Notes on Public Banking, Debt Peonage and National Dividend Checks

Ellen Brown, "What's the Wizard of Oz got to do money reform?"







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Notes on Public Banking, Debt Peonage and National Dividend Checks

A. Summary of argument that private banks create the public money supply from Ellen Brown:

§1. “Private bankers own mankind. You know they create money on a computer screen. Take their power away, but leave them the power to create money, and with the touch of a button they will create enough money to buy the earth back again.

You know that bankers create principal, but not the interest to service their loans. To find the interest, new loans must continually be taken out. This expands the money supply, increases prices, and robs you of the value of your money. Thus, private bankers ultimately rule through inflation, (ever-increasng debt) which makes you run faster and faster on a treadmill owned by the private bankers. Eventually you must drop.

You also know that the government does not create money (except for coins). The Federal Reserve creates money and lends it to us. Every dollar in your hand is a debt note to private bankers. And since we all use money, we all play with debt (negative capital) whether we like it or not. If we ended the private banking cartel, the federal debt could be paid, income taxes could be eliminated, and social programs could be expanded — all without imposing austerity measures or sparking runaway inflation. This is not utopian. It has been done many times in history, starting with ancient Rome.

The International Banker is like the Wizard of Oz, standing behind the curtain of policymakers and “elected” leaders. Behind the curtain is a little old man, playing with lights and loudspeakers.”

§2. In fact:! “Frank Baum wrote his Wizard of Oz books at the turn of the century, when the money question was still a hotly debated issue. His Oz books were an allegory for our tyrannical money system. Example: In the 1890s, the private bankers did not yet own all the media sources. Therefore everyone was concerned with how money should be created. Should the government create it with full accountability to the people — or should private banks create it in secret? After the Jekyl Island meeting in 1910, the latter option won. World War I and the Great Depression sealed the private banks’ power. We have been enslaved ever since.”

B. The Crazy 5,000 year history of debt peonage

“Debts that cannot be paid will not be paid. The only question is how they won’t be paid.” - Michael Hudson. 

§3. “A study of the long sweep of history reveals a universal principle to be at work: The burden of debt tends to expand in an agrarian society to the point where it exceeds the ability of debtors to pay. That has been the major cause of economic polarization from antiquity to modern times. The basic principle that should guide economic policy is recognition that debts which can’t be paid, won’t be. The great political question is, how won’t they be paid? There are two ways not to pay debts. Our economic mainstream still believes that all debts must be paid, leaving them on the books to continue accruing interest and fees – and to let creditors foreclose when they do not receive the scheduled interest and amortization payment. This is what the U.S. President Obama did after the 2008 crisis. Homeowners, credit-card customers and other debtors had to start paying down the debts they had run up. About 10 million families lost their homes to foreclosure. Leaving the debt overhead in place meant stifling and polarizing the economy by transferring property from debtors to creditors. Today’s legal system is based on the Roman Empire’s legal philosophy upholding the sanctity of debt, not its cancellation. Instead of protecting debtors from losing their property and status, the main concern is with saving creditors from loss, as if this is a prerequisite for economic stability and growth. Moral blame is placed on debtors, as if their arrears are a personal choice rather than stemming from economic strains that compel them to run into debt simply to survive.”

§4. “Mainstream economic models leave this problem to “the invisible hand of the market,” assuming trends will self-correct over time. But while the market may indeed correct, it does so at the expense of the debtors, who become progressively poorer as the rich become richer. Borrowers go bankrupt and banks foreclose on the collateral, dispossessing the debtors of their homes and their livelihoods. The houses are bought by the rich at distress prices and are rented back at inflated prices to the debtors, who are then forced into wage peonage to survive. When the banks themselves go bankrupt, the government bails them out. Thus the market corrects, but not without government intervention. That intervention just comes at the end of the cycle to rescue the creditors, whose ability to buy politicians gives them the upper hand.”

C. Documented Periodic Debt Jubilees in the ancient Near East

§5. “Sumerian kings solved the problem of “peak debt” by periodically declaring “clean slates,” in which agrarian debts were forgiven and debtors were released from servitude to work as tenants on their own plots of land. The land belonged to the gods under the stewardship of the temple and the palace and could not be sold, but farmers and their families maintained leaseholds to it in perpetuity by providing a share of their crops, service in the military and labor in building communal infrastructure. In this way, their homes and livelihoods were preserved, an arrangement that was mutually beneficial, since the kings needed their service.” (Ibid.)

D. How do create a modern debt jubilee?

§6. “One possibility is to nationalize … banks and sell their bad loans to the central bank, which can buy them with money created on its books. The loans can then be written down or voided out. Precedent for this policy was established with “QE1,” the Fed’s first round of quantitative easing, in which it bought unmarketable mortgage-backed securities from banks with liquidity problems…. “Another possibility would be to use money generated by the central bank to bail out debtors directly. This could be done selectively, by buying up student debt or credit card debt or car loans bundled as “asset-backed securities,” then writing the debts down or off, for example. Alternatively, debts could be relieved collectively with a periodic national dividend or universal basic income paid to everyone, again drawn from the deep pocket of the central bank.” (Ibid.)

E. Won’t creating free money lead to inflation?

§7. “Critics will object that this would dangerously inflate the money supply and consumer prices, but that need not be the case. Today, virtually all money is created as bank debt, and it is extinguished when the debt is repaid. That means dividends used to pay this debt down would be extinguished, along with the debt itself, without adding to the money supply. For the 80% of the U.S. population now carrying debt, loan repayments from their national dividends could be made mandatory and automatic. The remaining 20% would be likely to save or invest the funds, so this money too would contribute little to consumer price inflation; and to the extent that it did go into the consumer market, it could help generate the demand needed to stimulate productivity and employment.” (Ibid.)

F. California Legislature Assembly Bill No. 857

§8. “It is the intent of the Legislature that this act authorize the lending of public credit to public banks and authorize public ownership of public banks for the purpose of achieving cost savings, strengthening local economies, supporting community economic development, and addressing infrastructure and housing needs for localities. It is the intent of the Legislature that public banks shall partner with local financial institutions, such as credit unions and local community banks, and shall not compete with local financial institutions.”This bill establishes “banks that hold the government’s money and include socially responsible charters, anticorruption clauses, transparency, a board that includes community development professionals, and prohibitions on retail locations and on competing with community banks and credit unions.”