Ellen Brown on Debt Money, Why Money is Collapsing and Why Central Banks Need Adult Supervision

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Posted by Acudoc on 8/23/2009 2:26:51 AM

Edward Griffin, in his masterpiece "The Creature from Jekyll Island", gives a brief history of banks, the overwhelming majority of which practiced fractional-reserve lending; there were few banks throughout history that practiced 100% reserve warehousing of gold and silver coins and made loans strictly above board with the consent of those depositors wanting a return on their deposits and accepting the banks as an intermediary between them and those desirous of taking out a true loan.

The fractional-reserve banks always failed, and the 100% reserve banks thrived---until they succumbed to the siren call of the fast money that could be made by multiplying receipts for gold and silver in excess of the actual money in their vaults.

To me fractional-reserve management of money always leads to catastrophe because it is a form of fraud and if governments have any legitimacy, it is because they are to protect citizens against fraud, breach of contract, theft, and uninitiated physical aggression.

Please clarify for me your reasons for supporting a free-banking system that allows the fractional-reserve creation of money substitutes. Thanks again for another great interview. These are exciting times because of the fast exchange of ideas through the blogosphere.

Reply from the Daily Bell:

There are historical instances where private fractional reserve banking apparently thrived. Professor George Selgin, among others, has written extensively about these episodes. A point to consider: Why not let the market decide? In this instance, Ed Griffin, whom we admire, may have been bringing his prejudices to bear.

Posted by Ernest Kroll on 8/23/2009 7:38:27 AM

In today's Bell, you quote the Libertarian Ron Paul: "Justifying conscription to promote the cause of liberty is one of the most bizarre notions ever conceived by man! Forced servitude, with the risk of death and serious injury as a price to live free, makes no sense."

Ron Paul is referring to compulsory military service or the draft, a practice that began in America during the Civil War and continues in our present day Selective Service System.

If America is faced with imminent destruction by an enemy (e.g., the 'Axis' of WW2), I for one would expect every citizen capable of defending his country to volunteer to do so. If any such citizen refuses, what do we do with that dissenter (excepting one who dissents on religious grounds, whom we would expect to serve in in a noncombantant role)?

Do we force that dissenter to serve against his will (i.e., the draft), do we incarcerate him, or do we publicly hang and sign him as an example for others? We certainly can't just ignore him since that would defeat attempts to stir the citizenry into a frenzy of nationalism and defense of the homeland.

A moral issue wrapped in a dilemma - what is the answer? Is there an answer?

Reply from the Daily Bell:

The answer is likely a quasi-volunteer militia (non-standing). People will fight within their country and for their own land. People probably will not wish to fight overseas however as most will wish to fight in self-defense while avoiding the founders' famous "foreign entanglements." This would have the dual purpose of reducing a vast, overseas empire and taming military expenditures.

Posted by Jack Burns on 8/23/2009 8:46:12 AM

Thank you for this exceptional explanation. Both Ms. Brown's and yours. I just hope common sense can prevail over greed and PhD's in economics.

Reply from the Daily Bell:

Thanks for reading.

Posted by Kaydell Bowles on 8/23/2009 3:09:23 PM

USA is the model up until 1971 when they unpegged the money supply and gold. There were better business cycles and lower inflation before the unpegging, which provided greater faith and trust in the government. Now we have just the opposite.

Reply from the Daily Bell:

Thanks, but the problems with central banking go back farther than 1971 in our opinion.

Posted by Roark on 8/23/2009 3:14:18 PM

Mrs. Brown says "The Federal Reserve doesn't create money; banks do. The Federal Reserve responds by providing the reserves after the fact if they come up short." Doesn't the Fed determine the interest rate on money that it "loans" to the commercial banks? What role does the Fed play in clearing checks drawn on one bank and cashed at another? Thanx for the incredible interviews and analysis.

Reply from the Daily Bell:

The Federal Reserve sets short-term interest rates. The Federal Reserve also decides how much electronic money to provide to commercial banks.

-----------

From Wikipedia:

"Typically a central bank controls certain types of short-term interest rates. These influence the stock- and bond markets as well as mortgage and other interest rates. The European Central Bank for example announces its interest rate at the meeting of its Governing Council; in the case of the Federal Reserve, the Board of Governors. ... Both the Federal Reserve and the ECB are composed of one or more central bodies that are responsible for the main decisions about interest rates and the size and type of open market operations, and several branches to execute its policies. In the case of the Fed, they are the local Federal Reserve Banks; for the ECB they are the national central banks."

Posted by Roark on 8/23/2009 3:31:21 PM

Great choice of guest to interview. I read Mrs. Brown's book with great enthusiasm. I will never agree to her solution.

Until recently, I believed fractional reserve banking was inherently fraudulent. Upon further analysis, it can not be. If the participants agree to all aspects of a fractional reserve system, then no one involved should have a problem.

However, people doing business as "government" (just a glorified extortion racket) will required taxation to be paid with a certain currency (gold, silver, fiat).

Any attempt to bypass using this "official" money will bring much misery to the "offenders", (Liberty Dollar Company is their latest victim). How can anyone then avoid the government monopoly which is set up via taxation and create an alternative banking system?

Reply from the Daily Bell:

"Until recently, I believed fractional reserve banking was inherently fraudulent. Upon further analysis, it cannot be. If the participants agree to all aspects of a fractional reserve system, then no one involved should have a problem."

----------

This is the same conclusion we have come to. Most modern Austrians still refuse to consider it.

----------

As far as your other question is concerned, we don't believe that the current form of central banking can stand in the era of the Internet anymore than the Roman Catholic Church could weather the Gutenberg press. The result may eventually be some sort of hard money standard - either adopted by the market itself or imposed by a weakened monetary elite.

Posted by Dave Redick on 8/23/2009 6:36:06 PM

I am a fan of Ellen Brown, but prefer a fourth approach where paper and coins are designated in grams of gold, and paper is convertible on demand by anyone.

See # 1 Fake Money in the left margin of my site

Click to View Link. I don't trust the gov't to 'manage' anything! Dave

Reply from the Daily Bell:

Or we could let the market itself decide? ...

Posted by Robert Swim on 8/23/2009 7:39:21 PM

I really have to agree with Scott Smith that the views and solutions put forth by Ellen Brown do not view all the vagaries and realities, but does point to a rational understanding of, or a better (perhaps oversimplified) view of the present style of economy.

It is basically a "paper" economy, wherein banks put out debt and are repaid with principal plus X-interest, the X actually being indicative of the cost the banks charge to do business, and therefore creating their own profit, and driving forward with that.

We really have only to look at such instances of loss such as John McAfee, who was the Original seller of McAfee Security and online programs, his "paper" holdings in stock and real estate once totaled nearly 100 million dollars, and now he is reduced to about $4 million or so in actual worth.

It's remarkable at first to see that not just in this case, but nearly every wealthy stockholder or investor who expected investments to continue to blossom and provide continual returns have lost vast amounts, seemingly due to the fact that their holdings were over-priced, rather than their money being used for commodities which held value.

We have, perhaps for too long come to think that market value is based upon the quality of confidence in the commodity, company, stock, or enterprise (oil, Dell, Microsoft, internet, media). Yet we are very much "bubble" investors, where anyone on the inside track can determine at what point to get in, and now determination of what point to get out has become "iffy" at best.

Thus it is that some great losses have been sustained by insurance companies, colleges, financial bankers, etc. I think it can be easily argued that had people made investments in such things as gold or not fully relied upon the "paper" market, then would things have gotten to the point of inflated value which created these losses?

It's clear we need to address solutions, and possibly support some shift from a totally open market to one where government holds some more appreciable governance than the FDIC insurance for banks.

Bailout of companies is not bailing out the losses of value which are costing people their homes, and creating havoc with all levels of finances. Many people will have to begin creating their own value and create or think about their net worth as a combination of holdings and hedged materials which many had seen as being measured in home equity, and now we see that this equity was falsely driven up by banking and real estate industry that was trying to create capital at the eventual expense of the buyer when markets declined. Oversimplified, but woefully appropriate.

Reply from the Daily Bell:

Thanks for writing. Interesting points. Not sure, however, of your conclusion that we need some sort of shift from a totally open market to one more involved with government.

Posted by Dr. Brooks (ret.) on 8/23/2009 8:03:15 PM

I have corresponded with Ellen Brown, appreciating her knowledge in so many areas. It's amazing to read all the info that comes out like tommy gun rapidity in this interview.

But, after all is said and done, we're no closer to a solution to the problem of the worldwide meltdown, because the Khazar Banksters are still controlling the world's central banks, imported from the European Rothschilds for the purpose of bankrupting those who adopt them.

Has anyone ever thought seriously of BARTER, instead of letting a central power manipulate all exchange between people? BARTERING one item for another of equal value would meet all the requirements between two parties in any business venture. Why have a third party involved, who may or may not be honest? Even having a 3rd party desiring to intervene makes one suspicious of the motive.

Working within the system has been the modus operandi all through the years. How can one hope to better things through a corrupt system? I believe the millions of Americans must take the responsibility upon themselves to solve our dilemma.

My solution is for these millions to work in tandem with local sheriffs to make citizen arrests on all government employees from CORPWashDC to each coast, preferably on the same day at the same time.

Then those arrested would agree to either work with us to restore our Republic, or go to prison to answer for their treason and betrayal of the American people, who trusted them to represent us.

Sadly most of us will be dead before any such effort is even considered, let alone being effectively executed.

Reply from the Daily Bell:

Thanks for writing. Would prefer education to arrests, however. Barter is part of a free-market money system.

Posted by Dr. Brooks (ret.) on 8/23/2009 11:23:04 PM

"...would prefer education to arrest..."

Yes, but education has not worked all these years. The people employed by government do as they are told, just awaiting the next paycheck. And where can they get this education? The government schools have dumbed down everybody rather than educating them on what a Republic is and what to do when a government becomes tyrannical or a dictatorship. With the secret cabal behind the Oz curtain controlling education, the writing of textbooks, & virtually all the media, where can they find this education of which you speak?

"...free market money system."

The important item here is the control of this money system. As it is now, we have counterfeit debt notes, not real money. The government should control the printing of money based on real value items (earlier, they were silver & gold). Without debt-free money, the nation cannot but end up bankrupted and destroyed (which, I believe, was the motive in the Rothschilds' finally getting their central bank into CORPWashDC).

Reply from the Daily Bell:

Thanks for the feedback.

Posted by John Draganic on 8/24/2009 6:05:19 AM

Ellen brown is a confused woman.first she says the Federal Reserve does not create money, banks do. Then she goes on to say we gave away the power to create money to the private banking elite. Someone should inform her that the Federal Reserve and the banking elite are one and the same.

Reply from the Daily Bell:

Ms. Brown's perspectives, while innovative, do not correspond to classical free-market approaches - as she herself would agree.

Posted by Henry HOLLENBERG on 8/24/2009 7:43:51 AM

Enjoyed the article. Did notice one mistake. In Scott Smith's After Thoughts the section on Trust in government suggest that Greenbacks had no value. While it is true that there was a brief episode of devaluation to approximately 38 cents on the Gold dollar, the greenback quickly recovered to full parity (1879) with hard currency or gold. The confederate's monetary instrument was not so fortunate and the phrase "deteriorated to nullity" might be more appropriately applied to this currency.

Reply from the Daily Bell:

There was at least one episode, initially, in which Greenbacks appear to have lost nearly their full value.

This from Wikipedia ...

A Demand Note is a type of United States paper money that was issued between August 1861 and April 1862 during the American Civil War in denominations of 5, 10, and 20 dollars. Demand Notes were the first type of paper money issued by the United States in the sense that they were the first in the series of emissions which has continuously achieved wide circulation down to the present day. The U.S. government placed the Demand Notes into circulation by using them to pay expenses incurred during the Civil War including the salaries of its workers and military personnel. Because of the distinctive green ink on their reverse, and because state-chartered bank and Confederate notes of the day typically had blank reverse, the Demand Notes were nicknamed "greenbacks" ...

Secretary of the Treasury Chase began distributing the notes to meet Union obligations in August 1861. Initially, various merchants, banks and especially the railroad industry accepted the notes at a discounted rate or did not accept them all. In order to ease public distrust in the newly issued notes Secretary Chase signed a paper agreeing to accept the notes in payment of his own salary and on September 3, 1861 Union General-in-Chief Winfield Scott issued a circular to his soldiers arguing the convenience of the notes for those wishing to send home a portion of their pay. ...

The ability of the government to redeem the Demand Notes in specie came under pressure in December 1861. On December 10 Secretary Chase indicated that war expenditures were far exceeding projections while Federal revenues were falling short.

Then on the 16th, news of the British reaction to the Trent Affair reached New York and the major banks, which had been supplying gold to the government under the Act of July 17 in exchange for bonds which they were in turn reselling, saw the demand for their offerings of Union securities drop precipitously.

By the end of the month the banks had suspended specie payment on their own banknotes. The Demand Notes then began to appear at Assistant Treasurers' offices in great numbers for redemption, but since the government could not obtain adequate supplies of coin it was forced to follow suit and suspend redeeming the Demand Notes for gold in the first few days of 1862.

Posted by Kaski on 8/24/2009 9:36:29 AM

A gold and or silver backed money supply would not work because the owners of the Federal Reserve own most of the worlds gold and silver. The owners of the (privately owned) Federal Reserve are the families of the Rockefellers, Morgans, Warburgs, Schiffs, Schoenburgs... and the main owners, the Rothschilds.

Both Lincoln and Kennedy knew that gold could be manipulated (the Rothschilds set the price of gold and silver everyday in their London offices), and JFK knew the actual U.S. government didn't own any gold. It was turned over to the privately owned Federal Reserve in 1933 when America filed bankruptcy and the Federal Reserve went into receivership.

In 1963 the U.S. government did own silver after it had been acquired during and for WWII. JFK did back his United states notes by silver with interest free money to compete with the Federal Reserves money loaned (loan-sharked) with interest to put them out of business and end the strangle hold they have on the government of America.

Since then the silver market was cornered by the Hunts and others so that our government no longer owns silver either. We haven't had a real President since JFK because they have been just puppets of the owners of the Federal Reserve or were too afraid to stand up to them. They are the real power in America, not "We the People".

As for Lincoln and his "Green backs", of course there was inflation after the war because of all the money spent on supplying the war effort. The Rothschilds loved it and were counting on it.

If Lincoln had not been assassinated by the bankers he could pulled back some of the "Green backs" to decrease inflation and get back to normalcy. At some point after Lincoln's death the bankers wanted to go on a gold standard but a few in Congress stopped them because they knew gold could be manipulated by them, the bankers, the owners of gold. The bankers (Rothschilds and their cronies here in America) wanted very much to go on a gold standard because silver was starting to be found and mined in the western U.S. and they would lose some control of Americas money supply.

The point of all this is America and "We the People" must abolish the privately owned Federal Reserve and their loan-sharking of money to individuals, business and governments. The government of the U.S. must take over the Federal Reserve and loan money interest free and put private banking out of business. America should not be in debt to anyone foreign or domestic and be ruled by the few over the many. Read, study and learn for yourselves.

Reply from the Daily Bell:

Your conclusion is Ms. Brown's as well.

Posted by Richard Daughty on 8/24/2009 12:06:29 PM

Thanks for rebutting some of Ms. Brown's idiocies, like how a gold standard does not work and how California could just print up money and solve its problems and "have money left over"! Pure economic hogwash! Hahaha!

Reply from the Daily Bell:

Well, they could have "paper" left over, o great one ...

Posted by AllenCharlesReport on 8/24/2009 2:05:47 PM

The Worldwide DEBT is the problem.

The best solution for the present economic crisis would be a REBOOT or restart of the entire debt system for the ENTIRE WORLD.

1. A data base listing ALL DEBT, government, business and personal needs to be created. The list would need to list the debt and debt holder with a bank that could make an accounting of the debt. Included would be all national debt of all nations, all mortgages car notes and credit cards for individuals. All outstanding bond and other debt for corporations, The idea is to list ALL DEBT of any kind owed.

2 . Every government on the planet would need to call a special session of it’s legislature.
Using the same authority that governments have to use or create FIAT CURRENCY the legislatures and Central Banks need to authorize the creation of ACCOUNT CREDIT in an amount equal to all the listed debts in the world.

3. The Various governments and Central Banking Systems then need to make an accounting change equal to the debt in the form of an ACCOUNT CREDIT or CREDIT zeroing out ALL THE DEBT in the entire world, and crediting all debt-holders in the world.

The following day the economy of the entire world would restart and the Stock Markets of the world would react to the new renewed capital in the banking systems, the Capital now available to restart all business and the disposable income to the individual people would restart and grow the retail sectors and the manufacturing sectors of the entire world.

Allen Charles Report
Click to View Link/

Reply from the Daily Bell:

Thanks for the interesting read.

Posted by Robert Bostick on 8/24/2009 10:01:57 PM

You said"..we retain some reservations, mostly based on our affinity for free market economics." That view begs the question, how did that work recently for taxpayer bailouts for the financial sysem and the big two in the auto industry?

Where's the free market in obviating price machinations in oligopolistic and monopolistic industries;

- communications?
- home appliance?
- auto?
- farm equipment?
- agricultural marketing boards?
- and, 50 million Americans who
cannot avail themselves of
adequate medical care
via, Medicare, Medicaide,
Veterans Administration, FEHB
systems?

These are but a few deviations from free markets.

Returning to species invites the perennial speculator class to wreak its havoc whenever there are lows or highs in a nations economy. Clearly stated by Ms. Brown, during your interview, were historical examples, that obviously escape some casual observers of our monetary history.

As for your thesis on "... the spontaneous use of species when paper money is debased," please be reminded that Federal Reserve Notes are now worthless. As a reaction to that reality, China and other creditors are agitating not for gold backed legal tender but a more reliable fiat paper currency.

You must remember Lincoln was at War and as most wartime Presidents have done, used their war powers to ensure national support for the enterprise. He was not the author of "Greenbacks, His Secretary of the Treasury was. He was initially opposed to issuing Greenbacks. All currencies lose some of their value during wartime since so much money has to created to finance wars. In the case of the Greenbacks they were competing with gold and tons of counterfit Southern and Northern issued by private banks and counterfited by the Crown as an attempt to undermine the North. Greenbacks recovered their value by 1870 and were circulated through 1913. Pls. see Stephen Zarlenga, "The Lost Science of Money".

As for "Central Banks overproducing money," Ms. Brown informed in her interview with DB, "Central Banks don't supply money." Moreover there can be little stability in monetary aggregates as long as the Fed promotes fractional reserve lending, which is the primary generator of inflation/dollar devaluation.

Reply from the Daily Bell:

Thanks for writing. Good questions/points in our humble opinion. Our editors have tried to answer some of them already as best we could (See Scott Smith After Word).

Below, however, we shall address the issue of whether America has free-markets or not.

Well, here goes ... The United States has a gross national product of US$13 trillion or so. The United States government, federal, state and local, probably accounts for some US$4 trillion of that all told, or at least a third of the gross national product.

So ... A country with a government removing one third of citizen income in taxes (never mind the trillions printed by the Federal Reserve) has a questionable free-market at best. We would argue that America has pioneered a kind of corporate socialism - one that is biting ever harder during the Obama administration.

Finally ... Austrian economics does not recognize a monopoly within a true free market. Monopolies are not feasible when people are free to go elsewhere if service is shoddy or prices are high. American monopolies, such as they are, are a function of American corporatism, socialism and Draconian regulations that make real competition impractical or even impossible.

Posted by Mike on 8/25/2009 7:42:08 AM

If our governments had spent our taxes on capitalising and helping credit unions and mutals get set up during the "boom times" then we would have had more facility to move our money out of these parasitic commercial banks.

Eventually, we would also need to allow mutuals to create new currency. This is a charter of privilege, so we need a government that doesn't have its strings pulled by private cartels in order to pass through legislation that would see mutual/co-op banks as our main money creating institutions.

This would funnel interest back into communities and ethical projects of public interest, as opposed to lining the pockets of minority shareholders.

Reply from the Daily Bell:

The US government does not seem overly concerned about small banks.

Posted by Vermont Trotter on 8/25/2009 10:14:24 AM

Re: Debt Consuming Money and the place of bankruptcy.

Debt money commands destruction and the destruction takes place through bankruptcy. Why must destruction of wealth be commanded? Bankruptcy will still take place with free money, but it will not be commanded as it is under a debt money scenario.

Reply from the Daily Bell:

Yes, in a free-market the only money to be commanded is likely one's own.

Posted by Tawny on 8/27/2009 10:26:29 PM

One reader commented here on the wealth of information supplied by Ellen Brown in this interview. To me it seemed to be rather an outpouring of idiosyncratic/ eccentric OPINIONS which were flatly asserted with little or no logical/analytical explanation or support by historical examples.

Re fractional reserve banking... you say you think it is fine as long as all understand and agree to it. My reading indicates is that the people never did understand, let alone agree to it. Just as the earlier goldsmiths found it prudent NOT to disclose that not all of the gold left with them for 'safekeeping' was actually sitting in their safes, so likewise did and do the bankers fail to disclose that most depositors' 'money' in demand deposit accounts is 'in two places at once'.

The very fact that de facto deception has by policy and custom been a part of fractional reserve banking all along suggests that bankers know or strongly suspect that full disclosure would not meet with public approval. For one thing, most depositors would rightly say, 'Hey, if you're earning interest on my money,then cut me in on the take. Either that, or allow me to choose not to participate in this fractional reserve banking deal.'

This 'honor system' of fractional reserve banking resulted over and over and over in numerous runs on the bank and banking bankruptcies during the 19th Century in the USA. (These fractional-reserve- banking caused 'shortages' were in fact a justification put forward for an 'elastic' money supply overseen - controlled - by a central bank - an all-wise and public-minded cartel of that oxymoron, bankers with Boy Scout consciences.)

Also, fractional reserve banking provides one more temptation to bribe and corrupt government (as if more such temptations were needed. 19th Century Bankers bribed state governments to pass laws EXEMPTING banks from honoring their own contracts! This also was commonly occurring in European banking, according to my reading. Banks were at least permitted to suspend payments for long periods of time.

So: fractional reserve banking constantly tempts bankers to loan out too close to the edge. It provides the further temptation to corruption by providing bankers with a powerful motive to bribe government to pass said laws permitting bankers not to honor their contracts. (and if the honoring of contracts is not upheld as an inviolable principle and maxim of law, then basically there is no law - no 'rule of law and not of men.')

Perhaps you could give me a link or links to an article (or specific book or books) that presents actual historical instances of times and places in which fractional reserve banking practices did NOT lead to these abuses.

To me as I now see the matter, saying that fractional reserve banking can 'work' and not be abused by banks seems rather like saying that there is a way to set out honey and have it not draw flies.

Was not most of the turbulence in banking in the 19th Century in the USA caused by abuses of fractional reserve banking by the banks practicing it (runs on the bank - the loss of savings/earnings by hard-working people whose deposits were lost and never recovered when their bank folded due to its abuse of fractional reserve banking?

And - is not fractional reserve banking inherantly inflationary? Was it not a large factor in at least some of the depressions of the 19th Century?

I also think it is appropriate not merely to denigrate, ad hominem style, the Austrians, but rather to respectfully debate them point by point on the issues. Passing slurs(a la Webster Tarpley) do not an argument - or a refutation - make.

To me, the Austrians seem by far the most open and rational and logically and historically based of any of the economic theorists. They are EAGER to debate, and explicate, and their explanations are logical and comprehensible to the intelligent layperson, unlike such economists as the infamous 'bought man,' Keynes, and, no offense intended, unlike the self-taught girl wonder (also bought?) Ellen Brown.

I would love to be privy to a debate, verbal or written, between Ellen Brown and pretty much any one of the economists involved with the Mises Institute. Actually though not usually a betting person, I'd be bet heavily on the Austrians.

It is said that 'a little knowledge can be a dangerous thing.' That seems particularly true in some fields, such as economics, and law. Ellen Brown seems a walking, talking (and she can talk) illustration of that basic truth.

Reply from the Daily Bell:

You make good points. However, George Selgin and others have documented historical instances of functional private fractional banking. Please see today's article on US banking for more on this issue.

Posted by Tawny on 8/28/2009 2:50:32 AM

Re my speculation (in my previous comment) about Ellen Brown possibly being 'bought' (like Keynes fairly obviously was), I did a search and found a couple of interesting links re USAID, the "NGO" for which her husband worked (...'because he had always wanted to live abroad...').

One link my search brought up was: "USAID using mind control tactics" (on Iraqi school children) - it refers to the USAID as a CIA front.

Click to View Link

Another one says "Obama moves to undermine Iran with CIA-linked USAID "Democracy" researchris.blogspot.com/2009/07

Yet another says "USAID has worked closely with the CIA in the past, both in Southeast Asia and in..."

Click to View Link

There were several others mentioning a CIA - USAID link.

The search phrase I used was 'USAID linked CIA'.

In other words, Ellen Brown's husband worked for the CIA. Now she says her daughter works for another (unnamed) "NGO".

To me, this strongly suggests that she is 'compromised.'

I guessed as much just from the (pardon my bluntness) nonsensical economic gobbledygook she espouses.

In my opinion, when it comes to economics, there are a few 'controlled opposition' operatives who are arguing for exactly what Ellen Brown advocates - the pussycat 'reform' of still having an intrinsically worthless fiat currency, but having it issued by the US govt. instead of by the US govt. working hand in glove with the Fed.

This is such a limp-wristed non-'reform' that it hardly deserves the energy it would take to write a few sentences refuting it. Basically: we can trust the US government not to enrich itself by continuing to inflate the money supply? - the selfsame US govt. which has been the Fed's partner in crime for the past century of inflation and depression and declining standard of living and massive depreciation of our monetary unit, as well as hugely increasing the size and power of the central government, and massively eroding our freedoms? Really? This is a track record we can trust? Sorry. That bird don't fly and that dog don't hunt.

Other suspected operatives are Webster Tarpley (the self-professed FDR worshipper - on FDR, read , if you have not, Walker Todd's FROM CONSTITUTIONAL REPUBLIC TO CORPORATE STATE); the maker of the ZEITGEIST videos; and the maker of the MONEYMASTERS video. Oh, and Lynden LaRouche, another worshipper at the FDR shrine. (About FDR, read WALL STREET AND FDR, by Antony Sutton. Good research, lots of footnotes.

I am of course not saying that I KNOW these individuals are pied piper operatives; but I deeply suspect them. If it looks like a duck and waddles like a duck and quacks like a duck ... etc. etc. etc.

They seem to be part of an op the purpose of which is to 'divide/weaken the opposition' - confuse and perhaps 'capture'the less well-educated in the 'movement', and thus weaken the support of the patriots who have done their homework and know that we need to dump not only the Fed but the fiat currency as well, and return to a monetary unit of intrinsic value as specified in the Constitution, Article I, Section 10.

Posted by Mark on 8/31/2009 12:14:59 PM

I discovered your newsletter because I have read Ellen Brown's book "Web of Debt" and am a fan of her writing. I am greatly enjoying reading your newsletter.

I have been aware of the damage the Federal Reserve System of banking is doing to the USA for many years.

In general, my problem is that it seems that the discussion on this issue almost always ends up in a scenario that reminds me of the old Karate movies in which the characters claimed "my Kung Fu can beat your Ju Jitzu" except we are never getting to the fight at the end of the movie.

While we argue about fractional reserve banking, gold standard vs. fiat money etc etc etc ad nausem, the REAL PROBLEM of The Federal Reserve system enriching the elite "Banksters" aka Goldman Sachs etc goes on unabated and piles "Webs of Debt" onto the USA as a whole and its individual citizens individually.

I am a science teacher by trade and a student of economics as a personal interest and currently, I think, as a civic necessity. It seems to me that money is simply a conveyor of value created in order that we need not have to conduct trade in a barter form, which of course would be very cumbersome.

Therefore, it seems to me that any money system that can create money that holds a consistent value for its users is a valid money system. I used to prefer the "gold standard" money systems believing that they would restrict the government's natural tendency to overspend.

However, reading Ellen's proposal for a "fiat money" system, I believe her proposal is very valid. I find her description of Ben Franklin's use of this system in the Pennsylvania Colony to be very compelling (this description is found in her book and her articles posted her Webofdebt.com site).

I am a resident of California and I also find her proposal for a state bank to be a brilliant idea. Why should the state pay interest to private banks for the public projects it does when it could save the interest that would be paid for the completion of these public works projects by issuing the loans from its own bank?

And why shouldn't a state deposit its revenue into its own bank and make interest off of loans it creates for the benefit of its own citizens? The State of North Dakota has had its own bank and has been doing this for almost 100 years. It is one of the very few states with a budget not is in deficit.

At any rate, I submit that the real enemy is the Federal Reserve System because it empowers and enriches the controllers of the Fed with no benefit to the citizens of the USA. It also allows our elected politicians to spend more than the available revenues without taking direct blame for the inflation this causes because the money creation is actually done by The Federal Reserve system.

The Constitution of the United States grants the power to create money to the Federal Government. If the Congress was in charge of creating our money, they might (probably would) do stupid things, but at least they would have to do it in full public view and at least we could vote them out of office!

Reply from the Daily Bell:

Thanks for writing. The best solution still seems to us to be private money - gold and silver.

Posted by Dave on 9/9/2009 11:44:50 AM

Ellen Brown is right and Scott Smith missed the whole point and he is wrong. The government should print its own money and not the private cartel who is not responsible to protect the people. Private interests are not suppose to control the money creation, it should be public just like the police and the military use for the benefit of our democracy and not for just private wealthy dictators that take secret meeting determine the fate of others.

At least the govenerment with its own imperfections that might have inside will provide public meetings where everyone can see what is going and also by law they are required to help the people, but the private cartel is not required by law to help the people only themselves with a high degree of selfishness. Ellen Brown is correct.

Reply from the Daily Bell:

Thanks for the feedback. We believe it would be better to have no central banks at all. No bank, no temptation to meddle with the money supply.

Posted by William B. Ryan on 10/9/2009 7:02:33 PM

Ellen Brown: "Banks always take back more money in principal and interest than they put into the money supply as principal, making the system basically a pyramid scheme."


Actually, banks don't do that. "As principal" means in the form of loans, I presume. But that is not the only way that banks inject money in the form of bank deposits. They also inject money in the form of deposits when they pay ordinary business expenses, salaries, wages and dividends. These payments become available to pay interest back to the banks in reciprocal economic activity.

Reply from the Daily Bell:

Thanks for the feedback.

Posted by Karl on 11/10/2009 8:44:42 AM

A couple of ideas-

I can't agree that the population is currently voluntarily participating in Fractional Reserve Lending. I don't think that even 1% of the population understand Fractional Reserve Lending enough to consider their participation in it implied, informed consent. Most people think banks loan out deposits. They think it is like the Savings and Loan in "Its a Wonderful Life", when the run on the bank happens and George is explaining to the people" Sally, your money is in Bill's House", etc.

Who would knowingly deposit (actually, legally you lend to the bank), in an institution that disclosed, " We are going to use your deposit (loan) to us to meet a regulatory requirement permitting us to loan most of it away, and if you need it and we don't have it for you you are out of luck because we don't participate in the FDIC?" Doesn't Fractional Reserve argue against 2 of the justifications for charging interest; 1, the opportunity cost of loaning the money- but it didn't exist before the loan; and 2, potential loss, it didn't exist before the loan and there is no depositor on the other side of the Fractional Reserve Created Credit?

I don't understand how hard money and private fractional reserve can co-exist. If the thesis here is that Central Bank Fiat Money is the problem, then what would be the functional difference between Free Market Banking created Fractional Reserve Credit and Central Bank created fiat currency?
Money Standard / Trust in Government-

Isn't Ellen arguing that the problem with the central banks is that they are NOT Government- as is evidenced by the fact they have never been audited, and are resisting all efforts to be audited. Didn't the FED recently refuse a Bloomberg FOIA because they are not subject to the Federal Gov't Rules? I don't trust the Government, but do I trust them less than Enron? Goldman Sachs? AIG? Faceless Hedge Funds?

The Goverment court system frequently rules against the other branches- how often does that happen in a Corporate Arbritation Setting?

The selective trust / mistrust of the Government puzzles me. If we go to a hard money standard, who will we look to to certify and regulate the scales used to measure the gold? Or more fundamentally decide what an ounce is? To provide assays as to the purity of the gold? A private company legally answerable only to its owners,increasingly exerting Bill of Rights protections against reporting against itself (5th amendment), Lying as a form of Free Speech, (1st ammendment) like the Ratings agencies (Moody's etc.)are claiming as their defense against being sued for calling toxic assets Triple AAA investments for pensions, Inspections finding illegal activities being violations of the 4th amendment Right to Privacy- which DOW did in a whistleblower case about toxic emissions.

If I understand Free Market ideas then the market correction of a company that issues gold painted lead slugs in place of the real thing will go out of business when people figure it out, but at what cost?

I realise I am a bit rambling here, let me say I appreciate the open forum and the discussion of ideas. I was a hard money man for years, but my concept of money has evolved over time.

The idea of money being tied to a tangible is emotionally appealing. I am now reluctant to monetize a commodity, (precious metals), because commodities can be manipulated and monopolized, and your economy is restricted by the quantity of the commodity. Each day that I work,I am adding new value to the economy that didn't exist before, but the only way I can monetize that is if I am a gold miner?

Reply from the Daily Bell:

Sir, thank you so much for your earnest inquiry. The reason to trust markets more than government is simple. Markets, absent government interference, are ruled buy Adam's Smith Invisible Hand of competition. Governments are not.

In a competitive environment it is impossible to be dishonest over a long period of time because consumers will shift their patronage to a partner they can trust. Not so in a government setting.

Competition is a far more trustworthy medium for reducing anti-social behavior than government, which is often itself corrupt and anti-social. Who watches the watchers?

Posted by John on 3/5/2010 1:47:30 AM

I very much enjoyed this article, Ms. Brown has done good work. Although I don't agree with all of her points she certainly has a unique point of view on an important topic.

I am delighted to see the Daily Bell's response concerning spontaneous market produced money standards. I think the Daily Bell is spot-on in all points if its response. As Rothbard says, "The proper role of the Fed is to disappear" and "Get government out of the money business." Great job, and great interview, I'm so ecstatic to see this article and that this site gets it!

Posted by Pete on 3/29/2010 4:37:31 AM

There is an abundance of examples of 'free market' systems in history with little government interference and we know what it leads to: wealth for a few, poverty for the most. Let's face it, in a substantial part of our brain, which we share with the lizards, urges originate that make us dangerous. We don't shrink back to prey on each other. This applies especially to the people who have proven to be the most ruthless among us; the extremely wealthy.

A famous psychiatrist claims that religion corresponds to denying a part of reality. If that is true, then communism an liberalism are religions as well and so is the belief in a 'free market' system without government interference. A democratic government is an extremely slowly evolved intellectual concept, sprayed with rivers of human blood. Why? Because we don't need it? I have made a playful lecture to explain schoolchildren fractional reserve banking. It takes me less than 10 minutes to make them understand.

Why is it called "fractional reserve banking"? Tawny is so right about this. They, the bankers, prefer to hide it as long as they are able to. Interest is the foundation, fractional banking the tool and credit card culture and hedgefunds are the finishing touch in the redistribution of money from the poor to the rich. We might repeat the flabbergasting succes of Michael Unterguggenberger's succes in 1932 in a modern coat. Regional money without interest apparently appears to work if it concerns regional but dominant money.

Let the euro-, dollar- and yuanbankers have to compete with interest-free money. I shall put up a reward for a recording of them grinding their teeth. Free market?

Posted by KEITH TIBBITTS on 5/25/2010 11:04:47 PM

MANY OF THE ARGUMENTS AGAINST ELLEN BROWN ARE EMOTIONAL INSTEAD OF FACTUAL; THAT IS WHY IT IS SO HARD TO EDUCATE THE PUBLIC, THEY DON'T STUDY OUT THE FACTS. I'VE STUDIED THE FED RES FOR MANY YEARS AND MY STUDIES OF THE FACTS, NOT EMOTIONS, CONFIRMS THAT ELLEN IS CORRECT.

THE PROCESS OF FRACTIONAL BANKING IS A MUST, THE NEGATIVE OF IT IS THE AMOUNT OF INTEREST THE BANKS ARE TAKING FOR THEIR PART. IF YOU BORROW $100,000 TO BUY A HOME @ 6% YOU PAY THE BANK ABOUT $200,000 TO PAY OFF THE LOAN. YOU GET A $100,000 HOME AND THE BANK KEEPS $100,000 INTEREST PROFIT. THEY GET AS MUCH OF YOUR AFTER TAX $'S AS YOU, $'S YOU EARNED. ON A 10% LOAN, THEY WOULD GET OVER $200,000 INTEREST PROFIT. YOU ONLY BORROW 1/3 OF THAT.

THE DIFFERENCE BETWEEN A PRIVATE FED RES BANK SYSTEM LOANING YOU THE $100,000 AND/OR A GOVERNMENT BANK SYSTEM IS THAT THE INTEREST TO THE PRIVATE BANK WILL BE 10 X'S IN $'S WHAT THE GOVERNMENT BANK INTEREST WILL BE IF, THEY CHARGE COST ONLY.

IF THE GOVERNMENT BANK CHARGES THE SAME AS THE PRIVATE BANK THE INTEREST COULD OFFSET TAXES, IF ADMINISTERED CORRECTLY. THERE ARE A LOT OF IF'S, BUT THIS IS THE KIND OF DIFFERENCES ELLEN BROWN IS TALKING ABOUT.

YOU WOULD BE KEEPING MORE OF YOUR AFTER TAX $'S IF A GOVERNMENT BANK LOANED YOU AT COST OR IF THE CHARGES WERE APPLIED TO REDUCE YOUR TAXES. YOU NEED TO UNDERSTAND THIS CONCEPT TO UNDERSTAND ELLEN BROWN. WRITE ME AT MY E-MAIL. WITHOUT FRACTIONAL BANKING WE WOULD STARVE OUR ECONOMY.

WE MUST BE ABLE TO BORROW OR WE BECOME A STAGNANT ECONOMY, DEFLATIONARY, DOWNHILL ECONOMY, THIS CAUSES US TO LOOSE OUR MOST VALUABLE ASSET, OUR LABOR. THAT IS ALL SOME OF US HAVE, LOST IT NEVER COMES BACK. A GOOD MONEY SUPPLY IS WHAT KEEPS US EMPLOYED. A GOLD STANDARD DOES NOT KEEP US EMPLOYED, THERE IS NOT ENOUGH TO GO AROUND, UNLESS YOU DILUTE IT WITH MORE CERTIFICATES THAN YOU HAVE GOLD BACKING, THEN YOU JUST AS WELL HAVE THE PAPER STANDARD,LIKE THE ONE WE HAVE,WHICH IS GOOD AS LONG AS WE ACCEPT IT AS AN EXCHANGE FOR OUR LABOR. THAT'S ALL MONEY DOES.

Reply from the Daily Bell:

Your points were much weakened by your use of capital letters.

Anyway, we would ask Ellen Brown or any Brownian, why such a fixation on taxes? The US government would seem to utilize these public monies in ways that are immensely wasteful. Ms. Brown's emphasis is so strongly on government solutions - in an era where public solutions increasing fail - that we wonder what the agenda is. Why not let the free-market decide on money instead of trying to re-manipulate government to make it work "better."

Posted by KEITH E. TIBBITTS on 5/26/2010 8:14:15 PM

Would you rather have banks spend your hard earned interest dollars on things that do not concern you or establish rules governing government spending of your interest dollars on what they spend your taxes on anyway.

It hopefully would reduce your taxes if governed correctly. You missed the better point, that is to have a real government bank create and loan all of us money at 0% to 1%, that's what Ellen Brown is getting at. If you prefer private banks at bank rates you may not understand the downside of the Fed. Res. and what really needs fixing. Thanks for your comments.

Reply from the Daily Bell:

"It hopefully would reduce your taxes if governed correctly."

When on God's green earth have governments ever "governed correctly" - except for some small countries or (in some cases) in ancient times?

Giving government an enforced money monopoly surely dictates eventual disaster. (We know Ms. Brown cites historical precedent but we are suspicious of it.) Nonetheless, if Ms. Brown has her successes, we will try to cover them fairly - believing that her ideas are a step forward from what occurs today.

At the same time, we will continue to ask the question ... What gives anyone the idea that government, which does everything incompetently, can run money creation and monopoly central banking efficiently?

Posted by Keith E. Tibbitts on 5/26/2010 8:33:43 PM

Correction on feedback, Sorry, I should have said, I think this is what Ellen Brown is getting at. I will, but I have not read her book, yet, my comments are based on her suggestion to the Governor of California that perhaps creating a state bank would help our state get out of debt and I agree with that idea. Thank you.

Posted by Keith E. Tibbitts on 5/26/2010 9:54:38 PM

That is what governing seems to be about, as you said, re-doing it to make it run better. If we don't think we can govern better, why have this conversation.

Continuing to ask the same question is what congress does, we need to try change until we get it right. If we try having a true government bank do the job of the Fed Res., how could that be worse than what we have with private banking, at least the cost would be much cheaper, if they happened to get it right.

If we ignore the problem and do not bring change, why, anything. If you object to suggestions like Ellen Brown's, what do you offer to get at the problem and resolve it. Please do not tell me there isn't a problem with the Fed. Res. or that it doesn't need fixing.

There are certainly a lot of us that think there is and that it needs fixing. We need to come up with a suggestion and Ellen Brown is on the right track. I think you need to make a positive statement, not just suggest that everyone is wrong. Please, let's have a dialog that takes us to a solution!!! Make a statement why you believe she is wrong based on what she is suggesting we do, not that you don't think government will ever get it right. There is a better way, we just need to get there. Thanks!!!

Reply from the Daily Bell:

We agree with you about Ellen Brown. One of the reasons we think she shall have an impact (and IS having an impact) is because she is giving people a road-map on how to "fight back.' That is why we have never tried to be adversarial to her and her fellow Brownians, even though we have consistently pointed out the differences that anyone versed in Austrian economics would have with her analyses and monetary solutions.

As to what we suggest ... It is simple. Fight as hard as possible through education and other peaceful means to do away the insanity of regulatory democracy and return, at the very least, to Thomas Jefferson's agrarian-republican vision. Allow free-banking, let gold and silver circulate freely and emphasize simple rule making and common law whenever possible.

Admittedly, this is more complex than campaigning for a purely public central bank as Ms. Brown is doing, but we think the end results of such free-market solutions would recreate a satisfyingly broad civil society that most people would be pleased to be part of.

At least some of what we suggest currently exits in the republic of Switzerland, which in many ways is a fine place to live - in large part because political power flows from the Cantons on up, not down from the top.

Posted by Keith E. Tibbitts on 5/27/2010 12:32:21 AM

I may agree with a lot of what you are suggesting, but to help me know your position better, what do you propose for keeping the money supply sufficient to enable full employment? Full employment is the most critical element of any scenario and to provide this it takes an ever present money supply at reasonable cost, ready when the demand is there, not when the banker decides. Part of this question is,are you talking hard cash, silver and gold only, or fiat, created by the banker? Anxious!!!

Reply from the Daily Bell:

"What do you propose for keeping the money supply sufficient to enable full employment? "

We would suggest freedom -- freedom from government money, from duplicitous and wasteful taxes, terrible, onerous regulations, endless laws and petty bureaucratic interference. We would suggest the Jeffersonian, free-market model that leaves employment up to the individual and conflicts between people and communities resolvable quickly and efficiently by common law.

Freedom would bring about fuller and perhaps near-full employment more definitively and efficiently than all the thousands of government plans, programs and banks that can be imagined by over-sophisticated, modern-day, econometric thinkers.

Posted by Keith E. Tibbitts on 5/27/2010 2:07:30 AM

I like your freedom program to the tee, but,if you do not believe in re-constructing or re-manipulating government, good luck on achieving your freedom scenario.

I do not know what you are saying in espousing Jeffersonian or Austrian money theory, but I believe you are being short sighted to think you can carry on a prosperous society without an exchangeable money issue, sufficient to supply enough money to keep full employment.

Perhaps you can explain how that is done. Perhaps that is part of those theories. Thank you.

Reply from the Daily Bell:

Our program is freedom. You say you agree with it, entirely - but then you add that such a program must focus on re-constructing or re-manipulating government. You seem quite focused on government, whereas the Bell tries to focus on freedom and free-markets. That is where the confusion may lie.

Posted by Keith E. Tibbitts on 5/28/2010 1:35:39 AM

I made the statement that the process of fractional banking is a must, that is not necessarily true, providing you have another way of extending credit. If you depend on just the money in savings that is not circulating there simply is not enough to carry on the commerce of all engaged in production of all products needed. There simply is not enough money in the market place to produce and purchase all that is needed or wanted.

Yes we can get by with less I suppose, but it would be a rather simplistic empty existence for the average person. We must have credit to keep employed unless you live in an order that is non-existent where no one pays for anything and everyone is an honest contributor to the society.

Credit is the ability to have use today of your labor from the future. The important part is that any credit issued is paid back and the cheaper the credit issued the more of life's goods and services you can acquire. If you wish to live a very austere life style and everyone else is willing as well, all of our talk about a strong economy has no meaning, and credit is not needed. To have a robust economy and live the life style that most of us are accustomed to today, we must have available credit.

If you have a sophisticated barter system, you may be able to achieve the same, but it would require an intricate record system we have not even began to comprehend. A government bank system on the order of which I think Ellen Brown is suggesting could provide credit at cost, no profits, and be so simple you would wonder what took us so long.

As she said, government by the people, for the people, of the people, which we do not have today. All monies that have been paid in interest to banks could have been retained by ourselves. Interest and private banks are not needed to create credit, just credit and a peoples' bank.

Credit,when paid back becomes ones equity. Interest is bankers profits and is your labor going down a rat hole. I know that most people will not understand how this could be, but it is simply by getting rid of banks that charge interest and live off of the people like a huge leach.

We can accomplish this by instituting a government bank, run by the people. For those of you that have a negative feeling about government running anything, how could it be as bad as giving all of our interest to banks, when we could pocket it ourselves in an interest free society. That is real freedom, the kind I think the Daily Bell is suggesting. I think Ellen Brown is talking of this kind of advantage, as well.

Reply from the Daily Bell:

We do think Ellen Brown has put forth an interesting and actionable proposition. We do have major reservations. We think people will continue to pursue her solutions because they are perhaps realizable ones in this environment. Time will tell.

Posted by BOB on 6/6/2010 5:30:06 PM

You say that the US government should take over the Federal Reserve. President John F. Kennedy tried to do exactly that and he was assassinated shortly after. Everyone before him and after him was assassinated who tried to nationalize the Federal Reserve.

Posted by David G. Mills on 7/25/2010 10:15:57 PM

Why not have both public and private money? Why not let the government compete with the private banks? If the government (even a municipal one) decides it needs to build bridges and roads and have police and schools let it issue its own money which would essentially amount to a tax rebate. Pretty soon the tax rebates would circulate and be used as money. And then the government does not have to pay interest on the money to the banks. It is the interest on the government debt that is so destructive and such a racket for the banks. I believe that really is what Ellen is talking about.

Reply from the Daily Bell:

Here at the Bell, we call for money competition. But that would mean letting gold and silver circulate freely, along with free-banking, Real Bills, etc. Is that what Ellen wants?

Posted by Joe S. on 7/25/2010 11:18:02 PM

I enjoy everything that Dr. Brown writes. I don't see public banks as optimal but they would be a lot better than what we've got now.