China’s Secret Source For Funding Infrastructure by Ellen Brown

 

Image by woodleywonderworks via Flickr

by Ellen Brown
Writers, Dandelion Salad
The Web of Debt Blog
February 28, 2018/Blogger Ref   https://wiki.p2pfoundation.net/Transfinancial_Economics

“One Belt, One Road,” China’s $1 trillion infrastructure initiative, is a massive undertaking of highways, pipelines, transmission lines, ports, power stations, fiber optics, and railroads connecting China to Central Asia, Europe and Africa. According to Dan Slane, a former advisor in President Trump’s transition team, “It is the largest infrastructure project initiated by one nation in the history of the world and is designed to enable China to become the dominant economic power in the world.” In a January 29^th article titled “Trump’s Plan a Recipe for Failure, Former Infrastructure Advisor Says,” he added, “If we don’t get our act together very soon, we should all be brushing up on our Mandarin.”

On Monday, February 12^th, President Trump’s own infrastructure initiative was finally unveiled. Perhaps to trump China’s $1 trillion mega-project, the Administration has now upped the ante from $1 trillion to $1.5 trillion, or at least so the initiative is billed. But as Donald Cohen observes in The American Prospect, it’s really only $200 billion, the sole sum that is to come from federal funding; and it’s not even that after factoring in the billions in tax cuts in infrastructure-related projects. The rest of the $1.5 trillion is to come from cities, states, and private investors; and since city and state coffers are depleted, that chiefly means private investors. The focus of the Administration’s plan is on public-private partnerships, which as Slane notes are not suitable for many of the most critical infrastructure projects, since they lack the sort of ongoing funding stream such as a toll or fee that would attract private investors. Public-private partnerships also drive up costs compared to financing with municipal bonds.

In any case, as Yves Smith observes, private equity firms are not much interested in public assets; and to the extent that they are, they are more interested in privatizing existing infrastructure than in funding the new development that is at the heart of the president’s plan. Moreover, local officials and local businessmen are now leery of privatization deals. They know the price of quick cash is to be bled dry with user charges and profit guarantees.

The White House says its initiative is not a take-it-or-leave-it proposal but is the start of a negotiation, and that the president is “open to new sources of funding.” But no one in Congress seems to have a viable proposal. Perhaps it is time to look more closely at how China does it….

China’s Secret Funding Source: The Deep Pocket of Its State-owned Banks

While American politicians argue endlessly about where to find the money, China has been forging full steam ahead with its mega-projects. A case in point is its 12,000 miles of high-speed rail, built in a mere decade while American politicians were still trying to fund much more modest rail projects. The money largely came from loans from China’s state-owned banks. The country’s five largest banks are majority-owned by the central government, and they lend principally to large, state-owned enterprises.

Where do the banks get the money? Basically, they print it. Not directly. Not obviously. But as the Bank of England has acknowledged, banks do not merely recycle existing deposits but actually create the money they lend by writing it into their borrowers’ deposit accounts. Incoming deposits are needed to balance the books, but at some point these deposits originated in the deposit accounts of other banks; and since the Chinese government owns most of the country’s banks, it can aim this funding fire hose at its most pressing national needs.

China’s central bank, the People’s Bank of China, issues money for infrastructure in an even more direct way. It has turned to an innovative form of quantitative easing in which liquidity is directed not at propping up the biggest banks but at “surgical strikes” into the most productive sectors of the economy. Citigroup chief economist Willem Buiter calls this “qualitative easing” to distinguish it from the quantitative easing engaged in by Western central banks. According to a 2014 Wall Street Journal article:

“In China’s context, such so-called qualitative easing happens when the People’s Bank of China adds riskier assets to its balance sheet – such as by relending to the agriculture sector and small businesses and offering cheap loans for low-return infrastructure projects – while maintaining a normal pace of balance-sheet expansion [loan creation]….

“The purpose of China’s qualitative easing is to provide affordable financing to select sectors, and it reflects Beijing’s intention to dictate interest rates for some sectors, Citigroup’s economists said. They added that while such a policy would also put inflationary pressure on the economy, the impact is less pronounced than the U.S.-style quantitative easing.”

Among the targets of these surgical strikes with central bank financing is the One Belt, One Road initiative. According to a May 2015 article in Bloomberg:

“Instead of turning the liquidity sprinkler on full-throttle for the whole garden, the PBOC is aiming its hose at specific parts. The latest innovations include plans to bolster the market for local government bonds and the recapitalisation of policy banks so they can boost lending to government-favoured projects….

“Policymakers have sought to bolster credit for small and medium-sized enterprises, and borrowers supporting the goals of the communist leadership, such as the One Belt, One Road initiative developing infrastructure along China’s old Silk Road trade routes.”

“Non-Performing Loans” or “Helicopter Money for Infrastructure”? Money that Need Not Be Repaid

Critics say China has a dangerously high debt-to-GDP ratio and a “bad debt” problem, meaning its banks have too many “non-performing” loans. But according to financial research strategist Chen Zhao in a Harvard review called “China: A Bullish Case,” these factors are being misinterpreted and need not be cause for alarm. China has a high debt to GDP ratio because most Chinese businesses are funded through loans rather than through the stock market, as in the US; and China’s banks are able to engage in massive lending because the Chinese chiefly save their money in banks rather than investing it in the stock market, providing the deposit base to back this extensive lending. As for China’s public “debt,” most of it is money created on bank balance sheets for economic stimulus. Zhao writes:

“During the 2008-09 financial crisis, the U.S. government deficit shot up to about 10 percent of GDP due to bail-out programs like the TARP. In contrast, the Chinese government deficit during that period didn’t change much. However, Chinese bank loan growth shot up to 40 percent while loan growth in the U.S. collapsed. These contrasting pictures suggest that most of China’s four trillion RMB stimulus package was carried out by its state-owned banks…. The so-called “bad debt problem” is effectively a consequence of Beijing’s fiscal projects and thus should be treated as such.”

China calls this government bank financing “lending” rather than “money printing,” but the effect is very similar to what European central bankers are calling “helicopter money” for infrastructure – central bank-generated money that does not need to be repaid. If the Chinese loans get repaid, great; but if they don’t, it’s not considered a problem. Like helicopter money, the non-performing loans merely leave extra money circulating in the marketplace, creating the extra “demand” needed to fill the gap between GDP and consumer purchasing power, something that is particularly necessary in an economy that is contracting due to shrinking global markets following the 2008-09 crisis.

In a December 2017 article in the Financial Times called “Stop Worrying about Chinese Debt, a Crisis Is Not Brewing”, Zhao expanded on these concepts, writing:

“[S]o-called credit risk in China is, in fact, sovereign risk. The Chinese government often relies on bank credit to finance government stimulus programmes…. China’s sovereign risk is extremely low. Importantly, the balance sheets of the Chinese state-owned banks, the government and the People’s Bank of China are all interconnected. Under these circumstances, a debt crisis in China is almost impossible.”

Chinese state-owned banks are not going to need a Wall Street-style bailout from the government. They are the government, and the Chinese government has a massive global account surplus. It is not going bankrupt any time soon.

What about the risk of inflation? As noted by the Citigroup economists, Chinese-style “qualitative easing” is actually less inflationary than the bank-focused “quantitative easing” engaged in by Western central banks. And Western-style QE has barely succeeded in reaching the Fed’s 2 percent inflation target. For 2017, the Chinese inflation rate was a modest 1.8 percent.

What to Do When Congress Won’t Act

Rather than regarding China as a national security threat and putting our resources into rebuilding our military defenses, we might be further ahead studying its successful economic policies and adapting them to rebuilding our own crumbling roads and bridges before it is too late. The US government could set up a national infrastructure bank that lends just as China’s big public banks do, or the Federal Reserve could do qualitative easing for infrastructure as the PBOC does. The main roadblock to those solutions seems to be political. They would kill the privatization cash cow of the vested interests calling the shots behind the scenes.

What alternatives are left for cash-strapped state and local governments? Unlike the Fed, they cannot issue money directly; but they can establish their own banks. Fifty percent of the cost of infrastructure is financing, so having their own banks would allow them to cut the cost of infrastructure nearly in half. The savings on infrastructure projects with an income stream could then be used to fund those critically necessary projects that lack an income stream.

For a model, they can look to the century-old Bank of North Dakota (BND), currently the nation’s only publicly-owned depository bank. The BND makes 2 percent loans to local communities for infrastructure, far below the 12 percent average sought by private equity firms. Yet as noted in a November 2014 Wall Street Journal article, the BND is more profitable than Goldman Sachs and JPMorgan Chase. Before submitting to exploitation by public-private partnerships, state and local governments would do well to give the BND model further study.

This article was originally published on Truthdig.org.

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Ellen Brown is an attorney, founder of the Public Banking Institute, and author of twelve books including the best-selling Web of Debt. Her latest book, The Public Bank Solution, explores successful public banking models historically and globally. Her 300+ blog articles are at EllenBrown.com. Listen to “It’s Our Money with Ellen Brown” on PRN.FM.

From the archives:

Michael Hudson: Privatizing US Infrastructure Will Increase the Cost of Living

Michael Hudson and Ellen Brown: Avoiding The Road To Serfdom

If China Can Fund Infrastructure With Its Own Credit, So Can We by Ellen Brown

Corporate Plunder–The Bait and Switch of Public-Private Partnerships by Pete Dolack

Michael Hudson: Trump’s Infrastructure Plan, and The Idea of Proximity to Russia is All Fake

Central Bank Digital Currencies: A Revolution in Banking?

 

I met the authoress Ellen Brown a long time ago in London. She has done much sterling work in the cause of Monetary Reform. I have also a appended a link to her Wikipedia bio at the end of the following article.

 

September 16, 2016 by Ellen Brown (from her blog)   Blogger Ref  http://www.p2pfoundation.net/Transfinancial_Economics

 

 

 

 

 

 

 

 

 

Several central banks, including the Bank of England, the People’s Bank of China, the Bank of Canada and the Federal Reserve, are exploring the concept of issuing their own digital currencies, using the blockchain technology developed for Bitcoin. Skeptical commentators suspect that their primary goal is to eliminate cash, setting us up for negative interest rates (we pay the bank to hold our deposits rather than the reverse).

But Ben Broadbent, Deputy Governor of the Bank of England, puts a more positive spin on it. He says Central Bank Digital Currencies could supplant the money now created by private banks through “fractional reserve” lending – and that means 97% of the circulating money supply. Rather than outlawing bank-created money, as money reformers have long urged, fractional reserve banking could be made obsolete simply by attrition, preempted by a better mousetrap.  The need for negative interest rates could also be eliminated, by giving the central bank more direct tools for stimulating the economy.

The Blockchain Revolution

How blockchain works was explained by Martin Hiesboeck in an April 2016 article titled “Blockchain Is the Most Disruptive Invention Since the Internet Itself“:

The blockchain is a simple yet ingenious way of passing information from A to B in a fully automated and safe manner. One party to a transaction initiates the process by creating a block. This block is verified by thousands, perhaps millions of computers distributed around the net. The verified block is added to a chain, which is stored across the net, creating not just a unique record, but a unique record with a unique history. Falsifying a single record would mean falsifying the entire chain in millions of instances. That is virtually impossible.

In a speech at the London School of Economics in March 2016, Bank of England Deputy Governor Ben Broadbent pointed out that a Central Bank Digital Currency (CBDC) would not eliminate physical cash. Only the legislature could do that, and blockchain technology would not be needed to pull it off, since most money is already digital. What is unique and potentially revolutionary about a national blockchain currency is that it would eliminate the need for banks in the payments system. According to a July 2016 article in The Wall Street Journal on the CBDC proposal:

[M]oney would exist electronically outside of bank accounts in digital wallets, much as physical bank notes do. This means households and businesses would be able to bypass banks altogether when making payments to one another.

Not only the payments system but the actual creation of money is orchestrated by private banks today. Nearly 97% of the money supply is created by banks when they make loans, as the Bank of England acknowledged in a bombshell report in 2014. The digital money we transfer by check, credit card or debit card represents simply the IOU or promise to pay of a bank. A CBDC could replace these private bank liabilities with central bank liabilities. CBDCs are the digital equivalent of cash.
Money recorded on a blockchain is stored in the “digital wallet” of the bearer, as safe from confiscation as cash in a physical wallet. It cannot be borrowed, manipulated, or speculated with by third parties any more than physical dollars can be. The money remains under the owner’s sole control until transferred to someone else, and that transfer is anonymous.
Rather than calling a CBDC a “digital currency,” says Broadbent, a better term for the underlying technology might be “decentralised virtual clearinghouse and asset register.” He adds:

But there’s no denying the technology is novel.  Prospectively, it offers an entirely new way of exchanging and holding assets, including money.

Banking in the Cloud

One novel possibility he suggests is that everyone could hold an account at the central bank. That would eliminate the fear of bank runs and “bail-ins,” as well as the need for deposit insurance, since the central bank cannot run out of money. Accounts could be held at the central bank not just by small depositors but by large institutional investors, eliminating the need for the private repo market to provide a safe place to park their funds. It was a run on the repo market, not the conventional banking system, that triggered the banking crisis after the collapse of Lehman Brothers in 2008.
Private banks could be free to carry on as they do now. They would just have substantially fewer deposits, since depositors with the option of banking at the ultra-safe central bank would probably move their money to that institution.
That is the problem Broadbent sees in giving everyone access to the central bank: there could be a massive run on the banks as depositors moved their money out. If so, where would the liquidity come from to back bank loans? He says lending activity could be seriously impaired.
Perhaps, but here is another idea. What if the central bank supplanted not just the depository but the lending functions of private banks? A universal distributed ledger designed as public infrastructure could turn the borrowers’ IOUs into “money” in the same way that banks do now – and do it more cheaply, efficiently and equitably than through banker middlemen.

Making Fractional Reserve Lending Obsolete

The Bank of England has confirmed that banks do not actually lend their depositors’ money. They do not recycle the money of “savers” but actually create deposits when they make loans. The bank turns the borrower’s IOU into “checkable money” that it then lends back to the borrower at interest. A public, distributed ledger could do this by “smart contract” in the “cloud.” There would be no need to find “savers” from whom to borrow this money. The borrower would simply be “monetizing” his own promise to repay, just as he does now when he takes out a loan at a private bank. Since he would be drawing from the bottomless well of the central bank, there would be no fear of the bank running out of liquidity in a panic; and there would be no need to borrow overnight to balance the books, with the risk that these short-term loans might not be there the next day.
To reiterate: this is what banks do now. Banks are not intermediaries taking in deposits and lending them out. When a bank issues a loan for a mortgage, it simply writes the sum into the borrower’s account. The borrower writes a check to his seller, which is deposited in the seller’s bank, where it is called a “new” deposit and added to that bank’s “excess reserves.” The issuing bank then borrows this money back from the banking system overnight if necessary to balance its books, returning the funds the next morning. The whole rigmarole is repeated the next night, and the next and the next.
In a public blockchain system, this shell game could be dispensed with. The borrower would be his own banker, turning his own promise to repay into money. “Smart contracts” coded into the blockchain could make these transactions subject to terms and conditions similar to those for loans now. Creditworthiness could be established online, just as it is with online credit applications now. Penalties could be assessed for nonpayment just as they are now. If the borrower did not qualify for a loan from the public credit facility, he could still borrow on the private market, from private banks or venture capitalists or mutual funds. Favoritism and corruption could be eliminated, by eliminating the need for a banker middleman who serves as gatekeeper to the public credit machine. The fees extracted by an army of service providers could also be eliminated, because blockchain has no transaction costs.
In a blog for Bank of England staff titled “Central Bank Digital Currency: The End of Monetary Policy As We Know It?”, Marilyne Tolle suggests that the need to manipulate interest rates might also be eliminated. The central bank would not need this indirect tool for managing inflation because it would have direct control of the money supply.
A CBDC on a distributed ledger could be used for direct economic stimulus in another way: through facilitating payment of a universal national dividend. Rather than sending out millions of dividend checks, blockchain technology could add money to consumer bank accounts with a few keystrokes.

Hyperinflationary? No.

The objection might be raised that if everyone had access to the central bank’s credit facilities, credit bubbles would result; but that would actually be less likely than under the current system. The central bank would be creating money on its books in response to demand by borrowers, just as private banks do now. But loans for speculation would be harder to come by, since the leveraging of credit through the “rehypothecation” of collateral in the repo market would be largely eliminated. As explained by blockchain software technologist Caitlin Long:

Rehypothecation is conceptually similar to fractional reserve banking because a dollar of base money is responsible for several different dollars of debt issued against that same dollar of base money. In the repo market, collateral (such as U.S Treasury securities) functions as base money. . . .
Through rehypothecation, multiple parties report that they own the same asset at the same time when in reality only one of them does—because, after all, only one such asset exists. One of the most important benefits of blockchains for regulators is gaining a tool to see how much double-counting is happening (specifically, how long “collateral chains” really are).

Blockchain eliminates this shell game by eliminating the settlement time between trades. Blockchain trades occur in “real-time,” meaning collateral can be in only one place at a time.

A Sea Change in Banking

Martin Hiesboeck concludes:

[B]lockchain won’t just kill banks, brokers and credit card companies. It will change every transactional process you know. Simply put, blockchain eliminates the need for clearinghouse entities of any kind. And that means a revolution is coming, a fundamental sea change in the way we do business.

Changes of that magnitude usually take a couple of decades. But the UK did surprise the world with its revolutionary Brexit vote to leave the EU. Perhaps a new breed of economists at the Bank of England will surprise us with a revolutionary new model for banking and credit.
_____________________
Ellen Brown is an attorney, founder of the Public Banking Institute, and author of twelve books including the best-selling Web of Debt. Her latest book, The Public Bank Solution, explores successful public banking models historically and globally. Her 300+ blog articles are at EllenBrown.com. She can be heard biweekly on “It’s Our Money with Ellen Brown” on PRN.FM.


https://en.wikipedia.org/wiki/Ellen_Brown
 

Outside the Monetary Box "Money And Ethics In The 21st Century"

The following is from part of an interesting site, and gives some data on Transfinancial Economics originating from the Kheper site. Unfortunately, this specific data may be removed as it is an old version of the same subject. The most authorative, and accurate page for TFE originates on the following link at the present time. http://www.p2pfoundation.net/Transfinancial_Economics






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Freedom is a possession of inestimable value. Marcus Tullius Cicero

Our monetary woes are not going to go away by themselves. One thing is certain, they will go away. The question is only how and when. The number one cause of all the worlds troubles is us. You and me. It has to do with the monetary system. Not our monetary system, the monetary system. This idea is as easy to accept as it is to prove. Lets say I want to play Doug's game. So I make up the rules for Doug's game and try to attract people to play. What makes Doug's game a hit? A success? Players. I need players. Every game that is being played today requires consent and participation from the players. Without it, there is no game. It can't go anywhere.

It's easy to think that the monetary troubles on earth are extremely complicated and that my simple comparison doesn't really hold true. It does. There is nothing complicated in getting out of the mess we're in. It's very, very simple. It's not that the monetary system needs fixed. It needs to end. The idea that we need money or exchange systems to live is silly. The creators of the game can't afford for this thinking to surface. Surface is the right term. The idea is there, it just needs to come to our full awareness. The rule makers will kill anyone who attempts to bring this idea to it's full state of conscious awareness. I don't say this without a complete understanding of the rule makers. You can see the proof anywhere that someone is putting together a different game. Anywhere the threat, to the monetary game, becomes viable, people die. Anywhere the rules of the game are not being followed people are being killed. The other places that people are being killed is in those places where people want to stop playing the game. Also people will die so the game can be played where they were previously "in the way". If a place isn't serving the games purpose it gets killed. So it's not the rules that need modified. It's not that the system needs improvements. The system needs to end. The game must stop. There is only one way this will happen. The players must stop playing.

How do we stop playing? Have you all read the hundredth monkey story? If not search it and read it. Make sure you get the entire story. There is more than just the monkeys. It is an illustration in the relationship we have to each other at the conscious level. You will read that when a certain amount of people know something, all of a sudden everybody will know it. Knowing the way this works what do we need to do to change the world? When a certain amount of people "wake up" the rest will be awake. We could make this our game. I'll give an example of how this game works on the negative side. Actually as soon as I do you'll see so many examples it will astound you. "The difficulties in feeding the worlds populace." That's the negative idea. This idea has been fed into our brains over and over. As it is accepted it gets harder and harder to end starvation. The farmers disappear. Real food is being replaced by engineered product. Land is being destroyed so no food will grow on it. The list goes on and on. Why? Because people have accepted the idea. Do the rule makers understand the concept of the accepted idea? They may be stupid, but they're not stupid. In other words they have a very keen understanding of what makes us tick. They take this understanding and do stupid things with it. So here is the question - do you think that it's hard to feed the world? If you do, then you are working to make starvation a reality. You are fully immersed in a game of unconsciousness.

With that in mind here's the next experiment. "Do we think we need a monetary system?" If we accept that we do, then we are destined to have one. The preceding sentence reveals everything you'll ever need to know about destiny. We will have everything we have now as long as we think that it's hard to - not have it. That, in a nutshell, is the game we're playing. It's a hideous game we all play on the people of the world, ourselves included. It's the "it's hard game". One other destructive game we've been swept up in is the "someone will save us game". Here is a fact: we will save ourselves or we will be extinct. We can never save ourselves by playing the game that leads to our destruction. So how do we put an end to it? How do we put an end to world suffering? We see the possibility of something different. There is something I have written about a lot on my site. This is the concept of being convinced. It is this: nothing happens for us until we are convinced that it needs to happen. Nothing changes for us until we are convinced of the need for change. We can only change things if we know what those things are. We can only change them by addressing cause. We have to find cause. Then we can be successful and deal realistically with what we want to change. Then we can change our lives. Likewise we can change the world if we first recognize what needs to be changed. Once we're convinced of this we must be convinced that it's possible. In order to become convinced that it's possible we must understand cause. If we don't understand and deal with things at the causal level we as a race, here on earth, will be extinct. The cause of the worlds trouble is this: we see it as a fact of life. A natural product of life. This idea is being generated. It's part of the game. As hard as it seems to swallow we are killing ourselves with ideas that will only kill us once we voluntarily accept them. We must agree to our own demise. Is that not the height of craziness? All these ridiculous ideas need to be discarded. If they aren't, they will destroy us. We will destroy ourselves with them. We must be convinced, now, that our acceptance of ideas causes destruction. It doesn't matter where the ideas originated. ( but it is something we might all be interested in ) It has now become our idea. It is then, ours to be rid of. Our responsibility. We are responsible for the outcome of humanity. This is possibly a little overwhelming. It doesn't have to be. Our part, as individuals, isn't hard.

In fact like everything else that is real it's pretty simple. We must get the idea that a monetary system is necessary out of our heads. The other idea that we must be convinced of is this: as soon as enough people believe this it will change. As soon as that magic number of individuals sees this clearly it will go very rapidly. It will just sweep through the rest of the consciousness. That's how it works.

Financial amnesia (video) On 9/10/01 the Bush Administration announced that the Pentagon had lost $2.3 trillion.

Then they spent $3 trillion (or more) on the "War on Terror" including the disaster in Iraq. Now, as they're heading out the door, they've instructed the Fed to throw another few trillion on the fire. Is anyone keeping track? This is starting to add up to real money.

No mincing of words George Carlin understands...

EXPLODING THE MYTHS ABOUT MONEY

Ellen Brown, JD

Our money system is not what we have been led to believe. The creation of money has been "privatized," or taken over by a private money cartel. Except for coins, all of our money is now created as loans advanced by private banking institutions - including the private Federal Reserve. Banks create the principal but not the interest to service their loans. To find the interest, new loans must continually be taken out, expanding the money supply, inflating prices - and robbing you of the value of your money.

Not only is virtually the entire money supply created privately by banks, but a mere handful of very big banks is responsible for a massive investment scheme known as "derivatives," which now tallies in at hundreds of trillions of dollars. The banking system has been contrived so that these big banks always get bailed out by the taxpayers from their risky ventures, but the scheme has reached its mathematical limits. There isn't enough money in the entire global economy to bail out the banks from a massive derivatives default today. When the investors realize that the "insurance" against catastrophe that they have purchased in the form of derivatives is worthless, they are liable to jump ship and bring the whole shaky edifice crashing down.

Web of Debt unravels the deceptions in our money scheme and presents a crystal clear picture of the financial abyss towards which we are heading. Then it explores a workable alternative, one that was tested in colonial America and is grounded in the best of American economic thought, including the writings of Benjamin Franklin, Thomas Jefferson and Abraham Lincoln.

Trans-financial Economics

by Robert Searle

Introduction: The summary found here gives one a basic overview of Trans-financial Economics, or TFE which then leads on to a more detailed essay, or "paper". It should just take a few minutes to read for those pressed for time. However, it should be noted that it comes after a short summary of Positive Human Politics, or PHP. Like TFE it is a research, and development project but no detailed essay, or "paper" follows it. Essentially, PHP is the basic political background of our main subject matter. One can skip it if desired, and go straight to the summary on TFE.

Also, a short list of references are placed right at the end of this presentation. Alot more may be added at some future date.

Positive Human Politics

, or PHP/ The Basic Summary preceding Trans-financial Economics Overview. Positive Human Politics, or PHP can be seen as the Modern Universal "Paradigm". Like TFE it is neither right-wing, or left-wing in approach but simply creates a basic trans formative humanitarian framework. In it realistic, civilized,and progressive solutions, or options are presented. It seeks for the popularization of such notions to largely replace negative thinking, and general apathy on all things political.

Most of the major ideas for PHP already exist under different terms, and tend to vary only in "minor" detail as far as theory, and practice are concerned (eg. gaian democracies, co-intelligence, holistic politics, et al).A book entitled The Age of Consent by the journalist George Monbiot is a good example of advanced thinking involving among other things the concept of a genuinely accountable World Parliament. The futurist Jacque Fresco offers in his writings, and talks a more "Utopian" view of what could be. He draws his inspiration from technocracy,trans humanism, and the like.

There are many examples of Positive Human Politics. They notably include the following:-

a) The continued relevance, and importance of the Universal Declaration of Human Rights as the basic ethical foundation for change. This would lead to the greater development of possible enforceable International Laws along with their "correct" interpretation.

b) Empower positive citizenship.

c)The possible option of direct participatory democracy using computer voting by an educated informed public.

d) Greater evolution away from adversarial politics to something more positive, and progressive.

e)Reducing the information overload notably of social, economic, and political knowledge using the least number of words to describe issues for, and against a topic in a way which is seen to be genuinely open, holistic,and accountable. This would have notable implications for direct democracy.

f)Binary Economics, and other similar proposals for fairer wealth distribution.

g)The importance of the proper, and safe development of new sustainable technologies.

h) Full-scale nuclear disarmament if at all possible, or at least the simultaneous development of non-lethal weapons in which death, and destruction no longer occur in "pointless" wars.

i) The European Union can also be seen as a form of positive, progressive evolution, but still requires more reforms to make it more open, and legally accountable. The idea of a Super-State may seem fine in principle but such a political union may well be superfluous. Growing cooperation between independent sovereign states is arguably the best, and "safest" way forward.

Such proposals are good examples of PHP. Yet, we have no intention of expanding this subject. Much of it anyway is pretty obvious to all "right-thinking people".Unlike TFE there is as yet no lengthy essay on PHP giving further details. Now, we examine the former.

Trans financial Economics

~ The Basic Summary ~

Trans financial Economics, or TFE itself is also known as Non-Taxation Monetary Reform. It believes that new unearned money could be created for democratic governments both local, and national without raising taxes. Many NGOs, or independent non-governmental organizations could also be funded in a similar manner either in full, or in part. Thus, in most cases, fund raising, and donations should be largely unnecessary.This can also lead to greater decentralization of power from central government if desired.

Anyway,the creation of new unearned money itself without taxes, or fund raising would not lead to uncontrolled inflation, and devaluation of currency.This would be directly controlled by advanced computer technology. However, anonymous cash transactions would still be possible.

There is more than enough money to change the world. The problem notably for NGOs is legal access to it.

In TFE there is no redistribution of financial wealth, but NGOs concerned with fairer wealth distribution, and morally progressive concepts such as Binary Economics would be financially empowered as never before. Thus, their influence on public opinion would be far greater.

For some people TFE can be seen as a "transitional" system that would ideally lead from the greed of competitive capitalism to fairer economic systems both large, and small which would cooperate with each other. Unfortunately, this process would probably take many, many decades to occur.Though "scientific" evidence indicates that mutual cooperation for selfish ends is the real natural driving force in society there will "always" be the few who are "greedy," and "competitive" enough to succeed as top businessmen, and command huge sums of "earned" money, and resources.

On the other hand, real genuine socialism which confessedly has a more just, and fairer understanding of capital may gradually manifest itself fully. There may even come a time when everything may become free on demand without exchange of money at all.

Global Subsistence Economy

Message from Ervin Laszlo, founder and president of The Club of Budapest, co-founder of the WorldShift Foundation and president of its board of trustees.

We support the shift of our economic focus from transnational corporate "fusionism" to regional subsistence. Subsistence economy focuses on a "natural" way of living. This is not "back to stone age". It rather means a spiral, wavelike progress out of the life-destroying habits of today's so-called civilization and accepting and welcoming the complexity of life.

We support the development of sustainable, decentralized - that is local - high-tech production, combined with local use of local resources. and the redesign of our monetary system according to a fourfold model: 1) economy of gifting (a basic matriarchal feature), 2) counter-trade (barter) economy, 3) complementary local monetary systems for regional trade, and 4) unified currency (for example called "terra") for interregional and global trade. In our eyes compound interest has to be abolished. Also the concept of "owning" land must be reconsidered.

Regional subsistence is committed to fair trade. It appreciates community, supports redevelopment of social structures and teaches the necessity and the pleasure to share resources - thus making regions ready to downscale consumption, shift values from material to social wealth and to deal with migration in a peaceful way.

 

The Public Bank Solution

WHAT WALL STREET DOESN'T WANT YOU TO KNOW
Shock waves from one Wall Street scandal after another have completely disillusioned us with our banking system; yet we cannot do without banks. Nearly all money today is simply bank credit. Economies run on it, and it is created when banks make loans. The main flaw in the current model is that private profiteers have acquired control of the credit spigots. They can cut off the flow, direct it to their cronies, and manipulate it for personal gain at the expense of the producing economy. The benefits of bank credit can be maintained while eliminating these flaws, through a system of banks operated as public utilities, serving the public interest and returning their profits to the public. This book looks at the public bank alternative, and shows with examples from around the world and through history that it works admirably well, providing the key to sustained high performance for the economy and well-being for the people. Order here.

EXCERPTS
Read the Table of Contents for a preview of what is inside --

Foreword by Hazel Henderson
Chapter 1: From Bail-Outs to Bail-Ins: A Banking Dinosaur On Life Support

Chapter 14: The Reconstruction Finance Corporation: The Little-Known Public Financial Institution That Reversed the Depression and Funded World War II 

Chapter 25: Latin America: Breaking the Taboos of the Neoliberal Agenda
Chapter 36: Toward A New Theory of Money And Credit

Reviews

Ellen Brown has written what will become one of THE most important books of our time. She eloquently educates us on how the democratization of money is the very foundation of a free society. Ellen brilliantly shows how money can be the current or currency that facilitates the spiritual experience of manifesting our collective intentions for a better world.   Her book is an absolute game-changer and a must read for all those interested in having a world that works for everyone. Buy it, read it, and tell everyone you know to do the same.
— Lynne Twist, author of The Soul of Money and Co-Founder of the Pachamama Alliance

This is a must read! Ellen Brown is the leader of the public banking movement and this masterful work is certain to become the go-to book for anyone interested in transcending the speculation-driven global financial system—and helping lay sound foundations for the fast-emerging New Economy.
– Gar Alperovitz, author of What Then Must We Do?, Lionel R. Bauman Professor of Political Economy at the University of Maryland and CoFounder of the Democracy Collaborative

Brown has done it again. The Public Bank Solution follows her Web of Debt, a brilliant analysis of privatized banking, how it has usurped the money creation power, and how we can get it back. Public banking is the antidote to corrupted, dysfunctional privatized banking, the way forward for sustainable long-term growth and prosperity. The Public Bank Solution explains an idea whose time has come.
– Stephen Lendman, talk show host, author, How Wall Street Fleeces America

From Austerity to Prosperity. Ellen Brown. Why I Am Running for Treasurer of California

By Ellen Brown

Global Research, January 19, 2014

Counterpunch

Blogger Ref Link http://www.p2pfoundation.net/Transfinancial_Economics

Governor Jerry Brown and his staff are exchanging high-fives over balancing California’s budget, but the people on whose backs it was balanced are not rejoicing. The state’s high-wire act has been called “the ultimate in austerity budgets.”
Welfare payments, health care for the poor, and benefits for the elderly and disabled have been slashed. State workers have been downsized. School districts in need of cash have been reduced to borrowing through “capital appreciation bonds” bearing 300% interest. In one notorious case, the Santa Ana school district actually borrowed at 1,000% interest. And the governor acknowledges that California still faces a “wall of debt” amounting to $28 billion. Some analysts put it much higher than that.
At the end of the 20^th century, California was ranked the sixth largest economy in the world. By 2012, it had slipped to number twelve. It is coming back up, in part because European countries are falling further into recession; but California’s poverty rate remains the highest in the country. More than eight million Californians struggle to meet their daily needs, and one in four children lives in poverty. Income inequality is higher in the nation’s most populous state than in almost any other.
California cannot solve its budget problems by slashing services that have already been cut to the bone or raising sales taxes that hurt the poor far more than the rich. We are fighting over a pie that remains too small. The pie itself needs to be expanded – and it can be.
How? By reclaiming that portion that is now siphoned off in interest and bank fees.  When tallied up at every stage of production, interest has been calculated to claim one-third of everything we buy.
How can that money be recaptured?  By owning the bank.
The approach was pioneered in North Dakota, the only state to escape the 2008 banking crisis. North Dakota has the lowest unemployment rate in the country, the lowest foreclosure rate, the lowest default rate on credit card debt, and no state debt at all. It is also the only state to own its own bank.
In the fall of 2011, a bill for a feasibility study for a state-owned bank passed both houses of the California legislature. The Public Banking Institute, which I founded and chair, was instrumental in helping to get the bill as far as it got.  But it died when Jerry Brown vetoed it.  His rationale was that we already have a banking committee, and that the matter could be explored in-house. Needless to say, however, we have heard no more about it since.
I am therefore running for California State Treasurer on a state bank platform, along with Laura Wells, who is running for Controller. We are throwing our bonnets in the ring for the opportunity to show the Governorr or his successor that a state-owned bank can be our ticket to returning California to the abundance it once enjoyed.
I was a recipient of that abundance myself. I got my undergraduate degree at UC Berkeley in the 1960s, when tuition was free; and my law degree at UCLA Law School in the 1970s, when tuition was $700 a year.  Today it is $13,000 and $45,000 annually, respectively, for in-state students.  In the 1960s, the governor of California was Jerry Brown’s father Pat Brown, a New Deal visionary who believed that investment in education, infrastructure and local business was an investment in the future.  Our goal is to revive that optimistic vision in 2014.
We are running on the endorsement of the Green Party – along with Luis Rodriguez for governor and David Curtis for secretary of state – because Green Party candidates take no corporate money. Candidates who take corporate money – and that means nearly all conventional candidates – are beholden to large corporate interests and cannot properly represent the interests of the disenfranchised 99%.
The North Dakota Model: Banking that Supports Rather Than Exploits the Local Economy
California’s revenues are currently parked in those very largest of corporations, Wall Street banks. These out-of-state banks use our giant asset pool for their own speculative purposes, and the funds are at risk of confiscation in the event of a “bail-in.”
In North Dakota, by contrast, all of the state’s revenues are deposited by law in the state-owned Bank of North Dakota (BND). The BND is set up as a DBA of the state (“North Dakota doing business as the Bank of North Dakota”), which means all of the state’s capital is technically the bank’s capital. The bank uses its copious capital and deposit pool to generate credit for local purposes.
The BND is a major money-maker for the state, returning a sizable dividend annually to the treasury. Every year since the 2008 banking crisis, it has reported a return on investment of between 17 percent and 26 percent. The BND also provides what is essentially interest-free credit for state projects, since the state owns the bank and gets the interest back. The BND partners with local banks rather than competing with them, strengthening their capital and deposit bases and allowing them to keep loans on their books rather than having to sell them off to investors. This practice allowed North Dakota to avoid the subprime crisis that destroyed the housing market in other states.
Consider the awesome potential for California, with its massive capital and deposit bases. California has over $200 billion stashed in a variety of funds identified in its 2012 Comprehensive Annual Financial Report (CAFR), including $58 billion managed by the Treasurer in a Pooled Money Investment Account currently earning a meager 0.264% annually. It also has over $400 billion in its pension funds (CalPERS and CalSTRS).
California’s population of 37 million is more than 50 times that of North Dakota. In 2010, the BND had about $4,500 in deposits and $4,200 in loans per capita.  Multiplying 37 million by $4,200, a State Bank of California could, in theory, generate $155.4 billion in credit for the state; and this credit would effectively be interest-free free, since the state would own the bank.
What could California do with $155 billion in interest-free credit? One possibility would be to refinance its ominous “wall of debt” at 0%. A debt that is interest-free can be rolled over indefinitely without cost to the taxpayers.
Another possibility would be to fund public projects interest-free. Eliminating interest has been shown to reduce the cost of public projectsby 35% or more.
Take, for example, the San Francisco Bay Bridge earthquake retrofitting boondoggle, which was originally slated to cost about $6 billion. Interest and bank fees wound up adding another $6 billion to the overall cost to taxpayers. Funding through its own bank could have saved the state $6 billion or 50% on this project.
Then there is the state’s bullet train fiasco, which has been beset with delays, cost overruns, and funding issues. As with the Bay Bridge,costs are projected to double as a result of compounding interest on long-term bonds, imposing huge hidden costs on the next generation of taxpayers. By funding the bullet train through a state-owned bank, its costs, too, could be reduced by 50%.
The Challenge of a “Jungle Primary”
As voters become increasingly disillusioned with big-corporate-money candidates, the third party option is gaining traction. According to a recent Gallup poll, in 2013 42% of Americans identified themselves as political independents, significantly outpacing Democrats at 31% and Republicans at 25%.
The growing threat posed by independent and third-party candidates may explain why it is getting harder and harder to run as one. In California we now have Proposition 14, the Top Two primary, sometimes called the “Louisiana primary” or “jungle primary.” It might better be named the Incumbents’ Benevolent Protection Act.
Proposition 14 requires statewide and congressional California candidates, regardless of party preference, to participate in a nonpartisan blanket primary, with only the top two candidates advancing to the general election.  Incumbents and heavily-funded candidates have historically reaped the benefits of this arrangement. Third party candidates are liable to get knocked out in the first round in June, eliminating them from the November elections.
But the new system does have the advantage that anyone can vote for any candidate in the June primary; so if we can mobilize voters, we have a shot.
There is, however, another new hurdle imposed by Proposition 14. In place of the 150 signatures-in-lieu-of-filing-fee needed earlier, we now need 10,000 signatures – either that or $2,800. But we’re hoping to turn that requirement, too, to advantage, by using it to build the people power and energy necessary to take the June 3, 2014 primary.  If you would like to sign a petition or donate, click here.
There is another way to balance a state budget, one that leads to prosperity rather than austerity. California can stimulate its economy and the job market, restore low-cost higher education, build 21^st-century infrastructure, preserve the environment, and relieve the state’s debt burden, by establishing a bank that is owned by the people and returns its profits to the people.

Ellen Brown is an attorney, president of the Public Banking Institute, and author of twelve books including the bestselling Web of Debt. In The Public Bank Solution, her latest book, she explores successful public banking models historically and globally. Her 200+ credit blog articles are at EllenBrown.com. She is currently running for California State Treasurer on the Green Party ticket.

 www.WebOfDebt.com

www.ThePublicBankingInstitute.org

www.PublicCentralBank.com

The Web of Debt

 

Introduction

 

 

 

CAPTURED BY THE DEBT SPIDER

 

---

President Andrew Jackson called the banking cartel a "hydra-headed monster eating the flesh of the common man." New York Mayor John Hylan, writing in the 1920s, called it a "giant octopus" that "seizes in its long and powerful tentacles our executive officers, our legislative bodies, our schools, our courts, our newspapers, and every agency created for the public protection." The debt spider has devoured farms, homes and whole countries that have become trapped in its web. In a February 2005 article called "The Death of Banking," financial commentator Hans Schicht wrote:

The fact that the Banker is allowed to extend credit several times his own capital base and that the Banking Cartels, the Central Banks, are licensed to issue fresh paper money in exchange for treasury paper, [has] provided them with free lunch for eternity. . . . Through a network of anonymous financial spider webbing only a handful of global King Bankers own and control it all. . . . Everybody, people, enterprise, State and foreign countries, all have become slaves chained to the Banker's credit ropes.¹

Schicht writes that he had an opportunity in his career to observe the wizards of finance as an insider at close range. The game has gotten so centralized and concentrated, he says, that the greater part of U.S. banking and enterprise is now under the control of a small inner circle of men. He calls the game "spider webbing." Its rules include:

• Making any concentration of wealth invisible.
• Exercising control through "leverage" – mergers, takeovers, chain share holdings where one company holds shares of other companies, conditions annexed to loans, and so forth.
• Exercising tight personal management and control, with a minimum of insiders and front-men who themselves have only partial knowledge of the game.

The late Dr. Carroll Quigley was a writer and professor of history at Georgetown University, where he was President Bill Clinton's mentor. Dr. Quigley wrote from personal knowledge of an elite clique of global financiers bent on controlling the world. Their aim, he said, was "nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole." This system was "to be controlled in a feudalist fashion by the central banks of the world acting in concert, by secret agreements."² He called this clique simply the "international bankers." Their essence was not race, religion or nationality but was just a passion for control over other humans. The key to their success was that they would control and manipulate the money system of a nation while letting it appear to be controlled by the government.
The international bankers have succeeded in doing more than just controlling the money supply. Today they actually create the money supply, while making it appear to be created by the government. This devious scheme was revealed by Sir Josiah Stamp, director of the Bank of England and the second richest man in Britain in the 1920s. Speaking at the University of Texas in 1927, he dropped this bombshell:

The modern banking system manufactures money out of nothing. The process is perhaps the most astounding piece of sleight of hand that was ever invented. Banking was conceived in inequity and born in sin . . . . Bankers own the earth. Take it away from them but leave them the power to create money, and, with a flick of a pen, they will create enough money to buy it back again. . . . Take this great power away from them and all great fortunes like mine will disappear, for then this would be a better and happier world to live in. . . . But, if you want to continue to be the slaves of bankers and pay the cost of your own slavery, then let bankers continue to create money and control credit.³

Professor Henry C. K. Liu is an economist who graduated from Harvard and chaired a graduate department at UCLA before becoming an investment adviser for developing countries. He calls the current monetary scheme a "cruel hoax." When we wake up to that fact, he says, our entire economic world view will need to be reordered, "just as physics was subject to reordering when man's world view changed with the realization that the earth is not stationary nor is it the center of the universe."⁴ The hoax is that there is virtually no "real" money in the system, only debts. Except for coins, which are issued by the government and make up only about one one-thousandth of the money supply, the entire U.S. money supply now consists of debt to private banks, for money they created with accounting entries on their books. It is all done by sleight of hand; and like a magician's trick, we have to see it many times before we realize what is going on. But when we do, it changes everything. All of history has to be rewritten.
The following chapters track the web of deceit that has engulfed us in debt, and present a simple solution that could make the country solvent once again. It is not a new solution but dates back to the Constitution: the power to create money needs to be returned to the government and the people it represents. The federal debt could be paid, income taxes could be eliminated, and social programs could be expanded; and this could all be done without imposing austerity measures on the people or sparking runaway inflation. Utopian as that may sound, it represents the thinking of some of America's brightest and best, historical and contemporary, including Abraham Lincoln, Thomas Jefferson and Benjamin Franklin. Among other arresting facts explored in this book are that:

• The "Federal" Reserve is not actually federal. It is a private corporation owned by a consortium of very large multinational banks. (Chapter 13)
• Except for coins, the government does not create money. Dollar bills (Federal Reserve Notes) are created by the private Federal Reserve, which lends them to the banks that lend them to the government, individuals and businesses. (Chapter 2)
• Tangible currency (coins and dollar bills) together make up less than 3 percent of the U.S. money supply. The other 97 percent exists only as data entries on computer screens, and all of this money was created by banks in the form of loans. (Chapters 2 and 17)
• The money that banks lend is not recycled from pre-existing deposits. It is new money, which did not exist until it was lent. (Chapters 17 and 18)

• Thirty percent of the money created by banks with accounting entries is invested for their own accounts. (Chapter 18)
• The American banking system, which at one time extended productive loans to agriculture and industry, has today become a giant betting machine. An estimated $370 trillion are now riding on complex high-risk bets known as derivatives – 28 times the $13 trillion annual output of the entire U.S. economy. These bets are funded by big U.S. banks and are made largely with borrowed money created on a computer screen. Derivatives can be and have been used to manipulate markets, loot businesses, and destroy competitor economies. (Chapters 20 and 32)
• The U.S. federal debt has not been paid off since the days of Andrew Jackson. Only the interest gets paid, while the principal portion continues to grow. (Chapter 2)
• The federal income tax was instituted specifically to coerce taxpayers to pay the interest due to the banks on the federal debt. If the money supply had been created by the government rather than borrowed from banks that created it, the income tax would have been unnecessary. (Chapters 13 and 43)
• The interest alone on the federal debt will soon be more than the taxpayers can afford to pay. When we can't pay, the Federal Reserve's debt-based dollar system must collapse. (Chapter 29)
• Contrary to popular belief, creeping inflation is not caused by the government irresponsibly printing dollars. It is caused by banks expanding the money supply with loans. (Chapter 10)
• Most of the runaway inflation seen in "banana republics" has been caused, not by national governments printing money for the nation's needs, but by global institutional speculators attacking local currencies and devaluing them on international markets. (Chapter 25)
• The same sort of speculative devaluation could happen to the U.S. dollar if international investors were to abandon it as a global "reserve" currency, something they are now threatening to do in retaliation for what they perceive to be American economic imperialism. (Chapters 29 and 37)
• There is a way out of this morass. The early American colonists found it, and so did Abraham Lincoln and some other national leaders: the government can take back the money-issuing power from the banks. (Chapters 8 and 24)

The bankers' Federal Reserve Notes and the government's coins represent two separate money systems that have been competing for dominance throughout recorded history. At one time, the right to issue money was the sovereign right of the king; but that right got usurped by private moneylenders. Today the sovereigns are the people, and the coins that make up less than one one-thousandth of the money supply are all that are left of our sovereign money. Many nations have successfully issued their own money, at least for a time; but the bankers' debt-money has generally infiltrated the system and taken over in the end. These concepts are so foreign to what we have been taught that it can be hard to wrap our minds around them, but the facts have been substantiated by many reliable authorities. To cite a few –
Robert H. Hemphill, Credit Manager of the Federal Reserve Bank of Atlanta, wrote in 1934:

We are completely dependent on the commercial Banks. Someone has to borrow every dollar we have in circulation, cash or credit. If the Banks create ample synthetic money we are prosperous; if not, we starve. We are absolutely without a permanent money system. When one gets a complete grasp of the picture, the tragic absurdity of our hopeless position is almost incredible, but there it is. It is the most important subject intelligent persons can investigate and reflect upon.⁵

Graham Towers, Governor of the Bank of Canada from 1935 to 1955, acknowledged:

Banks create money. That is what they are for. . . . The manufacturing process to make money consists of making an entry in a book. That is all. . . . Each and every time a Bank makes a loan . . . new Bank credit is created -- brand new money.⁶

Robert B. Anderson, Secretary of the Treasury under Eisenhower, said in an interview reported in the August 31, 1959 issue of U.S. News and World Report:

[W]hen a bank makes a loan, it simply adds to the borrower's deposit account in the bank by the amount of the loan. The money is not taken from anyone else's deposit; it was not previously paid in to the bank by anyone. It's new money, created by the bank for the use of the borrower.

Michel Chossudovsky, Professor of Economics at the University of Ottawa, wrote during the Asian currency crisis of 1998:

[P]rivately held money reserves in the hands of "institutional speculators" far exceed the limited capabilities of the World's central banks. The latter acting individually or collectively are no longer able to fight the tide of speculative activity. Monetary policy is in the hands of private creditors who have the ability to freeze State budgets, paralyse the payments process, thwart the regular disbursement of wages to millions of workers (as in the former Soviet Union) and precipitate the collapse of production and social programmes.⁷

Today, Federal Reserve Notes and U.S. dollar loans dominate the economy of the world; but this international currency is not money issued by the American people or their government. It is money created and lent by a private cartel of international bankers, and this cartel has the United States itself hopelessly entangled in a web of debt. By 2006, combined personal, corporate and federal debt in the United States had reached a staggering 44 trillion dollars – four times the collective national income, or $147,312 for every man, woman and child in the country.⁸ The United States is legally bankrupt, defined in the dictionary as being unable to pay one's debts, being insolvent, or having liabilities in excess of a reasonable market value of assets held. By October 2006, the debt of the U.S. government had hit a breath-taking $8.5 trillion. Local, state and national governments are all so heavily in debt that they have been forced to sell off public assets to satisfy creditors. Crowded schools, crowded roads, and cutbacks in public transportation are eroding the quality of American life. A 2005 report by the American Society of Civil Engineers gave the nation's infrastructure an overall grade of D, including its roads, bridges, drinking water systems and other public works. "Americans are spending more time stuck in traffic and less time at home with their families," said the group's president. "We need to establish a comprehensive, long-term infrastructure plan."⁹ We need to but we can't, because government at every level is broke.

Money in the Land of Oz

If governments everywhere are in debt, who are they in debt to? The answer is that they are in debt to private banks. The "cruel hoax" is that governments are in debt for money created on a computer screen, money they could have created themselves. The vast power acquired through this sleight of hand by a small clique of men pulling the strings of government behind the scenes evokes images from The Wizard of Oz, a classic American fairytale that has become a rich source of imagery for financial commentators. Editorialist Christopher Mark wrote in a series called "The Grand Deception":

Welcome to the world of the International Banker, who like the famous film, The Wizard of Oz, stands behind the curtain of orchestrated national and international policymakers and so-called elected leaders. ¹⁰

The late Murray Rothbard, an economist of the classical Austrian School, wrote:

Money and banking have been made to appear as mysterious and arcane processes that must be guided and operated by a technocratic elite. They are nothing of the sort. In money, even more than the rest of our affairs, we have been tricked by a malignant Wizard of Oz.¹¹

In a 2002 article titled "Who Controls the Federal Reserve System?", Victor Thorn wrote:

In essence, money has become nothing more than illusion -- an electronic figure or amount on a computer screen. . . . As time goes on, we have an increasing tendency toward being sucked into this Wizard of Oz vortex of unreality [by] magician-priests that use the illusion of money as their control device.¹²

James Galbraith wrote in The New American Prospect:

We are left . . . with the thought that the Federal Reserve Board does not know what it is doing. This is the "Wizard of Oz" theory, in which we pull away the curtains only to find an old man with a wrinkled face, playing with lights and loudspeakers.¹³

The analogies to The Wizard of Oz work for a reason. According to later commentators, the tale was actually written as a monetary allegory, at a time when the "money question" was a key issue in American politics. In the 1890s, politicians were still hotly debating who should create the nation's money and what it should consist of. Should it be created by the government, with full accountability to the people? Or should it be created by private banks behind closed doors, for the banks' own private ends?
William Jennings Bryan, the Populist candidate for President in 1896 and again in 1900, mounted the last serious challenge to the right of private bankers to create the national money supply. According to the commentators, Bryan was represented in Frank Baum's 1900 book The Wonderful Wizard of Oz by the Cowardly Lion. The Lion finally proved he was the King of Beasts by decapitating a giant spider that was terrorizing everyone in the forest. The giant spider Bryan challenged at the turn of the twentieth century was the Morgan/Rockefeller banking cartel, which was bent on usurping the power to create the nation's money from the people and their representative government.
Before World War I, two opposing systems of political economy competed for dominance in the United States. One operated out of Wall Street, the New York financial district that came to be the symbol of American finance. Its most important address was 23 Wall Street, known as the "House of Morgan." J. P. Morgan was an agent of powerful British banking interests. The Wizards of Wall Street and the Old World bankers pulling their strings sought to establish a national currency that was based on the "gold standard," one created privately by the financial elite who controlled the gold. The other system dated back to Benjamin Franklin and operated out of Philadelphia, the country's first capital, where the Constitutional Convention was held and Franklin's "Society for Political Inquiries" planned the industrialization and public works that would free the new republic from economic slavery to England.¹⁴ The Philadelphia faction favored a bank on the model established in provincial Pennsylvania, where a state loan office issued and lent money, collected the interest, and returned it to the provincial government to be used in place of taxes. President Abraham Lincoln returned to the colonial system of government-issued money during the Civil War; but he was assassinated, and the bankers reclaimed control of the money machine. The silent coup of the Wall Street faction culminated with the passage of the Federal Reserve Act in 1913, something they achieved by misleading Bryan and other wary Congressmen into thinking the Federal Reserve was actually federal.
Today the debate over who should create the national money supply is rarely heard, mainly because few people even realize it is an issue. Politicians and economists, along with everybody else, simply assume that money is created by the government, and that the "inflation" everybody complains about is caused by an out-of-control government running the dollar printing presses. The puppeteers working the money machine were more visible in the 1890s than they are today, largely because they had not yet succeeded in buying up the media and cornering public opinion.
Economics is a dry and forbidding subject that has been made intentionally complex by banking interests intent on concealing what is really going on. It is a subject that sorely needs lightening up, with imagery, metaphors, characters and a plot; so before we get into the ponderous details of the modern system of money-based-on-debt, we'll take an excursion back to a simpler time, when the money issues were more obvious and were still a burning topic of discussion. The plot line for The Wizard of Oz has been traced to the first-ever march on Washington, led by an obscure Ohio businessman who sought to persuade Congress to return to Lincoln's system of government-issued money in 1894. Besides sparking a century of protest marches and the country's most famous fairytale, this little-known visionary and the band of unemployed men he led may actually have had the solution to the whole money problem, then and now . . . .

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