The following is an overview of the fourth chapter in our book:
The parasite of Capital
robs the productivity of Labor
In this segment, Step 4—Making money a public utility through sustainable economics, from our new book, 7 Steps to Global Economic and Spiritual Transformation, we discuss the private banking cartel’s admission that they can’t compete with public banks and, thus, seek to destroy them, by hook or crook; and, we provide a model for a sustainable economy and stable currency, based on a network of public banks, including the central bank, and regional, state, county, and municipal banks, all working within an environment where sovereign U.S. dollars are the circulating medium and interest is prohibited.
This is a frightening proposition to the Anglo-Euro-American banking cartel, because, despite their propaganda claiming that public banking doesn’t work, they know that a public banking network would be the death knell for their con game by which they control much of the world. For example, when President Lincoln began printing sovereign U.S. currency—nicknamed Greenbacks at the time, for the color of one side—the London Times printed the following editorial:
"If this mischievous financial policy, which has its origin in North America, shall become endurated down to a fixture, then that Government will furnish its own money without cost. It will pay off debts and be without debt. It will have all the money necessary to carry on its commerce. It will become prosperous without precedent in the history of the world. The brains, and wealth of all countries will go to North America. That country must be destroyed or it will destroy every monarchy on the globe." —Hazard Circular, London Times, 1865
The corporate financial crime syndicate is still trying to outlaw public banks. During long, tortuous attempts to muscle the world into accepting the TPP, TTIP, and other acts of war posing as treaties, Barbara Weisel, the United States Trade Representative's chief TPP negotiator, stated that State Owned Enterprises (SOE) are routinely "competing directly with private enterprises, and often in a way that is considered unfair."
What Weisel is attempting to promote is the notion that a small group of private profiteers should hijack sovereign functions, such as coining money, raising an army, managing postal services, building roads, and more—all sovereign powers assigned to the government by Article I, Section 8 of the U.S. Constitution.
In other words, what Weisel is selling is one of the textbook definitions of fascism: corporate control over the state. One of her ilk’s chief targets is the Bank of North Dakota, the only publicly owned bank in the U.S., and the chief reason why that state was generally unaffected by the 2008 crash. In fact, North Dakota runs a budget surplus, has no bank failures, and has the lowest unemployment rate in the nation, threatened only by the cartel's use of an environmentally and socially disastrous oil boom as a debt weapon and governance disruption.
Just imagine what would be possible if the central bank of the U.S. were publicly owned, in addition to publicly owned regional, state, county, and municipal banks. In our book we did just that, showing that a sustainable economy, stable currency, and progressive evolutionary society is only possible within such a system, as we show in the following three graphs and (indented) commentary for each:
Commentary: T = Time, so the events above the dotted line represent the initial interval or event, and the events below the dotted line represent the subsequent interval or event.In the first interval (T), a commercial bank creates a loan of $100, which temporarily increases the money supply by $100. When the loan is repaid (at 10% interest), the money supply is reduced by $100, with the original loan (bank money) being extinguished, plus a further reduction of $10 in the money supply (because the money to pay the interest is never created with the loan), which becomes the property of the commercial bank, to distribute or invest as it chooses.
In the second interval (T + 1), the commercial bank continues to inflate, then deflate, the money supply by choosing to leverage its $10 in interest income toward increasing its loan portfolio, so it loans $110 dollars and temporarily increases the money supply by that amount. When the loan is repaid (at 10% interest), the money supply is reduced by $110, with the original loan (bank money) being extinguished, plus a further reduction of $11 dollars from the money supply (since the money to pay the interest was never created), which becomes property of the commercial bank, to distribute or invest as it chooses. As you can see, after each interval, the money supply is reduced by an ever-increasing amount, which represents the growing private bank ownership over the money supply and the assets generated therefrom.
During the part of the “business cycle,” when the money created from loans is increasing, the process seems to work fine, because there is an increasing amount of money in circulation to pay the interest. But when the private banks choose to deflate the money supply by calling in their loans, the money supply is reduced by the principal of all the loans (bank money) plus the interest on those loans, which, if and/or when collected, will belong to the commercial banks, to distribute or invest as they choose. Under these conditions, there is no longer enough money to pay for all the principal and interest (since the money to pay the interest was never created), leading to bankruptcies, foreclosures, and joblessness, which enables the commercial banks to buy the collateralized assets (“the fruits of our labor,” which they have amalgamated through loans) at fire sale prices.
To recap, with privately owned banks and interest, an increasing amount of debt (loans) is needed to maintain or grow the money supply during the inflationary part of the “business cycle,” to pay off the interest. Following this, an event (say, the 2008 collapse of Lehman Brothers) is created as an excuse to constrain credit and reduce the money supply, thereby enabling the banks to repossess the collateralized assets backing the loans; or, if these are insufficient to cover the losses, any other available assets.
Whether the big banks that own the Fed recover their losses in this situation is immaterial, since for them the privately owned central bank is the lender of last resort and is used by these “too big to fail” private banks, as a backstop to prop them up following each crash, and to reset themselves, fully liquid and ready to buy up assets for pennies on the dollar, after destroying massive amounts of real value throughout the rest of the system. This destructive reset, in a capitalist system (i.e., privately owned money creation), is necessary because of all the counterfeit (false) value created by interest. Interest, then, is the poison pill by which the value created by labor is stolen, simultaneously devaluing labor.
Commentary: T = Time, so the events above the dotted line represent the initial interval or event, and the events below the dotted line represent the subsequent interval or event.In the first interval (T), a commercial bank creates a loan of $100, which increases the money supply by $100. When the loan is repaid, the money supply is reduced by $100 and the public central bank (paying the 10% interest) makes a $10 deposit with the private commercial bank.
In the second interval (T + 1), the private commercial bank continues to inflate and deflate the money supply by choosing to leverage the $10 it made in interest income by increasing its loan portfolio, so it loans $110 dollars and increases the money supply by that amount. When the loan is repaid, the money supply is reduced by $110 and the public central bank makes an $11-dollar deposit (paying the 10% interest) with the private commercial bank.
In this scenario, when the commercial banks choose to deflate the money supply by calling in their loans (based on whatever excuses they believe the public will buy, with orchestrated coaxing from the mass media that they own), the money supply is reduced by the principal of all the loans, but not the interest on those loans, since the public central bank has added to the money supply by paying the private commercial banks an amount equal to the interest charged. The banks retain this interest income during contractions, to buy assets from the jobless, bankrupt, or foreclosed victims for pennies on the dollar. Therefore, the shrinkage of the money supply would be of a magnitude similar to the private central banking system in the previous example. However, in this case, the public central bank would have the option of providing counter-cyclical programs to replenish the money supply (though this would not cure the problem of inflation, since money [interest payments created by the central bank] was added to the supply without adding value [labor]); that is, more money is chasing the same amount of goods and services.
In addition, further inflationary pressures would be generated because there would continue to be an impetus for the private banks to expand and contract the money supply for profit and “asset acquisition.” Since profit on loans are one of the means by which private banks stay in business, in this scenario, withholding the infusion of money by the public central bank to pay interest on loans would not be an option. In other words, even with the best-case scenario of a public central bank creating money to pay the interest on loans, a system that includes for-profit banks and usury leaves private parties in in control of the money supply, i.e., its creation and regulation, and therefore its manipulation for profit, rather than as a public utility managed in the public interest.
The solution to the inflationary problem illustrated in this model (base money paid by the central bank to cover the interest payments to the commercial banks) seems to call for the central bank to spend the so-called “cost of the loans” (compound interest) directly into the money supply, through public projects (goods) and/or social programs (services), rather than paying these costs directly to the commercial banks (which use them to manipulate the money supply); however, if such were the case, the commercial banks would be relegated to nothing more than pass-through institutions, merely administering loans without any profit, i.e., they would go broke (by private banking standards), or at least be operated on a “cost-plus” basis (the cost of providing goods or services, plus, say, 6% of that cost, as a profit margin (not as compound interest). This conversion of private banks dependent on profits generated by compound interest into banks that serve an administrative or pass-through function, begs our next model, where commercial banks are replaced by state-, county-, and municipal-owned banks that are members of a regional branch of the publicly owned central bank.
Before we detail that model, it’s worth noting that if the public-private ownership model illustrated in the above example were reversed, with a privately owned central bank and the rest of the system consisting of public banks—owned by states, counties, cities, and other political subdivisions (tax districts)—the inflationary outcome is accelerated, with the public banks forced to charge interest to pay off their loans from the central bank, thus generating an ever-accelerated destabilizing force that eats away at the money supply, transferring large portions back to the private parties that own the central bank. Additional inflationary forces would result from the government having to issue bonds and pay interest (since the government would not have its own sovereign currency) in order to generate privately issued central bank notes (“Federal” Reserve Notes, etc.) to pay its debts, or buy goods and services.
In either case, public-private or private-public “partnership,” yet another potential source of inflation is the loans by commercial banks that go unpaid during economic contractions, thus increasing the money supply without being extinguished upon repayment. Admittedly, it could be argued that this surplus currency is far offset by the shrinkage of the money supply as credit evaporates, and as assets (funded by the loans) are seized by the banks; however, the inflationary effects of interest on the cost of goods and services created by any individual or corporation with a debt service (i.e., interest expense) would remain.
As always, with private central banks, war profiteering, in its many forms, including economic predation in all major industries, would continue, and government debt would soar correspondingly, borrowing to pay for services mandated by corporate control over banking and governments. Again, corporate control over the state is one of the definitions of fascism.
Commentary: T = Time, so the events above the dotted line represent the initial interval or event, and the events below the dotted line represent subsequent intervals or events.In this model, private for-profit banks have been phased out of existence. The nation’s banks now consist of a publicly owned central bank (which is simply the nation “doing business as” [d/b/a] a bank) and publicly owned state, county, and municipal banks, and subsidiaries, as well as public banks formed by other political subdivisions that meet minimum capitalization requirements. In this case, with private banks no longer in the business of governance and no longer using compound interest as a means of inflating and deflating the value of the currency relative to goods and services, or to steal the value created by labor, the options for monetary policy improve significantly.
First, interest can be eliminated, as was recently proposed in Russia. As noted in Step 1, interest is, in the end, nothing more than a mathematical trick, which does not represent the cost of creating money. Eliminating interest would return sovereignty to the people, instead of allowing a few bank holding companies to dictate global policy. As it currently stands, there are nations that have publicly owned central banks and yet are not sovereign nations, in that they still issue bonds and pay interest to private parties that hold the bonds, which act as collateral for the receipt of private bank notes. But as we’ve noted, privately owned for-profit banks are not businesses. They are unconstitutional as well as fraudulent criminal enterprises that, by design, aim to destroy sovereignty and steal assets. It's also worth noting that the elimination of interest would not change the motivation of borrowers, since a good credit score would remain one of the basic qualifiers for borrowing within a publicly owned banking system.
Second, each political subdivision, working in concert with its own bank (or a bank owned by another political subdivision), may create credit through zero-interest loans; however, these political subdivisions (states, counties, municipalities, and other taxing districts) would be subject to balanced budgets and non-inflationary credit policies, evaluated by an analysis of the local price index (LPI), based on a basket of goods deemed to be necessary for “life, liberty, and pursuit of happiness” of the inhabitants. In other words, an economic bill of rights would determine the basket of goods and services to which the sovereign currency would be indexed (for example, food, clothing, shelter, healthcare, education, access to cultural tools, etc.), thus guiding the central bank as to the inflationary or deflationary pressures on the currency in local markets. Adjustments to the money supply could be made by (1) increasing or decreasing the availability of local credit, (2) by increasing or decreasing taxes at any level (city, county, state, or nation), (3) by the federal government spending base money directly into the economy or through grants to other levels of government, or (4) through the use of universal dividends (income)—in other words, “humanity credits”—as machines, computers, robots, and artificial intelligence take over an increasing number of jobs.
In the first interval (T), a publicly owned central bank participating with a state, county, or municipal bank, or a subsidiary of such, creates a loan of $100, which increases the money supply by $100. No interest or fees are charged, so there is no inflationary pressure on the goods and/or services created from the loan. The base money that the central bank spends into circulation to pay for the banking overhead would be figured as part of the overall growth or shrinkage of the economy, depending on the size of the workforce and the value of the goods and services in circulation.
When the loan is repaid, the money supply is reduced by $100 for a net gain/loss of zero. The money supply may be further altered by increasing or decreasing the rate at which loans are being created, based on the aforementioned amalgamated local price indices or, as noted, via tax rates and/or grants. Points could be charged for loan services as well.
As long as the money supply expands or contracts proportionately to the availability of goods and services in circulation, prices will neither inflate nor deflate. The tax rate could be set to zero, if there is no inflation, or if there were deflation. In the latter case, additional government spending (base money) would be called for, or more local credit could be made available. So, instead of the fake quantitative easing (QE) enacted by the Fed following the 2008 crash—where the money went to the “too big to fail” banks to buy up defaulted collateralized assets at fire sale prices—in a public banking system, QE would be channeled directly into the economy, particularly via small businesses (which generated half the jobs in the U.S., before the 2008 crash).
Also, states, counties, municipalities, and other political subdivisions, would have the option of issuing zero-interest bonds, which could then be purchased by the central bank or the state bank, depending on whether the issuer of the bonds was the state, or a county or city. The proceeds from the bonds would be spent, by the party issuing the bonds, into the money supply. The repayment of the bonds would later be extracted from the money supply in the form of tax revenues or fees and then paid back to the public bondholder. The net effect of the bonds on the money supply is zero. Thus, bonds—at the state, county, municipal or other political subdivision level—are another means of temporarily adjusting the money supply and regulating the value of currency, as per inflationary or deflationary trends indicated by the LPI. The projects that could be funded are endless at this point, given the environmental destruction and infrastructure deterioration that has transpired under the final vulture stages of capitalism.
If the Central Bank and the entire network of state and local banks were publicly owned and did not charge interest, then the banks and their corresponding governments, working in concert, could thus maintain a sustainable economy and stable currency.
Some may find this remarkable, lacking the understanding of how much productive capacity of American labor is stolen by global capital. The late Danish economist, Margrit Kennedy, estimated that up to 40% of the cost of goods and services in the current system is due to the effects of latent interest charges. In addition, inflation of prices is also fueled by the profiteering of global capital on war, healthcare, education, housing, and virtually everything else. The power to maintain this thievery stems from private control over key central banks.
The return of public control over our central bank and currency would, in short order, just as the 1865 editorial in the London Times claims, put the cartel out of business and eliminate its massive crimes against humanity and its theft of value created by labor, making universal income, healthcare, and education easily affordable while, at the same time, shortening the work week as machines, computers, robots, and artificial intelligence replace menial and repetitive jobs.
This would not only fulfill a longtime dream of humanity, but finish the work begun in 33 A.D., when the Senate of the Roman empire was wholly comprised of usurers.1 It’s now our turn to pick up the whip, and drive the money changers from the temple of democracy. It’s time for a new social contract.
# # #
Footnote:
1 Observations on: I. The Answer of M L’Abbé de Vertot to the late Earl Stanhope’s Inquiry concerning the Senate of Ancient Rome, dated December 1719; II. A Dissertation upon the Constitution of the Roman Senate, by a Gentleman, published in 1743; III. A Treatise on the Roman Senate, by Dr. Conyers Middleton, published in 1747; IV. An Essay on the Roman Senate, by Dr. Thomas Chapman, published in 1750; by Mr. Hooke, published in 1758, specifically “Observations of Dr. Middleton’s Treatise and Dr. Chapman’s Essay on the Roman Senate,” p. 189.
Copyright 2018
Robert Bows
No comments:
Post a Comment