Below, we take a break from analyzing news – from a free-market perspective – to discussing more monetary principles with the estimable Ellen Brown and her ardent "knights" – especially the eloquent Jimi Bigbear. The excerpts below are scattered throughout Bell feedbacks and as a (weekend) service to readers, we have gathered them together into one excerpt. As an aside, (we can't resist) such colloquies only reinforce our arguments as to why the mainstream media has a long way to go to catch up with the Internet, which is crackling with new ideas (well, old/new ones) such as those that Ellen Brown enunciates along with the hugely successfully perspectives of the Mises Institute. If, say, Rupert Murdoch were to allow "real" financial discussions into his business-oriented media properties – from our perspective anyway – then he wouldn't have to complain about Google. The rest of the US media wouldn't be (seemingly) running to the federal government for help, either. Their readers would likely return because most who read this sort of thing are serious people who are looking for the truth and will investigate it in any medium … Anyway, hope you enjoy the following as much as we did participating in it. – The Editors, the Daily Bell
Free-Market Feedback Discussion (Early Dec ‘09) with various Brownians and Ellen Brown:
Posted by (Brownian) Jimi Bigbear on 12/1/2009 2:26:39 AM
Nice interview with Ed Griffin – much of what came out is good and true, but as you might expect, I'm going to get into the ring in William's corner and also take a moment to defend Dr. Brown and the Brownian Movement (which you and the Bell inadvertently created by crowning her with her own major economics title of "Brownian.")
Several times The Bell has mis-stated Brownian philosophy and mis-characterized it as statist/socialist, etc. It is in fact THE most truly American monetary system in the free market place of ideas. In this interview you characterized Ellen as wanting to "nationalize" not only the banks, but all business, education, etc. She has never to my knowledge advocated any such thing.
I think she, I and the Bell agree that we do NOT want to put the MONEY POWER into the hands of the federal government – for us, primarily because the federal government is owned by the Creature that has stolen the MONEY POWER. What we most want to see now, and this is fully in accord with the growing State Sovereignty Movement in the US, is State and City PUBLIC banks. PRIVATE commercial banks can continue to exist but must be stripped of their power to create money out of thin air – the power of fractional reserve banking. They will have to do what most people believe they do now – lend their own and depositors' money out at a higher percentage of interest than they pay depositors – the difference being their profit.
The thing that continues to blow my mind about the Bell and Austrians in general, is that while you "see" so much, you don't see everything. It seems to me that the Libertarian / Anarchist philosophy, largely bastardized from Alisa Zinov'yevna Rosenbaum (aka Ayn Rand) clings dogmatically to the brazen lie that the FED is part of the government or that in some mysterious way the government controls the FED! Do you seriously believe that the tail can wag the dog?!?!?!
Ed Griffin was the first to coin the expression, "The federal reserve is no more federal than federal express," I believe. He of all people should know better. The FED as he has very well documented and informed millions, is the "reactor core" of the Establishment – what you call The Power Elite. Since everyone knows what this "elephant in the living room" is, but everyone is so afraid of saying, I'll say it for us: The Zionist Plutocracy that runs the world from behind the scenes.
Rothschilds continue to be the one family dynasty that dominates this Zionist Plutocracy. Before everyone gets out their ugly sticks to get in line behind Abe Foxman of the ADL to bludgeon me for Anti-Semitism, allow me to state that of course not all Jews are Zionists and not all Zionists are Jews. Just look on YouTube for Joe Biden professing that very fact. Permit me also to write that these opinions are my own and not Dr. Brown's. I had them long before I knew who she was. Perhaps David Icke is right and the Establishment is really composed of an alien reptilian race and they run in certain bloodlines to use the Jews as cover and scapegoats, I don't know.
My study of monetary history makes Adam Smith suspect. I believe that Scotsman (and my great grandfather was from Glasgow) was on the payroll of the Rothschilds and other would be owners of the Bank of England.
I can entirely sympathize with William's frustration and view that the Bell is (I believe, unknowingly) a defacto Fifth Column for the Establishment. Why? Because it is calling for EXACTLY WHAT WE HAVE NOW: The MONEY POWER in PRIVATE hands!
"Let me issue and control a nation's money, and I care not who writes the laws." – Mayer Amschel Bauer (later) Rothschild – page 218 of Griffin's Creature. Ed clearly knows the role of the Rothschilds in the creation of the FED and properly calls it what it is – a PRIVATE banking cartel. The FED *masquerades* as a government entity, and indeed it has all the powers and none of the responsibility/accountability of a 4th branch of government. One that indeed "wags" the other three.
So get in the game, Austrians! Drop this ruse that the FED is in any way controlled by the government, but in fact the opposite is true. Acknowledge the truth of monetary history that the MONEY POWER (as President Van Buren always wrote it) belongs to the Rightful Sovereign of the Nation. Whether that be King Henry the 1st – the son of William the Conqueror – and arguably England's greatest king, as he gave England the best TRUE fiat currency – the Tally Sticks – debt free, usury free, and out of the hands of PRIVATE bankers to issue or control, or in our supposed Republic – We the People. (The Tally Sticks worked well for the English people – nearly 700 years! They were destroyed by gold coins – in a true expression of Gresham's law – bad money, commodity money, drove out good.)
The Colonial Scrip of Pennsylvania and the Greenbacks are the models for PUBLIC money. The truth of what the Austrians call "the worthless continentals" is that they won America her Independence! The Continentals became worthless toward the end of the revolutionary war, not because the GOVERNMENT printed too many of them, but because General Howe and the New York city loyalists did! The lawful government – the Continental Congress – only ever printed what they said they would, about 220 million. Howe counterfeited over a BILLION by some estimates and advertised them for sale in a New York paper! You could buy as much as you wanted for the price of the paper they were printed on. The truth of the revolutionary period – actually the two great truths are that 1.) the reason FOR the rebellion is that the Lords of Trade and Plantations, at the behest of the PRIVATE Bank of England, got the Parliament to OUTLAW Colonial Scrip, and 2.) if the Founders had to rely on Austrian economics, there never would have BEEN a revolution! Where would we have got the gold? Borrowed it from the Bank of England??? HA!
Thanks for the forum. In the end, I think we all want the same things:
Liberty, Peace, Prosperity and Love – Jimi Bigbear
Reply from the Daily Bell:
Jimi Bigbear, this is certainly an eloquent statement of the philosophy of modern "state-organized" money.
Let us point out here, by the way, that Austrian Murray Rothbard characterized Any Rand's philosophy as a "cult." There was no great love either between Ludwig von Mises and Rand. Austrians, most of them as we understand it (being pro-Austrian ourselves) are not necessarily Randian.
Rand, though interesting, may be seen as incidental, in fact, to the great conversation about free-markets that has taken place over millennia.
We have trouble characterizing this millennial evolution, as William did, as an "ideology." For a brief evolution of modern, neo-classical economic thought, we refer you to a list of free-market economic philosophers stretching back several thousands years.
Here is a definition of socialism:
"A political theory advocating state ownership of industry."
There are plenty of others, but it will do. In advocating that the state organize and define money, Ms. Brown and Brownians generally seem to us to be advocating a form of monetary socialism (or at least government control).
We don't know if Ms. Brown wants the state to own all things. We doubt it. But if the state is to run the money system, even in a light-handed manner, what would you call it but a form of socialism (albeit restricted to money)?
We asked feedbacker William to define his public-money solution. You have mentioned it as well, as follows:
"The Colonial Scrip of Pennsylvania and the Greenbacks are the models for PUBLIC money."
We would request, then, that you describe this solution in more detail. Explain to us, especially, how a private market (free-banking) function (the regulation of the quantity of money) can be successfully implemented by what seems to amount to state price-fixing of a sort. (And free-market/free-banking proponents would argue that price-fixing never works and that only the market itself can truly determine the price and quantity of money over time.)
Perhaps we are missing something? Thanks for your several feedbacks on this important issue.
Addendum: Perhaps an explanation sufficient for our readers would start with this from Ms. Brown, which she wrote in a previous email:
"People themselves create money when they take out loans. The money is extinguished when the loan is paid back, as in a community currency system. The public bank is more like a court than an "issuer" of money. This is actually the system we have now, but the middlemen are private banks, which have been allowed to pretend they are lending pre-existing money. This gives them not only unwarranted power but serious liability when they can't balance their books because of defaults, toxic assets, etc.; and because they're always siphoning profits out of the system, it has become an unsustainable ponzi scheme. In a publicly-owned banking system, the interest would return to the public, making it mathematically sound and sustainable."
Posted by Too Bad on 12/3/2009 7:19:05 PM
Guess none of the Brownians took up your offer. They are in some cases quick to criticize and call names, (fifth column, etc.) but apparently not to seriously rebut an economic argument. I have read some of the history of free-market economics. Too bad.
Reply from the Daily Bell:
We have started an irregular "Brownian bonus" at the Daily Bell and will comment on her point of view as we go forward. We think she has made wonderfully challenging arguments to free-market thinking and these challenges ought to be addressed or at least recognized. Also … our editors have an amassed experience in the field of free-market thinking of over a century – and we have never individually or in aggregate been accused of being Rothschild fifth-column advocates. There is a first time for everything, it seems …
Posted by Jimi Bigbear on 12/4/2009 2:07:06 AM
Hey, don't count us Brownians out yet, TooBad! Here's the short answer: If I awoke tomorrow morning as King, here's what I'd do:
1.) Temporarily nationalize the FED. The power to coin or print money is a sovereign right – the most creative power of government for the good of the People who formed it. This power was STOLEN from We the People REPEATEDLY in the history of our Nation. As Money Masters creator, Bill Still points out in his new award winning movie, The Secret of Oz, (SecretOfOz.com) in fiscal 2008-2009, We the People paid the PRIVATE Banksters 700 BILLION dollars – just for USURY on the so called "national debt." WHY?!?!? Why are we paying THEM over $20,000 every second of every minute of every hour. . .? Why do they get to create money out of thin air and then LOAN it to US at INTEREST – and on "the full faith and credit of the US Government" – i.e., We the People, when We the People – or me, as King of the US (servant of the People)- can create the same money from nothing and spend it into existence, free of debt and free of usury?
2. I would decree that the national government would only do this for one year, after which each State would have its own PUBLIC bank, and large cities (properly City States) would have their own PUBLIC banks. After the first year, the national government would simply bill the States for their apportioned share of the legitimate functions of the national government. At the end of that first year, the national government would be cut down to size – no dept of education, no IRS, no dept of agriculture or homeland security. etc. etc. Generally, I'd put the national government back in its cage and return the power to the People via their State and City-State governments. This is in my view in keeping with the organic Constitution and Natural Law.
3. Immediately outlaw fractional reserve banking. This is the ages old scam of the goldsmiths – the first bankers. They discovered that not everyone who entrusted their gold to them came to get it at the same time, and that people started trading the warehouse receipts instead of going to get their gold to make the transaction. The goldsmith/protobanksters then started issuing more receipts than they actually held gold for – thus creating money out of thin air.
Presently MOST of our "money" is DEBT. It is created by the commercial banks. I know this is hard for some of you to grasp, but it's true. All our "money" is DEBT. The banks get to do this by fractional reserve banking. (See "Money as Debt" on YouTube)
The other main problem with fractional reserve banking is that while the bankers create the PRINCIPAL out of thin air, they do NOT create the INTEREST! This leads to a dog-eat-dog world of perpetual business failures, bankruptcies, misery and suffering, as we all fight to find the interest. Let's be clear that THIS is PURE USURY – as the bankers risked NOTHING – neither their own nor their depositors' money. Yet they continually suck this interest out of the economy.
THIS is also the true cause of inflation – not some FED BS propaganda about "too much money chasing too few goods and services!" (Who do YOU know who has "too much money?") THIS is also one of the main reasons why the FED will destroy the economy before they will allow an honest audit. As Henry Ford said, "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."
As Pennsylvania did with Colonial Scrip, during the first year the national treasury would LOAN all the local banks the amount they needed to have full deposits. The national treasury (nationalized FED) would loan this money to the banks at no more than 5% interest, and the banks could then do what everyone believes they do now – loan that out at a higher rate – say 8% interest. Their profit would then be the 3% spread. The 5% that the national treasury would take in would pay for the functioning of the "slimmed down " (gutted) national government – goodbye income tax!
4. I would declare that US is leaving EVERY foreign country over the next few months, that the Army and Air Force would be disbanded (Constitution permits no standing army for more than 2 years, absent a declared war – an Air Force not at all) – all things "defense" would be the Navy and the Navy's Marines if necessary. (I'd hire those returning troops who wanted a job for a year to close the southern border – but I digress. THAT invasion problem will be best addressed when we get rid of the FED/IMF/BIS/WB – the global banking cartel that destroyed the Mexican economy and laughed about it.) Returning GI's would get all that they were promised in terms of college, down payments on houses, etc. and we could put many of them to work rebuilding the infrastructure in America – and building the long over due "last mile" – fiber to every home and business.
I could go on, but hopefully this will give you gold bugs something to think about. What I plan to do is write, "Why Ron Paul and the Austrians are Wrong About Money and Banking," and I hereby offer it to The Daily Bell first for publication.
PS – In said article, I will clearly demonstrate why I think that the Austrians are (I believe unknowingly) acting as a DEFACTO fifth column for the Banksters, as they are sounding the same alarms (INFLATION! INFLATION!) and beating the same drums – HON EST MON EE HON EST MON EE – as the banksters used to thwart the Greenback Party, get rid of the silver threat of Bryan and the Democrats and eventually bring out the FED – the FOURTH and most long-lived PRIVATE national bank in the history of our Nation. All four of these PRIVATE central banks were and are owned by what the Bell terms "The Power Elite," what I and others (including Dr. Paul) call the Establishment – the Globalist Zionist Plutocracy that I wrote of earlier.
PS-2 – The Bell's attempted disassociation of Austrians from "Randians" notwithstanding, the two organizations are joined at the hip and greatly influence the other's thinking. Is Lew Rockwell not only a prominent Libertarian but also the Founder of the Mises Institute? It states right on the homepage: "You have found the world center of the Austrian School of economics and libertarian political and social theory." And even though Rand (Rosenbaum) didn't authorize or sanction it – her writings and philosophy are all over the Libertarian "brand."
Reply from the Daily Bell:
Well done. Whether one agrees or disagrees from a free-market standpoint this is a thoughtful even eloquently-stated program. Misesians, Austrians, people of good will around the world would applaud the shrinkage of the (unnecessary) military efforts of the Anglo-American alliance which currently operates some 1,000 military bases around the world. We would be very interested in looking at Jimi's White Paper and he is welcome to email it to us when it is finished.
1. We still don't understand why Jimi is on about Rand. She virtually excommunicated Murray Rothbard, Rockwell's mentor, and Rothbard actually wrote a play to express his disdain for the Randian "cult." There is not necessarily a great deal of overlap between classical Austrian economic philosophy, going back over 300-400 years (Mises, Hayek, Menger, etc.) and Ayn Rand.
2. One of the big problems we think we have with Ellen Brown's banking prescription is that from our point of view it is complicated (anything the state will administer is bound to be complex) and doesn't target central banking – and Jimi's perspective is, in fact, that he would KEEP a central bank (of some sort) functional. What Jimi's proposal effectively states is that the government would decide, one way or another, on the quantity of money available to the populace. Ellen Brown has her own prescription for how and why this would work. But it strikes us nonetheless as a form a price-fixing. Why not let the market decide on the price and quantity of money? That solution is called free-banking. It is NOT strictly speaking a Misesian solution (Rothbard was no fan of fractional reserve free-banking) but it is the most NATURAL marketplace solution of all.
3. Here at the Daily Bell, we prefer free-banking, a system in which banks, like any other business, are able to do whatever they want so long as government stays out of the picture. If banks want to lend fractionally, they can do so, so long as the practice is publicly described so that people understand the practice. We believe if the government stayed out of the money business, society would soon revert to a private silver and gold standard that has been the hallmark of honest money for eons. We note that in the Wizard of Oz, the book Ellen Brown quotes from on numerous occasions, Dorothy's slippers were silver and the road was gold. Ms. Brown seems to downplay this point in her analysis for some reason.
4. We're not sure what Jimi thinks inflation is. Here is a Misesian definition of inflation as Mises explained in his essay "Inflation: An Unworkable Fiscal Policy":
"Inflation, as this term was always used everywhere and especially in this country, means increasing the quantity of money and bank notes in circulation and the quantity of bank deposits subject to check. But people today use the term `inflation' to refer to the phenomenon that is an inevitable consequence of inflation, that is the tendency of all prices and wage rates to rise. The result of this deplorable confusion is that there is no term left to signify the cause of this rise in prices and wages. There is no longer any word available to signify the phenomenon that has been, up to now, called inflation. . . . As you cannot talk about something that has no name, you cannot fight it. Those who pretend to fight inflation are in fact only fighting what is the inevitable consequence of inflation, rising prices. Their ventures are doomed to failure because they do not attack the root of the evil. They try to keep prices low while firmly committed to a policy of increasing the quantity of money that must necessarily make them soar. As long as this terminological confusion is not entirely wiped out, there cannot be any question of stopping inflation."
When inflation is seen as a general rise in prices, then anything that contributes to price increases is called inflationary. It is no longer the central bank and fractional-reserve banking that are the sources of inflation, but rather various other causes. In this framework, not only does the central bank have nothing to do with inflation, but, on the contrary, the bank is regarded, against all evidence, as an inflation fighter.
Thus, a fall in unemployment or a rise in economic activity is seen as a potential inflationary trigger which therefore must be restrained by central-bank policies. Some other triggers, such as rises in commodity prices or workers wages, are also regarded as potential threats and therefore must always be under the watchful eye of the central bank.
The popular definition cannot explain why inflation is bad. If inflation is just a general rise in prices, then why is it regarded as bad news? What kind of damage does it do? Mainstream economists maintain that inflation, which they label as general price increases, causes speculative buying, which generates waste. Inflation, it is maintained, also erodes the real incomes of pensioners and low-income earners and causes a misallocation of resources.
Despite all these assertions regarding the side effects of inflation, mainstream economics doesn't tell us how all these bad effects are caused. Why should a general rise in prices hurt some groups of people and not others? Why should a general rise in prices weaken real economic growth? Or how does inflation lead to the misallocation of resources? Moreover, if inflation is just a rise in prices, surely it is possible to offset its effects by adjusting everybody's incomes in the economy in accordance with this general price increase.
However, if we accept that inflation is an increase in the money supply, and not a rise in prices, all these assertions can be easily explained. It is not the symptoms of a disease but rather the disease itself that causes the physical damage. Likewise, it is not a general rise in prices but increases in the money supply that inflict the physical damage on wealth generators.
Thanks to Jimi for kindly sharing his thoughts on a Brownian approach to economics, We're sure our readers will enjoy his comments and that he has given many of them much to ponder. We will continue to explore Brownianism as we find it a most significant challenge to market-economics and the most compelling argument for state intervention into the marketplace. We disagree fundamentally with the concept that government can EVER make things "better" (especially money!), but remain most impressed with the Brownian justification and the horsepower they bring to the effort.
Posted by Ellen Brown on 12/4/2009 11:17:49 AM
Hi, Boys. I am SO busy, but you know I can't resist your diplomatic clarion call! First I have to say I have never used the word Bankster.
Bankers are just business people like everyone else. It's the system itself that needs changing. As for whether the Federal Reserve is federal or private, I'll copy from an article I wrote in October 2008, after the Fed bought a majority interest in the world's largest insurance company, AIG:
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.
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.
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.
According to the Fed's website, the control Congress has over the Federal Reserve is limited to this:
The 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.
Reply from the Daily Bell:
Ms. Brown, thanks for your gracious response, especially given your present level of busyness. (Of course, that's what happens when you successfully contribute to a major, Western argument. You get what you deserve – a lot of people wanting to have a word with you!)
Anyway, you are absolutely right that the Fed functions as a private institution. But it is NOT, as you note, purely a private institution and derives its AUTHORITY in the US, we would argue, by MASQUERADING as a public one.
By constantly harping on the PRIVATE nature of the Federal Reserve, you (because you are an exceptionally convincing individual) distract people from the true horror of what is occurring today which is MODERN (hyper-) MERCANTILISM … when private entities use public garb to pursue private ends.
MERCANTILISM, the blurring of private enterprise with the "public good," is the curse of Western political systems and by virtue of the bureaucratic state has been virtually ENSHRINED into law.
21st century mercantilism in our opinion will be the ultimate downfall of the Western state! It is a recipe for endless, chaos, militarism, economic destruction, etc. (Yes, when every private act can be construed as a public good, and even enshrined into law, then civil society is surely kaput. And aren't we getting to that place rapidly?)
Your points about money being the pre-emptive purview of the state also ENCOURAGE people to think of the state as having a natural function within private enterprise. But everything in 400 years of free-market, neo-classical Austrian economics tells us that the state has LITTLE OR NO PLACE in the free-enterprise system and that almost every law, regulation and state-run effort actually helps destroy the valuable price information that only the private market can provide. (The laws of marginal utility and the concept of the Invisible Hand make this clear.) It is the lack of COMPETITION and the denial of INDIVIDUAL HUMAN ACTION that make state solutions pernicious, in our humble estimation.
Also, once you make a case that the state ought to be involved here or there, THERE ARE NO BOUNDARIES. The discussion shifts from ways to restrict the state to how much "good" the state should do. The only logical argument to make, in our opinion, is to ask that the state be restricted as much as possible, for everyone's good, which is indeed the argument that Jefferson made, is it not?
There is a perfectly logical argument to be made, historically, for private free-banking (Selgin, White et. al.) which takes the state entirely out of the banking business and even provides for fractional reserve banking so long as it is a PRIVATE function and, in our opinion, acknowledged.
However, having said that, your solution is not to our mind much more logically flawed than the Misesian solution (as enunciated by Rothbard, Rockwell et al.) that the state function basically under a natural free-banking order with the caveat that the state apparently PUT IN JAIL all those who attempt to pursue fractional reserve banking.
In fact, in some ways we think your solution identifies many of the problems with the current system and that you have admirably analyzed them. (We agree with much of your analysis about the Fed, too – except we believe it ought to be eliminated not tamed.)
However, as stated above, we are of the opinion that MARKETS ought to decide what money is, how much of it should circulate and what its price and substance would be …
We would BET the default position, in the absence of coercion, would be a natural evolution back to a PRIVATE gold and silver standard of the kind that has functioned effectively throughout history.
As far as the term "bankster" goes, while we are not sure we have ever attributed the term directly to you (does it matter?), it seems to crop up around your writings. It is even included in a foreword to your book (maybe not the most up-to-date one), as follows:
"… The lifeblood of this power elite is money, and its weapon is fear. The whole of civilization and all of its systems hang on this fulcrum of the money power. In private hands, where it is now, it can be used to enslave nations and ensure perpetual wars and bondage. Internationally, the BANKSTERS and their governmental partners use these fraudulent economic tools to weaken or defeat opponents without a shot being fired. Witness the recent East Asian financial crisis of 1997 and the Russian ruble collapse of 1998. Economic means have long been used to spark wars, as a pretext and prelude for the money power to stock and restock the armaments and infrastructure of both sides." (by REED SIMPSON, M.Sc., Banker and Developer, copyright (c) 2006 Ellen Brown)
Thank you again for sharing your insights with our readers. We have also benefitted from the opportunity to engage in a discussion of these highly important (though seemingly arcane) matters with those that you have directly inspired – Jimi Bigbear, who is exceptionally eloquent. (And "William": who has seemingly disappeared!)
Posted by Ellen Brown on 12/4/2009 (internal post)
Gentlemen … I totally agree with the first part of your comments, about a private group masquerading as public. On whether money should be a commodity trading in the free market, however, I have to disagree.
The fact is that what we have today is NOT a commodity. There is no gold or silver backing it. It is today merely a series of legal agreements backed by UCC law; and overseeing the law is a proper function of government.
You would not want private courts settling disputes; they would rule in favor of the party paying the largest fees. When banks advance loans, they are not advancing their own money but merely the public credit, so I would argue they should be public institutions.
Not that private banks should be outlawed; but if we want to be in the game, we need to set up some public banks to compete with them. Public banks could do the job better, more cheaply, with a far larger capital base, and with longer-term horizons capable of serving the community and the public interest rather than just their quarterly bottom lines.
Reply from the Daily Bell:
Ms. Brown, being true to our free-market roots, we absolutely would enjoy a return to private, common law justice with private courts – paid for by the aggrieved parties. The current socialist system of Western state justice, while theoretically fair, is an unjust abomination. The Draconian mandatory sentences in the United States for arcane white-collar accounting "crimes" (or illogical ones like insider-trading) are increasingly miserable and endlessly tragic. The British system is horrid and the EU system promises to be even worse. Yet there is no end in sight. All Western law is becoming, with its increasing emphasis on white-collar crime, is a way for the power-elite to put the competition in jail, in our opinion.
Insofar as banking is concerned, we would be happy to see the kind of public banks you promote engaged in competition with a private free-banking system. The only caveat we would have is that the playing field be level and that the public banks not benefit from any implicit backing of the government. We don't believe you would agree with that, of course. But that is a way we think the private/public banking debate could be fairly settled. We would bet, ultimately, that people would end up doing business with the private institutions …
Posted by Ellen Brown on 12/4/2009 (internal post)
Well, thanks! Okay, that's what we're trying to do here: get some publicly-owned (preferably state-owned) banks set up. Then we'll let the free market decide!
Reply from the Daily Bell:
Ms. Brown, we were perhaps being a touch facetious. We do not really understand how the state can set up public banks that would fairly compete with the private sector. We're not saying it couldn't be done, but we don't quite see how. We do agree on much of your analysis when it comes to the obvious banking problems. If you would put your great communication skills to work to put central banks out of business, instead of simply pushing hard for public banks, we think the alternative press and its growing readership would benefit a great deal.
Posted by Ellen Brown on 12/4/2009 (internal post)
It can be done: ask the Chinese, the Indians, the Australians, the New Zealanders, the North Dakotans. Read my articles! Here's my latest on that subject – Cut Wall Street Out! How States Can Finance Their Own Recoveries
Reply from the Daily Bell:
Thanks for drawing this to the attention of our readers – and thanks for being so generous with your time today.
Editor's note: Ms. Brown's article is very interesting. From the point of view of the argument above – that public banks not have advantages over private ones – it perhaps doesn't quite succeed, as we would note the following, drawn from the article in question:
"Private banks are limited by bank capital requirements and by their for-profit business models. And that is where a state-owned bank has enormous advantages: States own huge amounts of capital, and they can think farther ahead than their quarterly profit statements, allowing them to take long-term risks. Their asset bases are not marred by oversized salaries and bonuses; they have no shareholders expecting a sizable cut, and they have not marred their books with bad derivatives bets, unmarketable collateralized debt obligations and mark-to-market accounting problems."
No, it is probably not likely that public banks could ever compete fairly with private ones. From our private banking point of view, a simple return to pre-Civil War US free-banking (with all its government induced flaws) is preferable to the complexity and government intrusiveness that would come with introducing an entirely new public banking system. In fact, simply doing away with the Federal Reserve would probably go a very long way toward fulfilling the goal of a healthier American banking system. Unfortunately, because Ms. Brown is such a convincing and effective proponent of her public viewpoint, we are quite concerned that her dynamism may retard the swelling consensus (on the Internet anyway) that central banking must be radically downsized or even done away with. But perhaps that is not an entirely fair comment and, if so, we're sure we'll hear from our Brownian friends again and this dialogue will be … Continued!