states:

* “The twelve regional Federal Reserve Banks, which were established by Congress as the operating arms of the nation’s central banking system, are organized much like private corporations – possibly leading to some confusion about “ownership.” For example, the Reserve Banks issue shares of stock to member banks. However, owning Reserve Bank stock is quite different from owning stock in a private company. The Reserve Banks are not operated for profit, and ownership of a certain amount of stock is, by law, a condition of membership in the System. The stock may not be sold, traded, or pledged as security for a loan; dividends are, by law, 6 percent per year.”

* “[The Federal Reserve] is considered an independent central bank because its decisions do not have to be ratified by the President or anyone else in the executive or legislative branch of government, it does not receive funding appropriated by Congress, and the terms of the members of the Board of Governors span multiple presidential and congressional terms.”

* “The Federal Reserve’s income is derived primarily from the interest on U.S. government securities that it has acquired through open market operations. . . . After paying its expenses, the Federal Reserve turns the rest of its earnings over to the U.S. Treasury.”5

So let’s review:

1. The Fed is privately owned.

Its shareholders are private banks. In fact, 100% of its shareholders are private banks. None of its stock is owned by the government.

2. The fact that the Fed does not get “appropriations” from Congress basically means that it gets its money from Congress without congressional approval, by engaging in “open market operations.”

Here is how it works: When the government is short of funds, the Treasury issues bonds and delivers them to bond dealers, which auction them off. When the Fed wants to “expand the money supply” (create money), it steps in and buys bonds from these dealers with newly-issued dollars acquired by the Fed for the cost of writing them into an account on a computer screen. These maneuvers are called “open market operations” because the Fed buys the bonds on the “open market” from the bond dealers. The bonds then become the “reserves” that the banking establishment uses to back its loans. In another bit of sleight of hand known as “fractional reserve” lending, the same reserves are lent many times over, further expanding the money supply, generating interest for the banks with each loan. It was this money-creating process that prompted Wright Patman, Chairman of the House Banking and Currency Committee in the 1960s, to call the Federal Reserve “a total money-making machine.” He wrote:

“When the Federal Reserve writes a check for a government bond it does exactly what any bank does, it creates money, it created money purely and simply by writing a check.”

3. The Fed generates profits for its shareholders.

The interest on bonds acquired with its newly-issued Federal Reserve Notes pays the Fed’s operating expenses plus a guaranteed 6% return to its banker shareholders. A mere 6% a year may not be considered a profit in the world of Wall Street high finance, but most businesses that manage to cover all their expenses and give their shareholders a guaranteed 6% return are considered “for profit” corporations.

In addition to this guaranteed 6%, the banks will now be getting interest from the taxpayers on their “reserves.” The basic reserve requirement set by the Federal Reserve is 10%. The website of the Federal Reserve Bank of New York explains that as money is redeposited and relent throughout the banking system, this 10% held in “reserve” can be fanned into ten times that sum in loans; that is, $10,000 in reserves becomes $100,000 in loans. Federal Reserve Statistical Release H.8 puts the total “loans and leases in bank credit” as of September 24, 2008 at $7,049 billion. Ten percent of that is $700 billion. That means we the taxpayers will be paying interest to the banks on at least $700 billion annually – this so that the banks can retain the reserves to accumulate interest on ten times that sum in loans.

The banks earn these returns from the taxpayers for the privilege of having the banks’ interests protected by an all-powerful independent private central bank, even when those interests may be opposed to the taxpayers’ — for example, when the banks use their special status as private money creators to fund speculative derivative schemes that threaten to collapse the U.S. economy. Among other special benefits, banks and other financial institutions (but not other corporations) can borrow at the low Fed funds rate of about 2%. They can then turn around and put this money into 30-year Treasury bonds at 4.5%, earning an immediate 2.5% from the taxpayers, just by virtue of their position as favored banks. A long list of banks (but not other corporations) is also now protected from the short selling that can crash the price of other stocks.

Time to Change the Statute?

According to the Fed’s website, the control Congress has over the Federal Reserve is limited to this:

“[T]he Federal Reserve is subject to oversight by Congress, which periodically reviews its activities and can alter its responsibilities by statute.”

As we know from watching the business news, “oversight” basically means that Congress gets to see the results when it’s over. The Fed periodically reports to Congress, but the Fed doesn’t ask; it tells. The only real leverage Congress has over the Fed is that it “can alter its responsibilities by statute.” It is time for Congress to exercise that leverage and make the Federal Reserve a truly federal agency, acting by and for the people through their elected representatives. If the Fed can demand AIG’s stock in return for an $85 billion loan to the mega-insurer, we can demand the Fed’s stock in return for the trillion-or-so dollars we’ll be advancing to bail out the private banking system from its follies.

If the Fed were actually a federal agency, the government could issue U.S. legal tender directly, avoiding an unnecessary interest-bearing debt to private middlemen who create the money out of thin air themselves. Among other benefits to the taxpayers. a truly “federal” Federal Reserve could lend the full faith and credit of the United States to state and local governments interest-free, cutting the cost of infrastructure in half, restoring the thriving local economies of earlier decades.

Ellen Brown, J.D., developed her research skills as an attorney practicing civil litigation in Los Angeles. In Web of Debt, her latest book, she turns those skills to an analysis of the Federal Reserve and “the money trust.” She shows how this private cartel has usurped the power to create money from the people themselves, and how we the people can get it back. Her eleven books include the bestselling Nature’s Pharmacy, co-authored with Dr. Lynne Walker, and Forbidden Medicine. Her websites are www.webofdebt.com  and www.ellenbrown.com .

The Democratization of Money: The Trillion Dollar Coin, Joke or Game-changer?

moneygalore

The trillion dollar coin actually represents one of the most important principles of popular prosperity ever conceived: the creation of money by sovereign governments, debt-free. 

Last week on “The Daily Show,” Jon Stewart characterized the proposal that the White House circumvent the debt ceiling by minting a trillion dollar coin as an attempt to “just make shit up.” 

Economist and NY Times columnist Paul Krugman responded with a critical blog post accusing Stuart of a “lack of professionalism” for not taking the trillion dollar coin seriously. However, Krugman himself had called the idea “silly.” He thought it was just less silly — and less dangerous — than playing with the debt ceiling, which was itself an unconstitutional shackle on the Treasury’s ability to pay debts already incurred by Congress.

Stewart responded on January 15 that he stood by his “ignorant conclusion that a trillion dollar coin minted to allow the president to circumvent the debt ceiling, however arbitrary that may be, is a stupid f*cking idea.”

It’s all good fun – or is it? Most commentators have missed the real significance of the trillion dollar coin. It is not just about political gamesmanship. For centuries, a secret battle has raged over who should create the nation’s money supply – governments or banks.  Today, all that is left of the US Treasury’s money-creating power is the ability to mint coins. If we the people want to reclaim that power so that we can pay our obligations when due, the Treasury will need to mint more than nickels and dimes. It will need to create some coins with very large numbers on them.

To bail out the banks, the Federal Reserve, as head of the private banking system, issued over $2 trillion as “quantitative easing,” simply by creating the money on a computer screen. Congress, the White House, and the Treasury all rolled over and acquiesced. When it was proposed that the government bail itself out of its budget woes by minting a $1 trillion coin, the Federal Reserve said it would not accept the Treasury’s legal tender. And the White House again acquiesced, evidently embarrassed to have entertained this “ludicrous” alternative.

Somehow we have come to accept that it is less silly for the central bank to create money out of thin air and lend it at near zero interest to private commercial banks, to be re-lent to the public and the government at market interest rates, than for the government to simply create the money itself, debt- and interest-free.

The banks obviously have the upper hand in this game; and they’ve had it for the last 2-1/2 centuries, making us forget that any other option exists. We have forgotten our historical roots.  The American colonists did not think it was silly when they escaped a grinding debt to British bankers and a chronically short money supply by printing their own paper scrip, an innovative solution that allowed the colonies to thrive.

In fact, the trillion dollar coin represents one of the most important principles of popular prosperity ever conceived: national debt-free money creation.  Some of our greatest leaders, including Benjamin Franklin, Thomas Jefferson, and Abraham Lincoln, promoted the essential strategy behind it: that debt-free money offers a way to break the shackles of debt and free the nation to realize its full potential.

We have lost not only the power to create our own money but the memory that we once had that power. With the help of such campaigns as Occupy Wall Street, Strike Debt, and the Free University, however, we are starting to re-learn the great secret of money: that how it gets created determines who has the power in society — we the people, or they the bankers.

It is no secret who has that power today.  In the great bailout of 2008, banks were rewarded for  making irresponsible and fraudulent gambles in the subprime mortgage scandal, with no one serving time in jail.  Then there was the robosigning scandal, in which banks committed criminal fraud and came away with a slap on the wrist.  Now we are seeing the LIBOR scandal unfold.  While a commoner might get 10-20 years for robbing a bank, bank executives get huge bonuses for robbing us.

We may rail against the banks and demand change, but nothing will change until we grasp their fundamental secret, the foundation of their power: that those who create the nation’s money control the nation.  By mechanisms explained elsewhere, nearly the entire money supply today is created by banks.

Remembering Our Roots: A Refresher Course

Benjamin Franklin was called called “the Father of Paper Money.” He argued before the British Parliament that government-issued money had allowed the colonies to escape the yoke of debt, to thrive and grow. The king, urged by the Bank of England, responded by forbidding all new issues of paper scrip. The colonial economy then sank into a depression, and the colonists rebelled.  They won the revolution, but the power to create money was lost to a private banking oligarchy modeled on the one dominated by the Bank of England.

Fourscore and six years later, President Abraham Lincoln boldly took back the money power during the Civil War. To avoid exorbitant interest rates of 24% to 36%, he decided to print money directly from the US Treasury as US Notes or “greenbacks.” The issuance of $450 million in greenbacks was key to funding not only the North’s victory in the war but an array of pivotal infrastructure projects, including a transcontinental railway system.

Lincoln was assassinated, however and,the greenback program was quickly discontinued. Repeated popular attempts to revive it failed. In 1872, according to  Lynn Wheeler in Triumphant Plutocracy: The Story of American Public Life from 1870 to 1920, New York bankers sent a letter to every bank in the United States, urging them to fund newspapers that opposed government-issued money. The letter read in part:

Dear Sir: It is advisable to do all in your power to sustain such prominent daily and weekly newspapers . . . as will oppose the issuing of greenback paper money, and that you also withhold patronage or favors from all applicants who are not willing to oppose the Government issue of money. Let the Government issue the coin and the banks issue the paper money of the country. . . . [T]o restore to circulation the Government issue of money, will be to provide the people with money, and will therefore seriously affect your individual profit as bankers and lenders.

Bank-created money (which now includes electronic money) could be rented at a profit to the people.  The “people’s money” was limited to coin, which today composes less than one ten-thousandth of M3, the broadest measure of the money supply.

Lincoln’s assassination and the abandonment of debt-free greenbacks effectively marked the exchange of one type of slavery (race-based) for another (wage- and debt-based). As a result, the American government and American people are so heavily mired in debt today that only a radical overhaul of the monetary system can free us.

Gimmick or Game-Changer?

That is the real context and backstory of the trillion dollar coin.  The stakes are much higher today than just fending off the debt ceiling. We the people need to take back the power to issue our own money, and coins are the only means left to us to do it.

The idea of minting large denomination coins to solve economic problems was evidently first suggested by a chairman of the Coinage Subcommittee of the U.S. House of Representatives in the early 1980s. He pointed out that the government could pay off its entire debt with some billion-dollar coins.  The Constitution gives Congress the power to coin money and regulate its value, and no limit is put on the value of the coins it creates. In Web of Debt (2007), I suggested that to solve the government’s debt problems today these would need to be trillion dollar coins.

In legislation initiated in 1982, however, Congress chose to impose limits on the amounts and denominations of most coins. The one exception was the platinum coin, which a special provision allowed to be minted in any amount for commemorative purposes.

An attorney named Carlos Mucha, blogging under the pseudonym Beowulf, proposed issuing a platinum coin to capitalize on this loophole, after hearing me mention the trillion dollar coin in a Thom Hartmann interview. At first it was just an amusing exercise.  But with the endless gridlock in Congress over the debt ceiling, it got picked up by serious economists as a way to checkmate the deficit hawks.

Philip Diehl, former head of the US Mint and co-author of the platinum coin law, confirmed that the coin would be legal tender:

In minting the $1 trillion platinum coin, the Treasury Secretary would be exercising authority which Congress has granted routinely for more than 220 years . . . under power expressly granted to Congress in the Constitution (Article 1, Section 8).

Warren Mosler, one of the founders of Modern Monetary Theory, reviewed the idea and concluded it would work operationally. The funds would simply be new reserve balances at the Fed rather than new Treasury securities.

Joe Firestone pointed out that the trillion dollar coin could solve the government’s debt problems once and for all, putting was in its grasp the power to replace austerity with the abundance enjoyed by our forefathers.

The trillion dollar coin can raise cries of “hyperinflation!” It evokes images of million-mark notes filling wheelbarrows. But as economist Michael Hudson observes:

Every hyperinflation in history has been caused by foreign debt service collapsing the exchange rate. The problem almost always has resulted from wartime foreign currency strains, not domestic spending.

Prof. Randall Wray explains that the coin would not circulate but would be deposited in the government’s account at the Fed, so it could not inflate the circulating money supply. The budget would still need Congressional approval. To keep a lid on spending, Congress would just need to abide by some basic rules of economics. It could spend on goods and services up to full employment without creating price inflation (since supply an d demand would rise together). After that, it would need to tax — not to fund the budget, but to shrink the circulating money supply and avoid driving up prices with excess demand.

Time to Take Back the Money Power

The current economic crisis cannot be solved with the thinking that created it.  There is simply not enough money in the system to fund the services we desperately need, pay down the debt, and keep taxes affordable.  The money supply has shrunk by $4 trillion since 2008, according to the Fed’s own website.  The only solution is to add more money to the real, producing economy; And that means some congressionally-mandated entity needs to create it, either the Fed or the Treasury.

The Fed has declined. In flatly rejecting the Treasury’s legal tender, the Fed as representative of the banks is asserting itself as outranking the elected representatives of the people.  If the Fed won’t acknowledge the coins created by the government, perhaps the government needs to charter a publicly-owned bank that will.

We have a chance today to end the charade of big money gridlock politics, as well as the reign of the big banks. We have the power to choose prosperity over austerity. But to do it, we must first restore the power to create money to the people.

Ellen Brown is an attorney and president of the Public Banking Institute.  In Web of Debt, her latest of eleven books, she shows how a private banking oligarchy has usurped the power to create money from the people themselves, and how we the people can get it back. Her book The Buck Starts Here: Restoring Prosperity with Publicly-owned Banks will be released this spring. Her websites are http://WebofDebt.com, http://EllenBrown.com, and http://PublicBankingInstitute.org.

The Trillion Dollar Coin: A Debt Solution for the People

On Friday, January 11, economist and New York Times columnist Paul Krugman urged the White House to mint a platinum coin worth $1 trillion, as a counter to what was then a threat to block federal spending that Congress had already approved. (Republicans made good on that threat yesterday, putting the United States in danger of default.)

We have forgotten the role that money issued directly by the government has played in our history.

The White House responded by saying the trillion dollar coin is off the table, because the Federal Reserve declared that it “wouldn’t view the coin as viable.”

Even Krugman called the coin idea “silly.” He just thought it was less silly—and less dangerous—than playing with the debt ceiling.

But it is not silly. We have forgotten the role that money issued directly by the government has played in our history. The American colonists did not think it was silly when they escaped a grinding debt to British bankers and a chronically short money supply by printing their own paper scrip, an innovative solution that allowed the colonies to thrive.

Many people believe that the U.S. government creates its own money. This is not true. Today, the Federal Reserve creates trillions of dollars on its books and lends them at near-zero interest to private banks, which then lend them back to the government and the people at market rates. We have been brainwashed into thinking that it makes more sense to do this than for the government to simply create the money itself, debt- and interest-free.

In fact, the trillion dollar coin represents one of the most important principles of popular prosperity ever conceived: nations should be free to create their own money without incurring debt. Some of our greatest leaders, including Benjamin Franklin, Thomas Jefferson, and Abraham Lincoln, promoted this essential strategy. They realized that the freedom to print money offers a way to break the shackles of debt and free the nation to realize its full potential.

While a commoner might get 10 to 20 years for robbing a bank, bank executives get huge bonuses for robbing us.

Money creation is an all-important power that has been fought over for centuries, in a largely secret battle between governments and private banks. For the last two and a half centuries, the banks have had the upper hand, making us forget that any other option exists. But we are learning the great secret of money: that how it gets created determines who has the power in society—we the people, or they the bankers.

It is no secret who has that power today. Witness the great bailout of 2008 that rewarded banks for making irresponsible and fraudulent gambles in the subprime mortgage scandal. None of the bankers responsible served time in jail. Then there was the robosigning scandal, in which banks skipped important steps in the process of foreclosing on the homes of ordinary Americans, and came away with a slap on the wrist. Now we are seeing the LIBOR scandal unfold, in which traders at the Swiss financial services company UBS were convicted of colluding with other banks to tweak interest rates for their own financial benefit. We can make an educated guess as to how this too will turn out for them (hint: well). While a commoner might get 10 to 20 years for robbing a bank, bank executives get huge bonuses for robbing us.

We may rail against the banks and demand change, but change will not come until we grasp the fundamental secrets that are the foundation of their power: those who create the nation’s money control the nation, and nearly the entire money supply today is created by banks in concert with the Federal Reserve.

Remembering our roots

Everyone knows that Benjamin Franklin played an important role in the founding of the United States. Fewer know his views on the printing of money. “Experience, more prevalent than all the logic in the World,” he wrote, “has fully convinced us all, that [paper money] has been, and is now of the greatest advantages to the country.”

When the British forbade new issues of paper scrip by the colonial governments, Franklin went to London and argued that issuing their own money was responsible for the colonies’ prosperity.

The response of the king, leaned on by the Bank of England, was to ban all issues of paper scrip. Without their paper money, the money supply collapsed, and the economy sank into a deep recession. The colonists then rebelled. They won the revolution, but the bankers retained the power to create money by setting up a banking system like that dominated by the Bank of England.

Fourscore and six years later, in 1862, President Abraham Lincoln boldly took back the power to create money during the Civil War. To avoid exorbitant interest rates of 24 to 36 percent, he decided to print money directly from the U.S. Treasury as U.S. Notes or “greenbacks.” The issuance of $450 million in greenbacks was the key to funding not only the North’s victory in the war but an array of pivotal infrastructure projects, including a transcontinental railway system.

After Lincoln was assassinated, however, the greenback program was quickly discontinued. Repeated popular attempts by farmers and laborers to revive it failed. They were opposed by a wave of banker activism to maintain the banks’ control over the printing of money, which had been established by the National Bank Act of 1863.

In 1872, New York bankers sent a letter to every bank in the United States. The letter, as quoted by Lynn Wheeler in Triumphant Plutocracy: The Story of American Public Life from 1870 to 1920, read in part:

Dear Sir: It is advisable to do all in your power to sustain such prominent daily and weekly newspapers…as will oppose the issuing of greenback paper money, and that you also withhold patronage or favors from all applicants who are not willing to oppose the Government issue of money. Let the Government issue the coin and the banks issue the paper money of the country. [T]o restore to circulation the Government issue of money, will be to provide the people with money, and will therefore seriously affect your individual profit as bankers and lenders .

Bank-created money, including paper bills and now electronic money, could be rented to the people at a profit. The people’s debt-free money was limited to coins, which today compose less than one ten-thousandth of M3, the broadest measure of the money supply.

Lincoln’s assassination and the abandonment of debt-free greenbacks marked the exchange of physical slavery for what has been called “debt peonage” or “wage slavery.” Today, as a result, the American government and American people are so heavily mired in debt that only a radical overhaul of the monetary system can free us.

Gimmick or game-changer?

This is the real context and backstory of the trillion dollar coin. The stakes are much higher than just fending off the debt ceiling. We the people need to take back the power to issue our own money, and we can’t do it with nickels and dimes. We’re going to need coins bearing some very large numbers.

The coin could put within the government’s grasp the power to solve its debt problems once and for all.

The idea of minting large-denomination coins to solve economic problems seems to have first been suggested by a chairman of the Coinage Subcommittee of the U.S. House of Representatives in the early 1980s. He pointed out that the government could pay off its entire debt with some billion-dollar coins. The Constitution gives Congress the power to coin money and regulate its value, and sets no limit on the value of the coins it creates.

That may have been true then, but in legislation initiated in 1982, Congress chose instead to impose limits on the amounts and denominations of most coins. The one exception was the platinum coin, which a special provision allowed to be minted in any amount for commemorative purposes.

An attorney named Carlos Mucha, who at the time was blogging under the pseudonym “ Beowulf ,” proposed issuing a platinum trillion dollar coin to capitalize on this loophole, after he heard me mention the trillion dollar coin in a Thom Hartmann interview. At first, he said, it was just an amusing exercise. But with the endless gridlock in Congress over the debt ceiling, it got picked up by serious economists as a way to checkmate the deficit hawks.

Philip Diehl , former head of the U.S. Mint and co-author of the platinum coin law, confirmed that the coin would be legal tender:

In minting the $1 trillion platinum coin, the Treasury Secretary would be exercising authority which Congress has granted routinely for more than 220 years. The Secretary authority is derived from an Act of Congress (in fact, a GOP Congress) under power expressly granted to Congress in the Constitution (Article 1, Section 8).

Warren Mosler, one of the founders of Modern Monetary Theory (MMT), reviewed the idea of the trillion dollar coin and concluded it would work operationally. And Joe Firestone pointed out that the trillion dollar coin has far greater game-changing potential than mere political maneuvering. The coin could put within the government’s grasp the power to solve its debt problems once and for all, replacing austerity with the abundance enjoyed by our forefathers.

The invariable objection to government-issued money is that it will lead to hyperinflation. The trillion dollar coin can evoke images of million-Deutschemark notes filling wheelbarrows. But as economist Michael Hudson points out:

Every hyperinflation in history has been caused by foreign debt service collapsing the exchange rate. The problem almost always has resulted from wartime foreign currency strains, not domestic spending.

And as professor Randall Wray observes, the coin would not circulate in the general economy. Instead, it would be deposited in the government’s account and held at the Fed, so it could not inflate the circulating money supply.

As far as spending goes, the fact that the Treasury has money in its account doesn’t mean Congress could or would go wild spending the funds. The budget would still need congressional approval. To keep a lid on spending, Congress would just need to abide by some basic rules of economics. It could spend on goods and services up to full productive capacity without creating price inflation (since supply and demand would rise together). After that, it would need to tax—not to fund the budget, but to shrink the circulating money supply and avoid driving up prices with excess demand.

Time to take back the money power

The current political stalemate cannot be solved with the thinking that created it. There is simply not enough money in the system to fund the services that Americans desperately need, create full employment, pay down the debt, and keep taxes affordable. The money supply has shrunk by $4 trillion since 2008, according to the Fed’s own website.

The massive push from educational campaigns such as those organized by Occupy Wall Street, Strike Debt, and the Free University is starting to lift the veil from our eyes.

The only real solution to the unemployment created by this shrinkage is to add more money to the economy, and that means that someone needs to create it. Either the Fed does this in the way that it is currently done, by adding the money nearly interest-free to the balance sheets of banks to be lent to the government and the people at interest; or the Treasury does it and adds the money to the government’s account debt- and interest-free.

After a century of domination by the Federal Reserve, it is time we tried something new. In flatly rejecting the Treasury’s legal tender, the Fed as representative of the banks is asserting itself to be more powerful than the elected representatives of the people. If the Fed won’t acknowledge the coins created by the government, perhaps the government needs to charter a publicly owned bank that will.

We have a chance today to end the charade of big money gridlock politics, as well as the reign of the big banks. But the current government is so thoroughly captured by the bank-created money of our time that it is unlikely to take action without pressure from the people. Our ignorance on these issues has played into the hands of the 1 percent, who are dependent on the current system for their wealth and power. However, the massive push from educational campaigns such as those organized by Occupy Wall Street, Strike Debt, and the Free University is starting to lift the veil from our eyes.

We have the power to choose prosperity over austerity. But to do it, we must first restore the power to create money to the people.

This work is licensed under a Creative Commons License

Ellen Brown

Ellen Brown developed her research skills as an attorney practicing civil litigation in Los Angeles. In Web of Debt, her latest of eleven books, she turns those skills to an analysis of the Federal Reserve and “the money trust.” She shows how this private cartel has usurped the power to create money from the people themselves, and how we the people can get it back. She is president of the Public Banking Institute, http://PublicBankingInstitute. org , and has websites at http://WebofDebt.com and http://EllenBrown.com

The Trillion Dollar Coin: A Debt Solution for the People

On Friday, January 11, economist and New York Times columnist Paul Krugman urged the White House to mint a platinum coin worth $1 trillion, as a counter to what was then a threat to block federal spending that Congress had already approved. (Republicans made good on that threat yesterday, putting the United States in danger of default.)

We have forgotten the role that money issued directly by the government has played in our history.

The White House responded by saying the trillion dollar coin is off the table, because the Federal Reserve declared that it “wouldn’t view the coin as viable.”

Even Krugman called the coin idea “silly.” He just thought it was less silly—and less dangerous—than playing with the debt ceiling.

But it is not silly. We have forgotten the role that money issued directly by the government has played in our history. The American colonists did not think it was silly when they escaped a grinding debt to British bankers and a chronically short money supply by printing their own paper scrip, an innovative solution that allowed the colonies to thrive.

Many people believe that the U.S. government creates its own money. This is not true. Today, the Federal Reserve creates trillions of dollars on its books and lends them at near-zero interest to private banks, which then lend them back to the government and the people at market rates. We have been brainwashed into thinking that it makes more sense to do this than for the government to simply create the money itself, debt- and interest-free.

In fact, the trillion dollar coin represents one of the most important principles of popular prosperity ever conceived: nations should be free to create their own money without incurring debt. Some of our greatest leaders, including Benjamin Franklin, Thomas Jefferson, and Abraham Lincoln, promoted this essential strategy. They realized that the freedom to print money offers a way to break the shackles of debt and free the nation to realize its full potential.

While a commoner might get 10 to 20 years for robbing a bank, bank executives get huge bonuses for robbing us.

Money creation is an all-important power that has been fought over for centuries, in a largely secret battle between governments and private banks. For the last two and a half centuries, the banks have had the upper hand, making us forget that any other option exists. But we are learning the great secret of money: that how it gets created determines who has the power in society—we the people, or they the bankers.

It is no secret who has that power today. Witness the great bailout of 2008 that rewarded banks for making irresponsible and fraudulent gambles in the subprime mortgage scandal. None of the bankers responsible served time in jail. Then there was the robosigning scandal, in which banks skipped important steps in the process of foreclosing on the homes of ordinary Americans, and came away with a slap on the wrist. Now we are seeing the LIBOR scandal unfold, in which traders at the Swiss financial services company UBS were convicted of colluding with other banks to tweak interest rates for their own financial benefit. We can make an educated guess as to how this too will turn out for them (hint: well). While a commoner might get 10 to 20 years for robbing a bank, bank executives get huge bonuses for robbing us.

We may rail against the banks and demand change, but change will not come until we grasp the fundamental secrets that are the foundation of their power: those who create the nation’s money control the nation, and nearly the entire money supply today is created by banks in concert with the Federal Reserve.

Remembering our roots

Everyone knows that Benjamin Franklin played an important role in the founding of the United States. Fewer know his views on the printing of money. “Experience, more prevalent than all the logic in the World,” he wrote, “has fully convinced us all, that [paper money] has been, and is now of the greatest advantages to the country.”

When the British forbade new issues of paper scrip by the colonial governments, Franklin went to London and argued that issuing their own money was responsible for the colonies’ prosperity.

The response of the king, leaned on by the Bank of England, was to ban all issues of paper scrip. Without their paper money, the money supply collapsed, and the economy sank into a deep recession. The colonists then rebelled. They won the revolution, but the bankers retained the power to create money by setting up a banking system like that dominated by the Bank of England.

Fourscore and six years later, in 1862, President Abraham Lincoln boldly took back the power to create money during the Civil War. To avoid exorbitant interest rates of 24 to 36 percent, he decided to print money directly from the U.S. Treasury as U.S. Notes or “greenbacks.” The issuance of $450 million in greenbacks was the key to funding not only the North’s victory in the war but an array of pivotal infrastructure projects, including a transcontinental railway system.

After Lincoln was assassinated, however, the greenback program was quickly discontinued. Repeated popular attempts by farmers and laborers to revive it failed. They were opposed by a wave of banker activism to maintain the banks’ control over the printing of money, which had been established by the National Bank Act of 1863.

In 1872, New York bankers sent a letter to every bank in the United States. The letter, as quoted by Lynn Wheeler in Triumphant Plutocracy: The Story of American Public Life from 1870 to 1920, read in part:

Dear Sir: It is advisable to do all in your power to sustain such prominent daily and weekly newspapers…as will oppose the issuing of greenback paper money, and that you also withhold patronage or favors from all applicants who are not willing to oppose the Government issue of money. Let the Government issue the coin and the banks issue the paper money of the country. [T]o restore to circulation the Government issue of money, will be to provide the people with money, and will therefore seriously affect your individual profit as bankers and lenders .

Bank-created money, including paper bills and now electronic money, could be rented to the people at a profit. The people’s debt-free money was limited to coins, which today compose less than one ten-thousandth of M3, the broadest measure of the money supply.

Lincoln’s assassination and the abandonment of debt-free greenbacks marked the exchange of physical slavery for what has been called “debt peonage” or “wage slavery.” Today, as a result, the American government and American people are so heavily mired in debt that only a radical overhaul of the monetary system can free us.

Gimmick or game-changer?

This is the real context and backstory of the trillion dollar coin. The stakes are much higher than just fending off the debt ceiling. We the people need to take back the power to issue our own money, and we can’t do it with nickels and dimes. We’re going to need coins bearing some very large numbers.

The coin could put within the government’s grasp the power to solve its debt problems once and for all.

The idea of minting large-denomination coins to solve economic problems seems to have first been suggested by a chairman of the Coinage Subcommittee of the U.S. House of Representatives in the early 1980s. He pointed out that the government could pay off its entire debt with some billion-dollar coins. The Constitution gives Congress the power to coin money and regulate its value, and sets no limit on the value of the coins it creates.

That may have been true then, but in legislation initiated in 1982, Congress chose instead to impose limits on the amounts and denominations of most coins. The one exception was the platinum coin, which a special provision allowed to be minted in any amount for commemorative purposes.

An attorney named Carlos Mucha, who at the time was blogging under the pseudonym “ Beowulf ,” proposed issuing a platinum trillion dollar coin to capitalize on this loophole, after he heard me mention the trillion dollar coin in a Thom Hartmann interview. At first, he said, it was just an amusing exercise. But with the endless gridlock in Congress over the debt ceiling, it got picked up by serious economists as a way to checkmate the deficit hawks.

Philip Diehl , former head of the U.S. Mint and co-author of the platinum coin law, confirmed that the coin would be legal tender:

In minting the $1 trillion platinum coin, the Treasury Secretary would be exercising authority which Congress has granted routinely for more than 220 years. The Secretary authority is derived from an Act of Congress (in fact, a GOP Congress) under power expressly granted to Congress in the Constitution (Article 1, Section 8).

Warren Mosler, one of the founders of Modern Monetary Theory (MMT), reviewed the idea of the trillion dollar coin and concluded it would work operationally. And Joe Firestone pointed out that the trillion dollar coin has far greater game-changing potential than mere political maneuvering. The coin could put within the government’s grasp the power to solve its debt problems once and for all, replacing austerity with the abundance enjoyed by our forefathers.

The invariable objection to government-issued money is that it will lead to hyperinflation. The trillion dollar coin can evoke images of million-Deutschemark notes filling wheelbarrows. But as economist Michael Hudson points out:

Every hyperinflation in history has been caused by foreign debt service collapsing the exchange rate. The problem almost always has resulted from wartime foreign currency strains, not domestic spending.

And as professor Randall Wray observes, the coin would not circulate in the general economy. Instead, it would be deposited in the government’s account and held at the Fed, so it could not inflate the circulating money supply.

As far as spending goes, the fact that the Treasury has money in its account doesn’t mean Congress could or would go wild spending the funds. The budget would still need congressional approval. To keep a lid on spending, Congress would just need to abide by some basic rules of economics. It could spend on goods and services up to full productive capacity without creating price inflation (since supply and demand would rise together). After that, it would need to tax—not to fund the budget, but to shrink the circulating money supply and avoid driving up prices with excess demand.

Time to take back the money power

The current political stalemate cannot be solved with the thinking that created it. There is simply not enough money in the system to fund the services that Americans desperately need, create full employment, pay down the debt, and keep taxes affordable. The money supply has shrunk by $4 trillion since 2008, according to the Fed’s own website.

The massive push from educational campaigns such as those organized by Occupy Wall Street, Strike Debt, and the Free University is starting to lift the veil from our eyes.

The only real solution to the unemployment created by this shrinkage is to add more money to the economy, and that means that someone needs to create it. Either the Fed does this in the way that it is currently done, by adding the money nearly interest-free to the balance sheets of banks to be lent to the government and the people at interest; or the Treasury does it and adds the money to the government’s account debt- and interest-free.

After a century of domination by the Federal Reserve, it is time we tried something new. In flatly rejecting the Treasury’s legal tender, the Fed as representative of the banks is asserting itself to be more powerful than the elected representatives of the people. If the Fed won’t acknowledge the coins created by the government, perhaps the government needs to charter a publicly owned bank that will.

We have a chance today to end the charade of big money gridlock politics, as well as the reign of the big banks. But the current government is so thoroughly captured by the bank-created money of our time that it is unlikely to take action without pressure from the people. Our ignorance on these issues has played into the hands of the 1 percent, who are dependent on the current system for their wealth and power. However, the massive push from educational campaigns such as those organized by Occupy Wall Street, Strike Debt, and the Free University is starting to lift the veil from our eyes.

We have the power to choose prosperity over austerity. But to do it, we must first restore the power to create money to the people.

This work is licensed under a Creative Commons License

Ellen Brown

Ellen Brown developed her research skills as an attorney practicing civil litigation in Los Angeles. In Web of Debt, her latest of eleven books, she turns those skills to an analysis of the Federal Reserve and “the money trust.” She shows how this private cartel has usurped the power to create money from the people themselves, and how we the people can get it back. She is president of the Public Banking Institute, http://PublicBankingInstitute. org , and has websites at http://WebofDebt.com and http://EllenBrown.com

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NSA Snooping on Brazil's President's Emails. Unfolding Diplomatic Fall Out between Washington and Brasilia, Michael Werbowski, September 20, 2013 Revisiting “Red Lines.” Saving Syria from...

The Financial Armageddon Looting Machine: Looming Mass Destruction from Derivatives

Increased regulation and low interest rates are driving lending from the regulated commercial banking system into the unregulated shadow banking system. The shadow banks,...

Today’s Most Popular Articles on Global Research

.mask {width: 642px !important;] By Norman Ball, September 12 , 2013 By Peter Phillips, September 13 , 2013 By Dr. Paul Craig Roberts, September...

Trapped in a Web of Debt and a Derivatives Time-Bomb

Here's what's in your Prime Interest today: Bernanke's patting himself on the back right now -- at least with respect to Consumer Price Inflation, which...

Financial Half-Truths in Puerto Rico

A Moment of “Half-Way” Honesty About Puerto Rico in the Financial Press Last week in Barron’s, the journalist Andrew Bary, shows a rare example of...

Making the World Safe for Banksters: Syria In the Cross-hairs

http://www.truthdig.com/report/item/making_the_world_safe_for_banksters_syria_in_the_cross-hairs_20130905/ Posted on Sep 5, 2013 ...

Making the World Safe for Banksters: Syria In the Cross-hairs

http://www.truthdig.com/report/item/making_the_world_safe_for_banksters_syria_in_the_cross-hairs_20130905/ Posted on Sep 5, 2013 ...

Wall Street’s Secret “Economic Endgame”: Making the World Safe for Banksters, Syria in the...

Iraq and Libya have been taken out, and Iran has been heavily boycotted. Syria is now in the cross-hairs. Why? Here is one overlooked...

The Leveraged Buyout of America

Giant bank holding companies now own airports, toll roads, and ports; control power plants; and store and hoard vast quantities of commodities of all...

Not Too Big to Jail: Eliot Spitzer Is Wall Street’s Worst Nightmare

http://www.truthdig.com/report/item/not_too_big_to_jail_eliot_spitzer_is_wall_streets_worst_nightmare_20130819/ Posted on Aug 19, 2013 ...

Not Too Big to Jail: Why Eliot Spitzer Is Wall Street’s Worst Nightmare

Before Eliot Spitzer’s infamous resignation as governor of New York in March 2008, he was one of our fiercest champions against Wall Street corruption,...

Progressive Radio News Hour Guests for August 23, 24, and 25, 2013

Progressive Radio News Hour Guests for August 23, 24, and 25, 2013 Friday, August 23 at 10AM US Central time: Paul Craig Roberts Roberts was former...

Detroit: Government Chooses Big Banks Over the American People Once Again

Government Sides with the Big Banks Every Time Ellen Brown noted recently that Detroit is yet another example of the government choosing big banks over the...

The Detroit Bail-In Template: Fleecing Pensioners to Save the Banks

http://www.truthdig.com/report/item/the_detroit_bail-in_template_fleecing_pensioners_to_save_the_banks_20130805/ Posted on Aug 5, 2013 ...

Green Light for City-Owned San Francisco Bank

http://www.truthdig.com/report/item/green_light_for_city-owned_san_francisco_bank_20130802/ Posted on Aug 2, 2013 ...

Banks as Public Utilities

Establishing a city-owned San Francisco Bank is not a new idea. According to City Supervisor John Avalos, speaking at the Public Banking Institute conference...

Collateral Damage: QE3 and the Shadow Banking System

Rather than expanding the money supply, quantitative easing (QE) has actually caused it to shrink by sucking up the collateral needed by the shadow...

Progressive Radio News Hour Guests for July 26, 27, and 28, 2013

Progressive Radio News Hour Guests for July 26, 27, and 28, 2013 Friday, July 26 at 10AM US Central time: Paul Craig Roberts Roberts was former...

The Confiscation of Bank Savings to “Save the Banks”: The Diabolical Bank “Bail-In” Proposal

Is the Cyprus Bank “Bail-in” a “dress rehearsal” for things to come? Is a “Savings Heist” in the European Union and North America envisaged...

Hitler vs. Bernanke

Why was Adolph Hitler able to lift Germany out of the Great Depression, when policymakers in the US—particularly the Fed—have failed so miserably? Let’s look...

New Economic System Needed and Growing: Learn How to Build it in Your Community

Another jobs report is in and it shows continued waddling along in job creation, just enough to keep the unemployment figure stable. The reality...

Think Your Money is Safe in an Insured Bank Account? Think Again.

A trend to shift responsibility for bank losses onto blameless depositors lets banks gamble away your money. When Dutch Finance Minister Jeroen Dijsselbloem told reporters...

Think Your Money is Safe in an Insured Bank Account? Think Again

http://www.truthdig.com/report/item/think_your_money_is_safe_in_an_insured_bank_account_think_again_20130705/ Posted on Jul 5, 2013 ...

Banking on the Public: Going Postal, North Dakota and Other Finance Alternatives

(Image: Bank sign via Shutterstock)Hundreds of people seeking a roadmap for remaking the banking system gathered north of San Francisco in early June at...

The Crime of Alleviating Poverty: A Local Community Currency Battles the Central Bank of...

Former Peace Corps volunteer Will Ruddick and several residents of Bangladesh, Kenya, face a potential seven years in prison after developing a cost-effective way...

The Crime of Alleviating Poverty: A Local Community Currency Battles the Central Bank of...

http://www.truthdig.com/report/item/the_crime_of_alleviating_poverty_a_local_community_currency_20130628/ Posted on Jun 28, 2013 ...

Hundreds Gather for Public Banking and Economic Justice

http://www.truthdig.com/report/item/hundreds_gather_for_public_banking_and_economic_justice_20130623/ Posted on Jun 23, 2013 ...

Progressive Radio News Hour Guests for June 28, 29, and 30, 2013

Progressive Radio News Hour Guests for June 28, 29 and 30, 2013 Friday, June 28 at 10AM US Central time: Paul Craig Roberts Roberts was former...

Elizabeth Warren’s QE for Students: Populist Demagoguery or Economic Breakthrough?

http://www.truthdig.com/report/item/elizabeth_warrens_qe_for_students_20130614/ Posted on Jun 14, 2013 ...

Elizabeth Warren’s QE for Students

On July 1, interest rates will double for millions of students — from 3.4% to 6.8% — unless Congress acts; and the legislative fixes...

“The Gaia Plan: A Worldwide Guaranteed Income”

“The Gaia Plan: A Worldwide Guaranteed Income” By Richard C. Cook Speech Prepared for “Public Banking 2013: Funding the New Economy” Sponsored by Dominican University and the Public Banking Institute San Rafael, California June 2, 2013 My name is Richard C. Cook, and I am grateful to Dominican University and the Public Banking Institute for [...]

“The High Priests of Globalization”: Bilderberg Conference Convenes

Stephen LendmanInfowars.comJune 7, 2013 On June 5, the London Evening Standard headlined “No minutes,...

“The High Priests of Globalization”: Bilderberg Conference Convenes

On June 5, the London Evening Standard headlined “No minutes, no press conferences — just the world’s power brokers chewing the fat on the...

Italians Rejects Austerity

It's high time voters somewhere did. It transfers wealth to bankers, other corporate favorites and rich elites. It wrecks economies. It creates poverty, unemployment and human misery. It turns countries into dystopian backwaters.

US Economy: Troubled or All’s Well?

Is America on track for double dip trouble? In Q IV, government and business inventory spending declined. Auto sales alone drove consumer spending gains. Deep discounts, near zero interest rates, and Hurricane Sandy affected purchases stimulated sales.

The End of Prosperity

By Stephen Lendman - RINF | From too much of a good thing. From the 1980s and 1990s excesses. From the longest ever US bull...

The Paradox of Cyclical Ingenuity and Virtual Democracy

In Hellenic times, theatre was regarded as the institution that held all other institutions up to public examination and scrutiny. Its’ function was to...

The Humble Banana

By Dr. Mercola The humble banana is one of the most popular fruits in the world. Tasty, inexpensive and with its own clean and protective...

Putin: U.S. Routinely Meddles in Russian and Other Nations’ Elections

Eric Zuesse, originally posted at strategic-culture.org In a Showtime interview of Russian President Vladimir Putin by American film-maker Oliver Stone, which started airing on June...

America’s Retarded Awareness

Alternative ideas don’t come easily to Americans. It seems that Americans imported colonial hierarchal practices from Europe to cultivate them to their own advantage....

Is this person our new President?

Here’s Why Hillary Won’t Allow Her Corporate Speeches to be Published Eric Zuesse (update added 8 November 2016) In a previous report, I indicated "Why Hillary Clinton’s...

Here’s how against the Republican Establishment Trump is:

Eric Zuesse The following is a reprint (excluding the footnotes) of the wikipedia article: https://en.wikipedia.org/wiki/List_of_Republicans_opposing_Donald_Trump_presidential_campaign,_2016 List of Republicans opposing Donald Trump presidential campaign, 2016 Public officials Former Presidents Former President...

The Power Elite’s War

“A populace deprived of the ability to separate lies from truth, is no longer capable of sustaining a free society.” Journalist Chris Hedges As the ruling...

Prop. 51 Versus a State-Owned Bank: How California Can Save $10 Billion on...

(RINF) - School districts are notoriously short of funding – so short that some California districts have succumbed to Capital Appreciation Bonds that will cost...

Still the Only Christian Choice For President

Ron Paul is the only major presidential candidate Christians could hire without sinning against Jesus in my lifetime. What I mean by “sin” is doing...

158 songs banned by Clear Channel after 9/11, plus all by Rage Against the...

While the dust of the September 11 attacks still settled, the controversial media company Clear Channel...

The Most Important US Air Force Base You’ve Never Heard Of

The overseas hub for America’s “war on terror” is the massive Ramstein Air Base in southwest Germany. Nearly ignored by US media,...

Here’s Why Hillary Won’t Allow Her Corporate Speeches to be Published

Eric Zuesse (update added 8 November 2016) In a previous report, I indicated "Why Hillary Clinton’s Paid Speeches Are Relevant”, but not what they contained. The...

Muhammad Ali: Early American Adopter of Islam

Not many are aware that, years ago, Muhammad Ali shifted from being a Black Muslim to a traditional Sunni and then to a Sufi....

Women and War

This month we’ve seen a strange confluence of developments, anniversaries, and events bringing the subject of “women and war” to the editorial pages of...

U.S. SecDef Ashton Carter Implies Russia & China Are Enemies of U.S.

Eric Zuesse INTRODUCTION On Saturday November 7th, U.S. Secretary of Defense Ashton Carter, who had started his career at the Defense Department during the Reagan Administration...

Monstanto vs the world – How we will win the food war

By conventional wisdom it is excellent news. Researchers from Iowa have shown that organic farming methods can yield almost as highly as pesticide-intensive methods. Other...

The Jonas Salk Polio Vaccine: A Medical Breakthrough or a Propaganda Campaign for Big...

Timothy Alexander Guzman (RINF) — When polio (poliomyelitis) became an epidemic in the U.S. and other parts of the world many people were understandably concerned. Diseases...
Microphone surrounded by crowd at Trafalgar Square.

How Zionists Are Destroying Free Speech In Universities

If our universities can’t stand up to the Israel lobby and uphold free speech, how will the international community ever stand up to the...

The Origin of the ‘New Cold War’

Eric Zuesse This will be history, replacing myth. So: if at the start it might seem unbelievable, I request the reader – please click onto...

From Rodney King to Ferguson: Covering US Racism as an Event

Christian Christensen While following events in Ferguson on Twitter, I noticed a small-but-steady stream of tweets from African-Americans irritated by users who were suggesting that, because there...

In Many US Communities, Cops are the ‘Terrorists’

Police need to be demilitarized and remade as ‘peace officers’ Dave Lindorff  The apparent murder by a white police officer in Ferguson, Missouri, of Mike Brown,...

Who Profits from Ukraine’s War

an investigative report, by Eric Zuesse, RINF Alternative News To start with, an explanation is needed for this article’s sheer length: The civil war now raging inside...

U.S. Mayors Vote for Postal Banking

Posted on June 27, 2014 by ErnieM

by Matt Stannard on June 27th, 2014

DALLAS, TEXAS — At its June 20-23, 2014 annual meeting, the US Conference of Mayors (USCM) adopted a pair of resolutions endorsing postal banking, co-signed by eight mayors from six states. Their goal is to bring $1 trillion of job-creating economic stimulus primarily to low-income neighborhoods, over the next decade, at zero cost to taxpayers.

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Saying it on the air – “It’s Our Money” on PRN

Cities around the country have been ravaged by significant numbers of community foreclosures following the mortgage loan scandals of recent years. Big banks have been wheeling and dealing these finance contracts, often illegally, to execute fraudulent takings of property or profiteering from servicing fees. But they…Read More »


In the very first edition of this new program, Ellen provides a foundational
statement describing the nature of our debt-based money system, and what
this show hopes to achieve. With the recent 100th birthday of the Federal
Reserve and the appointment of its new Chairman, Janet Yellen, Ellen…Read More »

A National Summit: All About Israel

Dan Lieberman RINF Alternative News Public discussion , which has diminished in recent years,  on the Palestinian/Israeli crisis received a powerful impetus with The National Summit to...

Fracking: Suicide Capitalism Poisons the Air that We Breathe

Dylan Murphy  RINF Alternative News Shortly after operations began, we started to experience extreme headaches, runny noses, sore/scratchy throats, muscle aches and a constant feeling of...

What The Dulles Brothers Did To America; Or How We Learned To Live In...

I don't often recommend others' books, seeing as how I am trying to sell my own right now. But I have to make an exception for Stephen Kinzer's excellent work, "The Brothers: John Foster Dulles, Allen Dulles, And Their Secret World War." It is a must-read for all who are interested in genuine American history, not the crap we are taught in American classrooms. Kinzer has laid out in great detail how America, post- WWII, transitioned from a democracy (the one that elected FDR, rose out the Depression and squashed fascism) to a country ruled by a select few (the Dulles brothers and their corporate cronies) in secret. It is shameful that only now is the full truth being exposed, but if you were able to interpret the last 50 years through a discerning lens you probably already suspected that life in America was being controlled by a cabal comprised of its wealthiest and most powerful. Wars, assassinations, attacks, coups, economic calamity, and election fraud have all been arranged for their benefit. This cabal consolidated its power under Dwight Eisenhower in the early '50s when Allen Dulles took over as CIA Director and John Foster Dulles as Secretary of State. Almost immediately leftist foreign governments met their demise and capitalist enterprises reaped windfall profits.

Having seen firsthand the devastation of a global war, Ike was happy to fight another kind of war in the 1950s. A virtually bloodless war staged by spies manipulating events in covert ways. In essence he turned the country over to the Dulles brothers; in return all they had to do was promise that there would be no six million dead in concentration camps, no American GIs committed to foreign soil, no atom bombs dropped here or overseas. Allen and Foster obliged, and they ascended to the throne. With their power they staged coups in Iran, Guatemala, the Congo, and anywhere their clients’ interests were at stake. Who were their clients? The 1% who owned everything–-Dow, the Rockefellers, United Fruit, the duPonts–-and who relied on their legal advisors (Sullivan & Cromwell) and their bankers (Brown Brothers Harriman) to handle their money here and abroad. As shareholders, the Dulles brothers got their cut, of course, and the rest is the history no one knows. For the Dulles brothers were interested only in that part of America that benefitted them, not the rest of us. The rest of us wanted democracy; the Dulleses were invested in oligarchy. The system survives today; their legacy lives on. One percent of Americans feast at the table and the rest of us fight for the crumbs they spill. They’ve owned presidents, politicians, defense contractors, and judges. They’ve rigged the game to their own ends. They’ve starved us, lied to us, and killed us. And used the power of the CIA (Corporations Invisible Army) to do it. All for profit. That’s the Dulles brothers’ America. One president, and only one, challenged them. And see what happened to him in Dallas.

http://www.amazon.com/Presidents-Mortician-Tim-Fleming/dp/098882907X

4 Most Profound Ways Privatization Perverts Education

Paul Buchheit  RINF Alternative News Compared to other developed countries, equal education has been a low priority in America. Profit-seeking in the banking and health care industries...

Using Your Food Stores to Make 5 Alternative Flours

Note from Daisy: Since our family has just recently reduced our wheat consumption, this article couldn’t have come at a better time for us! I can personally recommend the chia seeds, the brown rice flour, and the oat flour that Tess describes below! by Tess Pennington Originally Published at Ready Nutrition Part of myRead the Rest...